No bottom for home prices – PMI

From Bloomberg:

Home Prices in U.S. to Decline Through 2010, PMI Says

Home prices will fall in more than half of the largest U.S. cities through 2010 as the recession slashes jobs and reduces buying power, according to PMI Mortgage Insurance Co.

PMI, the second largest U.S. mortgage insurer, said 21 of the 50 biggest U.S. metropolitan areas have more than a 75 percent chance of lower home prices in two years. Six others have more than a 50 percent chance, the Walnut Creek, California-based insurer said in a report today.

“We’ll see sales start to recover before the job market,” David Berson, chief economist at PMI, said in an interview. “Prices will lag because of the large number of homes for sale and those that are vacant but not yet on the market.”

In New Jersey, the Edison-New Brunswick area and Newark have an 89 percent and 84 percent probability, respectively, of lower prices in two years. Nassau-Suffolk in New York has a 78 percent chance; Washington has an 88 percent chance; and Baltimore has an 84 percent chance, according to PMI.

“The suburbs of New York and D.C. are high-cost areas that had substantial run-ups in prices,” Berson said. “They are the next group down from the sand states.”

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53 Responses to No bottom for home prices – PMI

  1. hoodafa says:

    Frist?

  2. Alap says:

    2nd!

  3. 3b says:

    outofstate good one from the prior post re: Bates Motel

  4. Alap says:

    CNNMoney: Auto sales not as bad as expected

    Nope, just down on average 40% across the board. But hey, not as bad as expected. Recession is over!

  5. Ben says:

    at what point does everyone stop looking for the bottom and just admit there is no bottom?

  6. grim says:

    at what point does everyone stop looking for the bottom and just admit there is no bottom?

    Capitulation, and that would be the bottom.

  7. jmacdaddio says:

    I’m calling around about refis. One broker claimed he had a client in Hunterdon who refinanced and put $70k into buying down the mortgage on the grounds that they weren’t making any money in the stock market and that the house was a better place for their cash. Might as well burn the money IMHO – the house won’t return it anytime soon. A house which appraised for 585k in December 2007 is now appraised at 465k, with the same appraiser doing the appraising.

    Another broker hinted at a new refinance product available in a week or so which will allow buyers who had 20% equity when purchasing to go ahead and refinance without having to do PMI. No word on the fees of course, or if this is backed by the government. It sounds good in theory – anyone in the RE Industrial Complex hear about it?

  8. comrade nom deplume says:

    Here’s a great little tax arbitrage opportunity for you laid off investment bankers, and it seems legal.

    Assuming you were in a high tax bracket in 2008, and got laid off in 2008, open and fund an IRA for 5K prior to 4/15. This lowers your taxable income by 5K, so if you are in an effective state/federal tax regime of 40%, you get back 2,000 in taxes.

    On or after 4/16, close the account and take back the 5,000.

    In 2010, you will have to pay a 10% penalty on the withdrawal, or $500.

    You pocket difference of $1,500.

    Now, this assumes you don’t find comparable work in 2009, such that your effective tax rate is essentially zero. If you do go back to work you have to pay tax on the 5K because you did not do so the year before.

    Also, the author of this dodge neglected Section 219(g), the phaseout for folks covered by a retirement plan. I suspect the authors assumed that you were not an “active participant” at the time so it doesn’t apply. I won’t make that assumption, but it could be correct. At a minimum, you had to be let go prior to 12/31 since your contribution is deemed to be 12/31/08.

    On the plus side, if they haven’t already, the feds may waive the 10% penalty. That makes this a great tax dodge as you have shifted income from high tax 2008 to low or no tax 2009. And you can do this for 401(k) money as well.

  9. Qwerty says:

    RE: “We’ll see sales start to recover before the job market”

    Interesting, will lenders qualify these imaginary buyers using unemployment checks as “income”?

  10. sas says:

    “We’ll see sales start to recover before the job market”

    ha ha ha.

    and the moon is made of cheese, and the govt doesn’t ship in drugs.

    SAS

  11. 2 Cents says:

    Lawrence Livermore Laboratories has discovered the heaviest element yet known to science. The new element, Governmentium (Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy neutrons, giving it an atomic mass of 312.

    These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Governmentium has no electrons, it is inert; however, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction that
    would normally take less than a second, to take from 4 days to 4 years to complete.

    Governmentium has a normal half-life of 2- 6 years. It does not decay, but instead undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places.

    In fact, Governmentium’s mass will actually increase over time, since each reorganization will cause more morons to become neutrons, forming isodopes. This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.

    When catalyzed with money, Governmentium becomes Administratium, an element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.

  12. comrade nom deplume says:

    Latest news from the Tax Foundation website:

    National Association of Realtors® Calls for Restricting Voting Rights to Property Owners Only
    Posted on April 1, 2009 by Gerald Prante

    Exhausted by lobbying for old and new homeowner subsidies for the past 16 months, and citing the downward spiral in home prices, the National Association of Realtors® on Tuesday announced that its members want the right to vote in U.S. elections restricted to property owners, “as our Founding Fathers had envisioned.”

    Realtors® Spokesperson Dewey Cheatem said that homeownership is so vital to the American dream that it makes sense to allow only those who are truly living the American dream to participate in the democratic process, which is another American dream he noted.

    Cheatem said that renters just don’t care about the state of the housing market, and he derided Obama’s new idea to limit the mortgage interest deduction for high-income people. “If only homeowners were voting, Obama would never make such a blunder.”

    While the prospects on Capitol Hill for limiting the vote to homeowners may seem like a long shot right now, Georgia Senator Johnny Isakson, a Realtor® himself, is convinced that a compromise could be reached in committee. “We may not get to one-homeowner-one-vote and one-renter-no-vote,” Isakson said. “But we may be able to work out an agreement that restores property ownership to its rightful place. I have a proposal to double-count the votes of homeowners and triple-count the votes of homeowners who can prove they used a REALTOR®, a member of the National Association of Realtors®.”

    The National Association of Home Builders eagerly endorsed Isakson’s idea and said in a statement, “Anything that can bring back the reasonable prices we saw three years ago is a step in the right direction.”

    When asked about the proposal, an Obama official was confused by the Realtors’® reasoning and asked, “Don’t renters get to claim the mortgage interest deduction and the property tax deduction? I did on my return last year, and I’m a renter.”

  13. HEHEHE says:

    After today’s action I think its safe to say the FASB action is likely baked in the cake.

  14. ruggles says:

    13 – since I own 4 houses I get 4 votes, right?

  15. HEHEHE says:

    Layoffs Watch ’09: JPM
    Posted by Bess Levin, Apr 01, 2009, 2:24pm
    Cuts are said to be underway for IB at the House of Dimon circa now.

    http://dealbreaker.com/2009/04/layoffs-watch-09-jpm-3.php

  16. HEHEHE says:

    ADP Employment Report Predicts Worst Job Market in Decades

    No matter how you slice and dice it, today’s ADP report is predicting that the US job market had one of its worst months on record in March. If Friday’s employment report shows the same magnitude of job losses as today’s ADP report, it will be the largest one-month decline in payrolls since October 1949.

    http://seekingalpha.com/article/128970-adp-employment-report-predicts-worst-job-market-in-decades

  17. grim says:

    From Bloomberg:

    Triad Ordered to Defer Mortgage Claims Payments by Regulator

    Triad Guaranty Inc., the mortgage insurer that stopped selling policies when capital ran short, was ordered by a state regulator to defer 40 percent of claims payments because of “uncertainty” whether it can meet its obligations to banks that purchased coverage.

  18. grim says:

    Also from Bloomberg:

    Thornburg Mortgage to File for Bankruptcy, Liquidate

    Thornburg Mortgage Inc., the “jumbo” home lender racked by the collapse of U.S. mortgage markets, said it plans to file for bankruptcy protection and shut down.

    Remaining assets will be sold or liquidated to pay bondholders and creditors, according to a statement today from the Santa Fe, New Mexico-based company.

    Thornburg specialized in mortgages of more than $417,000, typically used to buy more-expensive homes, and invested in mortgage-backed securities. It started running short of cash in August 2007 as foreclosures nationwide headed toward new highs and investors became leery of assets backed by home loans. A bailout in March 2008 from buyout firm MatlinPatterson Global Advisers LLC failed to revive the company as lenders demanded payments to cover the plunging value of mortgage assets.

    “Their long-term viability was dependent on restarting lending and restarting securitizations but that fell off the table by the middle of last year,” said Kevin Starke, an analyst at CRT Capital Group LLC in Stamford, Connecticut.

  19. crossroads says:

    13
    would this be homeowners who own the home as in no mortgage or debt slaves who needed gvt bailouts to stay in the home they can’t afford and shouldn’t own?

  20. crossroads says:

    13
    would this be homeowners who own the home as in no mortgage or debt slaves who needed gvt bailouts to stay in the home they can’t afford and shouldn’t own?

  21. Sastry says:

    Nom #8…

    I probably shouldn’t respond since it is April 1, and your post was.

    I’d think that 1.5k for those investment bankers is equivalent to one dinner of five — of course on expense accounts :)

    On a side note, I hope they raise the 3k loss write off to a little more… May be 10k or so? Are there any hopes of that?

    S

  22. 3b says:

    #17 hehe:and the market completely ignored it today.

  23. yikes says:

    DL says:
    April 1, 2009 at 3:17 pm

    Yikes: ref 59. Only way I can think of to combat the problem is to change the pension system. The defined benefit plan is the problem. The state needs to make the employee contribute to their own 401k and fund a portion of their retirement. I bet some of the teachers could even use the proceeds from their summer jobs to fund the 401.

    to whom do i propose this? GREAT idea.

  24. Sastry says:

    “… a client in Hunterdon who refinanced and put $70k into buying down the mortgage on the grounds that they weren’t making any money in the stock market and that the house was a better place for their cash.”

    I often wonder — is a better to pay off mortgage or stay perpetually at or close to 80% LTV (to avoid PMI)? Our tax agent says that it is better just to put 20% (and not anything more).

    Can one construct (if there aren’t any already) an “interest only” loan with 20% down payment for a long time [15 to 30 year]? It runs counter-intuitive to the “be debt free” logic though.

    S

  25. chicagofinance says:

    Clotpoll says:
    April 1, 2009 at 2:34 pm
    HE (125)- Taleb killed it today on Bloomberg.
    I’m beginning to like him more than Roubini.

    Taleb has the personality of a rectal embolism. He rehashes basic statistical financial concepts, write an insipid book, tugs on his beard, and expects everyone to genuflect. This guy need a visit to the French Connection UK.

  26. chicagofinance says:

    I have found a good way to understand the variances in pricing of markets in different geographies is to look at the cost of equivalent seats same sized venues of various Depeche Mode concerts.

  27. chicagofinance says:

    where is the edit function? :-p

  28. yikes says:

    feel like we’ve hit a lull in “solutions” as to how to play the RE market, stock market, etc in the next 6-8 months.

    is there a consensus on deflation/inflation? or are people still waiting to see some signs before springing into action?

  29. jcer says:

    The whole attack on teacher and police officer salaries is crazy, the salaries are not exorbitant. One problem is the paper pushers and fake jobs, seems rather unnecessary and costly. but the far bigger problem is the benefits cost. Like GM the government is crushed by pensions, so someone works 30 years and get paid for 50 or 60. They need to reform the system, they need to do it now. Your retirement benefits should be some percentage(10%) of your salary placed in an account annually that you can match out of personal funds optionally(tax free and only released at retirement) and you can how ever you wish, want stocks, or how about bonds, or maybe fdic insured cds, money market etc. (couldn’t possibly do worse than state pension funds CALPERS anyone?) Governments running pension funds lose tons of money and are there to enrich wall street bankers and just knowing in advance what the benefits cost makes it a lot easier to budget. Additionally it lets everyone know what the real salary is and it eliminates the government playing games with the pension money which inevitably leads to corruption. Eliminate pensions and replace them with a new system, 401k sucks so not that and reform the healthcare plans to save some money. The problem is not that difficult it is getting people to accept a new system which may them less as they are responsible for getting an 8% return it is not guaranteed. Low interest rates and years or pension fund mismanagement are to blame for a lot of problems. Similarly insurance companies have had the same issues.

  30. Sastry says:

    #31 Jcer

    From an employee point of view, pension funds are “guaranteed”. The alternative of 401k is also fine, but not flexible. More flexible accounts (IRA equivalents) can be a bit dangerous…

    I have a better idea, have all pension funds invest in real estate. They are not making land anymore, and more and more people need homes.

    S

  31. borat obama says:

    33th

  32. grim says:

    From Reuters:

    Credit card charge-offs hit record high -Moody’s

    Credit card write-downs soared to record levels in February, representing an all-time high in the 20-year history of the Moody’s Credit Card Index, as job losses mounted, the rating agency said on Wednesday.

    Credit card charge-offs, the write-down of uncollectable debt, advanced decisively to 8.82 percent in February, marking the sixth consecutive month of increases. The level, is more than 300 basis points higher than a year ago.

    Sharp increases were experienced across several large issuers and have closely followed the surges in unemployment occurring over recent months, the rating agency said.

    “We expect that the charge-off index will threaten double digits by the end of the year, in light of our expectation that the economy will worsen throughout the remainder of the year,” Moody’s said.

  33. jcer says:

    Sastry, you cannot save one from themselves. What ever course of action one chooses they must live with. I say give freedom but provide options that have safety. 401k sucks I’ll say it again safe, are you kidding everyone I know is down 30%. Pensions are not a right, they are not a safety net, this is not SS we are talking about.

  34. crossroads says:

    31 “The whole attack on teacher and police officer salaries is crazy, the salaries are not exorbitant”

    there was a report in the past year or two how small town chiefs were making more then chief of nyc and I would say administrators are overpaid

  35. freedy says:

    anyone who thinks cops , fire , and teachers are underpaid, is living on
    another planet. they have broken the back of NJ along with the pols.

  36. Dissident HEHEHE says:

    Tomorrow will be interesting with the FASB decision. My personal opinion is absent a complete abandonment of mark to market I don’t see any sort of major pop. A modification of current 157 and you see a flat to minor 1-2% pop. If they do nothing you could see an 8% drop.

    Anybody else want to go out on a limb?

  37. yome says:

    Government workers,work for the People.
    Why do ordinary people that pay their salaries have to work till age 67 to collect full SSS and they only have to work 25 years and have a lifetime pension with benefits.NOT OVER PAID?

  38. Clotpoll says:

    chi (28)-

    I know it is killing you that Taleb, Morgan, etc keep getting it right.

    Maybe they are getting it right for all the wrong reasons and in the wrong way; but right is right.

    Meanwhile, Timmay, Bergabe and crew keep getting it wrong: day after day, month after month.

  39. I'm a Putz says:

    Okay. I buy a house within my means and pay-off my mortgage years ahead of schedule , and the government helps the people who overextended and overspent.

    I pay off my credit card bills and the credit card companies write off the debt of people who over extend themselves.

    Why am I responsible?

  40. yikes says:

    yes, the pension system needs to be overhauled for teachers. no doubt.

    but i still believe “teachers” are vastly different from “administration.” The admin are the folks making big bucks and doing who-knows-what for work.

    i just scrolled through the bucks county teachers and they are making damn good money, but i didn’t see one “teacher” making 6 figures. only principals and other “admin” types.

    i think i might have to fire up a resume …

  41. Clotpoll says:

    HE (39)-

    I hope they totally ditch MTM. Let everybody pretend their shit don’t stink.

    Let ’em get some quick paper profits. Pump that sucker up…just to watch it go poof in about six months, when nobody wants MBS at any price and nobody wants to borrow anything more than a buck or two, for a pack of saltines and some HFCS soda.

    They wanna see illiquid? Markets that don’t clear? No price discovery? Get rid of MTM.

    If they do away with it, I’m getting even shorter.

  42. crossroads says:

    teachers work how many days a year?

  43. Clotpoll says:

    I think my house is worth 900K. Screw it if an appraiser says 475K. I won’t take a penny less than 900K.

    I also want the right to calculate my net worth by self-determining the value of all my assets and applying a 20% haircut to my liabilities.

  44. Essex says:

    46. Yeah, my life sucks….blame a teacher.

  45. crossroads says:

    my life doesn’t suck but some people who are in foreclosure could have used a better math teacher.

  46. grim says:

    New thread, up!

  47. Rich says:

    This high fear is creating some incredible deals. Some investors are buying properties at 1980’s numbers.

  48. Karthik says:

    So according to all of you if I am looking at buying a house in Somerset, North Brunswick area should I wait or go for it? when would be the best time to buy a house. Realtors say now is the time every time I ask them. Its confusing.

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