From the WSJ:
HOUSE TALK
Another Full Year Of Housing Pain?
By JUNE FLETCHER
May 1, 2008 3:55 p.m.
Don’t look for the housing market to improve until the daffodils bloom next spring.
For home sellers, the continuing pain means that that homes likely won’t sell unless they are well-kept, priced below the competition and are marketed aggressively. Adding incentives like seller financing or lease-options can help bring in buyers who are having trouble getting conventional financing.
The latest S&P/Case-Shiller Home Price Index shows that new and existing home prices fell 12.7% in February from a year earlier.
According to economists who convened at the spring construction forecast conference of the National Association of Home Builders in Washington, D.C., last week, the trend will continue until early next year, dragging down prices.
The consensus view was far gloomier than a few months ago, when housing economists predicted the bottom would be reached in late summer or early fall. But now the U.S. is in a mild recession, although it hasn’t been officially declared, and the pain is spreading to more parts of the country, according to the association’s chief economist David F. Seiders. “Foreclosures keep getting worse,” he said. “Where in the world does it stop?”
Foreclosures push homeowners out of their homes and simultaneously ruin their credit, making it difficult for them to become owners again, he said. The drop-off of demand from these owners, as well as would-be buyers who don’t want to purchase while prices are still falling has become a “diabolical feedback loop,” he said.
Home builders have put the brakes on building — total annualized housing starts are down 34.5% to 1.035 million in the first quarter of this year and will likely stay at under 1 million until the middle of next year. But demand is still too weak to absorb this pace of building, according to Mark Zandi, chief economist for Moody’s Economy.com. It would take 11 months at the current sales rate to sell the new homes now on the market.
Mr. Zandi expects three quarters of the country’s major markets to experience new and existing-home price declines. In places that have been losing jobs, prices could drop as much as 40% from their peaks. “The coast is not clear,” he said.
Eric Belsky, executive director of Harvard’s Joint Center for Housing Studies, noted that declining home prices, which eroded the equity of many homeowners, “caught people by surprise.” He expects to see more households doubling up in shared homes as job loss, foreclosures and the credit squeeze continues. “People are being forced to sleep on floors,” he said.
…
Economist James Glassman, a managing director of J.P. Morgan Chase & Co., said that the current quagmire is partly due to creditors overreacting to the subprime-mortgage crisis, leaving only good savers with enough cash able to buy homes. But overall, he said, the American economy is sound, and the crisis will eventually subside as credit becomes freer and home prices stabilize. “The wheels aren’t coming off the wagon,” he said.
From BusinessWeek:
S&P to stop rating home equity mortgage-backed securities
Credit ratings agency Standard & Poor’s said Thursday it will stop rating new securities backed by home equity loans because such rapid deterioration in the market has made it nearly impossible to accurately rate potential performance.
“The magnitude of our recent rating actions and projected losses on the 2007 U.S. (home equity loan) vintage transactions reflect an unprecedented level of loan performance deterioration,” S&P said in a statement.
In April, S&P cut the ratings on 184 securities backed by home equity loans. It cut ratings on more than 400 deals in the middle of 2007 and has been adjusting its ratings criteria since the beginning of the collapse of the mortgage lending market last year.
…
S&P said it will continue to review outstanding deals based on current methods used for reviewing deals, including looking at historical performance of the securities and projected losses.
“Don’t look for the housing market to improve until the daffodils bloom next spring.”
Dare I say it: optimistic.
“Credit ratings agency Standard & Poor’s said Thursday it will stop rating new securities backed by home equity loans because such rapid deterioration in the market has made it nearly impossible to accurately rate potential performance.”
Shouldn’t the same logic apply to existing HEL securities?
Why are existing securities any more susceptible to accurate rating? And if they aren’t, what does that say about the rating that S&P should be providing?
And, if S&P predicted back in February that there would be no more writedowns, shouldn’t we withhold judgment on any of their new pronouncements until we’ve heard what bi has to say on the subject?
“According to economists who convened at the spring construction forecast conference of the National Association of Home Builders…”
explains the optimism…
pretorius
“now the U.S. is in a mild recession, although it hasn’t been officially declared”
“Foreclosures keep getting worse,” he said. “Where in the world does it stop?”
“diabolical feedback loop,”
When you get quotes like these from the chief economist of the National Association of Home Builders, you know we must be in the fear stage and nearing the panic stage.
[1],
Maybe they should apply the same logic towards Ambac?
patient[5],
“Amid collapsing stock prices worldwide, the billionaire investor George Soros has told an Austrian daily, the Standard, that the United States is threatened with recession and the world is facing the worst financial crisis in half a century. “The situation is much more serious than any other financial crisis since the end of World War II,” Soros was quoted as saying.”
http://www.thefirstpost.co.uk/people,601,soros-predicts-worst-recession-for-50-years,13683
“Economist James Glassman […] said that the current quagmire is partly due to creditors overreacting to the subprime-mortgage crisis, leaving only good savers with enough cash able to buy homes. But overall, he said, the American economy is sound, and the crisis will eventually subside as credit becomes freer and home prices stabilize. “The wheels aren’t coming off the wagon,” he said.”
That’s the sort of BS cheerleading that you could only get from one of the guys who wrote “DOW 36,000” moments before the dotcom bubble burst.
His co-author was presumably too busy acting as McCain’s financial advisor to provide comment.
BC, it’s all part of his plot, of course. :)
OT
Patient- where are the NOLA pics?
Grim- When is the next gtg?
Vornado STILL hasn’t filled the prime retail space across from Radio City.
Maybe folks think there isn’t enough foot traffic or tourism dollars in that neck of the woods…
Sorry, lost. Tomorrow!
I have a nice shot of the Del McCoury Band on the Fais Do Do stage for you. It’ll go well with a quote from one of their songs that some folk here will appreciate better that most.
“”The wheels aren’t coming off the wagon,” he said.”
Because the “Wheels are already off the Wagon, Stupid”, look at the National Debt!
LOL….seller financing….like I wanna finance some yahoo who can’t get a mortgage…..riiiiiiiight.
re the madam
DC Madam Deborah Jeane Palfrey predicted she would be “suicided” on several occasions both recently and as far back as 17 years ago – comments that now appear ominous in light of the announcement that the former head of a Washington escort service allegedly killed herself today.
Palfrey had threatened to release the names of well-known clients of her upscale call girl ring in the nation’s capitol, and had indicated that Dick Cheney may be one of them.
“If taken into custody, my physical safety and most probably my very life would be jeopardized,” she wrote in August 1991 following an attempt to bring her to trial, “Rape, beating, maiming, disfigurement and more than likely murder disguised in the form of just another jailhouse accident or suicide would await me,” said Palfrey in a handwritten letter to the judge accusing the San Diego police vice squad of having a vendetta against her.
kettle1,
re: the madam
wouldn’t doubt someone doesn’t want there dirty laundry aired. Of course look at Spitzer, he probably ticked someone off enough that he got fingered. What happened to the other johns? I only think one other name was publicized…
The great state of NJ shows a decline in total taxes!
http://www.rockinst.org/WorkArea/showcontent.aspx?id=14784
njp,
Captions?
jb
19 grim
Del McCoury at Jazz Fest
New Construction in Old Metairie
Balconies in the French Quarter
(Was that what you meant?)
Kettle
I find it impossible to believe that she’d off herself without outing some clients in the process.
20
Lower 9th still a disaster area?
patient,
how many favors at blackwater or haliburton do you think cheney called in, in order for the madam to have an “accident”?
kettle……do you care? Another scumbag….gone. Oh well.
VOTE OBAMA….
essex,
i feel for someone who may have been forcefully suicidied. i think cheney should go sit on a road side bomb in iraq. that madam doesnt even come close to qualifying as a scumbag compared to most major politicians, heck she was more of an honest business women then your average CEO
sorry about more OY
but some might find this relevant…
“The Coming Collapse of the Middle Class”
by Elizabeth Warren
http://economistsview.typepad.com/economistsview/2008/04/the-coming-coll.html
correction,
that video does has a fair amount of relevant info on housing and living costs and how it has changed, a common debate here.
Is it worth an hour to watch it? The comments seem to indicate so.
hobokenite,
it is very well presented and has a lot of interesting data. this is a serious piece, not “the world is ending”. yes its worth 45 min
22 lost
I confess I don’t hang out there.
“she was more of an honest business women then your average CEO”
roger that.
30 Patient
Uh I don’t know anyone who does or did either.
re: the madam
drudge reports that mcain was in the book.
HC
Say it ain’t so!!!!!!
Baseball star Jose Canseco loses home to foreclosure
http://news.yahoo.com/s/nm/20080501/sp_nm/canseco_foreclosure_dc
kettle – the plot thickens – did you know this??
“One of the escort service employees was former University of Maryland, Baltimore County, professor Brandy Britton, who was arrested on prostitution charges in 2006. She committed SUICIDE in January before she was scheduled to go to trial.”
re: the madam
We better stop all this conspiracy talk about the madam, before one of us is found choking on our mouse pad.
kettle, thanks for the Elizabeth Warren lecture link.
Vitter after the press got wind.
http://www.youtube.com/watch?v=EX-Ex4hoZTY
BC (8)-
I think Soros falls into the category Tard would classify as “terrorist”. Of course, Soros is neither whining for handouts nor posting bits of his manifesto on blogs.
26 Kettle,
Nice video. Thanks!
Good interview with Fareed Zhakaria on Charlie Rose tonight (my foreign politics guru).
He was talking about the standing of the US in the world, about pandering to little immediate needs (the gas tax summer repeal) and the fact that all polititians avoid the big issues. His thesis is that for the US to maintain its standing, there need to be very hard choices and many sacrifices and that nobody essentially has the b@lls to go there and give it to the American people straight.
Good stuff.