“Housing is showing no ability to move to the upside”

Posted on September 23, 2010 by grim

From Bloomberg:

Sales of U.S. Existing Homes Probably Climbed to Second-Lowest on Record

Sales of existing homes in the U.S. probably climbed in August to the second-lowest level on record, indicating housing remains depressed a year after the economic recovery began, economists said before a report today.

Home resales rose to a 4.1 million annual pace, behind only July’s 3.83 million as the weakest in a decade’s worth of data, according to the median of 72 estimates in a Bloomberg News survey. Other reports may show jobless claims held at a two- month low and the index of leading indicators increased.

“Housing is showing no ability to move to the upside,” said Eric Green chief market economist at TD Securities Inc. in New York. It will take gains in employment, an improvement in confidence and a decline in the number of houses on the market for the industry to rebound, he said.

Economists surveyed project the jobless rate will average more than 9 percent through 2011, undermining confidence and signaling foreclosures will hinder real estate as households struggle to make mortgage payments. A distressed housing market was among reasons the Federal Reserve cited this week when it said it’s willing to take additional steps to spur growth.

The National Association of Realtors is scheduled to release the sales figures at 10 a.m. in Washington. Survey estimates ranged from 3.8 million to 5 million. Comparable data, which combines single-family houses and condominiums, began in 1999.

Posted in Economics, Housing Bubble, National Real Estate | 124 Comments

No quick recovery from recession

Posted on September 22, 2010 by grim

From the Star Ledger:

Economists: New Jersey’s recovery will be slow

The regional economy will go through tough times for several more years before it emerges from the post-recession slump, two economists said Tuesday.

The state and nation are unlikely to suffer a so-called double dip, but there are “massive challenges ahead” said Alexander Heil, chief economist of the Port Authority of New York and New Jersey.

“There are little bits of information that are positive; lots that are still negative,” he said.

Nancy Mantell, director of the Rutgers Economic Advisory Service, said a forecast she undertook in July indicates that the state will not to return to its pre-recession employment peak until 2016.

Employment will increase at a lackluster 25,000 jobs a year until 2020, she said. That’s well below the about 70,000 jobs added annually after the 1990-1991 recession.
…
Heil said one problem standing in the way of the recovery is the high consumer savings rate, with the average person now saving 6 percent of disposable income.

“As long as savings remain high, there may not necessarily be consumption-driven growth that will bring us out of the recession,” he said.
…
But the state will likely have to shed many local government jobs to return to health, she said, noting that public sector employment continued to grow throughout the last 10 years.

“The private sector is going to have to grow significantly to make up for that loss of employment,” she said.

Posted in Economics, New Jersey Real Estate | 86 Comments

MERS problems behind GMAC halt?

Posted on September 21, 2010 by grim

From the NY Times:

GMAC Halts Foreclosures in 23 States for Review

GMAC Mortgage, one of the country’s largest and most troubled home lenders, said on Monday that it was imposing a moratorium on many of its foreclosures as it tried to ensure they were done correctly.

The lender, which specialized in subprime loans during the boom, when it was owned by General Motors, declined in an e-mail to specify how many loans would be affected or the “potential issue” it had identified with them.

GMAC said the suspension might be a few weeks or might last until the end of the year.

States where the moratorium is being carried out include New York, Connecticut, New Jersey, Illinois, Florida and 18 others, mostly on the East Coast and in the Midwest. All of the affected states are so-called judicial foreclosure states, where courts control the interactions of defaulting homeowners and their lenders.

Since the real estate collapse began, lawyers for homeowners have sparred with lenders in those states. The lawyers say that in many cases, the lenders are not in possession of the original promissory note, which is necessary for a foreclosure.
…
Matthew Weidner, a real estate lawyer in St. Petersburg, Fla., said he interpreted the lender’s actions as saying, “We have real liability here.”

Mr. Weidner said he recently received notices from the opposing counsel in two GMAC foreclosure cases that it was withdrawing an affidavit. In both cases, the document was signed by a GMAC executive who said in a deposition last year that he had routinely signed thousands of affidavits without verifying the mortgage holder.
…
Nerissa Spannos, a Fort Lauderdale agent, said GMAC represents about half of her business — 15 houses at the moment in various stages of foreclosure.

“It’s all coming to a halt,” she said. “I have so many nice listings and now I can’t sell them.”

The lender’s action, she said, was unprecedented in her experience. “Every once in a while you get a message saying, ‘Take this house off the market. We have to re-foreclose.’ But this is so much bigger,” she said.

From the Palm Beach Post:

GMAC suspends foreclosure evictions and sales of seized property

Foreclosure defense attorneys say the affidavits withdrawn by the Florida Default Law Group center on foreclosure documents signed by a GMAC employee. The employee, in deposition questioning by West Palm Beach-based law firm Ice Legal, said he did not have personal knowledge of the accuracy of each of the 10,000 foreclosure-related affidavits he signed each month, they say. Some of the documents include assignments of mortgages on which the GMAC employee signed as vice president of Mortgage Electronic Registration Systems. MERS is a company created by the nation’s leading banks to ease the process of transferring and selling of home loans.

The legality of whether the nationwide electronic system can determine the owner of a mortgage and then assign it to a bank or investor is being questioned by some attorneys. It’s become especially complicated by the real estate boom-time practice of bundling home loans and selling them as securities.
…
Ice Legal attorney Christopher Immel, who deposed the GMAC employee, said after he posted the deposition online, legal teams from other states picked up on it and did their own depositions.

Immel said GMAC isn’t the only company that has a single employee signing off on thousands of foreclosure documents each month that he or she is supposed to have personally verified.

“To keep up with the foreclosure volume they need certain documents executed and they don’t have time to review them because it’s just an assembly line,” Immel said. “They’ve set this up as just part of their business practice.”

Posted in Foreclosures, National Real Estate | 153 Comments

Moodys: Housing prices to fall until Q3 of 2011

Posted on September 20, 2010 by grim

From HousingWire:

Moody’s downgrades billions in RMBS, more to come

Moody’s Investors Service issued another slew of ratings changes yesterday afternoon and earlier today, downgrading tens of billions of dollars of Alt-A and subprime residential-mortgage backed securities.

The lower ratings are due to the rapidly deteriorating performance of the mortgage pools that back the securities, in conjunction with macroeconomic conditions that remain 
under duress, according to Moody’s. In February, the ratings agency updated the loss expectations on Alt-A and subprime pools issued in 2005 to 2007.

Of the 2005 vintage alone, Moody’s rates more than 5,600 tranches of MBS and has adjusted ratings on nearly 2,000 tranches already this year with another 119 on review for possible downgrade.

Moody’s also now expects housing prices to continue to fall until the third quarter of 2011, analysts said in the most-recent ResiLandscape report from the firm’s structured finance group. The agency previously expected housing prices to stabilize in the first quarter of next year.

“Lingering weakness in the demand for homes, the expectations that job creation will remain soft this year, and the slow speed at which the mortgage industry is working through distressed mortgages,” led analysts to adjust their view.

Analysts see “increasing potential for a double-dip recession, which could cause a further 20% decline in home prices.” The now-expired homebuyer tax credit led to some purchases that otherwise wouldn’t of happened, boosting demand, but the pull-through sales distorted indicators, the effects of which are still reverberating through the market.

Posted in Economics, Foreclosures, Housing Bubble, National Real Estate | 189 Comments

Welcome to Fall

Posted on September 18, 2010 by grim

From the NYT:

A Cool Summer for Housing

THE fall real estate season is under way, and the school of hard realities is in session.

“The sales data is telling us nothing good,” said the market analyst Jeffrey G. Otteau. “Going into the end of the year, the trends are overwhelmingly negative in New Jersey: lagging home sales, declining prices, an inventory buildup — and everything in place to indicate the foreclosure rate will continue to rise.”

Mr. Otteau is the president of the Otteau Valuation Group, which collects contract sales data in 21 counties.

The August report showed a severe three-month-long dip in sales pace over the previous year, occurring in what has traditionally been the strong spring-to-summer period. “Now we are in the throes of fall,” he said, “when sales are always slower, and the general doldrums just grow more intense.”

Mr. Otteau said he remained loyal to the real estate maxim that local market situations differed.

But based on the “truths inherent in the data,” he predicted, no county, community or neighborhood in New Jersey would be unaffected by the overall market’s downward slump heading into 2011.

“Sales will remain sluggish, and home prices will go through a second round of declines, across the board in the state,” he said. “What will vary by market is the degree, the magnitude and depth of the weakening.”

In the August report, Mr. Otteau described the May-June-July period after the expiration of the federal home-buyer tax-credit program as “the weakest in six years — making it clear that the housing market is unable to sustain itself without additional stimulus.”
…
But, he added, “What is so troubling about the picture here in New Jersey is that housing trends tend to be a leading indicator of what will happen in the overall economy.”

Because “this recent relapse in the housing market follows 11 consecutive months of rising home sales,” which had the effect of helping stimulate other economic activity and employment, Mr. Otteau predicted that “going forward, if the housing market continues to lag, the reverse pattern can be expected.”

“Due to the close relationship between unemployment, home prices and mortgage delinquency,” he said, “foreclosure rates would rise further later this year.”

Posted in Economics, Foreclosures, Housing Bubble, New Jersey Real Estate | 146 Comments

“That’s so done.”

Posted on September 17, 2010 by grim

From the WSJ:

Reluctant Realtors: Fannie, Freddie

Two years after they were taken over by the federal government, Fannie Mae and Freddie Mac face a new challenge: The mortgage-finance giants are becoming two of the nation’s largest home sellers at a time when the housing market shows new signs of softening.

Fannie and Freddie have already taken back nearly as many homes in the first half of the year as they did all of last year. They owned more than 191,000 homes at the end of June, double the year-earlier total. That number will grow because they are taking back homes faster than they sell them.

In recent weeks, Fannie Mae has warned that it could get tougher on lenders that are taking too long to reclaim homes once they have determined that the home is vacant or once they have exhausted foreclosure alternatives, such as modifications. Mortgage servicers, which collect fees from Fannie, could face fines if the process is unreasonably prolonged.

Fannie’s recent reminder to banks signals a growing impatience with delays that have become “exaggerated and unmanageable,” says Edward Delgado, a former Wells Fargo & Co. executive who is now chief executive of the Five Star Institute, a provider of training programs for mortgage professionals.
…
Already, as borrowers fail to qualify for permanent modifications, newly initiated foreclosures at Fannie and Freddie have risen for three consecutive months to more than 150,000 in July, up nearly 60% from April, according to LPS Applied Analytics.

That creates an increasingly delicate balancing act. The costs of managing those homes are adding up, but the companies are reluctant to slash prices and dump lots of homes at big discounts.
…
Banks are also entering a less favorable environment for disposing of rising inventories. While mortgage rates continue to fall to record lows, home-buying activity stalled earlier this year when tax credits to spur sales expired.

“One year ago, you couldn’t even keep them on the market,” says Brett Barry, a real-estate agent who sells foreclosed homes for Fannie Mae in Phoenix. “That’s so done.”

Posted in Foreclosures, Housing Bubble, National Real Estate | 159 Comments

“A long if not lost decade”

Posted on September 16, 2010 by grim

From the NY Post:

Going down

The drop in US home prices — which are already down 28 percent since 2006 — could languish until 2013 as a massive 12 million homes in a shadow inventory still have to clear through the system.

Shadow inventory, which are homes in mortgage default or those already foreclosed upon but not yet on the market, will keep values from recovering as they drip back onto the market, experts said.

“Whether it’s the sidelines, shadow or current inventory, the issue is there’s more supply than demand,” Oliver Chang, a US housing strategist with Morgan Stanley told Bloomberg News, which first reported on the data supplied by his firm as well as Moody’s Analytics, Fannie Mae and Barclays.

The size and effect of the shadow inventory was one of several bleak housing reports released yesterday, with each pointing to continued weakness in the real estate sector.

The value of the nation’s homes could drop by as much as 15 percent in the next two years on the way to a new bottom, and remain stuck there at least three years, according to a report by Morgan Stanley.

One economist said that once the bottom comes, it could take 10 years for prices to recover to their historic annual growth track of 3 percent. Chief economist Mark Zandi of Moody’s Analytics called his recovery outlook “a long, if not lost, decade.”

From Bloomberg:

U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms

The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.

Shadow inventory — the supply of homes in default or foreclosure that may be offered for sale — is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.
…
Fannie Mae, the largest U.S. mortgage finance company, today lowered its forecast for home sales this year, projecting a 7 percent decline from 2009. A drop in demand after the April 30 tax credit expiration “suggests weakening home prices” in the third quarter, according to the report.

There were 4 million homes listed with brokers for sale as of July. It would take a record 12.5 months for those properties to be sold at that month’s sales pace, according to the Chicago- based Realtors group.

“The best thing that could happen is for prices to get to a level that clears the market,” said Shapiro, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.”
…
After reaching bottom, prices will gain at the historic annual pace of 3 percent, requiring more than 10 years to return to their peak, he said.

“A long if not lost decade,” Zandi said.

Posted in Economics, Housing Bubble, National Real Estate | 165 Comments

Montclair resident pleads guilty in $45m ponzi

Posted on September 15, 2010 by grim

From Bloomberg:

NJ woman pleads guilty in $45 mln Ponzi scheme

A New Jersey woman on Tuesday pleaded guilty to running a $45 million Ponzi scheme in which she promised to invest money in real estate, but instead gambled some of it at casinos.

Federal prosecutors said Antoinette Hodgson, 58, pleaded guilty to one count of wire fraud and one count of conspiracy before U.S. Magistrate Judge Ronald Ellis in Manhattan federal court. She had been charged in June. [ID:nN16167326]

Hodgson is expected to be sentenced to between 51 and 63 months in prison, and fined as much as $1 million.

The Montclair resident also agreed to forfeit $5 million, her stake in 24 properties she bought as part of the scheme and a Dunkin’ Donuts franchise in Arizona, prosecutors said.

From Bloomberg:

New Jersey Woman Admits to Ponzi Scheme, U.S. Says

Antoinette Hodgson, 58, of Montclair, New Jersey, entered her plea today to conspiracy and wire fraud in Manhattan federal court. Hodgson paid off early investors in her business with funds from later participants and spent some of their money on herself, U.S. Attorney Preet Bharara said in a statement.

“Hodgson promised investors high rates of return,” Bharara said. “Most of the $45 million she received from investors was immediately used to repay other investors.”

Posted in Housing Bubble, New Jersey Real Estate | 172 Comments

“We are managing to a view that home prices are more likely to be headed down rather than up”

Posted on September 14, 2010 by grim

From the Huffington Post:

Home Prices Set To Fall Further: Richard Fairbank, Capital One CEO

Speaking at the Barclays Capital 2010 Global Financial Services Conference, Capital One CEO Richard Fairbank was pessimistic about the housing market and about consumer demand — but optimistic about his bank’s prospects.

Fairbank, in remarks that were broadcast on the web, was asked by an audience member whether there will be a double-dip in the housing market. He chose his words carefully. “I think we feel very cautious about the housing market,” Fairbank said. “I think that even despite some of the recent months where home prices have gone up, I think it’s a very plausible case for home prices to go back down again.”

His dim view of the U.S. housing market, he said, is based on the current “logjam” of defaulted mortgages and foreclosures being dealt with at Capital One, which added a retail banking arm to its lending and credit card businesses in 2005. “Unsold inventory is really at just about an all-time high.”

Although he claimed not to be predicting a “double-dip recession,” Fairbank was not at all optimistic about the housing market. “We are managing to a view that home prices are more likely to be headed down rather than up,” he said.

Posted in Economics, Foreclosures, Housing Bubble, National Real Estate | 152 Comments

“It hasn’t been able to sell because of the market” … price

Posted on September 13, 2010 by grim

From the Courier Post:

Tough real estate market for the rich, too

There is a house for sale in Brick that overlooks a cove adjacent to Barnegat Bay. It has five bedrooms, 6 1/2 baths and an oversized kitchen with two granite islands. It has a three-car garage, a swimming pool and sweeping views.

And it can be yours for $3.3 million. Make that $2.5 million. Make that $2.25 million.

“It hasn’t been able to sell because of the market,” Jo Vocisano, a Piscataway resident who owns the home, said. “The house is beautiful. Beautiful view. And very different. And you need a person with that taste because the house is so beautifully different.”

The Shore’s million-dollar housing market has been struggling to gain traction. The number of homes for sale seem to outweigh the number of qualified buyers, making for a formula that is no different than the overall market.

Real estate agents say there are signs of hope. Prices have fallen in a correction that puts the market more in line with the economy. But a major hurdle remains: Banks, still burned by the housing bubble, are scrutinizing buyers’ creditworthiness more closely.

“The underwriting guidelines for jumbo loans — $1 million plus — are much tighter than they have ever been,” said Sean Clark, vice president of Advisors Mortgage Group LLC, a mortgage banker in Wall. “Higher down payments are required. Higher (credit) scores. Just all around much tougher.”

Posted in Economics, Housing Bubble, Shore Real Estate | 106 Comments

Remember 9-11

Posted on September 11, 2010 by grim

Posted in General | 131 Comments

We just got lucky

Posted on September 10, 2010 by grim

From Bloomberg:

Greenspan Should Have Seen Housing Crisis, Burry Says

Former Federal Reserve Chairman Alan Greenspan should have foreseen the collapse of the U.S. housing market and warned the public, one of the most prominent bettors against the subprime market wrote in a New York Times commentary yesterday.

“He should have seen what was coming and offered a sober, apolitical warning,” Michael Burry, who was head of Scion Capital LLC, wrote in the Times. “Everyone would have listened; when he talked about the economy, the world hung on every single word.”

“Unfortunately, he did not give good advice,” Burry said. In 2005, “Mr. Greenspan trumpeted the expansion of the subprime mortgage market” at a time when “the tide was about to turn,” Burry wrote.

“The signs were all there in 2005, when a bursting of the bubble would have had far less dire consequences and when the government could have acted to minimize the fallout,” Burry said in his commentary.

Burry, who was among the first to bet on subprime mortgage defaults, said Greenspan and other Fed officials have never asked how he came to his conclusions about the market.

“Mr. Greenspan should use his substantial intellect and unsurpassed knowledge of government to ascertain and explain exactly how he and other officials missed the boat,” Burry wrote.

Burry said Greenspan has dismissed those who saw the coming crisis as people who just got lucky.

Posted in Economics, Foreclosures, Housing Bubble, National Real Estate | 100 Comments

NY Fed – September Beige Book

Posted on September 8, 2010 by grim

From the NY Fed:

Beige Book – Second District–New York

Construction and Real Estate

Housing markets have shown further signs of softening since the last report, with much of the weakness again attributed to the expiration of the home-buyer tax credit. Buffalo-area Realtors say the market has cooled dramatically and describe home sales activity as “totally dead” in July and early August; historically low mortgage rates are said to be having little if any positive effect. They also report that pending sales activity has fallen sharply and that the number of active listings has increased. One contact in western New York State anticipates consolidation in the real estate industry, as some agents and brokers are likely to merge or exit the market. Across New York State more broadly, the number of sales transactions fell by roughly half from June to July–a far steeper drop than the seasonal norm–and was down 35 percent from a year earlier. The median reported sales price rose in July and was up from a year earlier, though one industry contact notes that this may reflect a shift in the mix, as the expiration of the tax credit predominantly affected the lower end of the market. An authority on New Jersey’s housing industry reports that market conditions appear to be weak but concedes that underlying fundamentals are difficult to gauge during this perennially slow season. With builders holding off on new construction, inventories have gotten quite low, though prices still seem to be drifting lower. Most of the multi-family development along New Jersey’s “Gold Coast” (across from Manhattan) has now shifted to rentals.

In New York City, conditions were more mixed. Activity in the city’s co-op and condo market has fallen off by somewhat more than the seasonal norm in July and August, following a brisk second quarter; activity has dropped off particularly sharply on Long Island and, in general, at the lower end of the market. A leading appraisal firm reports that prices remain essentially flat in Manhattan and across New York City generally. The appraisal business has reportedly remained strong. Manhattan’s rental market, though still somewhat slack, has continued to recover: rental activity has remained stable at a moderate level, while effective rents have rebounded–contract rents have risen only modestly, but landlords are offer fewer concessions (i.e. fewer months free rent). A considerable volume of new development will be coming onto the market, probably largely as rentals, in the months ahead.

Posted in Economics, New Jersey Real Estate | 118 Comments

Are we looking at the wrong set of borrowers to save?

Posted on September 8, 2010 by grim

From HousingWire:

40% of subprime mortgages stand delinquent, can prime be next?

Mortgage analytics firm CoreLogic is reporting, in data provided to HousingWire, subprime delinquencies are steadily trending downward; though the firm’s main economist warns the performance of prime mortgages may be a growing concern, especially considering economic hardship can suddenly hit any American family, regardless of the types of housing debt they hold.
…
Overall, the numbers show that despite the decrease in volume, subprime mortgages still account for the grand percent of current delinquent loans and foreclosures across the board.

As of June, 39.6% of the subprime loan market is 60 days delinquent — 35% of that is 90 days delinquent, 13% of that are now in foreclosure and 3.8% of mortgages are real estate owned.

But that’s comparable to the nearly 6.5 million prime mortgages that fit into the same delinquency categories, where 60+ day delinquencies are not showing a significant decline and foreclosures continue to steadily inch upward, now passing the 2% mark.
…
Prime loans, however, made it pass the housing bubble without much default or trouble because or they were not susceptible to price fluctuations. Fleming warned that the impact percentage of delinquent loans in the prime space have been masked because the volume is so huge. Compared to the less than 3.5 million subprime, there are about 40 million prime loans in the marketplace, 6.2% of which were 60 days delinquent in June 2010 and 3% of which were 90 days delinquent.

“If you’re looking at delinquencies and foreclosures by data type you’re comparing 16% versus 40%,” said Fleming in an interview. “But that’s 16% of 40 million loans (prime) versus 40% of only 2 million loans (subprime),” which equals 6,355,506 delinquent prime mortgages versus 950,448 delinquent subprime mortgages.
…
“Maybe we need policy to look at what kind of loans people have,” Fleming said with regard to decreasing delinquency. “If I were a policy maker I would be focusing law toward the prime space.”

Posted in Economics, Foreclosures, Housing Bubble, National Real Estate | 73 Comments

“If we keep trying to stimulate the market, that’s the definition of insanity.”

Posted on September 7, 2010 by grim

From the NY Times:

Housing Woes Bring New Cry: Let Market Fall

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”
…
The deteriorating circumstances have given a new voice to the “do nothing” chorus, whose members think the era of trying to buy stability while hoping the market will catch fire — called “extend and pretend” or “delay and pray” — has run its course.

“We have had enough artificial support and need to let the free market do its thing,” said the housing analyst Ivy Zelman.

Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”

A small decline in home prices might not make too much of a difference to a slack economy. But an unchecked drop of 10 percent or more might prove entirely discouraging to the millions of owners just hanging on, especially those who bought in the last few years under the impression that a turnaround had already begun.

Posted in Economics, Housing Bubble, National Real Estate | 113 Comments