Economics Topics
Economics Topics
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Housing Crash?
Calculated Risk has links to 22 “Housing Sites” in the left-hand column. Several of these focus on the possibility of a bubble.
Sentiment in the housing market in England and Wales deteriorated to its weakest level in more than 30 years in April as the global credit crisis weighed on demand and reduced the number of transactions, the Royal Institution of Chartered Surveyors said Tuesday.
The latest RICS housing market survey found ...
For less than the price of a decent used car, you can buy a home in Atlanta today. Actually, real estate agents list a dozen choices for $10,000 or less. Step up in price to $20,000 ...
In the first three months of this year, banks have launched preliminary foreclosure actions - known as lis pendens proceedings - against a record 120 borrowers in East Hampton and Southampton towns.
...
"This problem didn't even ...
The NYT took a strong position on its editorial page today demanding that President Bush join its effort to keep house prices unaffordable for tens of millions of families. That's right, the NYT wants housing to be unaffordable.
They didn't use this term, but they complained that house prices were ...
In Southern Spain, bitter expats talk about "Helldorado" - paradise that has mutated into a nightmare. Tumbling property prices, a glut of new properties still flooding onto the market and rising Spanish ...
From the North County Times: HOUSING: Signs of life appear in Southwest Riverside County (hat tip Tony)
... the southwest corner of Riverside County may be showing signs of ...
Even as the housing foreclosure crisis deepens, legislation to rescue homeowners and their lenders appears to be in significant political jeopardy.
The bill, which passed the House on Thursday, is quickly becoming ...
The argument in this piece is that over time, a series of "opportunistic" changes in the statistics describing the economy have led to a biased and overly rosy view of the health of our economic system. You can read it for yourself, there's a link to the article below along ...
The number of people who are losing their homes because they cannot meet rising mortgage bills is set to double this year, experts said yesterday.
...
The number of repossession orders granted in England and Wales in ...
Bankers and housing market analysts are warning of a chilling new trend in the mortgage world: Homeowners voluntarily defaulting on their ...
Millions of Americans are “upside down” on their mortgages — they owe more on their homes than their homes are worth. So far, however, there is little evidence that people who ...
In a 266-154 vote ... lawmakers approved a proposal ... to let the Federal Housing Administration (FHA) insure up to $300 billion in new loans over four years if lenders agree to reduce the mortgage principal.
To qualify, the lender would ...
More on the administration's opposition to the Democrat's plan to limit foreclosures and reduce the chances of a deep drawn out recession:
Keeping Families Above Water, by David Wessel, WSJ: The latest flash point in the debate over the nation's bursting housing bubble is this: Since ...
[The following chart] from Wellesley College Prof. Karl E. Case, one of the leading experts on the housing market in the country. And it suggests we may be at, or near, the bottom of the housing crash. ...
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March ...
From a Newsweek interview with ex-NAR economist David Lereah: It’s Going to Get Worse
"[I] just didn't realize the scope, the extent, the magnitude of the loose underwriting—not looking at incomes ...
The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will ...
D.R. Horton's latest quarterly results included $834.1 million in pretax charges related to inventory impairments and land options it's walking away from.
...
Reflecting ongoing weakness in the residential market, D.R. Horton's net sales orders fell to 7,528 homes ...
Bernanke, in a speech in New York yesterday, also reiterated his call for lenders to forgive portions of mortgages for some struggling homeowners. He said proposals should be "tightly targeted" at borrowers at greatest ...
Traxis Partners MD Cyril Moulle-Berteaux argues the US housing downturn is all but over:
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), ...
In the April survey, domestic and foreign institutions reported having further tightened their lending standards and terms on a broad range of loan categories over the previous three months. The net fractions of domestic ...
Bank of America Corp is likely to renegotiate its deal to buy Countrywide Financial Corp down to the $0 to $2 level or completely walk away from it, said Friedman, Billings, Ramsey, [analyst Paul Miller] ...
Countrywide's loan ...
An economist, Professor Amir Sufi (University of Chicago), shifted our focus in the afternoon session from debtor, to lender, behavior. In discussing his paper, Lender Incentives, Credit Risk, and Securitization: Evidence from the Subprime Mortgage Crisis, Professor Sufi asks why lenders made such bad decisions when making subprime mortgages. He ...
This first graph shows real Case-Shiller house prices for Los Angeles and the Composite 20 Index (20 large cities). The indices are adjusted with CPI less Shelter.
The US housing market is quite clearly the single most relevant issue that will decide shape, depth, and length of the US economic downturn, and its spillover to the rest of the world hence our continued interest in the subject. The best information source on the US housing ...
In February alone, prices fell 5% in San Francisco, and over 4% in Phoenix, Las Vegas ...
Eli Broad ... said he expects home prices to drop another 20 percent.
``I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, ...
Homeownership vacancy hit 2.9% in Q1 2008.
Graphs later (I'm at the conference)
Home sales decreased 24.5 percent compared with the same period a year ago, while the median price of an existing home fell 29 percent.
“Sales continue to be impacted by problems in the real estate finance ...
Robert Frank argues that as we decide who is responsible for the housing crisis, we shouldn't place too much blame on families who overextended themselves. They were, for the most part, trying to avoid sending their children to inferior schools:
Don't Blame All Borrowers, by Robert H. Frank, Commentary, Washington ...
Its no secret the U.S. is undergoing a housing slump of historic proportions, as todays new-home sales data reveal. Research by Goldman Sachs finds that in other housing busts throughout the OECD, Not only did GDP growth typically fall sharply, but it stayed below trend for many years, write economists ...
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LIVONIA, Michigan (Reuters) - Realtors in many U.S. states say lenders are demanding excessively high prices before allowing distressed borrowers to offload their homes in "short sales," making the housing crisis worse.
In a short sale, a borrower dumps the home at below-market value and ...
Economists and others weigh in on the existing-home sales report, which showed a drop in resales and the median home price.
There are many factors in play which are continuing to restrain home sales. Most notably, home prices have being falling at an accelerating pace, keeping potential buyers ...My buddy, Buce over at Underbelly, has a post up using the concept of option value to help explain why more people are not walking away from their underwater homes. By "underwater," we're not talking about Homer Simpson's imaginary home under the sea, but situations where the mortgage ...
Yale University economist Robert Shiller ... said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% ...
Bank of America said on Tuesday it plans to stop offering some riskier mortgage loans after it finishes buying Countrywide... the combined businesses will not offer "option" adjustable-rate mortgages ...
It also plans to "significantly curtail" other non-traditional mortgages, ...
For forecasting, probably the most important number in the existing home sales report is inventory; houses listed for sale. This tells us nothing about the number of distressed homes for sale (REOs, short sales). It also doesn't tell ...
Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them ...
Here’s a lesson many Floridians have learned the hard way: All hurricanes have three parts—the front half, the eye and the back half. The eye is a deceiving ...
Viles features one house on his blog L.A. Land: The foreclosure 'discount': 45% in Glassel Park. Check it out! Here is another:
There was a post on IEB in December 2006, on whether there was a bubble in Indian real estate (Link), courtesy IEB reader Annamalai Veerapan.
16 months later, Annamalai is back with a follow up post on the real estate bubble. It is reproduced below in full –
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Who is owning ...
"Canada's six-year housing market boom is officially over," said Douglas Porter, deputy chief economist at BMO Capital Markets."
The Canadian Real Estate ...
Some key points:
Housing permits in March fell sharply to 927 thousand at a seasonally adjusted annual rate (SAAR). This is the lowest since 1991.
Single family housing starts were at 680 thousand SAAR. This is ...
Merrill will report $6 billion to $8 billion in new write-downs, according to a person familiar with the matter. The latest would bring its total since October to more than $30 billion ...
$30 billion ...Slate is writing Here Comes the Next Mortgage Crisis.
Riverside County, outside Los Angeles, may be the foreclosure capital of the country, with a rate close to six times the ...
“With the traditional home buying season now well underway, we have not seen the bump in sales activity that we normally would this time of year.”
Sandy Dunn, NAHB president, April 15, 2008
The seasonal boost in sales between February and March was ...
A total of 12,808 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 18.8 percent from 10,777 the previous month but ...
From Jon Lansner at the O.C. Register: March home price ($506,000) is a 4-year low
DataQuick’s final count of Orange County home-buying activity last month shows the median selling price for all residences at $506,000 — the lowest since ...
The onset of spring did little to thaw Southern California's semi-frozen housing market: The seasonal boost in sales between February and March was less than half its normal level and a record low. The weak start to the ...
The NAHB reports that builder confidence was at 20 in April, unchanged from 20 in March. Usually housing bottoms look like a "V"; this one will probably look more like an "L". (this refers to activity like starts and sales, but ...
Several of the nation's major regional banks, from the Deep South through the Midwest, said on Tuesday that plummeting housing prices and other financial strains on borrowers are forcing large ...
U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.
More than 234,000 properties were in ...
Well, not entirely. When it comes to housing, lower prices don’t inevitably cause sales to rise. Why? Because lower housing prices create the expectation of still lower prices later, causing buyers to wait for a better deal. Left alone, a weak market ...
U.S. mall vacancy rates rise as economy slides
The vacancy rate at U.S. strip malls rose to the highest level since 1996 in ...
``Given WaMu's disproportionate exposure to states'' where home prices are forecast to decline, Goldman expects losses between $17 billion and $23 billion, the analysts wrote. Washington Mutual may have a $14 billion provision charge in 2008 ...
Yes - a ...Mortgage Guaranty Insurance Corp., for example, changed its ...
This morning, CBO released a new study on policy options for the housing and mortgage markets. The paper discusses the potential for federal intervention to ameliorate the situation, by encouraging and removing impediments to private mortgage restructuring or by providing federal financial support. (It does not, however, ...
This is a rather startling NPR piece about NACA, a non-profit housing assistance outfit, recruiting former subprime brokers (on the "it takes a thief" model, apparently). I was struck by the phrasing here (I see this a lot):
Barbosa says she was ...
... finally, tighter credit and overstretched household budgets are pulling prices down.
A collective shudder ran down the spines of British homeowners on Tuesday April 8th when Halifax, a part of HBOS and the country’s biggest mortgage lender, revealed that house prices ...
Henry J. Pulizzi reports from the White House.
The expansion of the Bush administration’s FHASecure program announced Wednesday isn’t a cure-all for the ailing housing sector, the White House acknowledged.
White House spokeswoman Dana Perino said the expanded program will bring the number of people helped by FHASecure to 500,000 by ...
On house prices:
[W]e believe median home prices will decline 20% from the peak in 2006. By contrast, the forecasts we used in November 2007 assumed a decline of 11%.
On unemployment:When we resolved the ...
What were economists saying about housing bubbles and regulation of mortgage markets nearly three years ago? I just came across this post from Jim Hamilton from June 18, 2005:
Another argument that's sometimes raised (for example, by Kash at Angry Bear) is that some of the buyers of homes at ...
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6 from an upwardly revised reading of 86.2 in January, and was 21.4 percent ...
“[C]onsistent with the company’s retail focused strategy, WaMu has made the very difficult decision to exit the Wholesale lending business.”
The Implode-o-Meter reports (not sourced):Washington Mutual will announce later today they are backing ...
Federal Deposit Insurance Corp. Chairwoman Sheila Bair said Monday policy makers needed to consider a more “activist” government response to prevent an escalation of foreclosures even if such measures aren’t “politically popular.” In a speech to the Equipment Leasing and Finance Association at a Washington hotel, Ms. Bair said policy ...
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International banks are scrambling to sell their holdings of Spanish mortgage debt at a steep discount, fearing that the country may be sliding into the worst economic downturn in its modern history.
Deals to buy O.C. existing homes and condos are now above year-ago levels for the first time since Sept. 22, 2005, says the math of Steve Thomas at Re/Max Real Estate Services ...
Alan Greenspan says to quit blaming the Fed for the housing bubble:
The Fed is blameless on the property bubble, by Alan Greenspan, Commentary. Financial Times: I am puzzled why the remarkably similar housing bubbles that emerged in more than two dozen countries between 2001 ...
The apparent froth in housing markets may have spilled over into mortgage markets. The dramatic increase in the prevalence of interest-only loans, as well as the introduction of other, more-exotic forms of adjustable-rate mortgages, are developments that bear close scrutiny. To be sure, these financing ...
[Brent] Meyers began his landscaping project in January, expecting to draw on his home equity loan to pay [the landscaper $75,000 for the project].
When ...
Here is an interview with me on CNBC on the housing market situation in western Europe and the US.
This post from Economics of Contempt looks at the relationship between price bubbles and regulation in housing markets, and poses an hypothesis about how regulation could have influenced the housing bubble. The argument is that regulation causes larger and more sustained swings in prices, and, on the upside of the ...
A year ago, the Mortgage Bankers Association was thrilled to sign a contract to buy a fancy ...
Apparently not, given the discussion of plans to have the government buy up or guarantee large amounts of home mortgages. I hate to be picky, but you cannot -- repeat CANNOT-- have a serious analysis of these proposals without discussing the housing bubble.
The reason is simple. In bubble inflated ...
Consider this troubling question: Do mortgage lenders have any obligation to take over a property that has defaulted on its mortgage?
The short answer, it appears, is no:
I hadn't previously considered this, ...
The March employment data was much worse than expected: NonFarm Payroll down 80,000, Unemployment Rate 5.1%, all prior revisions worsen than previous releases.
Let me be blunt: There is no way to spin these numbers, though that won't stop the usual syncophants and junkies from trying. Only the
Yesterday, we discussed Lender-Abandoned, Non-REO Foreclosures.
That started a robust discussion, leading to a follow up piece by Bob Ivry of Bloomberg: Lenders Buried By Foreclosures Let Late Borrowers Stay in Homes.
According to Ivry:
"Banks are so overwhelmed by the U.S. housing crisis they've started to ...
Everyone knows that housing markets are crashing and burning all over the place: the US, the UK, Spain, and many more besides. But that's not happening here. Here is a graph of housing starts in Canada and the US:
Mullins: Let's look at a specific area. What's happening in Denver, where ...
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Speculation in housing:
Much of the speculation in houses is due leveraging. The buyer puts down 10% on a $500,000 home, first year; price of the home goes up 10% to $550,000. ...
Much has been made in the news about the role of interest rate resets in ...
How far will house prices fall? Implications from the latest WSJ survey.
New York City's residential real estate market is showing the first signs of fallout as U.S. banks and securities firms cut the most jobs in seven years.
Manhattan apartment sales fell in January ...
What's really going on? What's going on is that perhaps $6T of mortgages with a duration of a decade that had been priced at a 1% per year chance of default (with a 1/3 value haircut in the event of default) are now being priced at a 4% per year chance of default. That's ...
What is the source of foreclosures, interest rate resets or falling prices? In this post, I said:
It's easy to explain how interest rate resets could increase foreclosure rates since the monthly housing payment will change as a result of the reset, but why do falling prices cause ...
Alan Blinder gives details on how to structure a modern version of the depression-era HOLC program to help reduce the number of foreclosures and stabilize financial markets:
How to Cast a Mortgage Lifeline?, by Alan S. Blinder, NY Times:
The financial markets are downright scary. And ...
After hitting a record in 2006, sales of vacation homes declined last year as would-be buyers held off purchasing retreats, the National Association of Realtors said.
Vacation-home sales fell 31% to 740,000 in 2007, from 1.07 million in 2006, according to the group’s annual Investment and Vacation ...
“Our industry continues to confront a growing oversupply of new and resale homes, tight mortgage lending conditions and a highly competitive pricing environment. These conditions drove down sale prices and further compressed margins in the first quarter of 2008, prompting ...
One of the reasons that we're sitting here in a recession, facing the worst financial crisis since the Great Depression (according to Alan Greenspan) is that most reporters never reported on the housing bubble as it grew to ever more dangerous levels. The most cited source on real estate markets ...
U.S. home prices are unlikely to recover until at least 2010, [Frank Nothaft, the chief economist for government-sponsored mortgage buyer Freddie Mac] said Thursday, adding that home building this year is likely to ...
Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "Market conditions have remained challenged and continued to deteriorate throughout our first quarter of 2008. The housing industry continues to be impacted by an unfavorable supply and demand relationship, which restricts the volume ...
Like the policeman in Casablanca, who pretended that he was "shocked, shocked" that gambling was going on, El Pais professes surprise that Europe's miracle economy has a housing crisis. Who would have thought that? Housing sales were down 27% annually in January, the Euribor to which ...
The slowdown in Spains real estate is a fact. Recent data released by the INE (National Statistics Institute) confirm the trend most foreign investors acknowledged in recent months. The figures are concerning: a drastic decrease of the sale and purchase of apartments, down 27.1% in January 2008 over the ...
It was clear the moment the Federal Reserve, for the first time since the Depression, last week opened its direct lending window to institutions other than conventional banks that the rules of regulation had to change. The Main Street banks to which the Fed traditionally lends — the ones that ...
Charles Evans, president of the Federal Reserve Bank of Chicago, today became the first Fed official to speak since the central bank lowered interest rates by 0.75 percentage point to 2.25%. Mr. Evans told the New York Association for Business Economics that he expects “weakness” in economic output ...
Apparently the Office of Federal Housing Enterprise Oversight (OFHEO) does.
From OFHEO: OFHEO Issues Final Guidance on Conforming Loan Limit Calculations
The final Guidance addresses the handling of decreases in the house ...
After the number of failed home loans hit a record in 2007, foreclosure filings in Cook County are on pace to top last year’s total by another 35%, based on the first two ...
Home prices in 20 major U.S. metro areas have plunged a record 10.7% in the past year as prices continued to decelerate, Standard & Poor's said Tuesday.
The 20-city Case-Shiller home price index fell a record 2.4% ...
Single-family home prices in 10 major metropolitan areas in January were down 11.4% from a year earlier and down 2.3% from December, according to the S&P/Case-Shiller home-price indexes. The Case-Shiller data aim to track the price path of single-family homes located in a particular metropolitan area by matching price pairs ...
NPR told us that there was good news in the increase in existing home sales reported last month. Sales did in fact rise, although it is reasonable to wonder about the extent to which weather was responsible. Sales in the Northeast rose by 11.3 percent. Since the weather for ...
I am serious. Steven Beard, an analyst interviewed on Market Place this morning, said that the data on existing home sales, which showed a modest increase in sales in February, could mean that the crisis in mortgage backed securities is over.
Excuse me, but do the "experts" on Market Place have ...
Click on graph for larger image.
The first ...
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February from a pace of 4.89 million in January, ...
As is so often the case, I find ...
The ailing U.S. mortgage credit market and housing market is poised to get a lift from a significant potential boost in lending activity by the GSEs (Fannie Mae and Freddie Mac). The ability of the GSEs to respond to the severe ...
More confirmation that the slowdown in housing has spilled over to manufacturing.
As the speculative froth of the housing boom dissipates, which markets are stuck with the most unfilled housing stock? Census Bureau data on annual homeowner vacancy rates in the 75 largest U.S. metropolitan areas help to fill in some of the blanks. Census numbers point to areas in and around ...
This article discusses how small builders all across the country are falling behind on their Construction and Development loans (C&D) and some are filing bankruptcy. This is impacting local small banks too:
Builders' problems ...
From Dow Jones: For Home Builders, Cancellations Create Expensive Problem (no link yet)
Many contracted buyers, spooked by falling home prices or suddenly unsure of their financial state, are fleeing before closing. The average cancellation ...
Back in August of 2007, we looked at the The Ongoing Impact of the Housing Sector.
At the time, I had assigned blame for all of the problems in the credit market to a variety of institutions and people. The blame went as follows:
* Federal Reserve (FOMC)
Subprime is so yesterday as people up and down the income ladder are defaulting on their mortgages in record numbers. After all, why pay off a $400k mortgage on a home that is worth $300K?
I thought that everyone understood this point by now. The problem is the collapse of the ...
Barry Ritholtz doesn't like Alex Tabarrok's"happy talk". Is he talking about this?
If the financial markets can predict where and when house prices will stabilize, then credit conditions can quickly return to normal, the economy can expand and house prices will indeed stabilize.
But ...
Beyond all the news on the causes of, and policy responses to the current US economic crisis focusing almost solely on financial markets, it's worth paying more attention to causes and policy responses for households. One household-level cause fits with the implications of a host of other evidence about credit ...
