by ilene - April 27th, 2011 2:25 am
Courtesy of Lee Adler at Wall Street Examiner
The S&P/Case Shiller Home Price Indices reported Tuesday are, as usual, so far behind the curve that not only did they miss the “double dip” that has come and gone, it will be at least July or August before it reports an apparent upturn in prices in March and April. S&P’s view of the data was dour. “There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing, ” said S&P’s David Blitzer. “The 20-City Composite is within a hair’s breadth of a double dip.”
There’s just one problem with that. Other price indicators that are not constructed with the Case Shiller’s large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low. Zillow.com’s proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. Zillow’s listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.
The Case Shiller Indices for February held slightly above the January level (not seasonally adjusted). I follow their 10 City Index due to its longer history. It was at 153.70 in February versus 152.70 in January. These levels are still above the low of 150.44 set in April 2009.
The Case Shiller index showed a recovery in prices in 2009-10 only because of the weird methodology it uses. Not only does it exclude the impact of distress sales that have been such a big part of the market, but it takes the average of 3 months of data instead of using just the most recent available month. The current data purports to represent prices as of February. In fact, it represents the average price for December, January, and February, with a time mid point of mid February. These are closed sales which generally represented contracts entered in mid to late November, on average. That means that the current Case Shiller index actually represents market conditions as of 5 months ago. Things can change in 5…
by ilene - October 16th, 2010 6:00 pm
Courtesy of John Mauldin at Thoughts From The Frontline
Trouble, oh we got trouble, Right here in River City!
With a capital "T" That rhymes with "P"
And that stands for Pool, That stands for pool.
We’ve surely got trouble!
Right here in River City,
Right here! Gotta figger out a way
To keep the young ones moral after school!
Trouble, trouble, trouble, trouble, trouble…
- From The Music Man
(Quick last-minute note: I think this (and next week’s) is/will be one of the more important letters I have written in the last ten years. Take the time to read, and if you agree send it on to friends and responsible parties. And note to new readers: this letter goes to 1.5 million of my closest friends. It is free. Now, let’s jump in!)
There’s trouble, my friends, and it is does indeed involve pool(s), but not in the pool hall. The real monster is hidden in those pools of subprime debt that have not gone away. When I first began writing and speaking about the coming subprime disaster, it was in late 2007 and early 2008. The subject was being dismissed in most polite circles. "The subprime problem," testified Ben Bernanke, "will be contained."
My early take? It would be a disaster for investors. I admit I did not see in January that it would bring down Lehman and trigger the worst banking crisis in 80 years, less than 18 months later. But it was clear that it would not be "contained." We had no idea.
I also said that it was going to create a monster legal battle down the road that would take years to develop. Well, in the fullness of time, those years have come nigh upon us. Today we briefly look at the housing market, then the mortgage foreclosure debacle, and then we go into the real problem lurking in the background. It is The Subprime Debacle, Act 2. It is NOT the mortgage foreclosure issue, as serious as that is. I seriously doubt it will be contained, as well. Could the confluence of a bank credit crisis in the US and a sovereign debt banking crisis in Europe lead to another full-blown world banking crisis? The potential is there. This situation wants some serious attention.
by ilene - October 16th, 2010 2:22 am
With risky behavior by big finance again threatening economic stability, how can we get things right this time?
Courtesy of Ellen Brown
Originally published in YES! Magazine
Looming losses from the mortgage scandal dubbed “foreclosuregate” may qualify as the sort of systemic risk that, under the new financial reform bill, warrants the breakup of the too-big-to-fail banks. The Kanjorski amendment allows federal regulators to pre-emptively break up large financial institutions that—for any reason—pose a threat to U.S. financial or economic stability.
Although downplayed by most media accounts and popular financial analysts, crippling bank losses from foreclosure flaws appear to be imminent and unavoidable. The defects prompting the “RoboSigning Scandal” are not mere technicalities but are inherent to the securitization process. They cannot be cured. This deep-seated fraud is already explicitly outlined in publicly available lawsuits.
There is, however, no need to panic, no need for TARP II, and no need for legislation to further conceal the fraud and push the inevitable failure of the too-big-to-fail banks into the future.
Federal regulators now have the tools to take control and set things right. The Wall Street giants escaped the Volcker Rule, which would have limited their size, and the Brown-Kaufman amendment, which would have broken up the largest six banks outright; but the financial reform bill has us covered. The Kanjorski amendment—which slipped past lobbyists largely unnoticed—allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability.
Rep. Grayson’s Call for a Moratorium
The new Financial Stability Oversight Council (FSOC) probably didn’t expect to have its authority called on quite so soon, but Rep. Alan Grayson (D-FL) has just put the amendment to the test. On October 7, in a letter addressed to Timothy Geithner, Shiela Bair, Ben Bernanke, Mary Schapiro, John Walsh (Acting Comptroller of the Currency), Gary Gensler, Ed DeMarco, and Debbie Matz (National Credit Union Administration), he asked for an emergency task force on foreclosure fraud. He said:
The liability here for the major banks is potentially enormous, and can lead
by ilene - September 22nd, 2010 6:03 pm
Courtesy of The Pragmatic Capitalist
I have to say that I have been enormously impressed by Diana Olick’s work at CNBC. She provides superb fact based analysis and reporting. Today, she reports that housing
Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!
by ilene - September 7th, 2010 5:53 pm
Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!
Courtesy of Reggie Middleton
This is part one of my update on residential real estate mortgages, whose credit conditions have seen a marked improvement over the past year. Of course (yes, you know there is always a but), I believe the improvement is the result of the rampant government intervention in the mortgage markets. As we shall see in part two for this update, even with rampant intervention some of the major mortgage institutions are so sick as to appear to be beyond mere assistance. Brace yourself for Financial Meltdown 2.0, open source edition.
Is it really a Housing Double Dip if Conditions Never Stopped Getting Worse?
Many analysts have speculated housing would reenter a “double dip” courtesy of falling home prices, decreasing home sales, increasing housing inventory, and other issues that have not been resolved since the collapse of the housing market began nearly three years ago. Inevitably, housing policy at the federal level has completely failed to support any regeneration of demand.
Mortgage Rates Can’t Find Rock Bottom: WSJ
- The Freddie Mac survey of 30 year mortgage rates has shown new record lows in rates for 11 straight weeks
- 15, 10, and 5 year rates have also continued their free fall as employment data fails to ease fear in the housing market
Figure 1: Courtesy of Freddie Mac
Figure 2: Courtesy of the Kansas City Federal Reserve Branch
Figure 3: Courtesy of the National Association of Realtors
Housing Prices Climb amid Falling Home Sales (the government’s hidden bid at work): CBS
- Foreclosures continue to increase, July home sales fell by 27%, employment conditions are not getting better, and home prices found a way to rise 7%
- Robert Shiller claims the San Francisco market is “booming” after climbing 21% since 2009 (but don’t ask about the record drops in 2008)
- If you are wondering where your unemployed neighbor is spending all of his free time, check and see if there is a distressed homeowners convention in town
Figure 4: Courtesy of the National Association of Realtors
Federal Reserve Still Watching Foreclosure Data: International Market News
- Average property vacancies have increased from 114 days in 2006 to 954 days in 2010
by ilene - August 11th, 2010 8:12 pm
Courtesy of Jr. Deputy Accountant
Anyone remember "whatever it takes"? Whatever it takes, even if it means keeping real estate at artificially high values just to stave off deflation, I guess.
If you guys wonder why I am so desperate to get out of this third world toilet I have called home for the last 11 years, look no further than the following. I hope every idiot who got stuck in a new home just for the $8000 tax break (no offense, WCV) enjoys the financial [violation] to come that is amortized over the next 30 years as still-broke municipalities scramble to pay their bills using property taxes as ATMs. Good luck with that, hope it was worth it!
The Bay Area’s two biggest metro areas had two of the nation’s three biggest housing price gains in the second quarter, the National Association of Realtors reported today.
The median house price in the beautiful San Jose-Sunnyvale-Santa Clara metro area jumped 26 percent year over year to $630,000. In the San Francisco-Oakland-Fremont area, the median price climbed 25 percent to $591,200. (Only Akron, Ohio, oddly enough, had a bigger gain, at 36 percent.)
Of course, prices in both the San Jose and San Francisco metro areas are still down sharply from the peak of the market. In 2007, for example, the median house price was $836,800 in the San Jose area (Santa Clara and San Benito counties) and $804,800 in the San Francisco area (which includes San Francisco, its relatively expensive suburbs in Marin and San Mateo counties, and more affordable — at least by Bay Area standards — communities in Alameda and Contra Costa counties).
Yes, you read that correctly. Read it again just to be sure.
The funny part is we were actually beat out by Akron, Ohio (of all God-forsaken places) as far as percent increases are concerned, though their median $119,700 looks pathetic next to our $591,000. $591,000? Man, what a steal!
Here are other winners and losers from around the country:
1) Akron, Ohio, $119,700 median price, up 36 percent
2) San Jose, $630,000, up 26 percent
3) San Francisco-Oakland-Fremont, $591,000, up 25 percent
Ponzi “Shark Loans” Fuel China’s Housing Bubble; Home Sales Plunge 44% in Xiamen; Bubble Busts in Tianjin
by ilene - July 21st, 2010 3:09 pm
Ponzi "Shark Loans" Fuel China’s Housing Bubble; Home Sales Plunge 44% in Xiamen; Bubble Busts in Tianjin
Courtesy of Mish
China’s property bubble is now on the verge of collapse. Transaction volumes are significantly down and declining volume is how property bubbles always burst. In simple terms, the pool of greater fools eventually runs out.
In China’s case, the pool of fools is heavily involved in "loan shark" schemes where speculators hope property values rise fast enough to cover the interest.
Ponzi Loan Shark Operations Fuel Bubble
In this article we will show how the ponzi shark loan scheme works and why we think the regime in China will fall. Our research is based on sources INSIDE CHINA
This is how this Ponzi scheme works:
Local officials, [required by] the government to produce double digit GDP growth numbers, give real estate developers permits to build housing projects in return for bribes. They also get bribes in return for allowing the shark loan companies to operate under their jurisdiction. Some of them are active partners in shark loan businesses. Every scheme has a ring leader whose job is to collect money from all the participants in the Ponzi scheme. When some of these Ponzi schemes blow up, the party leaders always get bailed out first.
Most of the funds that are collected in this classic Ponzi finance go to local land purchases and real estate development. Part of the funds are used in order to pay back the rolling loan. The short term interest rate in this black market is very high and ranges between 20%-150% annual rate. The sources of the Ponzi funds are diverse, as ordinary citizens, banks with corrupted bank officials, and state enterprises play the game.
A reader wrote to us this email two weeks ago, which triggered our in depth research:
“My hometown is Zhejiang, now I live in shanghai, my sister pledged her home to bank, she lived in Hangzhou, she bought her home around 500,0000rmb five years ago, now her home worth 2 million RMB, so she can get huge loan from bank, she gave this loan to a shark loan company with 30% return every year, she has been doing and living on this for 4 years, she is a middle school
by ilene - June 14th, 2010 11:41 pm
Courtesy of The Pragmatic Capitalist
Today’s chart of the day comes to us courtesy of Robert Shiller at Yale University. The following is Shiller’s famous inflation adjusted home price index. Interestingly, despite a 30%+ decline from peak to trough, housing
by ilene - May 31st, 2010 12:26 am
Courtesy of Mish
Inquiring mind may be interested in an email from Robert Clegg at the University of Calgary regarding housing prices in Canada vs. disposable income.
Robert writes …
Mish, I love your blog and read it daily. I came across this article with respect to Canada’s housing bubble. The articles states, " Canadians are spending more and more of their disposable income on housing. In Toronto, 44% of disposable income goes to housing and in Vancouver the figure is a whopping 68%. The trend is likely not sustainable."
Imagine, 68% of your disposable income being spent on housing costs with the remaining disposable income likely being spent on their favorite Top Ramen and KD dinners. This is insane as well as unsustainable. It’s funny that many Canadians seems to think that the 49th parallel has magically created immunity from a housing bust that in their minds is exclusive to the United States. I can’t tell you how many times friends and acquaintances say that Canada’s banks are sound and there was no sub-prime lending and it just can’t happen here. I’m quick to remind them that the loss of one income from a two income family will in essence convert a low credit risk to a poor credit risk akin to that of a sub-prime borrower real fast. Now, multiply this my hundreds of thousands if not millions of borrows and we too have a major problem in Canada no different from that of the US. Wishful thinking really. The proof’s in the pudding and this puddings going to bring a dose of reality to those that are living in fantasy land, way beyond their means and who apparently have missed the global financial crisis that’s been gaining traction and intensity since August 2007.
We’re not only "Hosers" in Canada but we’re royally Hosed as well!!
Robert Clegg, JD, LL.M
Ombudsman, University of Calgary
Is Canada’s housing bubble about to burst?
Here is the article to which Robert Clegg referred: Is Canada’s housing bubble about to burst?
Canadians are spending more and more of their disposable income on housing. In Toronto, 44% of disposable income goes to housing and in Vancouver the figure is a whopping 68%. The trend is likely not sustainable.
The federal government imposed tighter mortgage
by ilene - May 14th, 2010 11:25 am
Courtesy of Marla Singer, Zero Hedge
On the 5th of March in 1946, in Fulton Missouri, at Westminster College, Winston Churchill delivered an address (since christened the "Sinews of Peace") lamenting the burgeoning power and influence being slowly but surely gathered up by the Soviet Union. Perhaps the address will be familiar to some of you owing to its most famous passage:
From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in many cases, increasing measure of control from Moscow. Athens alone — Greece with its immortal glories — is free to decide its future at an election under British, American and French observation.
Ironic, as I will address, that he should mention Greece.
Much less well known perhaps is this later passage:
Our difficulties and dangers will not be removed by closing our eyes to them. They will not be removed by mere waiting to see what happens; nor will they be removed by a policy of appeasement. What is needed is a settlement, and the longer this is delayed, the more difficult it will be and the greater our dangers will become.1
The "Iron Curtain" came, of course, to signify the cavernous ideological, and eventually concretely physical, divide between East and West. It took some 43 years before it was lifted once more, first and haltingly, in the form of the removal of Hungary’s border fence in mid-1989 and then, of course, finally via the fall of the Berlin Wall in November that same year.
Not to be compared with a production of Italian Opera, the Iron Curtain did not describe a sudden, smooth, abrupt descent over the stages of Eastern Europe. Quite the contrary, its drop was in stutters of discrete, fractional lowerings, such that it was a full fifteen years after Churchill used the term before its ultimate expression, the Berlin Wall, was finally…