Posts Tagged ‘negative equity’

Where is the Bottom for Housing? We May Not Know for Years

Where is the Bottom for Housing? We May Not Know for Years

Courtesy of John Lounsbury writing at Credit Writedowns 

How far are we from a bottom in U.S. home prices?  There are many estimates that there could be another 10% or more for the national average and median prices to decline.  This author estimated that 2010 had a most probable decline around 11% from December 2009, with further declines possible in 2011.  Little decline has actually been seen as prices are quite near where they were nine months ago.  However, in the past couple of months predictions of further price declines have increased.  Two weeks ago I pointed out that the outlook for home prices may be degrading.

20% Price Decline to the Bottom?

Barry Ritholtz provides the following chart, originally from the New York Times, but updated for The Big Picture by Steve Barry.

For larger image, click on graph.

This decline is certainly within the possible limits I have discussed earlier in the year (see here and here) but the projection curve drawn by Steve Barry shows a much more gradual drop to the bottom than I have envisioned. I estimate that he is showing another 3.5 to 4 years to get 90% of the way there and 5-6 years to fully bottom out. My thinking has been that the drop to the final bottom will be much quicker, driven by the weight of foreclosures over the next one to two years.  However, current market conditions are causing me to reconsider.

Could Housing Go Below “Normal”?

What has not been considered by either Barry or me is the recurrence of another depression for housing, such as occurred from WW I to WW II. What sort of economic disaster would cause home prices to decline 55% to 60% from here? That is what would happen if the decline reproduced the 1920 bottom.

Or, asking a different question: What sort of economic disaster would result if home prices declined 55% to 60% from here? In such severe deflation, most mortgagors would default and every mortgage lender would be insolvent. There would be no future TARP or other shenanigan that could accommodate that eventuality.  This will be discussed further later in the article.

Under Water Mortgages

Calculated Risk has an excellent post about underwater mortgages. CR states that 4.1 million homeowners owe 50% or more than their house…
continue reading


Tags: , , , ,




The Pareto Principle and the Next Wave Down in Real Estate

The Pareto Principle and the Next Wave Down in Real Estate 

Courtesy of Charles Hugh Smith Of Two Minds

In February 2007 I suggested a 4% mortgage delinquency rate could trigger a decline in the entire housing market. Since that proved prescient, we should revisit the analytic tool behind that call: the Pareto Principle.Piranha

There is a whiff of euphoria in the housing market, a heavily touted confidence that "the bottom is in." It’s all roaring back--rising sales, multiple bids by anxious buyers, 3.5% down payments, low mortgage rates and the bonus of an $8,000 first-time home buyer credit (a gift from U.S. taxpayers). Housing Lifts Recovery Hopes (Wall Street Journal)

Foreclosure-related sales account for over 30% of all sales nationally, and over 70% in hard-hit markets such as Las Vegas, but like piranhas feasting on a school of weakened fish, nobody in the real estate business mentions the huge losses of capital and equity which created all these "bargains."

All we need for a complete bubble reflation is people avidly gaming the system… oh wait, we have that, too. A recent Time magazine cover story on Las Vegas contained this informative tidbit (courtesy of Michael Goodfellow):

(Realtor) Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that’s about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they’ve been living in at half the price they paid for their old house. Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it’s willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.

Hmm, isn’t this the same recipe of froth, low down payments, cheap, easy mortgage money and scamming which got us in trouble the last time? Only the lenders lose, but then now that Ginnie Mae and FHA have stepped up to replace the disgraced, bankrupt shells of Fannie Mae and Freddie Mac, then it really isn’t the lenders taking the risks, it’s the U.S. taxpayer (again).

It’s…
continue reading


Tags: , , , , ,




 
 
 

Phil's Favorites

Will Bitcoin Crash the Stock Market?

 

Will Bitcoin Crash the Stock Market?

Courtesy of 

When the S&P 500 fell in March last year, it brought Bitcoin down with it. So if stocks can bring down Bitcoin, it’s reasonable to ask if Bitcoin can bring down stocks.*

If you thought the Bitcoin run-up to 60k was emblematic of investor** euphoria, then you probably wondered what would happen if it were to come crashing down. Would that take other high-flying areas of the market down with it?

It might be premature, but as of now, the answer is no.

...



more from Ilene

Digital Currencies

Will Bitcoin Crash the Stock Market?

 

Will Bitcoin Crash the Stock Market?

Courtesy of 

When the S&P 500 fell in March last year, it brought Bitcoin down with it. So if stocks can bring down Bitcoin, it’s reasonable to ask if Bitcoin can bring down stocks.*

If you thought the Bitcoin run-up to 60k was emblematic of investor** euphoria, then you probably wondered what would happen if it were to come crashing down. Would that take other high-flying areas of the market down with it?

It might be premature, but as of now, the answer is no.

...



more from Bitcoin

Zero Hedge

Disappointing 2Y Auction Tails As Yield Jumps To 15 Month High

Courtesy of ZeroHedge View original post here.

Short-term rates moved sharply higher after last week's technical tweak by the Fed which pushed the IOER and RRP by 5bps to 15 and 5bps respectively, which had a downstream effect on all short-term yields, and today's 2Y auction was a case in point printing at 0.249%, the highest yield since March 2020 and a 0.5bps tail to the When Issued 0.244%. This was the biggest tail on the 2Y since July 2020 when the auction tailed 0.9bps.

And yet today's 2Y auction wasn't all bad: the bid to cover dipped from 2.736 to 2.540 yet even so it was right on top of the 6-auction ...



more from Tyler

Biotech/COVID-19

COVID-19: why lab-leak theory is back despite little new evidence

 

COVID-19: why lab-leak theory is back despite little new evidence

...



more from Biotech/COVID-19

Chart School

RTT Plus Bulletin

Courtesy of Read the Ticker

RTT Plus private blog answer these questions over the last two weeks.

Ending: 2021-06-19

- Metal stocks very bullish after gold smash
- FED taper talk vs Basel 3
- Dollar devaluatioin before end of 2021
- COVID, Vaccine insight (off topic)
- The next play for the deep sate (off topic)
- The debt loaded USA can not break these economic stats


RTT Plus membership required to review.

RTT Plus members can include chart building services if you wish. If you you do not want chart building services select 'RTT Plus' only during the membership sign up process.

Sign up now!






...

more from Chart School

Politics

The Ukraine Fallacies (with Victor Rud)

 

The Ukraine Fallacies (with Victor Rud)

Americans are confused about the history of Ukraine. That's just how Russia wants it.

Courtesy of Greg Olear, at PREVAIL

Greg is the author of Dirty Rubles: An Introduction to Trump/Russia 

...

more from Politics

Promotions

Live Webinar with Phil on Option Strategies

 

June is TD Bank's Option Education Month, and today (Thursday, June 10) at 1 pm EST, Phil will speak with host Bryan Rogers about selling options and various option strategies that we use here at Phil's Stock World. Don't miss this event!

Click here to register for TD's live webinar with Phil.

 

...

more from Promotions

Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



more from Kimble C.S.

ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



more from ValueWalk

Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



more from M.T.M.

The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



more from Tech. Traders

Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



more from Lee

Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

http://www.insidercow.com/ more from Insider





About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.