Owner: Housing Chronicles URL:www.housingchronicles.com Join Date: Tue, 12 Feb 2008 21:25:46 -0600 Rating:0 Site Description: A blog from Patrick Duffy, a consultant at MetroIntelligence Real Estate Advisors; commentary and news citations on regional, national and international economic and real estate trends. Site statistics:Click here
FBI investigates Countrywide for securities fraud 2008-03-08 16:26:00 Countrywide is one of 15 sub-prime lenders under investigation for potential securities fraud
related to statements about its financial position and the quality of loans in its portfolio. From a Wall Street Journal article:The Federal Bureau of Investigation is probing subprime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives. The inquiry involves whether company officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized...Fifteen other subprime companies also are under scrutiny by federal agents and prosecutors in a broad look at the subprim Read more:Countrywide
, FBI
The New York Times takes on Dunmore Homes 2008-03-06 21:54:00 In a detailed expose set to run in Friday's paper, The New York Times
tells the story of now-bankrupt Dunmore Homes
, which built throughout California's Central Valley for decades. Before selling his company to an investor last year, Sidney Dunmore was also one of the state's most respected homebuilders, who built a solid home and was active in building industry associations. But as the market slowed, over-leveraged bets began to unravel, uncovering what the story says "have come to symbolize the real estate crisis not just for Dunmore Homes, but for an entire industry:"When George P. Dunmore started his business in Sacramento in the early 1950s, World War II was over and the building boom was on. Over the next several decades his company, Dunmore Construction, along with other respected Read more:York Times
Foreclosures Rise as Home Equity Declines 2008-03-06 21:17:00 Not surprisingly, the ongoing decline in home equity has helped the level of foreclosures rise to an all-time high. Without sufficient equity in homes and 100% financing now a thing of the past, borrowers facing re-sets increasingly find themselves without options other than simply walking away from properties. From an L.A. Times story:Home foreclosures hit new highs and the amount of equity in homes reached new lows as the housing crisis escalated across the country in 2007, new figures showed Thursday. Nationwide, nearly 6% of all mortgages were delinquent at the end of the fourth quarter and just over 2% were in foreclosure, the Mortgage Bankers Assn. reported. The number of foreclosures was at the highest level since the association began keeping records in the 1970 Read more:Equity
, Foreclosures
, Home Equity
Builders going 'green' out of necessity 2008-03-06 16:31:00 When sustainable development first emerged a few years ago, most builders weren't willing to risk their production schedules for new building methods and options that were either untested, not in demand by buyers, or both. Even as recently as a couple of years ago, buyers claimed they wanted 'green' homes but weren't willing to pay the extra freight for its benefits. But now, with LEED energy certified projects in much greater demand (especially for commercial buildings but increasingly for residential developments), builders are finding that offering energy efficiency far beyond what's currently available in existing homes can sometimes pry skittish buyers out of hiding. From a Wall Street Journal story:More builders are adding "green" features to their new homes. It is a strategy bor Read more:Builders
Lenders starting to blacklist communities 2008-03-06 16:03:00 Opponents of a government bailout of lenders will undoubtedly have another weapon in their arsenal as mortgage lenders are increasingly blacklisting entire communities or regions, which could lead to an ongoing cycle of related price declines: with fewer lending options available, prices come under even more pressure, which is great for cash buyers but bad for sellers. From a story in the Wall Street Journal:As property values decline and credit markets contract, home lenders nationwide are growing ever more unwilling to finance home purchases in sharply declining housing markets, driving prices down further. In some cases, lenders have ruled out entire geographic regions and property types altogether, most notably high-rise condominiums in South Florida and Las Vegas. Lenders
inclu
How the media's focus on bad news can lead to recession 2008-03-06 14:51:00 One of my biggest beefs with the blogosphere is the lack of balance among many blogs, which pick an agenda and stick to it and deliberately ignore news items which contradict their missions; whereas big newspapers have multiple layers of fact-checkers and editors, blogs are the unedited musings of individuals. While this is certainly the strength of blogs -- which can quickly break important stories often much faster than newspapers -- it's also the concept's weakness, as objectivity can be clouded by specific agendas (i.e., even The Drudge Report tends to lean to the right rather than the center). To be sure, mainstream media
also has their agendas, such as the New York Times' Left-of-center reputation or Fox News' rather obvious embrace of the Right, but when covering issues such as ec
Emerging mortgage fraud a threat to a bailout 2008-03-06 02:20:00 I think one reason that the Bush Administration is so opposed to a wide-scale bail-out of mortgages is because of the amount of fraud
that is coming to light, not only from perpetrators of 'liar loans' but also from those who stole identities or created completely fictitious buyers to purchase investment properties, collect rent from tenants but never intend to pay the mortgages. How widespread could this have been? According to one expert quoted in this story from Reuters, as high as 30%:As the U.S. housing meltdown forces hundreds of thousands of Americans from their homes, the extent to which fraud was a factor in the crisis is just coming to light.Products such as stated-income loans -- known as "liar loans" because no proof of income was needed -- led to widespread misrepresentation Read more:threat
Homebuilders finding discounts working 2008-03-05 21:33:00 In Stage 1 of a housing downturn, homebuilders first try out a variety of incentives such as free upgrades of optional items, allowances at the design center or paying non-recurring closing costs. But as their competitors start to match these incentives, to move inventory they must become more aggressive and sometimes cut list prices.Understandably, builders hate to do this because it erodes the value of their investment, crimps whatever profit margins they have left and angers buyers who might have paid more for the same type of home (which is why price guarantees have recently taken off).But discounts do work, as summarized in a story in the L.A. Times (and which also quotes yours truly): Stuck with excess inventory, builders throughout California are beginning t Read more:working
Housing rescue plans: a summary 2008-03-04 23:54:00 With the various housing rescue plans
being floated by Congress, Fed Chair Ben Bernanke, Wall Street and community groups, it's hard to keep track of each one's respective merits. Fortunately, CNNMoney.com has posted a story that allows a much easier apples-to-apples comparison:The Government FixThe government buys at-risk mortgages from lenders at steep discounts, restructures the loans to reduce payments and resells the loans in secondary markets. Investors in mortgage-backed securities take a loss, but get most of their investment back. Borrowers get refinanced mortgages...The plan would jump-start the market for mortgages by establishing a true market value for the securities backed by these loans. Then investors would start buying the securities again, creating liquidity and making i Read more:Housing
Home values now the best in four years 2008-03-04 22:41:00 Apparently the slump in home prices has happened so fast in many markets that home prices are the most affordable in four years. According to some number crunching done by lender National City and Global Insight, 88% of the 330 metro areas studied showed improvements in affordability that make them more in line with long-term averages. Still, due to enormous negative press, depressing consumer psychology and a serious credit crunch, housing affordability may dip below its long-term trend line before eventually rebounding. From a CNNMoney.com story:Home prices have dropped so quickly and so far that valuations - the difference between what a home should cost and its actual price - are the lowest they've been since 2004, according to a report. The Cleveland-based bank National City Corp.
Enough dithering: we need more action 2008-03-04 22:18:00 Writing in the Daily Telegraph, International Business Editor Ambrose Evans-Pritchard argues that moves by the Federal Reserve and the Bush Administration not only have failed, but that the contagion in credit markets could very well spread far beyond U.S. shores:The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed...Why won't it end? Because US house prices are in free fall. The Case-Shiller index for the 20 biggest cities dropped 9.1pc year-on-year in December. The annualised rate of fall was 18pc in the fourth quarter, and gathering speed.As the graph shows below, US households are only halfway through the tsunami of rate resets - 300 basis Read more:Enough
Bernanke urges banks to adjust mortgages or face 'jingle mail' 2008-03-04 22:12:00 In his strongest words to date by far on the housing and mortgage crisis, Fed Chief Bernanke
gave banks
two stark choices today: be willing to forgive portions of mortgage balances for borrowers underwater or face increasing "jingle
mail" as homeowners walk away from properties and mail in their keys rather than continue paying mortgage payments. From the L.A. Times:Federal Reserve Chairman Ben S. Bernanke said today that the nation's banks must be ready to go beyond stretching out interest payments or trimming rates and write down the principal of some troubled mortgages in order to avoid widespread foreclosures and break the steep dive in housing prices. Speaking to a banking conference in Florida, where house prices have tumbled further than in almost any other state but California, Read more:adjust
Foreclosure moratorium has historical precedent 2008-03-04 15:00:00 Although many laissez-faire proponents continue to argue against any government intervention into the housing & mortgage crises in favor of Adam Smith's "invisible hand" letting free markets create their own solutions, some historians are pointing to the Great Depression, when moratoriums on foreclosures sometimes lasted many years. From a New York Times story:The Bush administration recently announced a plan to delay foreclosures for some troubled homeowners for 30 days. Senator Hillary Rodham Clinton, in the race for the Democratic presidential nomination, has called for a 90-day moratorium on foreclosures.But two state legislators have been quietly pushing for an even longer reprieve for homeowners in New York State: a one-year moratorium...The measure would allow residents to rema Read more:Foreclosure
, precedent
Builders Push for More Ways to Revive Market 2008-03-04 13:26:00 Although the post-Super Bowl traffic at new-home communities throughout the U.S. is rising, tighter credit conditions are keeping cancellation rates at record levels and preventing potential buyers from obtaining mortgages. Consequently, politically connected builders and the NAHB continue to press for more ways to revive the long-flagging housing market in more constructive ways than threatening to withhold donations to political candidates, which was widely derided by Washington insiders as a bit childish and by others as proving a quid pro quo between industry and government. Frankly, however, what did builders have to lose at this point in the cycle? From Nation's Building News:With reports from crucial markets around the country that the traffic of prospective home buyers has been p Read more:Builders
, Market
, Revive
Fannie and Freddie to raise appraisal standards 2008-03-03 23:14:00 Bowing to pressure from New York Attorney General Andrew Cuomo, GSE giants Fannie Mae and Freddie
Mac have agreed to institute new standards for appraisals related to the loans they buy in order to avoid potential collusion between lenders and appraise
rs. While I'm sort of curious why this wasn't done years ago (and along the lines of the City of Los Angeles' self-congratulatory press release for finally getting around to synchronizing 75% of the city's traffic lights, with the remaining 25% along the routes I tend to travel), it's an important step in giving lenders the confidence to open up the credit lines for an eventual housing rebound. From an L.A. Times story:Mortgage giants Fannie Mae and Freddie Mac agreed today to revamp their home-appraisal standards to eliminate the type of al
Could the housing doomsayers be wrong? 2008-03-03 19:54:00 Although the mission of Housing Chronicles is to provide a balanced portrayal of the housing market and related economics, that's not been easy to do lately, with various prognosticators calling for cataclysmic peak-to-trough pricing declines approaching 40 percent. So it's certainly nice to provide the occasional item that suggests that the doomsayers might be off the mark for a variety of reasons.At the Motley Fool -- which has no reason to either support or discourage homebuilding activity -- writer Marko Djuranovic suggests that home prices in many areas may be reaching the bottom for this cycle for reasons that have not been previously discussed: A recent BusinessWeek cover story touted the idea that housing prices could fall by another 25%. Although some areas are looking at a pre
Hope Now helps 1 million homeowners 2008-03-03 15:54:00 The Hope Now coalition of lenders created by the Bush Administration reports that it has helped 1 million
homeowners at risk of foreclosure. Of that amount, 278,000 actually saw their loans modified, while the remainder were put on repayment plans to make up for missed payments. So will this plan have long-term benefits or it is merely a band-aid? It depends on the borrower and their circumstances. From a CNNMoney.com article:Hope Now, the foreclosure prevention coalition put together with the Bush administration's support, claims dramatic success in helping at-risk mortgage borrowers stay in their homes. The groups has reworked more than 1 million mortgage loans since July, Treasury Secretary Henry Paulson said in a speech before the National Association of Business economists on Mond
Vacant Home Inventory at Record High 2008-03-03 12:27:00 Due to tight credit and high cancellation rates at new-home communities nationwide, the inventory of newly built homes that remain vacant stands at about 200,000 -- the highest level noted since the Commerce Dept. started tracking this data in 1973. While most builders have dramatically scaled back their operations and ceased building out new communities, in order to get some cash flow to maintain their core operations many have no choice but to complete existing projects. Apparently that doesn't sit well with many recent homebuyers, but given the choice between appeasing critics or staying solvent, which would you choose? From a Bloomberg story: Almost 200,000 newly constructed single-family homes are sitting empty in the U.S., the most since Commerce Department statistics began in 197 Read more:Inventory
, Record
Launch of a new industry: mortgage-related lawsuits 2008-03-03 11:52:00 Like NASCAR entrants gunning their engines awaiting the green light, attorneys are gearing up for what could be one of the biggest legal paydays in history: the subprime debacle. From an L.A. Times story:First came the sub-prime mortgage boom. Next was the bust. Now, as surely as day follows night, come the lawsuits.All large-scale financial scandals spawn mountains of litigation, but the sub-prime fiasco stands out because of the complexity of the system that funneled more than $1 trillion from investors around the world through Wall Street and mortgage lenders to borrowers with dicey credit. As losses mount on those loans, the scene of the blame game is shifting to the courts.Sub-prime borrowers are suing loan brokers and lenders, accusing them of deceptive practices. Wall Street firms Read more:industry
, Launch
, related
The dark side of reverse mortgages 2008-03-02 01:03:00 One week after the article I wrote on reverse mortgages for the Los Angeles Times was published, the New York Times also takes a look -- although the tone of that story is more focused on the perils of unscrupulous companies which sometimes try to sell unsophisticated seniors on annuities and other financial instruments they don't understand -- with potentially dire consequences. This is why it is so important to get expert, objective advice -- other than from the company offering the reverse mortgage. And just go for the reverse mortgage alone -- other financial instruments such as annuities can always be considered after the sale is complete:As the United States has become an older nation, reverse mortgages have grown into a $20-billion-a-year industry, with elderly homeowners taking o
A leaner (meaner) economy 2008-03-01 23:30:00 As the U.S. economy
continues to compete more in a worldwide economy, it seems that the old rules for finding and keeping a job no longer necessarily apply. College education? Nope. Master's degree? Depends what it's in -- and even then it may not help. At the same time that the country continues to reel from the worst housing bust since the Great Depression, many companies are simply refusing to hire new bodies -- and those which do have become increasingly picky. From a New York Times article:Across the nation, the labor market has been deteriorating. Many companies, long reluctant to add workers, are hunkered down and waiting for improved prospects, engaged in what Ed McKelvey, a senior economist at Goldman Sachs, calls “a hiring strike.” Americans with jobs are taking cuts to
How did so many people miss the housing bubble? 2008-03-01 23:10:00 Several years before the housing bubble burst, there were a few lonesome voices in the media -- such as Yale's Dr. Robert Shiller and former UCLA Anderson Forecast's Chrisopher Thornberg (now with Beacon Economics) -- insisting that there would be serious consequences to pay for rising home values that had no connection at all to underlying economic fundamentals. In the aftermath comes the obvious question: how did such an important story stay for so long under the radar? Dr. Shiller has an answer, which he provides in the New York Times:ONE great puzzle about the recent housing bubble is why even most experts didn’t recognize the bubble as it was forming.The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets Read more:people
Appraisal reform to raise overall fees to borrowers 2008-03-12 14:21:00 The good new is that reforms for the appraisal of residential properties will increase the objectivity of the process. The bad news is that it's going to cost borrowers more, mostly because a new appraisal will be required for each application, which mortgage brokers say will make them less competitive because they often submit to multiple lenders. But change may be on the horizon in terms of technology, with a start-up firm proposing to create a database of existing appraisals much like the business model for credit reporting bureaus. From a CNNMoney.com story:In a recent agreement with New York State Attorney General Andrew Cuomo, Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) pledged that they will only buy mortgages from lenders that use independent appraise
rs. Since these two Read more:Appraisal
Demographics point to strong future apartment market 2008-03-12 12:37:00 A good catch on the Lansner on Real Estate blog this morning about apartment
s. The National Multi-Housing Council is predicting that 75 million 'echo boomers' will put upward pressure on rents given that construction (aside from the over-building in the for-sale market) has not kept up with demand. What does that mean? Once the inventory overhang in single-family homes and condos is absorbed (which contributes to the 'shadow rental market'), the opportunity for multi-family investors looks very bright indeed:“The outlook for the apartment industry going forward is very strong,” said Mark Obrinsky, HMHC chief economist. “The nation’s 75 million echo boomers are already entering the housing market, and most begin as renters. … Strong immigration levels add even more demand for r Read more:point
Real estate brokerage partners with auction company 2008-03-12 12:32:00 Rather than continue to compete with either traditional or web-based home auction companies, a Coldwell Banker brokerage in Florida has partnered with an auction company
. Given the increased acceptance by consumers of auctions (in large part due to the success of services such as eBay) plus the explosion of information now available on the Internet, I'd expect this type of alliance to be a sign of things to come -- and to stick around even as the housing market recovers. From a story in the Tampa Bay Business Journal:Coldwell Banker Residential Real Estate Florida is now offering clients the option of auctioning property through a new affiliation with Daniel DeCaro Real Estate Auctions. Auction services are added to Coldwell Banker's offerings to clients looking to sell homes in Centr
Now home equity loans increasingly souring 2008-03-12 12:18:00 A few years ago, when homeowners were using their home equity lines of credit and loans as "ATMs," it was great news for lenders who aggressively pushed them with lines as small as $10,000. For those lenders which largely avoided sub-prime loans -- such as Wells Fargo -- it also initially appeared much safer. Unfortunately, the potential loss models used by these lenders were wrong, and greatly underestimated default rates, and now home equity loans are going bad at a rate they just didn't anticipate. From a story in the Wall Street Journal:When times were good, banks raked in billions of dollars in profit from home-equity loans, which allow borrowers to tap the accumulated value in their property with either a loan for a specific amount or a line of credit. As long as home prices were
Wall Street Journal: A good time to buy a house -- with caveats 2008-03-11 22:01:00 It's one thing when the real estate agent who sends you those calendars each year tells you that it's a good time to buy. It's another when the Wall StreetJournal
's Real Estate Journal section echoes that same sentiment. Still, such an endorsement comes with its own set of caveats:For years rapidly rising prices kept many first-time home buyers out of the housing market. But as home values slide further downward and interest rates hover at relatively low levels, it may be time to start looking to buy that first house. That is, if you have a secure job, can afford higher down payments than were required a few years ago and can meet lenders' much stricter income and credit requirements...The U.S. median home price was $201,000 in January, down 4.6% from January 2007. The S&P/Cas Read more:Wall Street
, Wall Street Journal
Recommend Site To A Friend
