Aug162013
Inventory up, demand down, the standoff over cloud inventory begins
In my opinion, the housing market has reached an important inflection point. Through May of this year, thanks to restricted MLS inventory and super low interest rates, sellers were firmly in control of the market. Anything put up for sale sold quickly, often well over asking prices with a plethora of competing bids.
As prices pushed higher, many distressed loanowners found comparable sales value reaching the outstanding balance of their loan. This is an opportunity to get out from under the debt on the house they really can’t afford, so many of them listed in hopes the rising bids would take them out at the ask. The influx of inventory has been significant.
As distressed sellers finally saw the light at the end of the tunnel, an event we all knew was coming — rising interest rates — came upon us sooner than anyone expected. The stampede for the exits in the bond market has sent mortgage interest rates up nearly 30% (from 3.5% to 4.5%), and recent activity in the bond market foretells even higher mortgage interest rates in the future. Rising rates cut the legs out from under the market. Buyers can’t stand tall and bid to peak prices on their flatlining incomes.
So where does this leave us?
We now have a large number of cloud inventory listings. These sellers can’t reduce their price because they need to pay off a big loan. So no matter how much of this inventory comes to market, it won’t put downward pressure on prices. It isn’t must-sell inventory, it’s can’t sell inventory. Potential buyers can’t finance the asking prices these sellers need to complete a sale. What we have is an old-fashioned Mexican standoff where neither party can pull the trigger. The market may stall and go nowhere.
What are the potential outcomes?
The reason I believe this is an important inflection point is because something in the market is going to change.
It’s possible that mortgage rates will fall again, and the rally will continue. With the imminent fed taper, this doesn’t seem a likely scenario.
It’s possible that the weight of this inventory will snuff the rally out. With the nature of cloud inventory, this doesn’t seem a likely scenario either.
It’s possible that buyers and sellers will be frozen in their unarmed Mexican standoff and sales volumes will fall. This scenario does seem likely. To some degree, this will come to pass over the next six to nine months.
Prices will be volatile. We may see pockets where prices rise significantly, and we may see areas where prices completely stagnate. This will probably play out in a random fashion depending on what neighborhoods and communities attract the remaining buying interest and what ones don’t. I expect the buying interest to be strongest in the most undervalued markets because the marginal buyers who find themselves priced out of the neighborhoods they really want substitute down to bargain neighborhoods. As the market pauses to catch its breath, the uneven relief rally may even itself out.
Housing Inventory Rose in July
By Nick Timiraos — August 13, 2013, 11:58 AM
The number of homes being offered for sale is rising heading into the softer part of the summer, a sign that higher home prices could be encouraging more sellers to test the market, according to a report released Tuesday.
Nationally, the number of homes for sale stood 5.2% below the levels of a year earlier. But inventories rose by 1.4% from June, an indication that the inventory crunch could finally be easing, data from Realtor.com showed. Compared with June, listings rose in 17 of the 30 cities.
The 1.96 million homes listed for sale was the highest since last September, according to the report.
Four cities posted increases in the number of homes for sale from one year earlier, led by Atlanta, where inventories were up almost 17.9%. Listings increased by 16.7% in Sacramento, Calif., by 6.8% in Los Angeles, and 2.8% in Orlando. Prices have risen strongly in all of those cities over the past year.
The number of listings is up in OC about 25% off the bottom, but it’s still down more than 30% from last year.
Despite the talk about resurgent demand, sales volumes are down 7.9% from last year’s levels.
Inventories stood below year-earlier levels in the remaining 26 cities, falling most sharply in Detroit (-30.2%), Boston (-28.9%), Denver (-25.1%), San Francisco (-19.4%), and Las Vegas (-19.1%).
Interesting that San Francisco, a market where prices were never allowed to deflate, has surging demand and declining inventory, and Las Vegas, the worst of the bubble crash markets also has surging demand and declining inventory. The demand for both markets comes from different places. In San Francisco, the economy is better, and the many highly-paid tech workers are bidding up prices. In Las Vegas, the economy is still in the doldrums, but the hedge funds are buying everything they can.
Another wild card: how homeowners respond to mortgage rates that have jumped by at least a percentage point over the last two months.
I think we have some idea how this wild card is playing out.
Real Estate competition eases up in July
Market competition balances out after peaking in March
Brena Swanson — August 15, 2013 11:44am
Competition for homes across the U.S. dropped in July, online real estate firm Redfin reported Thursday.
Last month, 63.3% of all offers obtained by Redfin agents landed in the middle of a bidding war, down from 68.6% in June and the peak of 75.7% in March.
Some of the more competitive markets — including Orange County and San Diego, Calif. — experienced steep drops in competition from June to July.
Redfin agents claim rising home prices, interest rates, inventory levels and buyer fatigue played a role in easing market competition during the summer months.
The rising inventory and flagging demand has also been noted by some of the astute observers on the blog:
Russ Wetherill says:
August 15, 2013 at 11:28 am
Here is what I am seeing in my area right now. On June 3rd, there were 9 active, 12 pending, and 14 sales in the last 3 months. As of this morning, there are 19 active, 2 pending, with 26 sales over the last 3 months. Seems like buyer activity was more or less absorbed during the last 3 months, and/or the rates have driven many buyers off the fence and back into their rental. …
The inventory has risen here from 82 to 114 (6/3 to 8/15). Prices are all about 10% too high. This is a very different market if prices are 10% lower. I keep looking for the pot of gold at the open houses I attend, but somehow it eludes me… The values just aren’t there for the amount down and monthly payment. Not all the sellers have to sell at these prices, however. About a third bought at the peak and are looking to breakeven. Twenty percent bought in 2009-12 and are looking for a windfall. The rest are long-term equity sellers. Apparently, they are all getting the same bad listing advice from their realtors based on what the prices were 1-2 months ago. There hasn’t been a single house go pending here in the last three weeks (July 27), and that was a cash sale that closed in 4 days. Two wheels are off the cart, and the other two are perilously close to the end of the axle.
IMO, this is the direct result of the spike in interest rates.
Perspective says:
August 15, 2013 at 1:59 pm
Sales have slowed to a crawl in our neighborhood. When we listed in late June there were two other listings. Today there are 13 (including ours). A nearly identical comp to ours listed two weeks ago. That homeowner bought in 2010 and is looking to earn a nominal profit. We bought in 2007 and are looking at a 10% loss, if we sell at a reasonable price.
Nobody makes an announcement when the market shifts, but based on these inventory anecdotes, we may be seeing it happen now.
The blog’s astute observations
I have been thrilled by the quantity and quality of the comments on this blog of late. At the time of this writing, there were 76 comments on yesterday’s post, and 40 to 50 is becoming the norm. Although the number of blog commenters is usually only about 1% to 2% of the total readership, they provide a great resource for discussing these issues and exploring different points of view. I’ve always considered these comments one of the best features of the blog. It gives this forum life.
I know I recently thanked all of you for your participation, but I want to do it again. Your contributions are immeasurable. Thank you.
Typical OC Ponzis
Ponzi living was a very common lifestyle during the housing bubble. With houses appreciating at rapid rates, and with banks eager to give free money to anyone who wanted it, many people became dependent upon their yearly infusions of cash. Appreciation was treated like wage income.
The former owners of today’s featured property paid $216,000 back on 8/27/2001. The rode the wave of appreciation and extracted $165,400 in mortgage equity withdrawal. The couldn’t afford the new payments, so they defaulted and gave up the house in a foreclosure auction last year.
[raw_html_snippet id=”newsletter”]
[idx-listing mlsnumber=”PW13160389″ showpricehistory=”true”]
235 North BERNIECE Dr Anaheim, CA 92801
$358,900 …….. Asking Price
$216,000 ………. Purchase Price
8/27/2001 ………. Purchase Date
$142,900 ………. Gross Gain (Loss)
($28,712) ………… Commissions and Costs at 8%
============================================
$114,188 ………. Net Gain (Loss)
============================================
66.2% ………. Gross Percent Change
52.9% ………. Net Percent Change
4.3% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$358,900 …….. Asking Price
$12,562 ………… 3.5% Down FHA Financing
4.32% …………. Mortgage Interest Rate
30 ……………… Number of Years
$346,339 …….. Mortgage
$96,521 ………. Income Requirement
$1,718 ………… Monthly Mortgage Payment
$311 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$75 ………… Homeowners Insurance at 0.25%
$390 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,493 ………. Monthly Cash Outlays
($354) ………. Tax Savings
($471) ………. Principal Amortization
$20 ………….. Opportunity Cost of Down Payment
$110 ………….. Maintenance and Replacement Reserves
============================================
$1,797 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,089 ………… Furnishing and Move-In Costs at 1% + $1,500
$5,089 ………… Closing Costs at 1% + $1,500
$3,463 ………… Interest Points at 1%
$12,562 ………… Down Payment
============================================
$26,203 ………. Total Cash Costs
$27,500 ………. Emergency Cash Reserves
============================================
$53,703 ………. Total Savings Needed
[raw_html_snippet id=”property”]
I concur. When I was in the market all I found was wrecks for low prices. Add in the need for 80-100k (no joke) of remodel due to how badly houses were trashed and it was no longer such a good deal. I was not looking for a rental or investment I was looking for another home to move to and I needed and wanted specific items.
The few houses I did bid on I got killed by cash buyers and people who were putting down 50% and bidding up the price. I wasn’t willing to go in huge debt over a house. I bowed out late last year when house prices went full retard. And we have top tier credit no bad marks. And 20 down and no debt. Bu that’s not good enough anymore
I’m seeing a LOT more inventory and houses not selling are starting to slap people in the face. I wonder how many slaps are people that bought for idiot price gonna feel when house values drop and they are left holding a potato they can’t sell. I bet that 3.5 % interest rate with your whopping 3% down isn’t so great when you’re underwater by 50-100k and your office said we need you to move to Idaho or quit. Yeah go try to sell that monstrosity to someone. I guess manipulating the market. Only works for a while but reality has a way of coming out and mess things up again.
“I guess manipulating the market. Only works for a while but reality has a way of coming out and mess things up again.”
We are seeing this play out on the small scale now, but imagine how this will look in five years after the bubble has been fully reflated, a new crop of buyers is locked in at peak prices, then interest rates go up to 7% again. The scenario you described with the 3% down crowd being trapped underwater will repeat all over again, but with a great many more people in that predicament.
It’s also possible that the flip houses lead the prices back down as they are the only ones that CAN reduce their price (profit) and get out.
This MIGHT lead to some price deflation, which COULD cause the organic sellers to de-list because they can’t sell at the lower prices.
Flippers are about the only must-sell inventory that could come to market in this environment. The banks have nearly completely stopped foreclosures, so we know this inventory won’t come from them. Homebuilders will slow their construction if the market cools, so they won’t be a big source.
Any decline in prices could cause these cloud inventory organic sellers to de-list, but they will return the moment prices rise again. That’s the nature of cloud inventory.
I am trying to get away from boomer hatred, but then I read things like this:
They are going to be coddled until death – well, beyond that, possibly, as we could well be taxed to pay for their burials and cremations.
I am no longer convinced that a generation-long boomer real estate sell-down is coming. We have to protect this big, politically-powerful class, who as senior citizens will be voting regularly, and we must protect the banks from their own stupidity. Elderly boomers will be allowed to squat for years at taxpayer expense.
I still don’t see, however, how we get a sustained increase in prices without income growth or massive population growth through immigration giving us more, and larger households (combining incomes under a single roof). We can have temporary bubbles, but there is simply not enough income-backed demand to prevent slow, Japanese style price deflation.
One thing: I no longer believe in the free-market fairy, in any way, shape or form. Yeah, the market will fix things – it is a force that cannot be denied in the long term – but the new equilibrium will occur after trillions of dollars have been shoveled from more rational beings to less rational ones, and massive resources misallocated. There is no economic principle which will right the injustices being done now. The market will only bring down the last in the chain of schemes, and the final correction may not happen in my lifetime.
That is a sad but accurate assessment of our future.
Correct: “One thing: I no longer believe in the free-market fairy, in any way, shape or form.”
The idea of a ” free market”, is like many ideologies..merely opium for the masses.
Why does everyone keep assuming that wages will not increase? My sense is that they will, big time, not on a real basis, but on a nominal basis.
Today’s “Saddleback News”, the Register’s local freebee and the most common source for NOT’s showed an uptick last week, followed by more this week. It’s happening.
The peak for OC foreclosures was 5 years ago this month.
The fact is there simply aren’t enough distressed loans in OC to reach the previous peak for NOD’s or foreclosures. When the current price bubble peaks out in a few years and subsequently deflates, you will once again have a wave of foreclosures, including some holdovers from the mid-00’s bubble.
Meanwhile, any upticks in NOT’s are nothing more than noise in the data.
I have to agree with MR on this one. Banks will get more aggressive with squatters on the fringe — those people they can foreclose on without losing much money — but they will continue to bait the rest with hopeless loan modifications and let the remainder squat until prices reach the peak where we can get our slow Japan-style deflation.
Also, I have often wondered that if some of the can’t sell (cloud) inventory will be forcibly converted to must sell (cloud burst) inventory by virtue of death, bankruptcy, divorce, etc.
Thus, prices will be marked to market for that inventory.
Later potential buyers will note those [lower priced] sales via comps.
Would the remaining cloud owners then throw in the towel and take it in the chin?
Could such a scenario be the first stray bullet fired in the Mexican Standoff or are we just shooting blanks?
“Would the remaining cloud owners then throw in the towel and take it in the chin?”
Most of these people can’t take the loss. The numbers are so large, and many of these people were Ponzis who have no other assets other than the home they were borrowing against.
We recently had one of our lender commenters relay the story of his conversation with a BofA banker who said that two-thirds of their short sale requests are rejected because BofA tells the seller they must cover the shortfall. Sellers are either unwilling or unable to do so.
I don’t think we will see voluntary capitulation from loanowners leading to an end of the standoff.
You are absolutely right, we are at an inflexion point….although it won’t show up in this month’s existing home sales.
But the people who follow this blog will know what’s going on long before it pops up in the media.
And this isn’t just about housing either…the possibility for things to go sideways fast is very real at this point. China and Japan are looking particularly squishy and all the taper talk is already pushing the 10-year higher and higher. I expect that Bernanke will leave just as the whole Potemkin edifice begins to crumble leaving the mess to Summers or Yellen.
It’s kindof funny though , isn’t it? I mean. it looks like the banks wanted to increase inventory to cool down prices a bit, but they released the homes just as the market was turning south. Now the decline will be even faster, although I don’t see prices dropping for some time.
The timing of these two events couldn’t have worked out in a worse way for the banks.
Price is a lagging component + you can only suspend gravity temporarily + waves of volatility create tipping points = recaptured equity has become a temporary credit that can simply be deleted.
China is selling their US treasuries. Remember when “those in the know” were saying that China could not stop buying US treasuries, let alone sell? That use to crack me up.
That reminds me of something else the “knowers” use to say; “The Fed will keep rates down until the economy recovers.” Is anyone finally getting a clue that the Fed does not control interest rates? Do they yet realize that the Fed only influences rates, … until it doesn’t.
The MSM simply doesn’t get it. The overhanging debt from the housing bubble is what’s causing the economy to be so weak. Yet, we see stories about how housing and construction are aiding the economy. What would really aid the economy is a mass purging of housing debt through foreclosures and lower house prices. Unfortunately, that isn’t going to happen.
Housing to Continue Aiding Weak Economic Recovery
Despite “lackluster” performance from the economic sector, the housing recovery will press on and stimulate overall growth, according to Freddie Mac’s most recent economic and housing outlook.
Over the past four years since the recession ended, GDP has grown only 9 percent.
At the current rate, the “U.S. has experienced the weakest economic recovery coming out of a recession in the Post-War era,” said Frank Nothaft, Freddie Mac VP and chief economist.
For example, during four-year periods following the past 10 recessions, GDP grew by an average of 17.4 percent, according to the GSE’s report. The recovery beginning in 1949 was the strongest, with GDP growth averaging 26.7 percent, while the 1954 recovery was the weakest, with GDP growth averaging a rate of 10.3 percent.
On the upside, the housing recovery is persisting at a strong pace. According to Freddie Mac, data shows housing starts have risen 18 percent and home sales are up 13 percent year-over-year as of the second quarter. Home prices indices also indicate prices are up by about 10 percent compared to a year ago.
So, despite the “frustratingly slow” growth rate, Freddie Mac expects the housing sector to aid the sluggish economic recovery in three ways.
For one, demand for housing should lead to more construction activity for single-family and multifamily properties and benefit home sales. For the second half of this year, Freddie Mac projects housing starts will average just below one million. If this comes to pass, the six-month period would be the best since the first half of 2008.
Secondly, as rising prices provide greater equity for homeowners, more wealth will be created for American households. This improvement in household wealth generally leads to an increase in consumption spending, according to Freddie mac.
Finally, improving home values should also give a push to small business growth since a “business owner’s home often serves as collateral for a start-up,” the GSE stated.
Freddie Mac also noted research from analysts representing the Census Bureau and the University of Maryland show weak home price improvements have been a key reason for the slow growth of small businesses.
I wonder if lenders will fight like hell to keep the 4.xxx% handle?
Maybe we’ll see 4.999% mortgage rate offers soon, even though they usually move in 1/8’s.
I heard when they will finally partially will privatize Fannie and Freddie you can see increase of 50 bps to 120 bps just due this event. Plus, you need to end QE and ZIRP.
Cost of Renting, Owning Unaffordable for Many Workers Across the U.S.
With the home price recovery moving along faster than income growth, many workers across the country are finding hard work is not enough to pay the bills, according to the 2013 Paycheck to Paycheck report from the Center for Housing Policy (CHP).
The report examined housing costs related to renting and owning for workers in five jobs that deal with travel and tourism across 207 metropolitan areas.
The occupations considered were housekeepers, wait staff, auto mechanics, front desk managers, and flight attendants. After exploring housing affordability for mid-career professionals in those areas, the report found only flight attendants could afford rent for a two-bedroom unit at fair market value in all 207 metros.
On the other hand, housekeepers and wait staff could not afford a two-bedroom unit in any of the 207 metros.
For auto mechanics, a two-bedroom apartment at fair market value was too expensive in 36 metro areas, and for front desk managers, 34 metro areas were unaffordable.
After observing the cost of owning a median-priced home in the 200-plus metros, data from the report revealed housekeepers and wait staff can afford to own in just 8 and 10 metro areas, respectively.
While flight attendants can rent in all 207 metro areas, they can afford to own in 182 markets.
According to the report, popular destinations such as Los Angeles, Seattle, Boston, San Francisco, and New York were generally ruled out for even relatively high-earning flight attendants.
Auto mechanics can buy a median-priced home in 127 metro areas, and front desk managers can achieve homeownership in 133 metro areas.
“One of the most overlooked aspects of this recovery is that for many workers, incomes are not rebounding in step with local housing markets,” said CHP senior research associate Maya Brennan, a co-author of the report. “Even in a strong sector like travel and tourism, wages have not kept pace with the rising costs of renting or home ownership.”
What’s the solution to that problem? I would argue lower prices are the answer, but I don’t expect to see that solution implemented. The political right will say tough stuff, sleep in the street. The political left will propose some kind of aid or subsidy program, perhaps increased Section 8 spending. Of course, that does nothing but drive up rents and make housing even less affordable, but it makes them feel like their doing something.
Wow, it’s going to be a another crazy change in the mortgage rates today. Roller coaster.
They never let the first housing bubble deflate. This is the same bubble as the one that started in the prior decade. BUT, things are different now:
The Bernanke has dropped trillions from his helicopter the last 5 years
The Bernanke’s helicopter is finally running out of fuel
Incomes are mute (no inflation)
Mortgage rates are ending 31 years of perpetual declines
The public will have no more bail outs of the TBTF banks
Affordability is peaked in OC
The way I see it, we just happen to live in the most overpriced real estate market in the entire country. Orange County gentrification will play a huge role in the coming years, as many cities like Fullerton, Anaheim and Huntington Beach are now full of old retired people who have owned the same home for 30+ years.
Assuming the bond market has finally turned the corner and mortgage rates will continue to rise, the only thing that can save OC housing prices in the future are many more jobs and rising incomes.
This is it … the next test is coming.
Correct. we have temporarily reversed the declines of the first housing bubble. this has absolutely nothing to do with cyclicality.
+1
A lot of people buying into ‘opportunities of the past’ are going to be burned simply because QE mutes all market signals and thus the cyclicality aspects.
“the only thing that can save OC housing prices in the future are many more jobs and rising incomes.”
Ultimately, that’s the only fundamental that matters. The MSM has tried to convince us that we can have a durable and sustainable increase in sales prices and volumes with no commensurate increase in employment or income. It just doesn’t add up.
How I hope you’re right; how I fear you’re not.
The problem is that political leaders are convinced that, if there is a bank implosion, most federal officeholders will soon be serving their last term in office. Also, they are surrounded by a bunch of Geithner clones who truly believe that the banks must be preserved, or the republic will collapse.
Plus, the banks contribute so much to the political campaigns of both parties that they basically own them. Our government has been captured by the banking oligarchs, and there isn’t much we can do about it.
“The public will have no more bail outs of the TBTF banks.”
Really? Just what is the public going to do about it? The TBTF fail banks are the shareholders/owners of the Federal Reserve. The Federal Reserve is not accountable to the public or the taxpayers or the voters or the citizens. Where do you think the governors come from?
Richmond’s Seizure Plan Complicated by Size of Mortgages
The city of Richmond, Calif., is seeking to acquire mortgages as large as $1.1 million under its plan to invoke powers of eminent domain to purchase and restructure underwater mortgages.
Some 43 of the mortgages the city wants to purchase or seize have balances over $600,000, according to data that analyst Marc Joffe received through a California public records request and shared with The Wall Street Journal. Mr. Joffe is a consultant to PF2 Securities Evaluations, a New York-based firm that advises on structured-finance valuations and lawsuits.
The data show the largest of the mortgages Richmond has proposed seizing has a balance of $1.12 million, and the city has offered nearly $680,000 to buy the loan out of a mortgage-bond pool that was issued by Countrywide. The second largest loan the city would purchase has a balance of $962,307 and the third, $888,361.
The hefty price tag for some of these loans could complicate the argument made by Richmond city officials that they need to seize the mortgages to help homeowners who owe more than their homes are worth, putting them at risk of foreclosure.
The median loan balance is around $380,000, according to the data Mr. Joffe shared with the Journal.
The high mortgage balances “shows that this is not necessarily a rich-versus-poor or a have-versus-have-not situation,” Mr. Joffe says.
“I think the danger is that other cities will follow” Richmond’s lead, he says.
City leaders in Richmond, a working-class suburb of around 100,000 on the San Francisco Bay, began sending letters two weeks ago to mortgage companies seeking to purchase loans on 624 properties at prices determined by the city. They said they would consider forcing sales via eminent domain if investors resisted. The city is teaming up with Mortgage Resolution Partners, a private investment firm based in San Francisco, to raise the funds to make the purchases.
“The city is acting to protect itself and its residents—not to stick it to the man, or because of moral judgments about the borrower who took out the loan or the lender who originated it,” said John Vlahoplus, the chief strategy officer for MRP. “Anyone who cannot recognize the fundamental public purpose of reducing harm to the community is morally blind.”
Wells Fargo & Co. said in a letter Tuesday to Richmond that it wouldn’t be selling any loans out of mortgage-bond trusts because it doesn’t have the authority to do so.
“The city is acting to protect itself and its residents—not to stick it to the man, or because of moral judgments about the borrower who took out the loan or the lender who originated it,” said John Vlahoplus, the chief strategy officer for MRP. “Anyone who cannot recognize the fundamental public purpose of reducing harm to the community is morally blind.”
Look at this blowhard spout about morality. What about the taxpaying citizens being forced to pay for this collectivist bullshit?
I had the rare opportunity to talk to an advocate of some of these homeowner “assistance” efforts last week at the Annual ABA Meeting. Katie Porter is a UC Irvine law professor whom CA AG Harris appointed to monitor CA’s progress with the National Mortgage Settlement.
I asked why the Settlement didn’t include a “recapture” component for principal reductions (considering areas like Irvine have returned to peak pricing) and mentioned how distasteful this program and many others are to responsible renters and owners. She danced around the question, and then acknowledged how difficult it is to create fairness in these efforts.
Nice. That would have been fun to witness.
Difficult to create fairness? That’s the understatement of the year. The only thing these programs accomplish is to create false hope among the masses, moral hazard, and undue enrichment to a few loanowners.
Since the CSO of this hedge fund seems so passionate about helping the community, perhaps he would be willing to forfeit the profit that his investors earn for seizing mortgages and also accept no salary for his charitable efforts.
LOL! +1
“The data show the largest of the mortgages Richmond has proposed seizing has a balance of $1.12 million, and the city has offered nearly $680,000 to buy the loan out of a mortgage-bond pool that was issued by Countrywide. The second largest loan the city would purchase has a balance of $962,307 and the third, $888,361.”
Why do people with such large mortgages need assistance? Presumably, these are wealthier people or very high wage earners who could either sell off other assets or earn their way back to solvency. Why should they benefit from this program?
FYI, Richmond is a S hole. Worse than Oakland in most areas. I can’t believe ANY home in that city is worth more than 500k.
Yeah, the cloud inventory isn’t going to go away anytime soon.
10-yr bond now yielding 2.82% …
If this trend continues in the bond market, we’re gonna see mortgage rates in the 5’s soon … at least the 30 year fixed.
Don’t worry, I heard higher mortgage rates means more sales. Also, higher gas prices means more miles driven.
Yes … of course, I remember now; “higher mortgage rates means a stronger economy” and rising energy cost means “higher demand” and also “a stronger economy”.
WTF kinda banana republic has our economy become.
It’s called “THE WEALTH EFFECT”.
Translation: it makes the borrower “feel warm and cozy” while is makes the banks and lenders wealthier. Ha ha!
Anything to keep the ponzi scheme going.
We’ve pushed higher than yesterday’s high water mark and it doesn’t look like a positive trend…
I bet you that Bill Gross is not a happy camper these last few months.
BTW, the homebuilders have been crushed since mid May. The last time housing crumbled it started with the builder stocks.
I think we’re beginning the 2nd tier of the inevitable decline in home pricing, and it will certainly impact credit dependent Orange County.
It might a time in the future to post your famous median price tables for Orange County. I remember those well.
TWITTER:
“Pogo said, We have met the enemy & he is us. I say, All asset mkts peaking; W/o central bank ck writing we only have ourselves 2sell2” ~ Bill Gross
2.844…are we entering the vortex?
http://www.mortgagenewsdaily.com/mbs/?Product=FNMA30
off a cliff again…
2.853!
Yipeee!
2.860…I must say, I’m impressed by the run up today.
Any lenders quoting 5% today?
5% mortgage rates are a real possibility. This is going to get ugly.
The first mortgage I got was 5 year ARM at 5.75%.
Hey People, if it is true, that the Fed has done all they can do or all they’re gonna do, then we’re gonna see a melt-up in mortgage rates … All the prognosticators who have made their predictions for mortgage rates likely missed this point.
If mortgage rates increase to the 5’s, then the 6’s and higher, no community will feel it more than Orange County where we currently have 1st time buyers spending 5-6 times their annual income. Normal housing markets around the country, where people pay 2-3 times their income to buy a house will not decline like Orange County.
Just imagine what authentic & organic mortgage rates look like?!?, now place that cost of that money on a typical $750,000 single family house in Orange County. Train Wreck!
Why is no one considering the possibility that the Fed will increase QE?
Re-Ponzi, the bankster way.
FHA offers mortgage backing to the once bankrupt
Potential homeowners who fell on hard times during the recession are being offered a lifeline back into the housing market, via the Federal Housing Administration.
According to a letter sent to mortgage lenders, the FHA said it would offer mortgage insurance to borrowers who, during the recession, filed for bankruptcy or lost their homes through a foreclosure or short-sale proceeding.
The insurance is now available to those who can prove they are no longer financially compromised — and met all other FHA requirements.
“FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage,” the letter says.
Besides the burden of proof on the borrower to demonstrate a recovery from the “economic event,” the potential homeowner must also complete housing counseling. This event would need to result in a minimum loss of 20% of the household income.
The FHA is requiring lenders to verify at least a year has passed since the foreclosure and the economic event is responsible for the loss of the home or bankruptcy.
They are really desperate for more bodies to buy houses.
Just because the FHA will allow it doesn’t mean lenders will originate it. Lenders are still on the hook for buy-backs if these loans go bad, and most will be hesitant to make these loans to Ponzis from the bubble.
FHA ML 2013-26:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee
So, only 12 months elapsed is required from your BK and/or short sale/foreclosure before FHA qualification may occur. Oh, and don’t apply if you strategically defaulted.
Fannie Could Curb Low-Down-Payment Loan Purchases
Fannie Mae is in discussions to curb its purchases of mortgages that require a minimum down-payment of 3%, according to people familiar with the discussions.
Fannie never stopped accepting purchases of loans with 3% down payments, even after lending standards were ratcheted up following the housing bust. But many lenders stopped offering them, in part because they weren’t able to obtain mortgage insurance for those loans, which Fannie requires.
In recent months, however, a series of changes in the mortgage market have led to an uptick in low-down-payment loans available for sale to Fannie. That prompted a review of the company’s lending policies, and officials are said to be working on a plan to limit the company’s purchases of these loans. The changes aren’t being made because of concerns about loan performance, according to people familiar with the discussions.
Freddie Mac stopped backing such mortgages several years ago and requires a minimum 5% down payment. Any loans without a 20% down payment at both companies must have mortgage insurance or some other type of so-called “credit enhancement.”
One proposal would be to continue purchasing only those sold by housing-finance agencies, which typically require home buyers to complete financial counseling. “We regularly review our standards and guidelines,” said Andrew Wilson, a Fannie Mae spokesman. “Any changes to our guidelines will be communicated to the market at the appropriate time.”
Even though Fannie hasn’t bought many of these loans, low down-payment loans have remained widely available throughout the housing downturn largely due to federal agencies, including the Federal Housing Administration, which insures mortgages with down payments of 3.5%. Veterans and rural homeowners can still obtain loans without any down payment through separate federal agencies, though they face some restrictions.
But Fannie is seeing more low-down-lending headed its way in part because the FHA has recently increased rather sharply the insurance premiums charged to borrowers. Private mortgage insurance companies, meanwhile, have begun to remove certain restrictions, or so-called “overlays,” that had limited the loans to a smaller group of borrowers. Better terms and growing availability of private mortgage insurance has made it possible for more lenders to offer low-down-payment mortgages that can be sold to Fannie.
“In recent months, however, a series of changes in the mortgage market have led to an uptick in low-down-payment loans available for sale to Fannie.”
This is one move lenders have made in response to higher rates cutting off the refinance business. You’ll start to see other stories like this more frequently.
With the huge decline in originations over the last 60 days, the cost pressure of all that overhead will either motivate lenders to relax standards or lay off a lot of people. I suspect we will see both.
Beyond 3.5%, The ‘Rotation’ Becomes Disorderly
As BofAML notes, the consensus is now that a 3.5% 10Y rate is enough to trigger a disorderly rotation by which institutional investors are unwilling (based on risk expectations) to bid for the yieldier credit market debt as retail flows out.
http://www.zerohedge.com/news/2013-08-14/beyond-35-rotation-becomes-disorderly
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I wouldn’t be surprised if the actual target is well below the 3.5 mark (which has been put out there for public consumption). just say’n.
If the real number is 2.85%, then things are about to get “disorderly.”
Can you image how the market is going to move when they finally announced who has been nominated to replace Bernanke? It’s going to be nuts.
In Santa Barbara, a similar market to coastal OC, active listings have NOT increased in the last 2 months; declined if anything. Sales seemed to take a breath for a while after the uptick in rates, but have resumed a fairly steady pace. Closing prices haven’t reached the 06 peak yet, but there are some WTF listings trying for peak pricing. Those don’t sell, but anything “reasonably” priced (5-10% below peak) still moves pretty fast.
Commentary: Summers Time?
With Ben Bernanke set to leave his post as Federal Reserve chairman next January, we could be set for a history-making appointment.
No, not the first female chair of the Fed if vice chair Janet Yellen is promoted, but a chair who is pegged as sexist if Lawrence Summers gets the nod.
There would be a certain irony if President Obama were to appoint Summers given the president’s track record on women’s issues and the debt he owes women for first his election and then re-election. But, when dollars are at stake, principles suffer.
The choice of the new Fed chair takes on added significance given the Fed’s relationship with the Consumer Financial Protection Bureau. The Fed dropped the ball in its role overseeing mortgage lenders before the housing bubble burst. Then, Fed chair Alan Greenspan explained he didn’t want the Fed to examine mortgage lenders, fearing they would claim to have received the equivalent of a seal of approval to give false assurances to borrowers.
Summers’ appointment would appear to be justified looking solely at his resume. He’s been Treasury Secretary (under Bill Clinton), Director of the National Economic Council (under Obama), and in between became the 27th president of Harvard.
But it was at Harvard he may have shown his true colors, supporting a protégé, Andrei Shleifer, by having the university in 2005 pay $26.5 million of a $28.5 million settlement of a federal lawsuit brought against Shleifer, a faculty member, and the school. Shleifer remained on the faculty.
During his tenure at Harvard, the school (with Summers’ express approval as both president of the school and a member of the Board of Harvard Corporation) entered into
a series of interest rate swaps, the same sort of derivatives which brought down Lehman Brothers and pushed Bear Stearns into the arms of JPMorgan Chase.
Will Smith should do another version of his song “Summertime”! I wonder how it would go? Lol.
UH OH! HOUSTON WE HAVE A PROBLEM!
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International Investors Dump $40.8 Billion in Treasuries, the Most Ever
Mike Larson | Thursday, August 15, 2013 at 3:35 pm
Did you hear the news out of the Treasury Department this morning? It was an absolute disaster for the bond market — and for good reason:
Foreign holders dumped a whopping $40.8 billion in long-term Treasuries, the biggest exodus from bonds in the history of the U.S.
Worse, June was actually the third month of mass dumping in the past four, for a total of $79 billion. China, the biggest holder of our bonds, unloaded $21.5 billion, while Japan, the second-largest holder, dumped $20.3 billion.
MORE: http://www.moneyandmarkets.com/international-investors-dump-40-8-billion-in-treasuries-the-most-ever-53693
Perhaps that’s where this big selloff is coming from. If foreign money wants to get out of bonds, they will also abandon the dollar.
Getting out of US Treasuries IS abandoning the dollar.
Lee – Remember the folks who use to say, “China can’t stop buying our bonds. You’re insane if you think they will sell them”? Their rational went something like, “The bank can foreclose if you owe them $100,000, but not if you owe them $100,000,000.” I think they also said that China can’t stop buying our bonds because that would mean they would lose buyers for their products. Too many mouth off something they heard on Squawk Box.
Institutional money is fleeing in droves…
Gold Bull Paulson Cuts SPDR Stake by Half in Bear Market
Billionaire hedge fund manager John Paulson, who told investors as recently as last month that they should own gold, cut his holdings in the metal by more than half as prices plunged into a bear market.
The hedge fund is following other money managers who have been more aggressive in getting out as investors lost faith in gold as a store of value. Prices plunged by a record 23 percent in the second quarter as U.S. equities rallied and inflation was muted, while the Federal Reserve suggested it will reduce fiscal support for the economy. Billionaires George Soros and Daniel Loeb sold their entire SPDR stakes in the past quarter, U.S. Securities and Exchange Commission filings showed.
This year, gold has dropped 19 percent, heading for the first annual decline since 2000.
Gold is heading for the biggest annual loss since 1997. In 2013, the MSCI All-Country World Index of equities has climbed 10 percent, and the Bloomberg Dollar Index gained 3.5 percent. The Standard & Poor’s GSCI Spot Index of 24 raw materials has advanced 0.3 percent, and the Bloomberg U.S. Treasury Bond Index declined 3.1 percent.
The value of global gold ETPs has plummeted by $56.1 billion this year.
Gold probably won’t see any “lasting gains” until investors stop selling ETP holdings, Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said on Aug. 8.
The metal jumped 70 percent from the end of 2008 through June 2011 as the Fed bought more than $2 trillion of debt. Fed Chairman Ben S. Bernanke is contemplating how to finish a third round of so-called quantitative easing that has swelled the central bank’s balance sheet to a record $3.59 trillion.
I’m a buyer until DOW:Gold nears 1:1.
Real interest rates remain negative.
Love all the negative press.
QE infinity. Gold is on sale.
The gold bashers have become my favorite contrary indicator.
matt-
The Dow:Gold ratio is meaningless because the Dow is a price weighted index. The 30 Dow components could do a 10:1 stock split tomorrow to hit your ratio but it wouldn’t mean anything in real life.
When stocks bottomed in March ’09 that was the inflection point. Gold has severely underperformed stocks ever since.
Now, this is the funny part. Experts are having a hard time predicting the end of the week, I doubt they can do 2017.
Experts Predict Annual Home Value Appreciation to Exceed 6 Percent in 2013
More than 100 real estate and economic experts predict home values will end 2013 up 6.7 percent from the end of 2012, as the housing market recovery continues to widen and accelerate, according to the latest Zillow Home Price Expectations Survey. A majority of the panel also said that while rising mortgage rates don’t pose a threat if they stay within the 4 to 5 percent range, they could derail the recovery if they reach 6 percent or higher.
The survey of 106 economists, real estate experts and investment and market strategists was sponsored by leading real estate information marketplace Zillow, Inc. and is conducted quarterly by Pulsenomics LLC. Panelists said they expected median U.S. home values to rise to $167,490 by the end of this year, up from $156,900 at the end of 2012 and $161,100 currently. Based on current expectations for home value appreciation over the next five years, the panelists on average predicted that U.S. home values could approach new record highs by the end of 2017, coming very close to the previous peak level of $194,600 set in May 2007.
The expectations for a 6.7 percent year-over-year increase in home values was up significantly from expectations of a 5.4 percent bump predicted the last time the survey was conducted.
Panelists expect annual home value appreciation rates this year to end on a strong note, before slowing considerably from 2014 through 2017. Panelists said they expected appreciation rates to slow to roughly 4.4 percent in 2014, on average, unchanged from the previous survey. This rate is expected to slow further to 3.6 percent, 3.5 percent and 3.4 percent in 2015, 2016 and 2017, respectively. Cumulatively, survey respondents predicted home values to rise 23.7 percent through 2017, on average, up from 22.3 percent in the last survey.
“Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand and low inventory. Combined, these factors will continue putting upward pressure on home values for the next few months,” said Zillow Senior Economist Dr. Svenja Gudell. “But the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise and more inventory becomes available. Over the next few years, these trends will help the market stabilize and will bring home value appreciation more in line with historic norms. As long as mortgage interest rates don’t rise too far and too fast, most markets should be able to absorb these changing dynamics while still remaining healthy.”
The ONLY question I would have for the 106 economists, real estate EXPERTS, etc, is how well did they call and personally profit from the last real estate cycle?
[…] ———— Inventory up, demand down, the standoff over cloud inventory begins – OC Housing News – In my opinion, the housing market has reached an important inflection point. … This […]
[…] ———— Inventory up, demand down, the standoff over cloud inventory begins – OC Housing News – In my opinion, the housing market has reached an important inflection point. … This […]