Americans have finally come to terms with the housing crisis, according to Zillow's Q4 Homeowner Confidence Survey, after surveys in recent months revealed an overwhelming majority of Americans were actually in denial over the state of the housing market.

More than half of America's homeowners — 57 percent — believe their own home lost value during 2008, according to the survey. This is markedly more than the 38 percent who believed their home's value was declining when asked during the second quarter of 2008.

In reality, 76 percent of all U.S. homes lost value in 2008, according to analysis of the Zillow Q4 Real Estate Market Reports. With these new findings, Zillow's Home Value Misperception Index shrunk to 10 in the fourth quarter, from 16 in the third and 32 in the second quarter. An index of zero would mean homeowners' perceptions were in line with actual values.

"It's clear that the 'not my house' sentiment that was so prevalent in earlier surveys is waning, and homeowners are opening their eyes to the unfortunate reality of significant losses in home values across most of the country," said Dr. Stan Humphries, Zillow's vice president of data and analytics.

However, when asked what the near future will bring for their homes, most homeowners expressed optimism, and appear to believe that the worst may be over — believing perhaps, we've bottomed out. According to the survey, more than two-thirds of homeowners believe their home's value will either increase or stay the same in the first six months of 2009. Only 30 percent believe it will decrease.

"[T]here's a curious optimism for homeowners when asked about the future – most seem to believe we've hit a bottom and the worst has passed. Unfortunately, the data tells another story. With year-over-year home value losses continuing to accelerate, most areas of the country will see housing values get worse before they begin to stabilize."

But homeowners' optimism for the future doesn't necessarily extend to their neighbors' homes. While 70 percent of homeowners think their own homes' values will increase or stay the same in the first half of 2009, only 52 percent believe home values in their local market will increase or stay the same during the same time period. 48 percent think values in their local market will decrease, but only 30 percent believe the same will happen to their own homes.

Homeowners are still more optimistic about their local market than in the third quarter, however, when 57 percent said values in their local market would decrease in the next six months.

Write to Kelly Curran at kelly.curran@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Mortgage applications dropped a seasonally adjusted 24.5 percent in the week ending February 6, 2009, according to a weekly survey released Wednesday by the Mortgage Bankers Association.

Refinance applications slouched a significant 30.3 percent, making up 66.7 percent of total applications, compared to 73.2 percent the prior week.

MBA's purchase index eased 9.8 percent, reaching its lowest level since 2000. The seasonally adjusted conventional purchase index decreased 11.1 percent, while the government purchase index decreased 7 percent. The widespread decline in mortgage application volume might be contributed to the slight, yet steady increase in mortgage rates seen in the last few weeks; although, in the week ending February 6, the MBA found rates actually decreased.

The four-week moving average of raw application volume, which often corrects for undue volatility, declined a whopping 20 percent from the previous week. The four week moving averge is down 8.7 percent for the seasonally adjusted purchase index, while the average is down 23.9 percent for the refinance index.

A separate survey conducted by Mortgage Maxx LLC — which adjusts raw application volume to account for multiple submissions by a single household — showed application activity slipped 9.3 percent on a seasonally adjusted basis for the week ending February 6.

"The bloom is definitely off the MAX as a second wave of mortgagors fails to materialize," said Paul Descloux, Mortgage Max publisher. "With rates now moving up and a four percent mortgage rate so far mythical, a repeat of 2008 may well be underway unless the Fed can buy down rates."

Write to Kelly Curran at kelly.curran@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Commercial and multifamily mortgage loan originations were no exception to the falling trend seen in single-family home originations over the past year. Fourth-quarter 2008 originations for commercial and multifamily mortgages were a whopping 80 percent lower than the same period the prior year, according to a quarterly survey released Tuesday by the Mortgage Bankers Association. And that year-over-year decrease was seen across all property types and investor groups.

"Commercial and multifamily mortgage lending slowed to a trickle in the fourth quarter," said Jamie Woodwell, vice president of Commercial Real Estate Research at the Mortgage Bankers Association.  "[O]riginations for all of 2008 were down approximately 60 percent from 2007 levels.  Between the worsening economy and the continued credit crunch, lenders are extremely cautious about lending and borrowers are likely to hold onto the assets and the loans they already have."

The decrease in total commercial and multifamily mortgage originations was led by a drop in commercial mortgage-backed security (CMBS) conduit loans and loans for commercial bank portfolios — a reflection of the credit crunch and other market disruptions, the MBA said.

When compared to fourth-quarter 2007, the overall 80 percent decrease included an 82 percent decrease in loans for retail properties, a 76 percent decrease in loans for industrial properties, a 72 percent drop in loans for office properties and a 62 percent decrease in multifamily property loans.

In a quarter-over-quarter comparison, fourth-quarter 2008 mortgage originations were 53 percent lower than originations in the third quarter of 2008. Compared to the third quarter of 2008, fourth quarter originations for retail properties saw a 75 percent decrease. There was a 68 percent decrease for industrial properties, a 63 percent decrease for office properties, and a 33 percent decrease for multifamily properties.

Write to Kelly Curran at kelly.curran@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Treasury Secretary Geithner unveiled details of a "comprehensive" financial stability plan Tuesday morning, admitting the strategy "will cost money, involve risk and take time." "We will have to try things we've never tried before," he said. "We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted."

It is essential for every American to understand that the battle for economic recovery must be fought on two fronts, Geithner said. "We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families." Under this framework, the Treasury is establishing three new programs.

Stress tests
For starters, banking institutions will be required to go through a carefully designed comprehensive stress test, if you will. "We want their balance sheets cleaner, and stronger," he said. "And we are going to help this process by providing a new program of capital support for those institutions which need it."

The Treasury's investments in these institutions will be placed in a new Financial Stability Trust. The government assistance will come with terms that should encourage the institutions to replace public assistance with private capital as soon as possible, Geithner said.

"We believe that access to public support is a privilege, not a right. When our government provides support to banks, it is not for the benefit of banks, it is for the businesses and families who depend on banks… and for the benefit of the country."

Public-private investment fund
Alongside the new Financial Stability Trust, together with the Fed, the FDIC, and the private sector, The Treasury will establish a Public-Private Investment Fund. This program will aim to provide government capital and government financing to help leverage private capital in order to get private markets working again. Treasury believes the program should ultimately provide up to one trillion in financing, but will start it on a scale of $500 billion.

1 trillion to support lending
Working jointly with the Federal Reserve, Geithner said the Treasury will commit up to a trillion dollars to support a Consumer and Business Lending Initiative. The initiative is meant to kickstart the secondary lending markets, to bring down borrowing costs, and to help get credit flowing again.

The lending program will be built on the Federal Reserve's Term Asset Backed Securities Loan Facility, announced last November, with capital from the Treasury and financing from the Federal Reserve.

"We have agreed to expand this program to target the markets for small business lending, student loans, consumer and auto finance, and commercial mortgages," Geithner said. The government will also take additional steps to make it easier for small businesses to get credit from community banks and large banks. By increasing the federally guaranteed portion of SBA loans, and giving more power to the SBA to expedite loan approvals, Geithner and his team believe they can turn around the dramatic decline in SBA lending that's occurred in recent months.

The government will also, according to Geithner, launch a comprehensive housing program. He said the President has asked his economic team to come together with a comprehensive plan to address the housing crisis, the details of which will be announced in the next few weeks.

"Our challenge is much greater today because the American people have lost faith in the leaders of our financial institutions, and are skeptical that their government has – to this point — used taxpayers' money in ways that will benefit them," Geithner said. "This has to change."

He said the government's work will be guided by the lessons of the last few months and the lessons of financial crisis throughout history. "As costly as this effort may be, we know that the cost of a complete collapse of our financial system would be incalculable for families, for businesses and for our nation," concluded Geithner.

Write to Kelly Curran at kelly.curran@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

As friction in Congress continued over the emerging Senate version of the financial stimulus bill Monday, two political adversaries sat down to friendly debate at the American Securitization Forum in Las Vegas. Karl Rove and James Carville never seem to fail to provide entertainment; the two also met in October at the Mortgage Bankers Association conference in San Francisco. The political environment and national awareness of the housing market has changed in the months since, but Rove and Carville are the same as ever.

In a lunch hour conversation littered with mild profanity and the occasional crescendo from civil discussion to an all-out yelling match, former deputy chief of staff Karl Rove went so far as to blame GSEs Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) for "increasingly more imprudent" behaviors that led to the current credit crisis. In response, Carville harshly criticized the GOP (with words we're not comfortable publishing) for nitpicking the spending initiatives in the financial stimulus bill after causing the massive deficit handed to the new President Barack Obama.

Carville, who was the lead strategist on the campaign of President William Clinton, defended government spending and changed roles of GSEs and other government agencies to lead the economy out of recession. "This country has been hit by a tsunami," he said. "Everything is going to change. It may be better, but it's going to be different." However, rebuilding trust in the market will be gradual, Carville said, mirroring events that followed the Great Depression, when people were hesitant to spend and invest in the market. "Government has got to let private investors get some skin in the game," he said.

Rove, of course, took the conservative view, saying the more important changes in the face of the crisis should take place outside the political arena. He predicted consumer behavior will change; people will start asking themselves if they need to consumer as much and leveraging on debt will shrink as consumers adopt "much more prudent views of risk," according to Rove. The government role in the crisis should be building positive responses (rather than Obama's warning of "catastrophe" without action) and careful inspection of the stimulus package to determine which government spending initiatives will really create jobs and promote economic growth, he said.

But Carville called attention to President George W. Bush's push for action on passing the Troubled Asset Relief Program with few administrative details which would later come under criticism for a lack of oversight. "Didn't I hear months ago if we didn't pass TARP, the 'whole sucker could go down'?" Carville said. "It's time we level with people. We've got to deal with this, and we've got to do it now. We can't spin our way out of it."

Rove pointed out inconsistent spending initiatives within stimulus bill that he said will not do enough to create jobs, specifically investments in education, which already displays job growth, and health care IT, the goal of which he said is making computer systems more efficient and cutting down on manpower. "Let's do something good" about the situation, he said. "Let's not pass this piece of trash…. It kills jobs."

The $830 billion-plus fiscal stimulus bill passed a Senate vote mid-Tuesday.

Write to Diana Golobay at diana.golobay@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

U.S. housing prices, as we know, continued a nationwide decline in December. In a report released Tuesday, Integrated Asset Services, LLC, a provider of default management  and residential collateral valuations, revealed just how far they fell. December's decline of 1.1 percent was actually less severe than November's 1.7 percent decline, but consistent month-over-month price drops brought the full-year 2008 decline to 13.8 percent. And since the market's peak at the end of 2006 through December, housing prices fell 19.1 percent.

"We're seeing house prices returning to pre-bubble levels and there are no signs of leveling off just yet," said Dave McCarthy, president and CEO of Integrated Asset Services. "But location is still everything, and in this turbulent market the ability of the IAS360 House Price Index to gauge movement at the neighborhood level will make it the most vital house price index to watch for signs of a recovery."

The IAS360 tracks home sales down to the neighborhood level, and then rolls up local totals in 360 counties, nine census divisions, four regions, and the nation overall.

December's IAS360 House Price found the hardest hit counties in 2008 were typically located –not surprisingly — in states that experienced the largest gains during the housing bubble, California and Florida in particular. California fared the worst with three of the nation's hardest hit counties: San Joaquin County, down 51 percent from its high in 2006, Monterey County, down 49 percent, and Kern County, down 45 percent.

At the U.S. Census region level, both the West and the South experienced double-digit declines for the full year 2008. The West, which dropped a significant 18.4 percent in 2008, fell an even more astonishing 24 percent from its peak in 2006, while the South, down 12 percent during 2008, was off nearly 18 percent from its high. The Northeast posted less severe declines of 9.4 percent for 2008 and 11.7 percent from its peak. The Midwest, despite significant declines, was the least impacted region in the U.S., and posted declines of 7.4 percent in 2008 and 10.4 percent from its peak.

If you break the figures down even farther, San Francisco, San Diego, and Miami were the hardest hit areas in 2008. Within San Francisco's metropolitan area, Contra Costa County declined at an astonishing rate of 35.5 percent during 2008 and 42.2 percent since its 2006 peak. Although, San Francisco's Marin County and San Francisco County posted much lower declines of 11.3 percent and 13.9 percent  from the 2006 high, while declines accelerated to 15.4 percent and 16.1 percent across 2008.

Write to Kelly Curran at kelly.curran@housingwire.com.