Archive for February, 2010
"If a big non-bank institution gets in trouble and threatens the whole system, there ought to be some authority that can step in, take over that organization and liquidate it or merge it — not save it," Volcker said on CNN.
"It's called euthanasia, not a rescue."
But Elkhart also symbolizes the failure of federal efforts to turn around the housing slump at the heart of the economic crisis. Housing in this community has become almost entirely dependent on a string of federal support programs, which are nonetheless failing to prevent a fall in prices and a rise in mortgage delinquencies.
More than one in 10 mortgage holders in Elkhart is seriously behind on payments. The median sales price has plunged to the level of a decade ago. Many homeowners owe more than their home is worth, freezing them in place for years. Foreclosures recently hit a record.
To the extent that the real estate market is functioning at all, people here say, it is doing so only because of the emergency programs, which have pushed down interest rates on mortgages and offered buyers a substantial tax credit.
As HousingWire reported over the weekend, sellers boosted asking prices on homes in the United Kingdom by 3.2% over January, according to UK property database Rightmove.
Scarce new sellers of UK homes bumped up asking prices to a national average £229,398 (US$359,499), while asking prices on London homes (like those pictured above) reached an all-time high, according to the February Rightmove house price index released Monday.
The monthly rise in average asking price is the highest it's been in years, since April 2007, Rightmove said:
The UK housing market, which has been "stock-starved", saw more than 90,000 new listings during the month, Rightmove said. The boost in asking prices, although "surprising" in the current economic setting, is supported by high demand particularly in areas short in supply. Asking prices of London homes, for example, reached the highest average Rightmove has recorded.
"Sellers are setting their sights higher, and some agents are going along with them in order to win scarce instructions," said Rightmove commercial director Miles Shipside. "Property for sale remains scarce in popular areas, but new supply to the market has to be priced at what buyers are willing and able to pay."
Shipside warned, however, that these homes may not actually sell at the higher average asking price.
"An average increase of over £7,000 may prove to be a bit too spicy for some buyers’ tastes, now that economic constraints have forced them to develop a simpler palate,” he said.
Scarcity of London property for sale and agent demand for new stock pushed the average asking price of London homes up by 5% to a new record of £427,987, Rightmove said. That price is up 10.3% from a year earlier.
“Where supply remains well below historic levels, which is especially noticeable in parts of London, upwards price pressure looks sustainable," Shipside said. "The average asking price in London has now reached a new high twice in the space of five months, with this month’s price toppling the record set in October 2009 of £416,157.”
Average national asking prices are now 6.1% – or £13,300 – higher than a year ago. Rightmove indicated new UK property coming to market will likely continue to be at higher prices in the first half of 2010.
Write to Diana Golobay.
A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues:
The Federal Deposit Insurance Corp. (FDIC) reported no bank closures over the weekend. The last bank to be shut down by regulators was 1st American State Bank of Minnesota, which closed on February 5 at an estimated cost of $3.1m to the FDIC's deposit insurance fund.
The FDIC on Friday issued a statement regarding its loss-sharing agreement with OneWest Bank, the thrift holding company that was formed by a consortium of private investors to manage IndyMac Federal Bank.
In the statement, FDIC director of public affairs Andrew Gray addressed "blatantly false claims" in a video regarding the loss-sharing agreement between the FDIC and OneWest Bank.
"Here are the facts: OneWest has not been paid one penny by the FDIC in loss-share claims," Gray said. "The loss-share agreement is limited to 7% of the total assets that OneWest services, and OneWest must first take more than $2.5bn in losses before it can make a loss-share claim on owned assets. In order to be paid through loss share, OneWest must have adhered to the Home Affordable Modification Program (HAMP)."
Gray added: "The producers of this video perpetuate other falsehoods. The FDIC has not requested to borrow money from the Treasury Department. Indeed, we continue to be funded by the banking industry through assessments, not by taxpayers as claimed in the video."
The delinquency rate on commercial MBS conduit and fusion loans rose by more than 50 bps in January, driving the total rate to 5.42% in February, according to a report by Moody's Investors Service. The total delinquent balance is more than $36bn – a $3bn rise over the previous month. It marks the largest increase in the delinquency rate, by dollars and basis points, as recorded in the current downturn by Moody's.
The office loan delinquency rate rose 34 bps to 3.53%, while multifamily loans grew 63 bps to 8.77% delinquent. Hotel loans rose 75 bps to 9.82% delinquent, the highest of all commercial loan categories (illustrated below).
A class action securities lawsuit was filed against Bank of America (BAC: 7.29 -0.14%), alleging the company violated the Securities Act of 1933. According to the complaint, BofA did not disclose to securities investors the degree to which its loans, leases, collateralized debt obligations (CDOs) and CMBS were impaired. The suit seeks to recover damages on behalf of investors that acquired certain securities and then lost money when the investments underperformed.
According to a press release from the law firm representing the plaintiff in the case, BofA reported $1.72bn of CDO-related losses, a $2.99bn allowance for loan and lease losses during Q409 and $853m of CMBS-related write-downs.
The Federal Reserve Bank of New York bought another $11bn in agency mortgage-backed securities (MBS) from Freddie Mac (FRE: 0.00 N/A), Fannie Mae (FNM: 0.00 N/A) and Ginnie Mae last week. The $11bn of net purchases brings total net purchases to date to more than $1.18trn – or nearly 95% of the program's $1.25trn purchasing power, according to weekly commentary by the JP Morgan MBS strategy team.
And across the pond, scarce new sellers of homes in the United Kingdom bumped up asking prices by 3.2% from January to an average £229,398 (US$359,499), according to the February house price index released Monday by UK property Web site Rightmove.
Scarcity of London property for sale and high demand pushed the average asking price up by 5% to a new record of £427,987, Rightmove said. That price is up 10.3% from a year earlier.
“A price jump of 5% is more comparable to the pre-credit-crunch boom-times and has raised the average asking price in London to the highest it has ever been," said Rightmove commercial director Miles Shipside. "Sellers are setting their sights higher, and some agents are going along with them in order to win scarce instructions. If sellers return to the market in larger numbers the current upwards price pressure will not be sustainable with the restricted number of mortgage-strapped buyers.”
Write to Diana Golobay.
Disclosure: The author holds no relevant investment positions.
I have been thinking about “credit scores” in relation to the housing market and any kind of recovery we hope to see.
Everyone is touting 2K10 as the year of the short sale. I would agree that it seems to be heading in that direction. There are going to be hundreds of thousands of short sales. People who can’t pay on a loan even if modified to a 0% rate will be in this group.
But in my opinion the larger contingent will be people who don’t qualify for a modification but could sustain the payment and people who no longer want the property because they are so far underwater. Short sale is likely to be their solution of choice.
Now perhaps things will change this year but right now most lenders will not talk short sale until the borrower is behind in their mortgage. Add to that the hit the borrower takes with a short sale (less then with a foreclosure, but a big hit none the less) and you will have hundreds of thousands, even millions of short sale sellers that will not be able to become buyers again from two to seven years because of their credit score and record of a short sale.
These are people who can afford to buy homes. They have ample income to support a purchase and have — or had — excellent credit save the blemishes caused by the short sale process.
Unless something is done to allow these qualified buyers back into the market sooner than 2-7 years, who is going to buy the REO, short sales and deeds-in-lieu after we go through all of the first time buyers?
There will, of course be a strong investor market, but they must buy at a discount in order to make it profitable. That will keep prices down and will prevent the market and price recoveries the economy needs to advance.
In my opinion the credit scoring agencies and the lenders will have to come up with a better litmus test for qualification. Low credit score from a short sale should trigger a loan reviewer to look more closely at the other factors such as income stability, debt ratios and previous credit history before summarily turning down a loan application from a qualified buyer who did a short sale.
If we do that, we will bring in a huge population of buyers who will be able to buy at retail prices and that will reduce inventory and keep values at a reasonable level.
Cary Sternberg is the president of Excellen REO.
Marc A. Spilker, the head of Goldman Sachs Asset Management and a member of Goldman’s management committee, has abruptly left the Wall Street firm, according to internal memorandums obtained by DealBook.
Edward C. Forst, 49, Goldman’s former head of investment management, is slated to take over for Mr. Spilker, 45.
It may not be the most widespread measure of housing prices, but if you want to follow a powerful driver, look at rents.
Specifically, it's the rents Americans pay on condos, apartments or houses that are about the same size, and share the same neighborhood as your ranch or colonial, that in the end determine what your house is worth.
"If you look at the trend in rents to see where housing prices are headed, you're looking at the right measure," says Yale economist Robert Shiller.
