Archive for August, 2010
With unemployment high and jobs scarce, work is hard enough to find. But in today's economy, there's an even bigger barrier for some: their home.
Many people can't afford to sell their homes; as many as one-third of homeowners owe more than their home is now worth, and there are few buyers. Americans who once expected mobility now find themselves grounded, with their careers and lives fixed in place. They can't move to better job markets without taking a huge financial hit.
Yesterday, in a short preview of coming negative news, I mentioned that the Institute for Supply Management (ISM) PMI will be released next week (Wed, Sept 1st) – and that the ISM PMI will probably continue to decline based on the regional manufacturing reports.
Gavyn Davies at the Financial Times posted a graph of the New York and Philly Fed surveys compared to the ISM's PMI…
A Canadian insurer is turning to a seldom-used strategy to make a big wager on falling prices over the next decade.
As more investors worry about the possibility of deflation—or a sustained period of falling prices that could cripple stocks—Fairfax Financial Holdings Ltd. has spent nearly $200 million to buy derivative contracts wagering on a decline in the consumer-price index, an inflation indicator. The trade could lead to huge profits if deflation occurs.
With bank lending already down, renewed weakness [in housing] would supposedly strangle a nascent economic recovery.
Scary stuff for sure, but also arguably overdone. Most would agree that heavy investment in the housing sector helped get us into the mess we’re in, so for housing worriers to suggest that an artificially enhanced property market is our cure is to get things backward.
A slowdown in U.S. business investment may soon hit the job market, further hindering a recovery in the world’s largest economy.
Capital spending, one of the few bright spots in the recovery, declined in July, according to Commerce Department figures released yesterday in Washington. Sales of new homes fell to the lowest level since data began in 1963, another report from the same agency showed, indicating a lack of jobs is crippling housing.
US housing data aggregator CoreLogic is now offering a short sale fraud detection tool that monitors the property even after the sale is completed.
Nearly two weeks ago, CoreLogic announced that short sales will unnecessarily cost lenders $310m in 2010.
"Today lenders, to a higher point than ever before, are dealing with foreclosure and dealing with borrowers," said VP of Fraud Solutions at CoreLogic, Frank McKenna, "and with an estimated 400,000 short sales to be negotiated with real estate agents, there needed to be a way to make sure all offers on a property are disclosed."
The new service allows lenders to receive alerts on potentially risky lending and even closed short sale transactions to minimize unnecessary losses related to fraud and property underpricing, an example of which is in the below graph:
McKenna said the risk of this flopping fraud — giving a low ball offer, closing, then selling again at a higher price — is becoming so pervasive that some lenders are considering putting in place requirements to prevent property resales for 90 days after closing.
The new CoreLogic Short Sale Monitoring Solution alerts lenders whenever a higher bid is made, but not necessarily disclosed by an agent. Once the short sale is closed, the monitor still keeps tabs to report any bids for resale.
Freddie Mac reported that it has seen short payoff volume grow more than 1,000 percent, and that the upward trend in volume leaves the market ripe for incidences of short sale payoff fraud.
Write to Jacob Gaffney.
NYU economics prof and RGE chairman Nouriel Roubini appeared on CNBC's Squawk Box this morning — and said that the risk of a double-dip recession has risen to 40%. He also said he expects to see Q3 GDP between zero and 1%, and argues that the Fed is running out of policy bullets.
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