Archive for December, 2010
When revelations that banks filed flawed foreclosure paperwork in thousands of cases emerged over the fall, it was widely assumed that the problems would be a disaster for the U.S. housing market.
Now, evidence is emerging that the threat–at least for home sales–may be less significant than it appeared.
More Australians are considering buying homes in the United States as the Australian dollar becomes at par with the U.S. dollar according to real estate executives.
There have been more inquiries recently on U.S. properties as firms specializing in American property investments have opened in the country. Vincent Selleck, of 888 U.S. Real Estate told Sydney Morning Herald that, “At the beginning, people were quite skeptical. In the past two months, the spike we've seen is incredible.”
Outgoing House Financial Services Committee Chairman Barney Frank sharply criticized incoming chairman Rep. Spencer Bachus on Wednesday, ridiculing the Alabama Republican for reportedly saying "Washington and the regulators are there to serve the banks."
Frank has already said he plans to defend the Dodd-Frank Wall Street Reform and Consumer Protection Act from Republicans next year, but his press release made it clear he was willing to get personal.
Frank said Bachus' statements and subsequent clarification "makes two things very clear."
The Council of Mortgage Lenders has forecast that net lending will fall to just £6bn next year, the lowest since 1980. Before the credit crunch hit in 2006, net lending totaled £110bn.
The slump is likely to be exacerbated by the fact that banks will have to repay £130bn they borrowed through the government's special liquidity scheme by the end of next year.
Iowa’s attorney general said yesterday that he will bring criminal charges over the foreclosure scandal. But most of the press doesn’t have the news.
Yves Smith of Naked Capitalism picks up on this story, as does The Huffington Post and HousingWire.
But the only mainstream media coverage it got was in the Des Moines Register and Reuters.
This is a story the rest of the press might want to report. The ante just got upped bit on this scandal.
Especially telling news Wednesday highlights the shifting demographics in macroeconomic study that are being drastically realigned.
I'm speaking directly to the redefining of "community development" as it is known under the Community Reinvestment Act.
The Department of Housing and Urban Development states that banks that help neighborhoods blighted by foreclosures will fall into their favor big time.
"There is a pressing need to provide housing-related assistance to stabilize communities affected by high levels of foreclosures," according to the final rule.
There was a time when communities were deemed prosperous by an absence of poverty and an abundance of employment. That is changing.
The benchmark for determining affluence of a neighborhood is now pegged to household formation. That means, ladies and gentlemen, the worth of America is now measured in the value of its housing.
Also telling is the Bank of America Merrill Lynch global economic outlook for 2011 that sees the total recovery of housing in America is up to a decade away.
Household formations, that is when people get together to start a family and decide to buy a home to house themselves, is a great indicator of economic strength, as its linked to all things economic.
Mark Zandi, chief economist at Moody's Analytics, gave HousingWire an exclusive Q&A for our January issue and would likely agree with my point.
"Household formations are very important to absorbing the excess inventory of homes weighing on the housing market," he said. "There has been a lot of doubling up on homes during the recession. As the job market improves, there should be a substantial pick-up in formations, as the households break apart."
An uptick in formations equals a vastly improving economy. Whether or not that will take 10 years, who knows?
All of this underpins the enhanced importance now placed on valuations. I've been a long-time critic of the homebuyer tax credit and will likely continue to rail against it as long as its legacy drags the market down.
A slide from an Altos Research webinar recently showed how the homebuyer tax credit only stimulated demand temporarily and more importantly, lead to sellers denying price reductions to sell. After all, the borrower was getting $8,000 for nothing right?
Now, sellers are even more distressed as valuations plummet.
"Price reductions are on the rise and nearly back to crash levels," Scott Sambucci, the main analyst at the data provider, said during the webinar.
Even more depressing is the thought that sellers are now realizing if they waited until today to buy, without the credit, they would have gotten a better deal (chart below).
This would be fine if those borrowers had the right to sell their home today, if they aren't already underwater, and could look for a better deal. But they can't sell for the next three years, unless they plan to give the tax credit back.
No stimulus program should ever be provided with entrapments. And I applaud HUD for finally seeing the logic on rewarding incentives based on need. HUD understands the importance of housing in understanding the needs of the nation.
On Monday, I went to breakfast with John Burns, who runs his own real estate consulting service, and we talked about the 2011 outlook for housing. He highlighted the importance of the growing set of local investors who are going to help absorb the demand.
I mentioned that it was my opinion that the average American is quite simply running out of money.
In a follow-up, his office supplied a map breaking down local market delinquencies:
I can't help but wonder how things would have turned out if the government instead provided $8,000 to everyone in the red on that map. Would a need-based stimulus, based on mortgage delinquency status have worked differently?
Should Americans who need to get the mortgage back on track get a stimulus check?
Perhaps in the future, policy makers will follow in the footsteps of HUD logic.
Things will get better in less than 10 years if America's worth is measured in the value of its housing.
Jacob Gaffney is the editor of HousingWire.
Write to him.
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