Archive for April, 2011
A story in today’s Journal shows that the housing market is so broken that home prices are falling amid more competition for homes.
The factors feeding the competition stem from the fact that many traditional homeowners can’t or won’t sell, leaving deal-hungry buyers clamoring for bank-owned foreclosures. The trend is apparent from a range of statistics, which we highlight in an interactive graphic. But another telling one is the “sale-to-list” ratio, or the difference between a home’s final list price and its sales price. When sale-to-list is flat, it’s a draw for buyers and sellers: No discount to finalize the deal, and no extra profit amid competition. If it goes up, sellers have the advantage; if it goes down, buyers are getting a discount.
In other words, a rising sale-to-list ratio could be called, as Yale economics professor Robert Shiller said, a bullish indicator. So it’s something of a surprise to see such a bullish sign in cities hit hard by foreclosures.
The Treasury Department reported a $1.2 billion gain on troubled mortgage-backed securities it bought through the Public-Private Investment Program.
In March 2009, the Treasury launched PPIP to buy residential and commercial mortgage-backed securities at a time when many financial institutions were struggling to unload them and raise capital. Through the first quarter, private-sector fund mangers raised $7.4 billion, which was matched by the Treasury. Including an additional $14.7 billion in U.S. debt capital commitments, PPIP held $29.4 billion in total purchase power at the end of the first quarter.
Of the $7.3 billion of matched capital put up by the Treasury, $5.2 billion has been spent to buy troubled MBS. In a report released last week, the Treasury said those investments netted taxpayers $1.2 billion in unrealized gains as of March 31.
If the $523 million in interest and principal paid back to the Treasury is included, the PPIP investments saw a 33% return.
So far, the private fund managers drew down roughly $20.9 billion, or 71.2% of the total purchasing power.
The Treasury broke down its MBS investments by product type in the graph below.
PPIP bought roughly $17.7 billion of private-label RMBS and $4.4 billion CMBS. Subprime securities made up 11% of the residential securities, or $1.9 billion.
Through the first quarter, the eight individual funds reported returns ranging from 22% to 51%. Banking analysts recently called the program a success that far and even called for a second round of PPIP to help buy-up assets in the shadow inventory of foreclosures.
"We're still in the program's initial stages, but we are pleased with the returns we've seen thus far," a Treasury spokesman said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
As Republicans try to kill an Obama administration foreclosure prevention program that even Democrats agree hasn’t lived up to expectations, a program in Pennsylvania is being lauded for being simpler, cheaper and more effective.
It’s called the Pennsylvania Homeowners Emergency Mortgage Assistance Program and was established in 1984, long before the recent mortgage crisis. The program gives bridge loans to people who have recently lost their jobs. Loans do not accrue interest until the participant’s income is restored.
And a recent study from the New York Fed says the Pennsylvania law works, far better than the $30 billion national program set up in 2009 called the Home Affordable Modification Program, which so far has led to 630,000 loan modifications, against a target of 3 to 4 million.
The housing crash seems to have had little impact on consumer confidence, as 81% of adults believe buying a home is the best long-term investment a person can make.
According to a report by Pew Research released this week, this figure is only down 3% from 1991. Pew cites a CBS News/New York Times survey completed in 1991.
Of those 81% of the adult sample, 37% "strongly agree" that a home is the ultimate long-term investment, while 44% only moderately agree. Both figures indicate less adamant view than the 1991 survey.
Pew finds the overwhelmingly positive results notable in light of the fact that 47% of survey respondents said their home value depreciated since the beginning of the recession. About one-third of those surveyed claimed their home value has stayed the same, while 17% said their homes are now worth more than before the recession.
The national median home price in March was $177,001, according to Denver-based RE/MAX.
Almost half (44%) of individuals whose homes lost value said they expect to recoup their equity losses in three to five years. Another third are less optimistic and believe it will take between six and 10 years.
Homeowners aren't the only people who consider a house the best long-term investment one can make. Approximately 81% of current renters surveyed by Pew reported they would like to buy a house at some point. One-quarter said they would continue to rent.
Homeownership ranked first among long-term financial goals for those who took the survey. That prospect was followed closely by living comfortably during retirement, being able to pay for their children's college and being able to leave an inheritance.
Pew Research polled 2,142 adults between March 15 and March 29 for this survey. The survey sample was comprised 57% of current homeowners and 30% of renters. The remaining percentage of people had special living arrangements, such as living with family members.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Most people involved with any aspect of mortgage finance are probably pretty stressed out, as the market struggles to get on its feet with the threat of a double-dip recession looming.
But according to one job-listing website, real estate agents are feeling the most work-related stress.
The profession ranked as the 10th most stressful job of 2011, according to CareerCast, which maintains a database of job postings from across the U.S. and Canada.
In general, this discovery is not surprising. Real estate agents are on the front line of the housing crisis, playing witness to neighborhoods of empty houses and meeting with many Americans who may not qualify for a loan. Plus, their commission, and, in turn, salary are heavily dependent on positive prospects in the housing market. And we all know how home sales are faring.
As far as I see it, being a real estate agent is like being a hybrid blue collar, white collar worker — you work the regular weekly hours, have to work outside the regular hours to cater to those who work the regular hours and you have to work weekends! Atrocious!
Many commenters complained on CareerCast's website about the lists of most and least stressful jobs, claiming their job was more stressful than the next. But have you really ever been in a real estate agent's shoes?
Have you ever had to put on that smiling face when you know that housing inventory nationwide is skyrocketing to the highest levels ever seen in modern history? How are you ever going to sell a home when it could take Americans up to 14 years to save for a down payment under the qualified residential mortgage exemption to risk retention? What if lenders decide to stop lending?!
Yup, real estate agents have the worst of it. They should be ranked above architects and newscasters, at least. Those careers ranked sixth and fifth-most stressful, according to the CareerCast report.
Well, agents rank above newscasters who aren't reporting about the housing industry, no doubt. That's just double the stress.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: CareerCast, real estate agents
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