I've seen after today suggesting the bottom is in for house prices. This isn't like 2005 when it was almost certain that prices would fall, and fall sharply. Now we are much closer to the bottom than to the top in prices (for some metrics, see ) In some areas prices have probably already hit bottom - like some non-bubble areas, and some bubble areas with significant foreclosure activity. But I think many areas, especially the mid-to-high priced bubble areas, there will be further price declines. I'm not as certain as I was in 2005, but I think these price declines will drag down the Case-Shiller indexes - and I don't think the price bottom is in. I do not have a crystal ball, but ... It seems there are many more foreclosures coming. Some of this depends on the success of the modification programs, but the shows a growing number of homeowners in the problem pipeline. And the yesterday suggests few of these delinquent homeowners will cure. That seems to mean rising foreclosures, and more distressed inventory. The MBA Chief Economist Jay Brinkmann thinks foreclosures will peak at the end of 2010. Historically prices bottom about the same time as foreclosure activity peaks. Maybe it will be different this time - maybe the modification programs will significantly reduce foreclosures - maybe prices will bottom before foreclosures peak ... but I'll go with the normal pattern. And on the demand side, there has been a surge in first-time homebuyer activity. There was significant pent up demand from potential first-time buyers who were priced out of the market in 2004-2006, and then were afraid to buy as prices fell. But demand from these buyers will probably wane later this year, even if another tax credit is enacted. Just like the "cash-for-clunkers" demand declined after the initial burst. For mid-to-high priced homes, there are few move-up buyers (or so it would seem since so many low end homes were distress sales). Right now the months-of-supply...

Imagine a headline in June 1991 (if Case-Shiller was around): "House Prices increase at 11.6% annualized rate in June!" The horrible price declines were over ... right? Nope. Real house prices declined for almost another 5 years. Just something to remember. From Bloomberg: In buildings attended by doormen, rents on one-bedroom apartments dropped 10 percent from a year earlier to an average of $3,274 a month, according to a report by the Real Estate Group of New York. Studio prices fell 7 percent at those properties to $2,329 and two-bedrooms declined almost 6.9 percent to $5,161. Falling rents means a further decline in house prices to lower the . And a market graph from . This matches up the market bottoms for four crashes (with an interim bottom for the Great Depression). Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500. By request the Feed is Full length and Free of ads. And also by request , once a month, here is a tip jar - to leave a tip. Thanks! CR

submits: Given Freddie Mac’s () recently reported profitable second quarter earnings, it is time for Treasury Secretary Geithner to amend the terms of Fannie Mae () and Freddie Mac’s Senior Preferred Stock Purchase Plan with the Treasury to be comparable to the preferred stock purchases the Treasury made in commercial banks last October under TARP. Reasons to Change Fannie and Freddie’s Deal with the Treasury Fannie and Freddie should not have a materially worse deal than the banks just because their deal was cut four weeks before TARP. Fannie and Freddie are critical to the domestic economy as they have been the only source of mortgage capital for the past 12 months. The mortgage market will need private capital in the future and cannot rely on government support forever, so Fannie and Freddie will have to raise more capital in the future. If the GSEs are going to raise capital in the future, the Treasury is going to have to treat existing capital better than its current deal with the GSEs. Fannie and Freddie incurred higher expenses because they were team players and supported the Obama Administration’s economic recovery plan. Changing their deal would be a small payback for the support they have given the country and the Administration. Recognition that placing the GSEs in conservatorship was a political attack by led by former Treasury Secretary Paulson and Fed Governor Kevin “Hey, Brah” Warsh. Recognition that former Treasury Secretary Paulson caused a decline in the GSEs stock prices by not outlining the terms under which he would provide capital to the GSEs in the July 2008 legislation. Sec. Paulson then used circular reasoning in claiming that the GSEs had to be taken over because they had low stock prices and couldn’t raise capital. In fact, they couldn’t raise capital because he would not state the terms of a potential future Treasury investment. Paulson’s reasoning for the harsh treatment of GSE shareholders was that shareholders had to pay for the poor risks...

submits: It’s very hard to come up with scenarios where they’re worth any money. There’s a tremendous amount of sentiment trading in general. - , Analyst, Keefe, Bruyette & Woods

The July housing data could be caused by a recovering economy or it could be just something caused by the government incentive for first-time home buyers. I’m betting that it was caused by the government incentives for first-time homebuyers for two reasons: first, sales of low-end houses are the only area that is increasing; and second, just about all of my kid’s friends who hadn’t owned a house before have bought one. Sales on low-end houses have been very good in the Cleveland area where I’m based.

Many people are living paycheck to paycheck, on the edge of disaster as highlighted in a new Monster Poll that reveals . Over a one week period beginning July 6 and running through July 13, more than 16,000 visitors to Monster.com participated in the Monster Meter Poll question “If you were laid off without severance, how long would your savings cover your living expenses?” One Week or Less: 34% 2-4 Weeks: 16% 1-2 Months: 16% 3-5 Months: 14% 6 Months or Longer: 20% Creating three broad groups, 50% have less than a month of savings, while only 20% have 6 months or more. The remaining 30% are in between. Although the Monster Poll is not scientific, I cannot help thinking it is reasonably accurate. The implications on the savings rate are obvious: It will continue to rise. Those out of work may wish to consider Monster's that contains a few worthwhile albeit mostly obvious tips for people to follow. Monster's was disappointing. The odds of success even in good times are not very high, something the article failed to address. Certainly the odds of success in starting a business right now are much worse than in normal times. And for those down to their last few months of cash, the odds of success approach zero unless one has the proverbial rich uncle willing to provide cash for a large number of years. Banks certainly are not lending to startups with no cash. Heck, banks are tightening lending standards even for those who do have significant skin in the game. Charts Show Grim Employment Stats The jobs picture is grim, unemployment is likely to rise through 2010, and up to 1.5 million workers are expected to lose unemployment benefits by the end of the year. For a discussion and some interesting chart on expiring benefits, please see . I expect unemployment benefits will be extended a third time, but living on unemployment benefits is far different than living on a normal paycheck. Moreover, many jobs are gone and will never come back. Few are prepared for that grim...

This following graph compares the Case-Shiller Composite 10 SA index with the Stress Test scenarios from the Treasury (stress test data is estimated from quarterly forecasts). The Stress Test scenarios use the Composite 10 index and start in December. Here are the numbers: Case-Shiller Composite 10 Index, June: 152.55 Stress Test Baseline Scenario, June: 148.82 Stress Test More Adverse Scenario, June: 140.71 Unlike with the unemployment rate (worse than both scenarios), house prices are performing better (from the perspective of the banks) than the the stress test scenarios. I believe there will be further price declines later this year, because I think the Case-Shiller seasonal adjustment is insufficient, and because I expect the first-time home buyer frenzy to slow just as more distressed supply comes on the market - even if an extension to the tax credit is passed.

submits: Citigroup Inc.’s () initiatives in the U.S. to keep distressed borrowers in their homes have paid off. The loss-mitigation successes have outnumbered foreclosures completed by a ratio of more than 12 to 1 in the second quarter, compared with 6 to 1 reported six months ago. Around 108,000 U.S. homeowners were helped by Citigroup to avoid potential foreclosures on loans totaling more than $16 billion. This was 30% higher then the prior quarter.

The Obama administration raised the estimate for the 10-year deficit to $9 trillion -- $2 trillion more than forecast. The White House foresees unemployment hitting 10% over the next year and a half.

To highlight the seasonality of housing and its impact on pricing where the spring is the busiest of the year, the S&P/Case Shiller Index, which does not seasonally adjust its m/o/m pricing, has shown its best performance in Q2 in every year except one going back to ‘01. ‘09 is of course not complete but Q2 saw a gain of 1.3% after a drop of 7% in Q1. On the downside in ‘07 and ‘08, Q2 saw the smallest decline and in the boom years in ‘04, ‘05 and ‘06, Q2 saw the biggest rise. In ‘03, Q3 price gains barely exceeded the Q2 rise while in ‘01 and ‘02, Q2 had the best price increases. The price data seen is welcome relief but it’s that time of the year and the $8000 tax credit and slowing foreclosure rate had its impact. Add to this the still punk Present Situations component in Confidence and it helps to explain again, the lack of belief in the sustainability of recovery that the bond market has relative to stocks.

The Federal Reserve Bank of New York today launched an expanded section of its website, adding new regional information on consumer credit conditions intended to assist policymakers address mortgage delinquency and foreclosure issues. The U.S. Credit Conditions section offers new interactive maps and data on auto and student loan delinquencies, and mortgage “roll” rates. These features complement existing maps and spreadsheets on mortgage foreclosures and delinquencies, measures of subprime and alt-A mortgages and bank credit card delinquencies. The data are available at the state and county level.

Data through June 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index improved in the second quarter of 2009.

Some people knew this was coming ... From Reuters: Deutsche Bank AG plans to raise new Tier 1 debt ... as banks seek to rebuild balance sheets in the wake of the financial crisis. The German bank confirmed it planned to issue euro fixed-rate perpetual notes, with annual call dates beginning from March 2015, and said it was managing the issue. ... the first of an expected series of new Tier 1 notes to hit the market in coming months from banks ... The deal would be smaller than 1 billion euros as the bank was seeking to test the market's appetite ... And SunTrust hints at raising new capital, from Bloomberg: “The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Chief Executive Officer James Wells III said today in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.” ... “The industry has moved from a potentially cataclysmic scenario to one that is merely very difficult,” Wells said. “The industry is back from the brink of a potential global financial-system meltdown.” ... “ Even if the economy begins to improve modestly, commercial real estate conditions will probably deteriorate until 2010 .” ... Wells said SunTrust may repurchase $4.9 billion in preferred shares sold through the U.S. Troubled Asset Relief Program “as soon as possible,” without being more specific. Ahhh ... just prudent balance sheet management!

The majors all have the story that Ben will be reappointed by Obama: Obama will make the announcement tomorrow on Martha’s Vineyard, Massachusetts, where he is vacationing with his family, and Bernanke is expected to join him, said the official, who spoke on the condition of anonymity. The nomination requires Senate approval. Bernanke’s four-year term as chairman expires Jan. 31 Game theory would have it this is the safe pic, the one that you cannot get into trouble for, even if things go bad later. A new Fed Chair, in the event something went awry down the road would lead bame back to the White House. See also • (Bloomberg) • (WSJ) • (NYT)

submits: In the past week, two prominent analysts have said they expect hundreds more small bank failures in the second half of this year. At the same time, the Financial Select Sector SPDR ETF () , a fund that tracks top U.S. banking institutions, has risen to a year-to-date high. But at what point will the number of regional bank bankruptcies drag on the performance of the bulge bracket institutions? The answer may be never. More unfortunately still, judging by the numbers, it seems that small bank failures are actually propelling both earnings and investor appetite for the big banks.

submits: Moody’s has issued its seventh annual report of the material impairment and loss rates of global structured finance securities, covering the credit performance through year-end 2008 of all structured finance securities issued since 1993. One startling statistic: the total number of 12,666 newly impaired tranches in 2008 is almost four times the total of 3,346 for the previous 14 years combined.

Homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study shows.

If you are looking to purchase a Mobile Home or Manufactured Home in the State of California, take extra care to ensure that the seller of the home is not pulling the wool over your eyes. California law requires all manufactured or mobile home salespersons, dealers and manufacturers that intend to conduct business in the state of California to have the proper license issued by the California Department of Housing and Community Development, or HCD. This law is so broad that if a person or company advertises itself in the state of California via mailers, telephone marketing or any other direct advertising or marketing, and does not have the proper licensing, that seller is violating state law.

Here is an email sent out by George Mason University today (thanks to KurtyBoy): Beginning August 30, after hours parking in the FDIC parking garage, from 5:30 pm to 11:00 pm with a valid Mason Arlington permit, is no longer available. Click on email for larger image in new window. KurtyBoy adds: "Notice how the bullet about the parking has been added in a different font? Like a change that just got made.... " Looks like long hours for Sheila Bair and crew. And from Jim the Realtor: Here is the market graph from Doug Short, is matching up the market bottoms for four crashes (with an interim bottom for the Great Depression). Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.