I saw a classified ad recently where a person had a vintage French military rifle for sale. The description said "Mint condition, never fired; only dropped twice".
We receive housing news a lot more than twice a month. Every week, it seems, some source publicizes a measure of the housing market in the United States. I made a quick list of the housing-related economic news that proliferate our monthly lives. I am sure I missed some, but we have Housing Starts, Building Permits, FNC's latest Residential Price Index (RPI), the S&P/Case-Shiller 20-city price index, the FHFA house price index, Pending Home Sales, New Home Sales, Existing Home Sales, CoreLogic National Foreclosure Report, and the Zillow Real Estate Research.
But wait, there's more: Lender Processing Services (LPS)'s Mortgage Monitor Report, RealtyTrac's foreclosure numbers, the National Association of Home Builders' (NAHB) Remodeling Market Index, Gallup.com's U.S. Homeownership, the U.S. Census Bureau's vacancy rates for owner & rental properties, the RPX Monthly Housing Market Report (put out by Radar Logic), Fannie Mae's National Housing Survey, etc. What is anyone supposed to pay attention to when there are literally dozens of indices? Darned if I know - maybe they should agree to at least come out on the same day of the month...
And what's it all telling us? Well, Wells Fargo's economic team suggest that early reports show that the critical spring home buying season has gotten off to its best start in five years. "Sales of new single-family homes totaled 83,000 units during the first quarter, up 16 percent from a year ago, while sales of existing single-family homes rose 7.2 percent, marking the best combined pace for first quarter home sales since 2007. The rise in existing home sales has generated a little excitement, as news is spreading that homes sold outside the foreclosure process are often receiving multiple bids and selling above the asking price."
Wells suggests that "the sudden prevalence of multiple bids around the country appears to be the result of unseasonably mild winter weather, which brought buyers back into the market to a much greater degree than sellers. The first quarter is typically the slowest quarter of the year, with March being the only busy month. Inventories of existing homes have fallen to just a 6.3-months' supply, and the inventory of unsold vacant homes has fallen by 353,000 units over the past year. Inventories of new homes continue to decline and are now at a paltry 144,000 units nationwide. Only about one-third of those homes are actually completed. With inventories dwindling, home prices have improved a bit."
Of course Realtors can tell you that the better news on sales and prices, along with near record high affordability and near record low mortgage rates, has encouraged builders to move forward with a few more projects. Starts of new single-family homes rose 16.7 percent during the first quarter, for a total of 104,600 units.
But the Jefferies Monthly Housing Monitor took somewhat of the opposite tack: On the surface it appears that momentum is building towards favoring a near-bottom in U.S. housing. Small positives have emerged, as they have in the past, but the data is "still inconsistent enough to keep us concerned about such a fragile sector. Nonetheless, it is easy to agree that mixed is certainly better than down and the recent stronger-than-expected pending homes sales report adds support. The positive spin is that we haven't seen material drops in recent months in most housing data, and in some cases we have seen actual improvements. The negative spin is simply that the market remains saturated with inventory (lots in the "shadows") and that lending activity for home purchases remains exceptionally tight in the face of record low costs of homeownership."
Practically everyone agrees that if affordability is at record levels, the government continues to try and prop up housing markets, so why are we still mired in such a soft housing sector? On the lending side, LO's and underwriters can tell you that access to, and the securing of, mortgage capital a challenge for many borrowers. Origination is economically very lucrative for lenders, but lack of clarity on future regulatory fronts and the costs of compliance weigh heavily on the sector: simply put, lack of clarity results in lack of funding.
Along those lines, Steve Kaye with Catalyst Funding wrote, "A little over 2 years ago I went to see my Congressman, Darrel Issa, to share a plan that stressed a more aggressive approach to the housing crisis was necessary; one that extended beyond simple loan modification. The "problem" with a straight modification-only plan is that it only provides a temporary solution - at best - and only addresses the mortgage payment - which is no longer the only issue or concern. The homeowner who is $150K or more upside down on his mortgage would absolutely benefit from saving $500 a month or more on his mortgage payment. However, when he wakes up the next morning, he is still going to be $150K upside down on his mortgage and looking at a minimum of 8-10 years at normal appreciation to climb out of that hole. No...This is merely a band aide that would only extend our housing woes."
He continued, "I lobbied for historic reform that would require, in conjunction with the modification, a principal reduction plan that would put home values at 100% of current market value --- a 'clean start", so to speak. It would not give the gift of equity, but would provide some optimism and hope for the future. And if the owner sold in the following 5 years, 50% of any equity gained would have to be paid to the existing lender who provided the modification/reduction. Other portions of the Plan addressed additional ways to stimulate the market in regard to expanding home ownership and purchasing power without compromising normal loan qualifying. Clearly, we cannot stimulate the housing market by only providing opportunity for 1st time homebuyers. Yes, there would be losses absorbed by lenders and financial institutions However, the revitalization and stabilization of the housing industry would stimulate the economy and provide additional earnings through more home lending, more use of credit, etc. Homeowners who are not upside down will also gain as equity - lost during these past years - will return and provide value. The more I have read over the past year, the more I am convinced that these 'simplistic' ideas will, in some manner, be put into play at some point --- they have to. Oh...and Congressman Issa's reply to me (actually his assistant as the Congressman was in DC): "We need to get Obama out of office before we can think about doing anything aggressive". It's a shame that political agendas have to place roadblocks on the economy's recovery and extend hardships for the American people. Steve Kaye at stevekayeloans@gmail .com.
When you're the government, you win some, and you lose some. The US government could make a $15 billion profit on its 2008 bailout of insurer AIG, a government auditor has estimated. The Government Accountability Office, the investigative agency of the US Congress, produced the forecast Monday as part of its regular reports on the company's rescue. Though the estimate could be seen as premature - taxpayers still own most of the company's common shares - it provides yet another bright spot for a bailout program which the Obama administration has sought to trumpet for its apparent successes. GAO's forecast is based on the Treasury being able to shed its roughly 1bn shares of common stock in AIG at the March 30 closing price of $30.83 and on the Federal Reserve Bank of New York recouping the full value of its holdings in the Maiden Lane investment vehicles that were created as part of the rescue.
A Treasury spokesman declined to comment on the estimate. On Sunday, after the Treasury sold $5 billion of its stake in the company, an official said it expected to recoup "every single dollar invested in the company" per the Financial Times.
But on the other end of the credit and profit teeter-totter, Ally Financial, the lender majority-owned by the US government, received a strong signal from the US Treasury that it could proceed with a bankruptcy of ResCap. A Treasury official said that the department would not block a bankruptcy for Residential Capital, which is struggling with losses and litigation tied to bad loans, per the Financial Times. The government owns 74% of Ally, which wants to shed ResCap in the hope that it can abandon its liabilities. The crunch date could come next week when about $1.4 billion of loans extended by Ally to ResCap matures.
Turning briefly to the markets, Tuesday saw some price improvements - as if anyone is clamoring for lower rates. As Thomson Reuters reported, "Meanwhile, the Fed, fast money and banks kept up with originator supply and other selling through most of the day. Mortgage banker selling appears to have picked up from recent below normal levels of $2.0 billion to near or modestly above. Pipelines are also growing with rates lower and this risks a pickup in supply, especially if the market sells off. While price levels encouraged profit taking, the looming 10-year note auction tomorrow and 30-year bond auction on Thursday no doubt were a factor as well as some concession to take down the longer terms would not be surprising."
By the time the dust settled prices on mortgage-backed securities were a little better, and the 10-yr T-note was up almost .375 closing near 1.84%. It is pretty darned early as I head to Texas for few days, and I'll be darned if I know where the market is. There will be a $24 billion 10-year note auction scheduled at 1:00 pm, but there are two economic reports of interest but that won't move rates: the MBA's Mortgage Application Survey and the Wholesale Trade figures for March.
Calling the Last Rites
Here in NY, a man is struck by a bus on a busy street in New York City. He lies dying on the sidewalk as a crowd of spectators gathers around.
"A priest! Somebody get me a priest!" the man gasps. A policeman checks the crowd but finds no priest, no minister, no man of God of any kind.
"A PRIEST, PLEASE!" the dying man says again.
Then out of the crowd steps a little old Jewish man of at least eighty years of age.
"Mr. Policeman," says the man, "I'm not a priest. I'm not even a Catholic. But for fifty years now I'm living behind St. Mary's Catholic Church on Third Avenue, and every night I'm listening to the Catholic litany. Maybe I can be of some comfort to this man."
The policeman agrees and brings the octogenarian over to the dying man.
He kneels down, leans over the injured and says in a solemn voice: "B - 4. I - 19. N - 38. G - 54. O - 72."