Monday, May 17, 2010

Real estate's new problem: Not enough homes + Steamy Hot Phoenix Housing Market

[mEDITate-OR:
see that this is NOT a free, open, competitive RE market...

From there being not funding from anyone, not even FMaeORFMac in July 08...
to a total collapse of home prices in the Sand States...

to now, where everybody is holding back...
banks are not lending to U.S., banks/lenders are holding back foreclosed homes off the market...
and a flood of home owners who WANT to sell, but cannot due to price declines and no jumbo RE loans.
thousands of "investor" purchased foreclosed home now being rented, in competition with apartments..

This is a dislocated RE market.
Giving a whole new meaning to.... "location, location, location"...!!!
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Real estate's new problem: Not enough homes

This so-called "shadow inventory" comes from two main sources: properties lenders have not yet repossessed or have not yet put back on the market; and homeowners who want to sell but who have refrained because of low prices.
Lenders are also holding back on foreclosing at all, either because they're having trouble handling the volume of repossessions or because they want to sell off some of the inventory they already have.
"Notices of default are filed, but they're not taking the properties back,
there's a big pool of homeowners who have wanted to sell their homes during the past three years but market conditions either prevented sales or kept them from trying. The company estimates that 8% of homeowners are very likely to try to sell their homes in the next twelve months if they see signs of improvement in their local markets.
"These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there's a hint of good news,"
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Housing market diagnosis: Bipolar

On one hand, sales and prices are rising, indicating recovery.
On the other hand, so are interest rates and repossessions, which most certainly do not.
And then there are the millions of foreclosures that need to be sold but haven't yet been listed -- so-called shadow inventory -- that could derail a real recovery if they hit the market in floods.
The prognosis? Negative short term but turning positive by the end of 2010.

there are some strong negatives dragging on the market:
1. Interest rates have been intermittently creeping up. Although nobody expects 6% until at least 2011, the days of 4.5% mortgages are behind us.
2. Bank repossessions are on track to surpass a million homes in 2010. But at least foreclosure filings fell in April, the first time since RealtyTrac began reporting.
3. More than a quarter of borrowers are "underwater," meaning they owe more than their homes are worth.
4. "Strategic defaults" -- where underwater homeowners walkway even when they can still afford to pay -- accounted for 31% of all foreclosures in March, according to a recent study.

But there is one factor that has experts really scared:


homes that are ready to be sold but haven't been put on the market.


Right now, there could be more than 4.5 million homes in "shadow inventory,"


But now, with home prices so low and so many foreclosures on the market, both homeowners and banks have been waiting to put properties on the market.


"These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there's a hint of good news,"


But as more sellers put their homes up for sale, supplies increase, which will depress prices again. Rinse and repeat ad infinitum.


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Phoenix inventory levels by price

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Sunday, May 16, 2010

April Retail Sales and Housing: The Rough Correlation

[mEDITate-OR:
fail to correlate the views

As CR reports to U.S., there is a REAL connection between the ability of U.S. to make our house payments and to purchase goods & services at retail.

However, as another article points out to U.S., that correlation is NOT as high right now as it has been.
People are shifting their money around - especially the strategic defaults, and the about to be foreclosed. They are making some payments and not others, in patterns not previously seen by U.S.

So, while the retail sales numbers appear better, they may also be very deceptive.


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April Retail Sales and Housing: The Rough Correlation
May 14, 2010

While the latest data appears to indicate that the consumer is on the mend, it's important to note that retail spending is still far below the peak levels of 2006 and, in real terms, on par with the level seen in 1994. (Click to enlarge)
The following chart shows the year-over-year change in discretionary retail sales and the year-over-year change to the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

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Mortgages: The Second Wave..., or will it be "The Seventh Wave" that sinks U.S.

[mEDITate-OR:
not share some very good thoughts.
{Yes, especially the cartoon...}

The Griz comment is interesting, about ARMs becoming fully amortizing.
THAT is a little known fact.

And, what the chart tells U.S. is that "Prime" RE loans are going to be the largest RE market sector this coming year.
The option ARMs are really not going to hit U.S. between the eyes until this time the following year.

Ugly..., really, really ugly.

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John, while your analysis is very good, there are some factoids about ARMs that you left out.

First, almost all of them, or at least the majority , were issued in the "Sand States" - Cal, Nev, Fla & Az. Second, they were issued during the "dead zone" - 2002 to 07 - therefore, they are almost ALL underwater, and deeply so. Third, the majority of all RE loans were "securitized packages" by Wall Street investment banks, where there is NO known "holder" - to talk to or negotiate with about any modification. And, most  were originated by WAMU, Countrywide and Wachovia - now owned by Chase, BkOAmer and Wells. The Good News and the Bad News is that most of them are still being "serviced" by those same three banks.

Did you happen to read/see the latest Chase investor warning about their problems with RE loans? Buried in that news/SEC report was the fact that ALL of their WAMU portfolio is now underwater. Don't hold your breath.

May 16 08:35 PM
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Actually, the real issue with Option ARM's (the largest block in yellow above) is that when they reach the reset point they become fully amortizing. This means that the speculator (errr... home-owner) can no longer defer the interest on the loan to be paid later. The vast majority of the holders of these types of mortgages used them as a short-term financing vehicle with hopes that in time and with housing price appreciation they would be able to refinance into another mortgage later (or just flip the house).

These tools were typically used to finance homes in the mid to upper tier price levels, so while the Subprime crisis affected middle America, the Option ARM crisis will hammer the high-end housing markets (i.e. coastal California, North-east, Virginia, etc.) further.

With so many of these Option ARM mortgage holders underwater at this point, and not just a little underwater, they are typically just making the lowest payment available (as it is cheaper than paying rent for an equivalent home right across the street). They are doing this full knowing that when the reset hits, they will stop paying altogether and then get a free ride for another 24 months until the bank kicks them out.
May 16 10:11 AM
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Mortgages: The Second Wave
May 16, 2010

One of my favorite cartoons for the paranoid is a fitting companion for the graph that follows:
From the 5-Min. Forecast comes a recasting of a familiar graphic to those following the housing market:
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Under pressure from Congress, drugmakers are starting to disclose Payments made to doctors, medical professionals

[mEDITate-OR:
not see corruption right in your face...

Years ago there was "The Payola Scandal" over under the turn table cash
While few died due to that one...

One might ask why should WHAT medicine you are prescribed
is determined by how much they are bought off.

Medicare/Medicaid fraud..., and a lot of doctor fraud, too...!
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Under pressure from Congress, drugmakers are starting to disclose Payments made to doctors, medical professionals
By Ken Alltucker - May. 16, 2010 12:00 AM
The Arizona Republic


Pharmaceutical companies long have used office calls, free lunches and drug samples as ways to promote their products to physicians.

These perks are well-known strategies that drug representatives use to get face time to market products to busy doctors. Perhaps less well known is that drug companies also use cash, paying millions to physicians who act as consultants or speak to other doctors about the latest brand-name drugs.

Now, under pressure from Congress and legal settlements, companies for the first time are beginning to disclose payments made nationwide to doctors and medical professionals.

Five pharmaceutical companies distributed more than $2.1 million in payments to 182 Arizona doctors and health professionals last year. Eli Lilly, GlaxoSmithKline, Merck, Cephalon and Pfizer all have disclosed 2009 payments made to doctors who serve as speakers, consultants, advisers or other purposes. Doctors also were reimbursed for travel and meals.

Psychiatrists were among the top takers of pharmaceutical money compared with those in other specialties. Of the 21 Arizona doctors and medical practices paid more than $25,000, six were psychiatrists. But drug-payment recipients ranged across all specialties, including pediatricians, neurologists, urologists, endocrinologists and others. More than two dozen physicians took payments from two or more drug companies.

The highest payment from one company was $75,000; the average payment, $11,702

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2009 UNITED VAN LINES MIGRATION STUDY

[mEDITate-OR:
move on, America...

Mobility is the essence of U.S.
- "Go West young man", and "Up or out, soldier"...

However, that was then, this is now.

Far Right, to many have been unable or unwilling to move due to their home values.
They believed..., that the RE markets would recover, it wouldn't get worse, the Govt's announced programs would work for them, that they would not also loose their jobs..., whatever.

Now they know that is simply not true. Hence the rise in strategic defaults.

This study is for last year, this years numbers probably are different.
People have and will decide that there is no reason anymore to stay stuck where they are, and are moving to where things look better for them.

And, Immigrants will leave AZ, and move to where they are more welcome.

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2009 UNITED VAN LINES MIGRATION STUDY

WESTERN REGIONS MAINTAIN GROWTH POTENTIAL
WHILE GREAT LAKE STATES CONTINUE TO SUFFER, ACCORDING TO

The entire Western region continued to witness tremendous growth in 2009, with six states capturing high-inbound move rankings. The findings are among the results of United Van Lines’ 33rd annual “migration” study, which tracks where its customers moved from and the most popular destinations over the past 12 months. The findings were announced today by Carl Walter, vice president of United Van Lines, the nation’s largest household goods mover. 


United has tracked shipment patterns annually on a state-by-state basis since 1977. For 2009, the study is based on the 143,194 interstate household moves handled by United among the 48 contiguous states and Washington D.C. United classifies the states as “high inbound” (55% or more of moves going into a state), “high outbound” (55% or more of moves coming out of a state) or “balanced.” 

MOVING IN
In 2009, the District of Columbia (67.8%) maintained its reign as the top destination in the United States for the second year in a row. While North Carolina (55.4%) was the only other Mid-Atlantic state to experience high-inbound growth, the state did fall in the migration study rankings, from the No. 3 high-inbound ranking in 2008 to the No. 10 spot in 2009.


In the Western region, six states captured high-inbound rankings. Oregon (58.9%) came in second and celebrated 22 consecutive years of high-inbound migration, while Nevada (57.2%) ranked fourth and celebrated 24 years of high-inbound migration.
In addition, Wyoming (56.3%) maintained its position from 2008 as fifth on the high-inbound list.Idaho (56.1%) and Colorado (56.0%) made their debut on the high-inbound list, ranking sixth and seventh, respectively. New Mexico (55.5%) held its own as the only Southwest state on the high-inbound list this year.
In the South, Arkansas (57.7%) rose to No. 3 on 2009’s list of highest inbound states. Both Georgia(55.6%) and Texas (55.4%) also made the inbound list, after just missing the top 10 in 2008. Most Southern states transitioned from high-inbound to more balanced migration statistics in 2009. 
MOVING OUT
The historical data pulled from United’s migration study over the past 33 years shows an ongoing outbound trend for the Great Lakes region. Michigan (68.0%) once again captured the No. 1 spot, a title held since 2006. Indiana (57.5%) also earned the distinction of being a high-outbound state, continuing a 16-year trend. Other Great Lakes states that made the high-outbound list include Illinois (58.2%, ranked No. 2 on the list), Wisconsin (56.3%) and Minnesota (56.5%).
Four Northeastern states round out this year’s high-outbound list. New Jersey (58.1%) ranked third in high-outbound states, continuing a trend that started in 1988. Pennsylvania (57.4%) came in fifth on the outbound list, an improvement over its No. 4 ranking in 2008, followed by Maine (55.6%) and New Hampshire(55.2%). 
North Dakota (57.0%) fell from its No. 2 ranking in 2008 to No. 6 on the high-outbound states list in 2009, with the number of outbound moves decreasing by about two percentage points.

BALANCED

While the majority of states are considered balanced, this year’s study revealed that six states achieved a near-perfect balance, gaining approximately the same number of residents as were lost. Those states include Massachusetts and Maryland in the Northeast region,Missouri and Nebraska in the Midwest, and California and Utah in the Western region
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