KeNo's Housing and Economic Portal: Thursday July 9 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

More reasons not to believe the NAR - (themessthatgreenspanmade.blogspot.com) In addition to dubious assertions the other day about property assessors coming in too low with their valuations, thus thwarting a rebound in home prices, the National Association ofRealtors (NAR) also reported a stunning decline in the percentage of distressed sales, a development that prompts the update of the chart below, first presented back in February. What this chart does is back out the percentage of sales classified as "distressed" in the NAR's monthly report on existing home sales, which results in a trend that looks very similar to that of new home sales, what has confounded homebuilders over the last couple years. That is, up until last month, when distressed sales plunged! And, after some rudimentary math, non-distressed home sales must have surged, as shown above. Did non-distressed sales really surge last month? That's essentially what the realtors' trade group said on Tuesday because overall sales were about flat in May, but the percentage of distressed sales tumbled from 45 percent in April to just 33 percent in May, down from over 50 percent in March. Moreover, the current level of distressed sales is now below the level that was seen when this statistic was first reported last fall. Does that really make sense given the waves of foreclosed properties that continue to hit the market or is the decline a little bit of "stretching the truth" for a statistic that surely does not have the reporting rigor of, say, the total number of homes sold? A smaller number of "distressed" sales might make the real estate market as a whole seem a little bit less distressed itself and might even serve to stir some of the "animal spirits" of homebuyers who might otherwise be a bit put off with such a high number of bank-owned properties being sold.

The NAR's Appalling Fight Against Honest Appraisals - (www.businessinsider.com) Yesterday we mentioned how the National Association of Realtors, and its chief economist Larry Yun, was complaining about "low-ball" appraisals, saying they were hurting the housing market. Basically, they're upset about a new law that requires an objective, third-party appraiser and the use of distressed sale prices (AKA market prices) in determining the value of a home. Well, Barry Ritholtz has done more digging into this, and suggests that based on the NAR's activity, you might almost conclude that the NAR is "pro fraud" He found this letter from the NAR, detailing its effort to thwart the legislation:

TO: State Association Executive Officers
State Association Presidents
FROM: NAR Government Affairs
DATE: 19 June 2009
RE: Fly-In Head’s Up

Please note this notice is going to all state executive officers and state presidents. We will be sending Fly-In details on Monday June 22, 2009 to the states who have Members of Congress and/or United States Senators on the House Financial Services Committee or Senate Banking Committee. (list of states at end of memo) There is growing concern in the real estate industry over the implementation of the Home Valuation Code of Conduct (HVCC) and its effect on the use of appraisal management companies (AMCs) by lenders. NAR is taking the following actions: (Target dates in bold)

1. NAR is scheduling meetings with the Director of Federal Housing Finance Agency, Jim Lockhart to raise concerns about implementation of the HVCC and problems with AMCs and ask for an immediate 18 month moratorium. Director Lockhart is the conservator over Fannie and Freddie who entered the consent order with the NY Attorney General. ( June 22, 23, 24, or 25th)

2. Government Affairs will conduct a fly in the week of June 22. Two members from each Association (State AE/State President or FPC as appropriate) to meet with members/staff of the House and Senate Banking/Financial Services Committee. The ask will be to cosponsor the bill (item 3) and to support an 18 month moratorium.

3. Our legislative team will work on getting a bill introduced in Congress asking for a 18 month moratorium. (week of June 22)

4. We will ask the Chair and Ranking Members of the House and Senate Banking [ Reps Frank and Bachus/ Senators Dodd and Shelby] Committees to write Director Lockhart asking him to grant a 18 month moratorium (week of June 22)

5. We will try and get an 18 month moratorium attached to an immediate pending appropriation bill or other similar fast track bill. (June)

6. Staff will talk to the American Bankers Association who heretofore is fine with the AMC system to see if we can negotiate support.(June 19)

NAR will engage a coalition of Appraisal Institute, MBA, Home Builders and other appropriate trade groups.

7. NAR Research is conducting a survey so we have concrete data information to bring to the regulators and the NY Attorney General’s office . The survey will also be run through the State Association. EHS will be released next week and the appraisal issue will be mentioned front and center in NAR’s release. Survey release June 22

8. NAR is scheduling a meeting with NYS Attorney General Andrew Cuomo and representatives of NYSAR. (June 29. 30)

9. NAR will conduct a Call For Action if we do not get a moratorium in the next week to 10 days

Real Estate Associations Want Appraisers To Inflate House Prices - (www.huffingtonpost.com) The housing is still struggling because appraisers are being too tough assessing the value of homes. That's the self-serving argument being made by realtors who are complaining that lower appraisal values of homes are delaying deals, ruining sales and prolonging the housing crisis. Their solution? Delay reforming the appraisal industry for another 18 months, then we can worry about the real value of a home. Until then, they argue, what's wrong with a few inflated prices? Well, as Barry Ritholz puts it: Appraisal fraud was an enormous contributor to the unsustainable run up in prices during the boom period. Many (but not all) mortgage brokers and realtors referred buyers to appraisers that ALWAYS hit the number of the home purchase price. New York Attorney General Andrew Cuomo, in an attempt to prevent this kind of appraisal fraud, instituted the Home Valuation Code of Conduct, which took effect May 1. According to the Wall Street Journal: The code covers any mortgage that can be guaranteed by Fannie or Freddie, which means the majority of all home loans. It bars loan officers, mortgage brokers or real-estate agents from any role in selecting appraisers. The idea is that people who are hungry for commissions shouldn't be in a position to lean on the appraiser. Now, NAR and other real estate lobbying groups, who are trying to maintain stay in business despite the total destruction of their market, are mobilizing a major effort to reach out to Congress and housing officials. As NAR economist Lawrence Yun said earlier this week, "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales." Instead, Yun and his bunch want appraisers who won't be too tough. As Yun puts it, "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected." With so much going on in Washington, it may be an uphill battle drumming up support for delaying reforming the real estate market in the wake of one of the worst housing crisis in modern history. Hey, but that's just us.

Bloomberg Buys the Discredited Realtor Lobby's Spin - (www.cjr.org) You’d think that by now the media would be done with the National Association of Realtors, a discredited organization that caused the press so much embarrassment during the housing bubble. But here’s Bloomberg writing a story that could be an NAR press release, warning that “There may be another culprit scuttling a U.S. housing recovery: low home appraisals.” To which Yves Smith of Naked Capitalism provides a welcome dose of “yeah, right.” As Smith points out: The fact that this story appears to have come from industry-cheerleading NAR’s lips to Bloomberg screens is a red flag. Just because the NAR says something doesn’t mean it’s a story—or such a story at least ought to be accompanied by a heaping helping of skepticism given the source. The sliver of “to be sure” Bloomberg dutifully slides into the story doesn’t come until too far down, as Smith points out: When home values come in below the sales price, that’s not the appraiser’s fault, it’s a reflection of the market, the Appraisal Institute, a Chicago-based professional group that represents more than 25,000 appraisers, said in a statement yesterday. “We take offense with the notion that an appraisal is only good if it happens to come in at the sales price,” the group said. “That mentality helped cause the mortgage meltdown to begin with.” Smith notes that “the story immediately undercuts that and returns to the “low appraisals” mantra.” And indeed it does. But I have a more pressing consideration here. Hey, Yves: Leave some media criticism for me! This is too good. But seriously, it’s an excellent piece of media criticism. The whole Bloomberg story is obviously part of a lobbying pushback by the NAR against new restrictions on appraisals intended to curb the corruption that goosed the housing bubble. Barry Ritholtz points to a passage from his new book Bailout Nation that succinctly describes said corruption: Historically, there was no incentive to inﬂate appraisals. But with the rise of the mortgage brokers—many working closely with real estate agents—the business of steering appraisals to the most generous rose rapidly. By inﬂating appraisals, many appraisers found they could attract more referral business; some even managed to always hit the target prices given by real estate agents, which contributed signiﬁcantly to the huge run-up in home prices. In 2005, more than 8,000 appraisers—roughly 10 percent of the industry—petitioned the federal government to take action against such abuses. But both Congress and the White House did nothing, allowing this rampant fraud to continue unabated. Ritholtz adds: So the very people who were enormous contributors to the credit bubble (mortgage brokers), and their colleagues who helped feed the housing boom and bust via friendly (i.e., corrupt) appraisals (RE Brokers, appraisers), are now mobilizing to make sure that honest appraisal reform is thwarted.

Living without credit cards - (msnbc.msn.com) Lisa Brough was forced into a debt-free life by medical disaster. Her husband has Huntington’s disease, a degenerative brain disorder, and has been unable to work since 1999. The couple, who have three children, saw their finances suffer as a result. They ended up with $50,000 worth of credit card debt as Brough worked two jobs and still struggled to pay the bills and the high property taxes on their home in Westchester County, N.Y. “I said to myself, ‘I can’t do this anymore,’ ” she recalled. “He was going downhill, and I had to figure out a way to get out of this. I couldn’t count on tomorrow because I didn’t know what tomorrow would bring.” In 2005, she took drastic measures. She decided to sell her $350,000 home, pay off all the family’s debt, and move to lower-cost Cary, N.C., where she was able to buy a house for $164,000 house in cash. Since then it’s been cash and debit cards only for Brough, 50, who has no debt of any kind. How does she do it? She buys secondhand furniture and electronics, gets her husband’s medicines from Canada at cut rates, has a $10,000 emergency fund and thinks long and hard before she opens up her wallet. “When you use cash you think about what your needs are because you’re paying a big chunk of money at once,” she said. This concept is probably a foreign one to many Americans who are addicted to buying almost everything on credit. But believe it or not, it is possible to survive and thrive without depending on credit cards. In fact, Brough is part of a small but growing debt-free movement, some joining because of personal or economic hardships, and others just looking to simplify their lives. It’s all about economic empowerment. “Times are tough and people want to take control of their finances,” says Denis Cauvier, a financial psychologist and co-author of “The ABCs of Making Money.” “When people look at what’s happening, all the ups and down of the stock market, housing prices, people getting laid off, they get a sense they are out of control,” Cauvier says.

Personal bankruptcies surge in Southern California - (www.latimes.com) The region had the nation's biggest percentage jump in 2008, and the number this year through April is up 75% despite a 2005 rule overhaul aimed at curbing filings by those who would benefit unfairly. Going legally broke has made a big comeback -- especially in the Los Angeles area -- despite a mid-decade revision to the U.S. Bankruptcy Code intended to curb filings. The number of Southern Californians seeking bankruptcy protection nearly doubled in 2008 from 2007 in the U.S. Bankruptcy Court's seven-county California Central District, by far the biggest increase in the nation. Bankruptcy is still booming. Personal filings from January through April, the most recent month available, rose 75% in the Central District compared with the year-earlier period. Bankruptcy experts attribute the growth mainly to the mortgage meltdown, which hit the region's adventuresome borrowers particularly hard. Add soaring credit card debt and medical expenses, and people who never thought they'd see a bankruptcy courtroom are lining up with petitions in hand. "California has been one of the biggest climbers in the filing rate in the last few years," said Robert Lawless, a law professor at the University of Illinois and contributor to the Consumer Bankruptcy Project, which examined how the 2005 bankruptcy overhaul affected filers. "I attribute a lot of that to the foreclosure problem." The scene plays out weekdays in the downtown Los Angeles bankruptcy filing office. In 2006 and 2007, with bankruptcy filings in the doldrums, official statistics indicate this room was less than bustling. But on a recent morning, nearly 20 people were waiting in the hallway before the doors opened, many looking for a way out of their mortgage troubles. Kim Smock raced in to ask a clerk: "Do you think I can make an 11:30 sale?" It was 10:45 a.m. and Smock had only 45 minutes to stop the foreclosure sale of his home. In short order, Gerri Colwark arrived for a similar reason -- the bank was ready to sell her father's foreclosed home that morning. A bankruptcy filing stops a foreclosure sale, at least temporarily, even if the paperwork is stamped only a minute before the sale is to take place. "I rushed over here," she said, a bit out of breath. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was designed to keep people who had the ability to pay debts from enjoying the benefits of bankruptcy. At the heart of the changes is a complex "means test" to analyze a person's ability to pay debts before being allowed to seek Chapter 7 bankruptcy protection, which along with Chapter 13 are the types most often used by individuals.

OTHER STORIES:

New house sales in May down 33% from last year - (money.cnn.com)

4 of America's nastiest housing busts - (articles.moneycentral.msn.com)

Graph of Equity in Household Real Estate - (www.ritholtz.com)

Value of commercial real estate back to 2004 levels - (www.sfgate.com)

The Tyranny of Mark-to-Market Rules for Houses - (www.reason.com)

Banksters Polishing Their Sleazy Image - (www.bloomberg.com)

Goldman Sachs Manipulating Markets Since Depression - (zerohedge.blogspot.com)

Instead of Real Financial Reform, Obama capitulates to Wall Street - (www.globalresearch.ca)

World Real Estate Markets In The First Quarter - (www.nuwireinvestor.com)

The 13 Most Distressed Cities Of The Super-Rich - (www.forbes.com)

With housing still tumbling, what's best way to gauge prices? - (www.latimes.com)