KeNo's Housing and Economic Portal: Monday August 8 Housing and Economic stories

Sunday, August 7, 2011

Monday August 8 Housing and Economic stories

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TOP STORIES:

Laurie Goodman On Why Another 11 Million Mortgages Will Go Bad - (www.businessinsider.com) A major bear on the housing market, Amherst Securities' Laurie Goodman has predicted since 2009 another housing crash as banks are forced to liquidate tons of bad loans. Up to 11 million mortgages are likely to default, according to Goodman. This is a frightening figure, seeing as only several million have been liquidated since the crisis began. When it happens the market will be flooded with supply. Goodman reached 11 million by projecting default rates for non-performing loans, re-performing loans, and underwater loans. Here's a slide from a recent presentation (via The Atlantic): Meanwhile banks are refraining from liquidations in hope that bad loans turn good. Thus the shadow inventory keeps growing:

Existing house sales portend another bad year for the housing market - (www.thehill.com) Sales of previously owned homes dropped in June behind a spike in contract cancellations, signaling what could possibly be the worst year for the housing sector since the market crashed. Existing home sales fell 0.8 percent last month to a seasonally adjusted annual rate of 4.77 million, down from 4.81 million in May, the National Association of Realtors said Wednesday. The new totals are well below the 6 million homes each year that economists say represents a healthy housing market. The latest sales figures are 8.8 percent below the 5.23 million-unit level in June 2010, and represent sales that are lagging behind 2010 levels through the first half of the year. Last year, 4.91 million homes were sold, the worst sales in 13 years as sales have fallen in four out of the past five years since the housing sector crashed.

House sales on pace for worst showing in 14 years - (www.google.com) People are buying homes at the weakest pace in 14 years. Sales of previously occupied homes fell in June for a third straight month to a seasonally adjusted annual rate of 4.77 million, the National Association of Realtors said Wednesday. This year's pace is lagging behind the 4.91 million homes sold last year — the fewest since 1997. In a healthy economy, people buy roughly 6 million homes per year. Fewer first-time homebuyers are entering the market. Many can't obtain a loan or meet larger down payment requirements. Another problem is that a growing number of contracts are being canceled before sales are finalized, many because of lower appraisals that are scuttling loans. And the slowdown in hiring is making people think twice about taking on extra debt. High unemployment, millions of foreclosures and tighter credit are likely to keep people from buying homes in the second half of the year, economists say. Even low home prices and cheap mortgage rates are unlikely to draw buyers to the market.

Homeowners in Denial About Value of Properties - (blogs.nytimes.com) Homeowners, especially those who bought their houses after the real-estate bubble burst, are still having trouble accepting just how much the values of their properties may have fallen, says a new report from the real-estate site Zillow. Current sellers who bought their homes in 2007 or later, an analysis of the site’s home listings shows, are overpricing their properties by an average of 14 percent. Sellers who bought their houses before the bubble, and those who bought during the big run-up in home values, also are overpricing their homes, but not by as much. Those who bought before 2002 are pricing their homes roughly 12 percent over market value, while those who bought from 2002-06 price them about 9 percent over market value. In the analysis, Zillow compared the asking price of one million homes for sale to the homes’ previous purchase price, then factored in the change in the Zillow Home Value Index for the respective ZIP code, to determine an estimate of that home’s current market value.

When was the last time California had a sensible housing market? - (www.doctorhousingbubble.com) The market has dramatically collapsed in the Inland Empire and Central Valley with very little news coverage and many of these areas run similarities closer to what we are seeing in Las Vegas and Arizona. Take for example Riverside County. Home prices peaked in June of 2006 with the median home price selling for $422,000. Today the median price is $200,000 down a jaw dropping 52 percent from the peak. Let us now take Orange County. Orange County peaked in August of 2007 with a median price of $642,250 and today the median price is $445,000, a drop of 30 percent.