The Electric Mini
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Entries Tagged as 'Housing'
Available Housing Inventory
Cecelia Maben, Associate Broker with Peter Anderson Realty Assoc., Inc., delivers a monthly newsletter to our door. It is always useful. It has a list of pending home sales and actual sales in the neighborhood. It allows me to be a nosy neighbor, to see how much the house across the street sold for without asking, “So, how much did this house cost you? Really, that much!” Then I get to tell Bev our comparable house just appreciated another $50,000. Well that was in the good old days.
Maben newsletter also gives a street view of the happenings in the Grant High area. This month she has a table that shows the available inventory in months in the Portland Metro area.
As the table indicates, we currently have 9.2 months of supply of homes for sale, about double last year and you have to go back to 2000 to see it near this high. The good news it did get better after 2000.
How does that compare with the rest of the country? Jesse’s Café Américain has this chart as part of a triptych on the housing slump.
Click chart to enlarge.
Emergency Home Ownership and Mortgage Equity Protection Act (H.R. 3608)
The Mortgage Lender Implode-O-Meter reports that Reps. Brad Miller (D-NC) and Linda Sánchez (D-CA) have introduced a bill in the House,
Called the Emergency Home Ownership and Mortgage Equity Protection Act (H.R. 3608), the bill would make it possible for a bankruptcy court to restructure a home mortgage — meaning a bankruptcy judge could change interest rates or alter principal amounts as part of a Chapter 13 restructuring plan.
Bottom line, you get into trouble with one of those sub-prime loans and are forced into bankruptcy, the judge can restructure the loan. If you had a 1% loan and were able to make the payments prior to bankruptcy, what would prevent the judge from changing the loan to a 60-year loan? That would certainly mess up buyers of mortgages and Implode-O-Meter is right, new originated loans would have higher interest rates to compensate for the added time risk.
Seamless!
We’ve read that if the owner of our mortgages goes bankrupt, there will be no effect on the homeowner. We just make our mortgage payments to the new mortgage holder. Seamless!
Well, the WSJ offers a different take. Thousands of homeowners face an “imminent risk” of losing their homes because American Home, for example, collected our payments for principal, interest, taxes and insurance, but failed to make the payments to keep our insurance in force and failed to pay the property taxes.
“Therefore, there is the imminent risk that borrowers’ insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties,” Freddie Mac said
Then there’s the situation in which the new mortgage owner receives our paperwork from the previous owner, now bankrupt.
“Payments are being deemed late, even when they’re not, because they can’t catch up with the paper.” The result is additional insurance costs and accumulating late fees.
I am not in favor of the government helping out those who willingly took out 1% adjustable mortgages and now find the payments have adjusted to reality, nor those who took out 110% loans and find they have negative equity. I do believe the feds owe their full faith and credit to make sure we don’t lose our homes or insurance protection when we have been diligent.
imminent risk
They’re Back!
The NY Post reports that Countrywide (CFC) Seeks 2nd Bailout. They have already raised $11.5 Billion by tapping their credit line with 40 banks, then another $2 Billion from a preferred offering to Bank of America. Now they need more!
Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation’s largest home lender continues to struggle amid the global credit crunch and declines in the housing market, The Post has learned.
Dave in Denver writing in a note to Bill Murphy at Le Metropole Cafe (You really must try their free trial) analysed the balance sheet of CFC and found this item interesting: Securities sold under agreements to repurchase and federal funds purchased: $46.1 billion (here’s a link to the CFC balance sheet pdf). This item was $32.6 Billion in March of 2006.
Quoting Dave,
I discovered that particular balance sheet account is essentially mortgage assets held by Countrywide, mostly “for sale” (i.e. to be sold into the asset backed market which is no longer functioning), and is financed by short term commercial paper, which needs to be rolled over if Countrywide can’t get the mortgages sold. In effect, the $13.5 billion (11.5 bank plus 2 billion preferred) financed a portion of the above $46.1 billion. So, in reality, Countrywide ultimately needs close to another $33 billion in financing to replace the financing behind the above mortgages (assume they sold off some before the mortgage market collapsed as that number is as of 6/30 quarter end).
Countrywide appears to be in a tough spot! Countrywide’s chief executive Angelo Mozilo, who announced plans last week to eliminate as many as 12,000 jobs, said,
“The issues the economy is facing are worse than most people believe.”
Don’t worry about Mozilo, though. He’s okay. He sold CFC stock that netted him over $500,000,000. The boys at Enron were such pikers.
Just three months ago the stock was almost $40 per share.
Countrywide Financial Corp. (CFC)
Update:
Houses Built from Oranges
Hat tip to Rickey.org for the Orange Parade somewhere in the world.
The “Housing Bubble”
A lot has been written about a housing bubble in the US. The Economist had a cover story about the bubble, The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops.
I did a Google search on “Housing Bubble” and there are 963,000 entries on the subject. Business Week in Housing Bubble — or Bunk? said
A countrywide meltdown in housing prices could have a profound affect on the economy, as more Americans invested in real estate than in stock. According to the Federal Reserve, homes’ appraised value made up 145% of nominal gross domestic product in March, while stocks and mutual funds were worth 82% of GDP.
So that’s why I was surprised by the story about Real Estate Boom Over? in the Early Warning Report by Richard Maybury (by subscription only). Maybury says
…when we see real estate prices climbing, we’re not watching real estate rise, we’re watching the dollar fall.A way to make this clearer is to express US real estate prices in terms od currencies other than the US dollar….
The average US home price increase in terms of the six foreign currencies (British pound, Swiss franc, New Zealand dollar, gold, Japanese yen and Canadian dollar) is just 4% in 4 years. In my opinion, US real estate, on average, has yet to heat up the way raw materials have. (emphasis added)
If you have been reading Mover Mike for long, you know that I am bullish on gold and raw materials and bearish on the DJIA and the USD. I expect the price of gold to exceed the Dow Jones Average. According to Maybury, Real Estate in the US is down 6% versus Gold since 2001. If it maintains that kind of relationship, slightly underperforming gold, and gold soars, Maybury could be right about “a genuine real estate boom has now begun.”
So what, you say. Opinions are like a–holes! Everybody has one. You are absolutely right. I just get that prickly feeling when almost everyone agrees we are in a bubble. The houses in my neighborhood are selling at $200 per square foot. We are experiencing net immigration to the city. Our Urban Growth Boundary seems to encourage a lowering of supply, and the increasing demand, benefits the politicians with higher property tax collections. In California, houses can sell for $1000 per square foot. It could happen here.
Portland Metro Housing Up 15.3% in April !
The Oregonian reports Home prices go through the roof
The Portland-area median home price jumped 15.3 percent in April — to $224,900 — compared with the same month in 2004, according to the Regional Multiple Listing Service. The median price in the first four months of the year ran 14 percent above the figure for the same period last year. That’s after a 10.2 percent increase in the annual median price in 2004.…snip…
Increasingly, buyers from out of state (California) also are snatching up Oregon homes as investments, real estate agents say.
In the NE area of Portland where we live, homes are going for $200+ per square foot. Rents for 1200-1300 square foot Condos in the Pearl are going for $2500-$3000 per month. Amazing, but aside from low interest rates, in-migration, investors from California, we, also, have an urgan growth boundary that concentrates the real estate activity, leading to a limited supply.
Here’s a thought. At 14% increase in price per year equals a double every 7 years. We purchased our house for $155,000, 10 years ago. Last time I checked, it’s probable market price is $350,000. Another seven years it would be $700,000, and then $1,400,000. Yahoo! Wonder if a Starbucks will be $10 or $15 by then?
