Housing Prices – Bad Less Quickly

Here’s an article in Housing Wire that compares housing prices in January of 2009 to January 2010 and also December 2009 to January 2010.  A couple of thoughts about this article:

• The numbers are not an improvement.  House prices didn’t go up, but they are getting bad less quickly.   If the trend continues, eventually we’ll see an improvement.   But bad less quickly isn’t the same as good.
• The article references “excluding distressed sales.”    I don’t get that.   When 30% or more of the market is distressed sales, why aren’t they including them?   Isn’t that sort of like saying, “Excluding the 100 snowiest days of the year, Michigan has great weather!”

So, the trend is heading in the right direction, but it’s heading there quite slowly.

Thursday, March 18th, 2010, 4:13 pm

National home prices were down less than 1% in January compared to one year earlier, and down 1.9% from the previous month, according to First American CoreLogic’s monthly home price index (HPI).

The 0.7% year-over-year decline in January was better than the3.4% decrease in December. January’s narrowed decline comes exactly one year after the CoreLogic HPI took its biggest annual decline in the 30-year history of the index.

Excluding distressed sales, prices declined 0.4% year-over-year in January, CoreLogic said. That’s better than 3.3% in December 2009………

……“The cumulative loss in home prices of 28% is more severe than the next worst housing recession of 24% cumulative decline which began in Louisiana in the mid-1980s,” said First American CoreLogic chief economist Mark Fleming. “It took Louisiana five years to recover from the bottom, we expect this recovery to take at least as long.”

Michigan, Oregon, Nevada, Maryland and Arizona are expected to see the largest future price declines for the balance of 2010, ranging from 3.5% to 4.5%. On the opposite end of the spectrum, Alabama, South Dakota and Kansas are projected to see price appreciation ranging from 0.5% to 1.5% through the end of 2010.

During the next 12 months, CoreLogic projects national price will increase 4.5%. Excluding distressed sales, that appreciation grows to 5.6%.

Nevada experienced the worst year-over-year price decline in January at 16.9%, followed by Idaho (12.9%), Florida (9.3%), Oregon (8.9%) and Arizona (8.9%).

Excluding distressed sales, the worst five states for year-over-year price declines were Nevada (15.1%), Idaho (9.4%), Florida (8.5%), Arizona (8.2%) and Wyoming (6.8%).

Another leak? Is that what this is?

Paul Jackson does a great job of summarizing what’s happening with the Federal Home Loan Bank System.   I’m not going to try to summarize what he says, but let’s just say that it kind of looks to me like it’s another “leak in the dam.”

You know the type of thing, there is a flood on the river and they have built a dam to hold the water back?   Then they see a leak in the dam and are afraid that it’s going to build and break through and flood the entire town?

Read more……

Serious cracks are showing in the nation’s Federal Home Loan Bank system, and it now appears as if member banks are being forced to take at least some of the hit for it. Various banking industry sources suggested Friday afternoon that some Home Loan banks are squeezing the liquidity faucet, and refusing to pay banks back for FHLB stock they purchased

Banks May Take Hit on FHLB Stock Holdings : HousingWire || financial news for the mortgage market.

Se

Fitch: Alt-A Mortgages Deteriorating More Rapidly than Expected

Citing “a rapid deterioration of U.S. Alt-A RMBS performance,” Fitch Ratings again took the hatchet to its previous assumptions for Alt-A mortgages on Monday morning, revising its surveillance methodology and updating loss projections for all U.S. Alt-A RMBS.

Fitch: Alt-A Mortgages Deteriorating More Rapidly than Expected : HousingWire || financial news for the mortgage market.

For those who don’t remember, what is “Alt A?”   Alt A is the loan programs where they didn’t “quite” meet standard underwriting guidelines but the numbers crunched by the ratings agencies said that they’d still perform very well.

Guess what, the ratings agencies didn’t quite have it right…..

Tom Vanderwell

P.S. More defaults means more losses for financial firms, more losses for Wall Street and more foreclosed houses on the market.   How’s the song go?

Quote of the week : House Prices

“People freak out about high food and gas prices, but high home prices are good? It doesn’t make sense. In the long run, prices will be in line with people’s incomes.” — Christopher Thornberg, economist with Beacon Economics, in an interview for a story in an upcoming January 2009 issue of HousingWire Magazine.

Quote of the week : HousingWire || financial news for the mortgage market.

Fannie Warns of Reverse Stock Split

Fannie Mae (FNM: 0.90 -22.41%) appears to be headed for a reverse stock split in a bid to keep its shares trading on the New York Stock Exchange. According to a filing with the Securities and Exchange Commission last week, the GSE said it had notified the NYSE that it intends to bring the share price of its common stock and the average share price of its common stock for 30 consecutive trading days above $1.00 by no later than May 11, 2009.

Fannie Warns of Reverse Stock Split : HousingWire || financial news for the mortgage market.

So what?  They are making two shares (or three or four?) of stock into one.   What’s the big deal?

Let’s just say that the big deal is that they are doing it for a couple of reasons:

1. They have no choice – the New York Stock Exchange has a rule that they won’t keep a stock on their exchange that is worth less than a dollar for 30 days in a row.
2. Hopefully by combining several shares into one, that can be avoided.

It’s a signal of how bad things are at Fannie and Freddie that several shares of their stock need to be combined in order to get the price over $1.00.

Ouch.

Tom Vanderwell

Home Value Denial: Not Just a River in Egypt : HousingWire

Half of U.S. homeowners live in a state of denial about falling home values, according to a third quarter homeowner confidence survey released Wednesday by real estate information providers Zillow.com. The survey found that while 74 percent of homes have lost value during the past year, a full 49 percent of homeowners said they believe their home had either maintained or gained value during that time.

via Home Value Denial: Not Just a River in Egypt : HousingWire