The plan announced today by the Obama administration on mortgage modification is one more example of missing the target and too little, too late. The biggest fault I have with this new plan is that it is aimed at homeowners who are under water (fine!) but who are current with their payments. These are the people who are holding their heads high, making payments even if difficult. Ones the administration calls "worth saving". They definitely are worth saving BUT SO ARE the 4.5 Million other homeowners that are not able to pay the mortgage and are behind on their payments.
These are the people that need help NOW! The Obama plan is basically an attempt to shore up the results of their original mortgage modification plan that has helped at most 170,000 homeowners out of the 1.1M or more that have applied!
What Obama should do is kick some butts in the banks. Short-sales are a very viable alternative to foreclosure but the banks aren't doing much to make this type of sale "short". I have perosnally had a buyer walk away from a transaction after waiting TEN MONTHS for a price approval and I know of another buyer who waited a FULL YEAR without getting a price approval. This is terrible for both the buyer and the seller. Both transactions involved the same lender. A real American (wink-think about it- you'll figure out who!!).
A second task should be to speed up and streamline the existing loan modifcation process. It's way too complicated if 90% of the applicants are "blamed" for not completing the paperwork on-time or correctly and thus do not get their loans modified.
And lastly, change back the "mark to market" rule that was subverted in March 2009 and now allows banks to hold loans on their books at face value until the property is sold irrespective of what the actual value may be. The change in 2009 destroyed their incentive to negotiate or move quickly.
I'm happy for anyoine who can take advantage of the new plan BUT there'smore important and more pressing priorities out there and the Obama folks just won't make the tough choices.
Friday, March 26, 2010
Thursday, March 25, 2010
Are we headed for a double dip in housing?
Well, I am on the fence on this one! What an unnatural positon for me! Here is what I see in this debate:
Local inventories are down, way down, from the highs in the past two years. But nationwide things aren't as good. Nationwide inventories are running about 7 months at the entry level and higher as you go up in price. Here we see only DAYS of inventory below $800,000 and several months above that price point.
Prices seem to have stabilized on homes priced below $800,000 and are still declining slightly above that figure. Sales volumes are way up compared to even a year ago locally at prices below $800,000. High-end home sales are also up but only slighthly.
The end of the purchase of mortgage backed securities is scheduled for next week. However, if the housing market falters, or rates start to rise precipitously, expect the Fed to jump back in somehow and support rates. The only problem with this is that more money will be funnelled into the economy "artificially" by the Fed and could be tough to retract later. Consider a loan broker's dilemma. He must loan money to allow his business to survive. If rates rise, he will mkae fewer loans but he still survives. However, if he cannot sell the loans he makes, he will not survive as he can't make new loans without available mortgage money. If the fed stops buying MBS, then the largest purchaser of these securities will be gone and to take up the slack, new buyers will have to be found. Thus rates the lender pays on mortgage backed securities will have to rise. To offset this rise, rates on new loans will have to rise. Lenders will survive but it's a balancing act. I cannot see how mortgage rates will not rise in the coming months!
The Home Buyer Tax Credit is set to expire for new contracts on April 30th, a scany five weeks from now. The tax credit purchase price limit is why the number $800,000 appears so frequently in the above comments. This credithas been the primary driver of previously-owned home sales for the past two years. We are definitely pulling buyers forward similar to the "cash for clunkers" program. What will happen to sales after April 30th? I expect a decline at prices below $800,000. Above that level, things should not be affected unless mortgage rates change.
Employment remains near 10% and is a significant drag on the economy and home sales. As long as unemloyment remains high, sales will be sluggish. While investors and cash-rich buyers are buying today, there is a limit to how many of these buyers there are.
Some banks are showing a reluctance to foreclose on owners IF they are involved in either a re-negotiation of their loan or a short-sale. Even when owners have stopped paying their mortgage, banks are holding off on some Notices of Default if the owners are in a short sale transaction.
I can go on and on, but the bottom line is I think it's 60-40 odds that we will have a double dip in home sales after April 30th. How deep and how lengthy the second dip is will have a huge effect on the rest of the economy.
Local inventories are down, way down, from the highs in the past two years. But nationwide things aren't as good. Nationwide inventories are running about 7 months at the entry level and higher as you go up in price. Here we see only DAYS of inventory below $800,000 and several months above that price point.
Prices seem to have stabilized on homes priced below $800,000 and are still declining slightly above that figure. Sales volumes are way up compared to even a year ago locally at prices below $800,000. High-end home sales are also up but only slighthly.
The end of the purchase of mortgage backed securities is scheduled for next week. However, if the housing market falters, or rates start to rise precipitously, expect the Fed to jump back in somehow and support rates. The only problem with this is that more money will be funnelled into the economy "artificially" by the Fed and could be tough to retract later. Consider a loan broker's dilemma. He must loan money to allow his business to survive. If rates rise, he will mkae fewer loans but he still survives. However, if he cannot sell the loans he makes, he will not survive as he can't make new loans without available mortgage money. If the fed stops buying MBS, then the largest purchaser of these securities will be gone and to take up the slack, new buyers will have to be found. Thus rates the lender pays on mortgage backed securities will have to rise. To offset this rise, rates on new loans will have to rise. Lenders will survive but it's a balancing act. I cannot see how mortgage rates will not rise in the coming months!
The Home Buyer Tax Credit is set to expire for new contracts on April 30th, a scany five weeks from now. The tax credit purchase price limit is why the number $800,000 appears so frequently in the above comments. This credithas been the primary driver of previously-owned home sales for the past two years. We are definitely pulling buyers forward similar to the "cash for clunkers" program. What will happen to sales after April 30th? I expect a decline at prices below $800,000. Above that level, things should not be affected unless mortgage rates change.
Employment remains near 10% and is a significant drag on the economy and home sales. As long as unemloyment remains high, sales will be sluggish. While investors and cash-rich buyers are buying today, there is a limit to how many of these buyers there are.
Some banks are showing a reluctance to foreclose on owners IF they are involved in either a re-negotiation of their loan or a short-sale. Even when owners have stopped paying their mortgage, banks are holding off on some Notices of Default if the owners are in a short sale transaction.
I can go on and on, but the bottom line is I think it's 60-40 odds that we will have a double dip in home sales after April 30th. How deep and how lengthy the second dip is will have a huge effect on the rest of the economy.
Tuesday, March 23, 2010
Investors Are Buying
The article in yesterday's USA TODAY described the surge in home buying by cash-rich investors. We have been seeing that phenomenon here in the S County for over a year. A previous blog addressed the reasons why these buyers are snapping up properties and paying all-cash or buying with large cash down payments.
And there were several interesting statistics in the USA TODAY article. One was that investor buying has risen nationwide to 17% of all home purchases in January 2010, up from 12% in November 2009 and just 9% a year ago.
All-cash transactions have risen as well to 26% nationwide up from 18% from Jan. 2009 and a recent low of 12% in May 2009. That means that almost 10% of all home sales today are being purchased as a primary resience by all-cash buyers! If that astounds you, consider that a good percentage of these buyers likely sold their previous home sometime in the past and have been patiently (or impatiently) watching the market and waiting for the right home to purchase.
And there were several interesting statistics in the USA TODAY article. One was that investor buying has risen nationwide to 17% of all home purchases in January 2010, up from 12% in November 2009 and just 9% a year ago.
All-cash transactions have risen as well to 26% nationwide up from 18% from Jan. 2009 and a recent low of 12% in May 2009. That means that almost 10% of all home sales today are being purchased as a primary resience by all-cash buyers! If that astounds you, consider that a good percentage of these buyers likely sold their previous home sometime in the past and have been patiently (or impatiently) watching the market and waiting for the right home to purchase.
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