Blog on the Run: Reloaded

Monday, June 24, 2013 6:12 pm

“This is a uniquely bad time to buy a house.”

I’m not in the market, and if Mike Whitney’s reporting is accurate, you shouldn’t be, either:

… nearly 5 million homes are either seriously delinquent or in some stage of foreclosure. This unseen backlog of distressed homes makes up the so called “shadow inventory” which is still big enough to send prices plunging if even a small portion was released onto the market.   In other words, supply vastly exceeds demand in real terms. Now check this out from Zillow:

“13 million homeowners with a mortgage remain underwater. Moreover, the effective negative equity rate nationally —where the loan-to-value ratio is more than 80%, making it difficult for a homeowner to afford the down payment on another home — is 43.6% of homeowners with a mortgage.” (Zillow)

This might sound a bit confusing, but it’s crucial to understanding what’s really going on. While many people know that 13 million homeowners are underwater on their mortgages,  they probably don’t know that nearly half (43.6%) of the potential “move up” buyers (who represent the bulk of organic sales) don’t have enough equity in their homes to buy another house.  Think about that. Like we said,  housing sales depend almost entirely on two groups of buyers; firsttime homebuyers and move up buyers. Unfortunately, the number of potential move up buyers has been effectively cut in half.  It’s simply impossible for prices to keep rising with so many move up buyers on the ropes.

So, if “repeat” buyers cannot support current prices, then what about the other “demand cohort”,  that is, first-time home buyers?

It looks like demand is weak there, too. According to housing analyst Mark Hanson: “First-timer home volume hit a fresh 4-year lows last month and distressed sales 6-year lows”.

So, no help there either. First-time homebuyers are vanishing due to a number of factors, the biggest of which is the $1 trillion in student loans which is preventing debt-hobbled young people from filling the ranks of the first-time homebuyers. Given the onerous nature of these loans, which cannot be discharged through bankruptcy, many of these people will never own a home which, of course, means that demand will continue to weaken, sales will drop and prices will fall.

Now, despite these appalling numbers, he notes, foreclosures are down by a third from this time last year. Is it because the housing market is really any better? Nope. It’s because the fewer foreclosures the banks follow through on, the fewer losses they have to report, the more profitable they seem and the bigger the bonuses their executives can then claim. The technical term for this behavior is “securities fraud,” and it looks as if every major bank is involved to a greater or lesser degree.

But by all means, let’s reduce enforcement on banks and mortgage companies. Free markets! Murca, hail yeah! Who cares if millions of homeowners and would-be homeowners get hurt?

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Tuesday, February 8, 2011 8:14 pm

Want to see something you won’t see on a big bank’s balance sheet?

Filed under: We're so screwed — Lex @ 8:14 pm
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Voila! A housing market even worse than in the Depression:

Along with the snow and cold, November brought continued declines in home values. In fact, the Zillow Home Value Index has now fallen 26% since its peak in June 2006. That’s more than the 25.9% decline in the Depression-era years between 1928 and 1933.

November marked the 53rd consecutive month of home value declines, with the Zillow Home Value Index (ZHVI) falling 0.8% from October to November, and falling 5.1% year-over-year.

But wait! Some good news!

Foreclosures, however, took a tumble in November, with fewer than one out of every 1,000 homes being foreclosed.

Awesome! That’s way down!

Unfortunately, that is an effect of the bank moratoriums that took place after the robo-signing issues came to light. Foreclosures are expected to rise again once that effect wears off.

Oh.

Crud.

Now, you might think that a housing market this bad would mean that a lot of mortgages that are listed as “assets” on various balance sheets are only assets if, by “assets,” we mean, “instruments worth half or less of what we say they’re worth.” And you would be correct. However, the banksters got to Congress and so Congress got to the FAAB and so now banks and their accountants are allowed to lie about how big their assets are and stay in business, rather than being liquidated in orderly fashion with their executives, stockholders and bondholders made to take the haircut.

In the financial Super Bowl, the refs are all being paid off. And you, mon ami, are not a ref.

Friday, June 25, 2010 8:40 pm

Are we having fun yet?, cont.

Filed under: We're so screwed — Lex @ 8:40 pm
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May existing-home sales, expected to be up 6% YOY, actually were down 2.2%.

Six months ago almost to the day, Reggie Middleton posed a haunting question:

So, what does it mean if we get another significant [housing] downturn? Well, not only are the 2003 to 2007 vintage mortgages in trouble, but those 2008 and 2009 mortgages are at risk as well. What are the chances of this happening? Fairly significant. For all of those guys who swear we are on the brink of a booming economic recovery, recall that it was housing depreciation that set all of this off to begin with. It was not a dip in GDP, not unemployment, not a dip in corporate profits, definitely not a change in analyst’s earnings forecasts and not a crash in the stock market. It was a crash in housing. What happens if we get another housing crash (or more accurately put, the continuing of the current one) after a few hundred billion of stimulus and a 62% run in the S&P to guarantee that the stocks are nice and ripe in their overvaluations?

We’re about to find out.

Monday, December 21, 2009 10:40 pm

Odds and ends for 12/21

Let God sort ’em out: A new book makes both Bill Clinton and the FBI that went after him look bad.

Release the e-mails: There’s more to know about AIG before we let it off the taxpayers’ hook, and the taxpayers deserve to know it. (More interestting but depressing details here.)

Relatedly: How ’bout we claw back some of that taxpayer money that went through AIG to Goldman Sachs at 100 cents on the dollar, thankyouverymuch?? Goldman was pretty much the only bank in such dire straits at the time that didn’t end up settling for 10 to 13 cents on the dollar from AIG, and now it wants to take that tax money and pay it out in employee bonuses. Homey don’ play dat.

Another banking shock: What determines how suitable a bank is for a federal bailout? Size? Nature of its business? Try … wait for it … political ties to the Federal Reserve. Yup, and there’s gambling going on in this casino, too. So can we just audit the damn thing already?

Decade of (self-) deception: Farewell to the ’00s, in which we begged to be suckered and found no shortage of those eager to accommodate us, from “compassionate conservatism” and Enron to Goldman Sachs and Tiger Woods. One other parallel: None of the hucksters, besides maybe Ken Lay, has been held accountable.

Democrats throwing women under the bus. Again: Tbogg on Twitter, for the win: “Bart Stupak will not be happy until he has had a close personal relationship with more vaginas than Tiger Woods.”

Boulevard of broken dreams promises: Jon Walker walks us past the mileposts of broken Obama campaign promises that constitute the current Senate version of health-care reform.

He just can’t quit you: Jon Walker, who apparently has no commitments in life besides health care reform, offers 35 ways to fix the current Senate bill. I’d say it’s unlikely at best that more than one or two will happen, and quite possibly none of them will. But if nothing else, this is a good road map of the kind of crappy legislation that comes out of unified GOP opposition and an undemocratic Senate hidebound by the filibuster.

Speaking of the filibuster, here’s some interesting background on how its use has grown of late. Memo to the mainstream media: Guilt is not equitably distributable.

Ask and ye shall receive: LA Times blogger Andrew Malcolm wants a caption for this picture. OK, here’s mine: “Andrew Malcolm is such an idiot that I could grab his head and smash it into this table like this and the experience would actually make him smarter.”

Memo to Ceci Connolly: Defining being “smart” in Washington as “disagreeing with what two-thirds of the country wants” doesn’t make you look, well, smart.

Related: Time was, and not all that long ago, a David Broder column, whether you agreed with it or not, would be undergirded by some reporting. Now, not so much. (Besides which, on the substance, what appears to be surprising him is that Congressional Democrats are opposing something that Obama himself opposed. This is wrong, or surprising, or even news, how, exactly?)

John McCain fought Teh Stoopid and Teh Stoopid won: He goes on the teevee to claim, laughably, that Ted Kennedy wouldn’t have liked that health-care reform passed on a partisan vote. He crowns that particularly serving of Teh Stoopid topped with whipped Teh Stoopid with this maraschino Teh Stoopid: “There has never been a major reform accomplished in the history of this country that wasn’t bipartisan.” Uh, John, that’s because there has never before been a major reform that one party unanimously rejected purely on partisan grounds.

Top 10 reasons to kill the Senate health-care bill, from Firedoglake, with background links on each. I don’t know whether the bill should be killed, but I do know there are a lot of things about it I absolutely do not like. (One “bug,” starting the taxes before the benefits take effect, could be sold as a way of reducing the deficit. But I’m unsure of the exact math over the long haul, and whether you choose to look at that item as a bug or a feature, I don’t think it makes much difference in the big picture.)

How I would decide on whether or not to pass the health-care bill (Senate version), if I had a vote: Which saves more lives, passing it or killing it? And by killing it, I mean, “killing it,” not, “killing it and immediately passing some fantasy better version that in the real world may or may not ever happen within my lifetime.” Anyone with a documentable answer to this question is welcome to weigh in.

Conservative of the year: Human Events picks Dick Cheney, although, as more than one pundit has pointed out, the actual, substantial policy differences between Cheney and, say, Barack Obama on foreign-policy and civil-liberties issues are much less than meets the eye.

Kentucky legislator wants to prosecute mothers of alcohol- and drug-addicted newborns: Because treating addicts like criminals instead of people with health problems has done so much to reduce addiction over the years.

Gathering storm: The “shadow pool,” the nation’s pool of homes that haven’t yet gone on the market but are about to because of delinquency/foreclosure, has increased more than 50% in just one year, to about 1.7 million. A lot of those homes are or will be vacant, which spells trouble for their neighbors, too.

Some good news for a change: Obama signed the military appropriations bill, which is good because it contained Al Franken’s amendment barring contractors from forcing employees into arbitration when they get raped. Which, in turn, is good not only for those employees but also because it gives candidates who give a damn about rape victims, be they competing in the GOP primary or in the general election, a big ol’ hammer with which to hit the 40 current incumbent Republican senators over the head.

And more good news: The signed consolidated appropriations bill DIDN’T ban federal funding for needle-exchange programs, the first such bill since 1988. Now that a smidgen of common sense has crept into the War on Some Drugs, expect the end of the world before lunchtime tomorrow.

I don’t know who Drew Westen is, and I don’t know if he’s right. But I do know that his perceptions are remarkably similar to mine.

Thumbsucker: Long journalism pieces that raise lots of Big, Serious Questions — often without offering answers, sometimes because no answers can be found — are known in the journalism biz as “thumbsuckers.” In the era of dying print and shorter attention spans, thumbsuckers are a dying breed, in part because the form is attempted far more often than it is mastered. But here’s a good one, asking whether the GOP has any relevant ideas to contribute to discussion of some of the biggest issues that face us. (My short answer: Yes, but to find them you’ll have to listen to the party members who, right now, aren’t doing most of the talking the public hears.)

Quote of the day, by Jonathan Chait of The New Republic in the thumbsucker linked above: “If government intervention appears to be the answer, [Republicans] must change the question.”

Friday, November 27, 2009 5:12 pm

Odds and ends for 11/27

  • Down in the desert: Dubai, whose potential sovereign-debt default is in today’s news, is messed up, economically and in other ways. Zero Hedge’s Marla Singer, who has spent time there, offers a pretty readable summary. Key takeaway: Dubai’s travails say a lot less about the pitfalls of capitalism than meets the eye.
  • Housing-market update: I’m not smart enough to know what to do about this, but more U.S. homes are in delinquency or foreclosure than are for sale.
  • The “deadbeat stimulus”: At least $160 billion a year.
  • Tim F. observes how the health-care reform bill is being set up to fail.
  • Martyrs: The people trying desperately to help Sarah Palin run her life are getting no help at all from the boss. I’m shocked.
  • The Obama-Bush Administration: The Obama Justice Department’s arguments against exoneration for former Alabama Gov. Don Siegelman are being prepared by the very same people involved in the original frame-up — the one in which Karl Rove was involved up to his eyeballs. So spare me all this talk about how much better things are in government now that Obama has replaced Bush.
  • So if we fire all the execs who ran the banking system into the ground, the banking system will crash and burn? Well, pardon me for agreeing with a former public official who barebacked a whore, but I’m thinking we should test that hypothesis.
  • Apologies are fine, but the Roman Catholic Church needs to take some of the time it’s spending on apologies and spend it on turning the guilty over to police. Also? Any institution with this kind of problem needs to get itself fixed before presuming to comment upon moral issues.
  • Relatedly, not only does a 2007 court filing by Bishop Thomas J. Tobin, last seen denying communion to Rep. Patrick Kennedy because Kennedy won’t oppose abortion, admit the existence of more than twice as many accused priests as the diocese had admitted just three years earlier, it also cites that high number (~125) as a reason why court-ordered disclosure of documents would be excessively “burdensome.” Awwwww …
  • Unproductive speculation: If anyone has any ideas about how to end it other than by taxing financial transactions — an idea devised in 1972 by a Nobel winner, by the way — I’m all ears. But it needs to end.

Thursday, December 11, 2008 9:57 pm

Wrecking an economy, 90 houses at a time

Filed under: We're so screwed — Lex @ 9:57 pm
Tags: , , , ,

The housing bubble that led to the current economic collapse has a lot of complex, interlocking causes, from unqualified buyers to unscrupulous lenders to undiligent mortgage repurchasers to ignorant investment bankers to inattentive (or worse) regulators.

This article in the St. Petersburg (Fla.) Times focuses on one guy who traded in houses in the Tampa Bay area and whose deals, multiplied across the country, illustrate how a significant part of the crisis came to be. Fun fact: One buyer, who worked for a car wash, reported his income as $40,000. A month.

Also depressing, but not surprising: the level of ignorance in the comments.

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