2010 March 12 | The Mess That Greenspan Made

Your Path to Homeownership

On March 12, 2010, in Housing, Our Culture, by Tim

A funny look at Ginnie Mae’s online tool that can be used to make that all-important rent versus buy decision, recently spotted over at Patrick.net.

The numbers are pretty funny too – $750 to rent and a purchase price of $950,000??

One Million “Homeowners” Now in Loan Mods

On March 12, 2010, in Housing, by Tim

Just a few hours after the Washington Post said there are between five and seven million homeowners barreling toward foreclosure (as noted here earlier), Reuters reports that one million American homeowners are in one stage or another of having their troubled mortgage modified as part of Washington’s rescue plan.

The report said there were 1,003,902 active loan modifications through February and 168,708 of those have been made permanent. That was up from 946,735 active loan modifications and 116,297 permanent loan modifications through January.
…
The Treasury said it still hopes to help 3 to 4 million homeowners by 2012 under the $75 billion program. There are roughly 6.0 million borrowers more than 60 days behind on their payments but not all of them are eligible for the Home Affordable Modification Program (HAMP). Treasury said it expects the number of eligible borrowers to increase.

Most loan modifications result in lower monthly payments, although some lead to reduced principal on mortgages. Trial modifications were initially for three months, but the Treasury added 60 days, effectively making them last five months.

A wider used of principal write-downs (otherwise known as cram-downs) is probably on the way and there still seem to be big problems with second liens on homes (once fondly referred to as those “housing ATM cards”).

Marc Faber and Mike Shedlock on Tech Ticker

On March 12, 2010, in Economy, by Tim

Marc Faber and Mike Shedlock appeared on Tech Ticker to talk about the prospects for the U.S. economy – shortly after you hit the Play button, you’ll start to feel the optimism ooze out of your computer screen and onto your keyboard.

Says Faber: “Well, I think the collapse of civilization has already begun, but it began for me very nicely yesterday. I was at the Chicago airport and I ordered a beer…”

Shadow Housing Inventory Still Looming

On March 12, 2010, in Housing, by Tim

Renae Merle at the Washington Post throws cold water on the idea that the “nascent” economic recovery (is anyone still calling it that?) will continue much longer in this story about a subject that seems to slip further and further from the top of everyone’s list of concerns – the growing backlog of foreclosures or soon-to-be foreclosures.

The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.

As someone who is planning to buy a house later this year, the idea of stretching out this entire process for years is appalling – not only for how it affects our buying plans, but because it virtually assures a lost decade ahead for the U.S. economy.

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Surprisingly, Retail Sales Rise

On March 12, 2010, in Economy, by Tim

The Commerce Department reports that, despite the inclement weather in many parts of the country during February, retail sales saw broad-based gains, up 0.3 percent on a seasonally adjusted basis following a gain of 0.1 percent in January.
This marks the fourth increase in the last five months and, on a year-over-year basis, sales are now up 3.5 percent in what looks to be a return to the pre-2008 pattern, however, February retail sales are now at about the levels seen in 2006, about five percent below the peak level of sales seen in 2007 and 2008 and this comes for a data series that should naturally rise due to both population growth and inflation.