Today’s Housing Bubble Post – PRIME Loans Failing

Countrywide feels pain of ailing mortgage market,

Countrywide said payments were at least 30 days late at the end of second quarter on 4.56% of prime home-equity loans serviced by the company, up from 1.77% a year earlier.
Payments were late on 23.71% of sub-prime mortgage loans, up from 15.33% at the end of the same period in 2006, the company said.

A huge jump from 1.77% to 4.56% of prime mortgages with late payments, and from 15.33% to 23.71% of sub-prime. And housing prices haven’t even really started falling yet.
But they will.

Today’s Housing Bubble Post – Foreclosures Jump

U.S. Foreclosure Filings Jump to Record in First Half,

Mortgage foreclosures in the U.S. jumped to a record in the first half as rising interest rates and falling home prices battered homeowners.
[. . .] In June, defaults surged 87 percent to 164,644 from a year ago, said RealtyTrac, a seller of foreclosure data, in the statement today. Last month’s total was 7 percent lower than in May. California, Florida, Ohio and Michigan accounted for half the national total in June.
[. . .] California had the second-highest rate, with one filing per 315 households, and the most filings overall, 38,801, for the sixth month in a row. Foreclosures in California, the most populous state, increased almost three-fold over a year ago.

Today’s Housing Bubble Post – Slowwwww!

Slow sales, prices keep dropping.
Home Sales Hit Slowest Pace in 4 Years: Financial News,

Reflecting further housing troubles, sales of existing homes fell in May to the lowest level in four years while the median home price dropped for a record 10th consecutive month.
… The median price of a home sold last month dropped to $223,700, down 2.1 percent from a year ago. It marked the 10th straight price decline compared with a year ago, the longest stretch of weakness on record.

I noticed this weekend that MANY more “For Sale” signs are out in the Bay Area than before.
Update – My observation is confirmed: Housing inventory piling up: Inventory of homes for sale hits 15-year high,

The inventory of previously owned homes up for sale in May rose to the highest level in relation to sales in 15 years, a real-estate trade group said Monday.
… Inventories of homes on the market rose by 5% to a record 4.43 million, representing an 8.9-month supply at the May sales pace. That’s the biggest overhang of inventory since June 1992, at the tail end of the last housing bust.
The inventory figure compared with 8.4 months in April and 7.4 months in March.

Today’s Housing Bubble Post – Record Foreclosure Pace

U.S. Mortgages Enter Foreclosure at Record Pace,

The number of Americans who may lose their homes because of late mortgage payments rose to a record in the first quarter, led by subprime borrowers pinched by an economy that grew at the slowest pace in four years.
… Falling home prices hurt homeowners who fall behind on their payments, as they find it more difficult to sell the property or refinance into another loan, said Doug Duncan, chief economist for the Washington-based bankers’ group.

Also, “More pain” – the “subprime” problems are rippling out:

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Today’s Housing Bubble Post – Prices Down

Yesterday’s bad news was about new homes. Today’s bad news is about existing homes. Home prices fall for 9th straight month,

Sales of existing homes fell by a larger-than-expected amount in April while the median price of a home sold during the month fell for a ninth straight month as the troubles in the subprime mortgage market acted as a further drag on housing.
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The National Association of Realtors reported Friday that sales of existing homes fell by 2.6 percent last month to a seasonally adjusted annual rate of 5.99 million units. That was the slowest sales pace since June 2003.
… Sales were weak in all parts of the country. The Northeast experienced the biggest decline, a fall of 8.8 percent in April from the March sales pace.

And the news is only going to get worse:

The drop in sales was accompanied by a big jump in the number of unsold homes left on the market.

Today’s Housing Bubble Post

I haven’t done a housing bubble post for a while, so here is a roundup.
Lenders have “tightened up” on their requirements to qualify for a loan, so fewer buyers are qualifying: As mortgage lending tightens, house hunters with weak credit get shut out,

Rising interest rates and dropping home prices have squeezed a market that had been propped up by risky loans and easy credit during the housing boom. As mortgage bills came due, foreclosures rose, and the easy credit dried up for families like the Shields.
[. . .] This year, the volume of subprime mortgages is expected to drop by about 30 percent, said…

So there are fewer buyers.
Meanwhile, foreclosures are up, which means more houses for sale with special deals. So just as there are fewer buyers, there are more sellers.
Stories like these, around the country: National: Brace for wave of foreclosures,

More than 1.1 million homeowners will lose their homes to foreclosure by 2014 because they can’t afford the rising payments on their adjustable-rate mortgages, according to a researcher.

Kansas: Foreclosures up as loan rates adjust,

“We’re just in the first wave of anniversaries now,” Hermes said. “There will be a second, third and maybe a fourth wave of foreclosures. Then, all the people who are getting subprime loans now — they’ll start to kick in.”

Sacramento: Foreclosures Hurting Local Property Values: Many Homeowners Forced To Take Loss

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Today’s Housing Bubble Post – “Worldwide Bubble”

A warning, and not just on housing: All the World’s a Bubble,

Grantham says we are now seeing the first worldwide bubble in history covering all asset classes.
Everything is in bubble territory, he says.
Everything.
[. . .] And it becomes self-sustaining. “The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you.”
[. . .] “The bursting of [this] bubble will be across all countries and all assets, with the probable exception of high-grade bonds,” Grantham warned. “Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity.”
Ouch.

Yes, ouch. Watch your backs. And, maybe buy some gold.

Today’s Housing Bubble Post – Worst Drop In 18 Years

The tightening of mortgage lending standards is beginning – just beginning – to have an effect.
Existing home sales pace, prices fall again in March – Apr. 24, 2007,

Home sales posted their sharpest drop in 18 years in March, a real estate group said Tuesday, as problems in the subprime mortgage sector pushed sales well below what economists had forecast.
Sales of existing homes fell 8.4 percent to an annual rate of 6.12 million in March from February’s 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989. Economists surveyed by Briefing.com had forecast sales would fall to an annual rate of 6.45 million in March.

It’s also beginning – just beginning – to affect prices,

At the same time, prices also dropped. The median price of an existing single-family home decreased 0.9 percent last month, to $215,300, compared with a year earlier.

And it will get worse,

The realtors’ association report reflected a housing market that is becoming increasingly unfriendly to anyone looking to sell their home. While the number of unsold existing homes for sale fell 1.6 percent in March, to 3,745,000, the time it took to sell a home increased. There was a 7.3-month supply of unsold properties on the market last month, up from a 6.8-month supply in February.
Economists said that if home prices continued to fall, potential buyers would be discouraged from acting while they waited for the bottom of the market to hit.

All of this could add up : Poor housing data raise fears for US economy

Today’s Housing Bubble Post – Not Just Subprimes

It’s not just “subprimes” that are in trouble. See Mortgage crisis hits million-dollar homes, page 2

“Everyone’s looking at subprime. The rock they aren’t looking under are the adjustable rate mortgages and teaser rates and low money-down loans,” said Mark Kiesel, a portfolio manager for Pacific Investment Management Co., the world’s biggest bond manager. “It’s going to affect prime as well.”

In fact, it’s everywhere. Subprimes are the tip — now the iceberg is coming into view.

Josh Rosner, managing director at investment research firm Graham Fisher & Co., says the growing numbers of foreclosures outside the subprime market is just the start.
“To define the problem as a subprime problem is short-sighted,” Rosner said. “It’s really seeing the tip of the iceberg as the iceberg.”

Today’s Housing Bubble Post – Sales Lower, Inventories Higher

New home sales dropped again – 3.9% to lowest level in 7 years. Inventories up again to the highest level in 17 years. Go see The Bonddad Blog: More on New Home Sales and New Home Sales Drop 3.9%.
Here’s the thing. Last week lenders tightened requirements for getting a loan. This means that fewer people can get loans now for buying houses. So demand for houses is about to drop — a lot. The drop in sales reflects the month before this tightening so things can only get worse.
We have an increase in supply and a big decrease in demand. That can only — ONLY — mean a drop in housing prices is coming. BUT WAIT, THERE’S MORE!

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Today’s Housing Bubble Post – Bad News Spun Good

Headline sounds great, no? Home Sales Rise Unexpectedly in Feb. But what about the story?

The increase pushed sales up to a seasonally adjusted annual rate of 6.69 million units, still 3.6 percent lower than a year ago. Sales fell by 8.5 percent for all of last year as housing hit a sharp slowdown after setting sales records for five straight years.
… “Sales cannot be sustained at this level, which is way above the pace implied by mortgage applications,” said Ian Shepherdson, chief economist at High Frequency Economics.
The price of a median home sold last month dropped to $212,800, down by 1.3 percent from the same month in 2006. It marked a record seven straight months that the median home prime has fallen compared to the same period a year ago.
… “Our view is that the tightening in the subprime market will have a negative impact on home sales,” Lereah said. “It probably won’t postpone the recovery (in housing) but it will slow it.” [emphasis added]

So the real story is year-over-year sales are down 3.6 percent and EVERYONE expects things to get worse.
Nice headline, though.

Today’s Housing Bubble Post – “Woes Could Spread”

Greenspan warns subprime woes could spread,

Former Federal Reserve Chairman Alan Greenspan said on Thursday there was a risk that rising defaults in subprime mortgage markets could spill over into other economic sectors.
Speaking to the Futures Industry Association, Greenspan conceded it was “hard to find any such evidence” about spillover from housing yet, but added: “You can’t take 10 percent out of mortgage originations without some impact.”

Duh! You take away a big percentage of buyers by tightening the rules about who can get a mortgage at the very same time as inventory is rising, and OF COURSE prices have to fall. DUH!
Meanwhile,

He said that subprime woes were “not a small issue” and seemed to result primarily from buyers coming into lofty housing markets late after big price run-ups that had left them vulnerable to hikes in adjustable mortgage rates.
Default rates in the subprime segment of the U.S. mortgage market have jumped in recent months as the housing industry slowed and prices fell.
At least 20 lenders in the subprime mortgage sector, which serves borrowers with poor credit histories at high interest rates, have gone out of business as a result.
The crisis has triggered broader concerns that the fallout may spread to mainstream lenders and damage the economy.

And the good news?

He also noted the problem would be quickly resolved if the housing sector regained its footing and prices moved up by 10 percent.

Right. Prices at the highest ever, fewer buyers, high inventory, and things will be fine IF prices go up. OF COURSE they’ll be fine if prices go up. But at the top of a bubble it’s ALWAYS fine if prices go up. But they won’t.
The situation in Iraq would be fine if Shiites and Sunnis gave each other a big hug, too. But they won’t.