Posts Tagged ‘housing market’
Wednesday, July 7th, 2010
Bank repossessions of homes rose 44 percent in May over the same month last year, reaching an all-time high and with increases occurring in every state as lenders stepped up the rate of seizures. Realty Trac, Inc., an Irvine, CA-based data company that tracks foreclosures, reports that bank repossessions totaled 93,777 in May, with filings — including default and auction notices — soaring to 322,920. In other words, one out of every 400 households in the United States has now received a filing.
According to Rick Sharga, Realty Trac’s senior vice president for marketing, “We’re nowhere near out of the woods. We’re likely to set a record for home seizures if June is anything like May. The second quarter won’t be the peak. I’m not even sure 2010 will be.” April previously held the record for the most seizures - 92,432 of them. Sharga believes that an additional 5,000,000 delinquent mortgages will end in foreclosure.
Approximately 25 percent of American homeowners are under water - they owe more than their homes are worth - notes Zillow.com. Bank sales of foreclosed houses comprised more than 20 percent of all transactions in March. Some of the largest lenders - primarily Wells Fargo & Company and Bank of America - are giving homeowners who owe more than 120 percent of what their houses are worth a helping hand by cutting the principal. “Marginal people, those types who were working as laborers, are most affected by foreclosures,” said Albert Kyle, a finance professor at the University of Maryland’s R. M. Smith School of Business. “A lot of foreclosures are occurring in modest homes.”
Tags: Bank of America, bank seizures, Business Week, foreclosures, housing market, realty Trac Inc, under water mortgage, Wells Fargo, zillow.com
Posted in Economics, Residential | No Comments »
Tuesday, September 29th, 2009
The long recession has dramatically impacted the lives of all Americans, according to demographic data released by the U.S. Census Bureau. Commutes are lengthier; people are not moving; immigration is down; and couples are delaying marriage. The annual American Community Survey report, based on information gleaned from three million households, highlights how deeply the recession impacted all Americans.
The number of people who drive solo to work fell last year to 75.5 percent, the lowest in a decade. Yet, the average commute time rose to 25.5 minutes, as people left home earlier in the morning to pick up car-pooling co-workers. Mobility is at a 60-year low, which will impact congressional district reapportionment based on 2010 census data. The number of foreign-born individuals living in the United States fell to less than 38 million, after reaching an all-time high in 2007.
Of Americans over the age of 15, 31.2 percent reported that they had never been married, the highest percentage in a decade. According to the survey, the number of unmarried Americans started climbing when the housing market downturn started in 2006. Sociologists believe that young people are taking more time to achieve economic independence because they are having trouble landing well-paying jobs or are studying for advanced degrees.
“The recession has affected everybody in one way or another as families use lots of different strategies to cope with a new economic reality,” according to Mark Mather, associate vice president of the not-for-profit Population Reference Bureau. “Job loss - or the potential for job loss - also leads to feelings of economic insecurity and can create social tension.” With unemployment still rising, Mather notes that “It’s just the tip of the iceberg.”
Tags: Census Bureau, economy, housing market, immigration, job insecurity, recession, unemployment rate
Posted in Economics, General | No Comments »
Wednesday, September 23rd, 2009
Commercial real estate investors are taking a wait-and-see attitude before jumping in and buying distressed assets, according to an Ernst & Young study. “We haven’t seen many portfolio transactions so far,” says the study’s author, Chris Seyfarth, who is national director of E&Y’s non-performing loans. “Given the size and the magnitude of the 
problem with banks, I think the expectation is that at some point we’ll start seeing sizable portfolio transactions.”
According to the E&Y study, 53 percent of respondents have purchased distressed or non-performing loans in the last 18 months. Another 45 percent believe it is too early to even think of buying non-performing loans. Distressed assets are “piling up faster than they’re being resolved,” Seyfarth says. “The broad view is that commercial real estate assets are getting worse, not better, and that’s going to impact financial institutions. The issue is that the price expectations are different between the two players, and in some cases significantly different.”
Only 35 percent of those investors claim to have return requirements above 20 percent, and an equal number actually are shooting for returns in the 10 percent to 15 percent range,” Seyfarth concludes. Once the anticipated tsunami of distressed assets his the market, it could be met with a rush of pent-up capital, all trying to get the best deals at the same time - which may, ironically, further cushion price declines, resulting in a more competitive investment market.
News about the spike in housing starts and the buoyancy of the stock market, which has recaptured $3 billion in value in just a few months, suggests that the recession has at least stabilized and economic recovery is near. This should encourage increased liquidity in the credit markets, eventually supporting the commercial real estate investment market.
Tags: banks, commercial real estate, credit market, distressed assets, economic recovery, Ernst Young, financial institutions, housing market, non-performing loans, recession, stock market
Posted in Economics, Financing | No Comments »
Thursday, September 10th, 2009
Paul Krugman - winner of the Nobel Prize in Economics, Princeton University professor and New York Times columnist - is taking advantage of falling home prices in a difficult market. Krugman and his wife, economist Robin Wells, recently paid $1.7 million for a three-bedroom co-op apartment in a pre-war building on Manhattan’s upscale Riverside Drive. The apartment had been on the market for more than one year and had an original asking price of $2.495 million, according to StreetEasy.com, a property listing service.
According to Krugman, “We really wanted a place that has the ultimate New York luxury, which is a washer and a dryer. I do expect New York prices will fall some more, but we need a place. And I came into some money.” Krugman’s Nobel Prize included a $1.4 million cash award. The six-room apartment has nine-foot ceilings, offers “romantic cityscapes” and has a monthly maintenance fee of $1,820. Krugman’s long-time one-bedroom apartment on West 89th Street is under currently contract for a bargain $599,000. Additionally, the Krugmans own a house in Princeton, NJ.
Median Manhattan home prices fell 18.5 percent to $835,700 from a year earlier, according to appraiser Miller Samuel, Inc., and broker Prudential Douglas Elliman Real Estate. The number of sales is half of the 2008 number.
Krugman’s purchase comes at a time when the housing market appears to be stabilizing. Existing home sales rose 3.8 percent in the second quarter to a seasonally adjusted rate of 4.76 million over the first quarter, according to National Realtor Association statistics.
Tags: economy, falling home prices, home sales, housing market, luxury apartment, New York City, stabilization
Posted in Economics | No Comments »
Tuesday, August 4th, 2009
One European nation has escaped the worldwide financial meltdown and recession. It’s Norway, which saved its money - rather than spent - through the boom years. As a result of frugal financial management, Norwegian housing prices and consumption are on the upswing and interest rates are affordable. Norway’s fiscal responsibility of its income from enormous oil and gas reserves has allowed the Scandinavian nation to build one of the globe’s largest investment funds.
After large deposits of gas and oil were discovered in the mid-1970s, Norway didn’t go on a spending spree, and channeled its revenues into a state investment fund. The government - with very few exceptions - can spend only four percent of those revenues annually. “By the end of this year, I guess we are approaching $400 billion U.S.,” according to Amund Utne, a director general of Norway’s Finance Ministry. Do the math, and that adds up to $400 billion in a nation whose population is 4.5 million.
Beyond its oil and gas revenues, strict banking regulations - tightened after a banking crisis in the early 1990s - shielded Norway from the credit crisis. Norwegian banks made loans wisely and stayed away from exotic investments and financial products over the past decade. “They (the United States) got all the bright guys to make all kinds of fantastic products. Very creative. And it turned out it was maybe not the best solution in the end,” Utne said, with typical Norwegian understatement. “I think Norwegian banks are not as creative. In this situation, it may be good to be somewhat boring.”
Norway also was immune from the housing bubble. According to Bjorn Erik Orskaug of DnB NOR, Norway’s largest bank, “Housing prices are back up. Consumption is up. Banks are lending normally to the household sector and interest rates are staying low.”
Tags: banking, financial crisis, government, housing market, interest rates, investment, investment fund, oil prices, recession
Posted in Economics | No Comments »
Wednesday, June 3rd, 2009
It’s no surprise that investors are still wary of investing in derivatives, given the financial devastation that these vehicles’ collapse caused last year. Proof of the fact is that the IPO of a financial instrument designed to be on American home prices failed because its auction did not generate adequate investor interest.
According to its Securities and Exchange Commission filing, MacroMarkets turned down all auction bids because there was an “insufficient demand for an equal number of Down and Up shares”. In other words, MacroMarkets was forced to abandon the auction process because the offering would work only if there was an equal number of shares in both the “up” and the “down” trusts - and if each pair of shares totaled $50. The firm had initially set a minimum closing investment pool of $125 million, though CEO Sam Masucci did not disclose the value of the bids received before pulling the plug.
MacroMarkets sought out investment from homebuilders and banks who want to hedge their housing exposure, as well as foreign investors seeking a stake in U.S. real estate. The problem is that investors had difficulty valuing the shares because it meant predicting the movement of the 10-city index on which the offering was based. That’s not easy in a housing market where prices may not have bottomed out yet.
When housing trusts eventually restart, their shares will trade under the symbols UMM for “up” and DMM for “down” on the NYSE Arca, the New York Stock Exchange’s all-electronic U.S. trading platform.
Tags: auction, auction bids, banks, derivatives, DMM, Down and Up shares, financial devastation, financial instrument, foreign investors, home, home prices, homebuilders, housing exposure, housing market, housing trusts, interest, investing, investment, investment pool, investor, investors, IPO, MacroMarkets, New York Stock Exchange, NYSE Arca, Sam Masucci, Securities and Exchange Commission, UMM, US real estate, US trading platform, value
Posted in Economics, Financing | No Comments »
Monday, June 1st, 2009
Las Vegas may be in the middle of a desert, but right now it’s underwater. Fully two-thirds of the once fast-growing city’s housing stock is underwater, meaning that the owners owe more on their mortgages 
than the home is worth.
According to www.zillow.com, borrowers who are underwater totaled 20.4 million at the end of the first quarter of this year, compared with 16.3 million at the end of last year. This represents 21.9 percent of all homeowners.
The irony in these numbers is that falling prices are making homes more affordable for first-time buyers who previously were shut out of the housing market. At the same time, the decline in home prices compounds problems for owners who get into financial trouble by making it harder for them to refinance and take advantage of the current low interest rates.
“What’s going on here is that you don’t have any markets that have turned around and you have new markets, like Dallas, that have joined the ranks of communities where home prices have fallen,” noted Stan Humphries, a Zillow.com vice president.
Zillow.com reports that the nation’s top 10 underwater cities are:
- Las Vegas, NV 67.2 percent
- Stockton, CA 51.1 percent
- Modesto, CA 50.8 percent
- Reno, NV 48.5 percent
- Vallejo Fairfield, CA 46.5 percent
- Merced, CA 44.4 percent
- Port St. Lucie, FL 43.5 percent
- Riverside, CA 42.8 percent
- Phoenix, AZ 41.7 percent
- Orlando, FL 41.7 percent
Tags: borrowers, city housing stock, communities, Dallas, desert, financial trouble, first-time buyers, home, home prices, homeowners, housing market, Las Vegas, low interest rates, Merced California, Modesto California, mortgage, Orlando Florida, Phoenix Arizona, Port St Lucie Florida, refinance, Reno Nevada, Riverside California, Stockton California, underwater, Vallejo Fairfield California, zillow.com
Posted in Economics, Financing, Residential | No Comments »
Tuesday, January 6th, 2009
Consumer confidence fell to an all-time low in December, despite the fact it was in the midst of the annual Christmas-shopping frenzy. The reasons for this new low include deepening job insecurity, fast-deteriorating housing markets, and declining asset values. According to the Conference Board, the Consumer Confidence Index fell to 38 in December, compared with the 44.7 reported during November. The Present Situation index, which measures respondents’ attitudes to business conditions and employment prospects, fell to 29.4 in December, compared with 42.3 in November. That is close to the levels last seen during the 1990-1991 recession.
With the nation’s unemployment rate rising to 6.7 percent during November, the Board warns of more layoffs during the first six months of 2009. Respondents to the Conference Board’s survey of 5,000 American households who believe that jobs are “hard to get” rose to 42 percent in December, from 37.1 percent during the previous month.
This consumer confidence extends to commercial real estate, where values are in a gray zone, awaiting the inevitable write downs and workouts that will attend a slow recovery. Until this happens, many buyers and sellers feel in limbo. The simple formula to fix this is: somebody needs to get off the dime. To quote a couple of clichés, nothing succeeds like success and no news isn’t always good news in a credit crunch.
Tags: commercial real estate, housing market, job insecurity, layoffs, unemployment rate
Posted in Economics | No Comments »