Monday, April 16, 2007

Update on US housing market

The Housing Bubble is a good aggregator of main-stream-media coverage of the US housing market. Here are a few excerpts from stories quoted there along with my comments:

Reuters says: "demand for mortgage-backed securities fell to a three-year low, a U.S. Treasury Department report showed.”

“U.S. agency bonds, principally backed by home mortgages, saw their lowest net purchases by foreigners in nearly three years in February, as news of troubles in the subprime mortgage sector increased.”

“Purchases of U.S. agency bonds, such as those issued by home loan funding company Fannie Mae, fell to $2.02 billion in February, their lowest level since net sales of $624 million in March 2004.”

“‘It probably is related to general concerns about what’s going on in the mortgage-backed arena,’ said Alan Ruskin, chief international strategist at RBS Greenwich Capital.”" There is probably a relationship between those facts and what we see in this chart of the dollar's recent value versus the euro:

Another interesting fact is that "“Kara Homes Inc., the New Jersey builder known for so-called McMansions, became one of the first major, closely held home builders to file for Chapter 11 protection in October." Okay, that is old news, but interesting nonetheless.

“Wachovia Corp said it remains on track to meet its goals from its $24.2 billion acquisition of Golden West, which it acquired in October, though Chief Executive Ken Thompson said ‘it’s a trying time to be a participant in the mortgage market.’ “With Golden West, Wachovia added more than $122 billion in mortgages during the quarter, almost all with adjustable rates.” That is a hefty chunk of exposure.

Finally, Fitch Ratings is quoted as follows: “After studying the collateral attributes of early payment default (EPD) loans and comparing them to loans that did not default in the first 12 months after issuance, Fitch found that Fair Isaac Corp. (FICO) scores have become less significant as an early default indicator when other high risk loan attributes, such as piggyback second liens or loans with no-income verification, are present.” Thanks for the blinding flash of the obvious...

More from The Housing Bubble:
'“The National Association of Realtors thinks the national median price for existing homes will drop this year for the first time since the organization began keeping records in the late 1960s.” “‘My first thought was, ‘Wow, not even the spinmeisters at the NAR can sugarcoat the current market any longer,’ said Sarasota Broker Thomas Heimann.' Heimann said that "‘As a matter of fact, 9 of our 10 last sales had 100 percent financing, and if the subprime market dries up, then that will have a certain impact on sales activity"...
“U.S. homeowners who bought a home with a subprime mortgage, and now face foreclosure because they cannot make their payments, may have an unlikely remedy: get another subprime loan.”
‘If regulators come in and disallow subprime lending, we are going to end up seeing more foreclosures because these people just can’t get another loan,’ said Patrice Yamato, president of the Florida Association of Mortgage Brokers.”

“But debating the virtues of refinancing into another subprime loan may be academic, said Patrice Yamato, since funding for high-risk mortgages has evaporated.”

“‘Subprime lenders have tightened up so much that a lot of those subprime loans are not getting made,’ she said, so many homeowners are just going to have to brace for a payment shock or contemplate giving up their homes"...that sounds about right...


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