The Perils of the Fiscal Cliff

The Perils of the Fiscal Cliff

Countrywide's Mozilo to pay $67.5 million settlement

Countrywide's Mozilo to pay $67.5 million settlement

New home construction surges 41%

New home construction surges 41%

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Home Prices Continue to Inch Up

See the latest article from Wall Street Journal: http://tinyurl.com/2byrcbw

How Will the Fed's MBS Exit Affect Mortgage Rates? - Business - The Atlantic

How Will the Fed's MBS Exit Affect Mortgage Rates? - Business - The Atlantic

A Close Look At Existing Home Sales

Existing Home Sales ROSE by 9.4% in September to 5.57 million, compared with market expectations for a smaller increase to 5.35 million.

- This increase has lifted sales to their highest level since July 2007.
- Over the past year, existing home sales have increased by 9.2%. However, this is 23.2% below their September 2005 record high.
- About 45% of sales were estimated to be to first-time home buyers, spurred by low prices and the home buying tax credit from the government.
- About one-third of sales were estimated to be distressed.

The Inventory of Homes Available for Sale FELL by 7.5% to 3,630k. With this decline, the inventory of homes available for sale is now 15.0% below its year ago level. This reduced the months supply to 7.8, its lowest level in since March 2007. This is supply is significantly lower for relatively low priced homes and substantially higher for relatively high priced homes. However, there appears to be a large "shadow" inventory of homes available for sale, both from homeowners who have kept their homes off the market because of low prices and from financial institutions temporarily holding foreclosed homes off the market.


Home Prices continued to decline compared to their year ago levels. Over the past year, average prices have fallen by 6.5% while median prices have tumbled by 8.5%. Year-on-year prices have declined in 37 of the last 38 months and are still falling moderately, partly reflecting a shift in the composition of sales to lower priced homes and partly reflecting the much lower prices associated with distressed sales.

Excerpts from a 10/23/09 Existing Home Sales report by Steven A. Wood, Chief Economist of Insight Economics.

New housing starts rose less than expected

Published Tue, Oct 20 2009 11:20 AM by Adam Quinones


New housing starts rose less than expected to 590,000 annualized units, economists were expecting a rise of 610,000 units after a read of 598,000 in August (which was revised lower to 587,000 annual units). The rise in new housing starts was a factor of a 3.9% increase in single family construction starts while multifamily starts fell by 15.2%. Building permits fell by 1.2% to 573,000 annual units led by a 3.0% decline in single-family permits while multi-family permits rose by 6.0% to 123,000 annualized units. ...

Fed continues to slow down on the purchase of Mortgage Backed Securities (MBS)

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the four trading days between October 8 and October 14, the Federal Reserve purchased a total of $21.42 billion agency MBS. In those four days the Federal Reserve sold a total of $5.32 billion agency MBS with almost all sales being Fannie Mae 5.5 MBS coupons. After sales, the Fed's weekly net purchases were $16.1 billion.

The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Since the inception of the program the Federal Reserve has spent $941.03 billion, or 75.28% of the allocated $1.25 trillion which is scheduled to run out in March 2010.

This is the fifth consecutive week the Fed has reduced MBS purchases. A slowdown of daily purchases is expected as the Fed begins to exit from the agency MBS purchase program. Up to this point the gradual withdrawal has not affected the performance of MBS coupons against benchmarks. This is a function of a slowdown in new production from originators.

MarketWatch First Take: U.S. unemployment rate drops -- well, sort of - MarketWatch

MarketWatch First Take: U.S. unemployment rate drops -- well, sort of - MarketWatch

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Mortgaget Rates are Headed up

Treasury 10-Year Notes Fall Most in 2 Months on Growth Outlook

Cap-and-Trade: Bad For The Economy

Cap-and-Trade: Bad For The Economy & Us - Forecasts & Trends - InvestorsInsight.com | Financial Intelligence, Advice & Research / Investment Strategies & Planning for Individual Investors.

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Seattle-area prices back to July 2005 levels

Tuesday, March 31, 2009
Last updated 10:24 a.m. PT
By AUBREY COHEN
SEATTLEPI.COM STAFF
Seattle-area house prices posted record declines in January, bringing them back to levels
not seen since July 2005, according to a new report.
The typical house in King, Pierce and Snohomish Counties was worth 15 percent less in
January than it was a year earlier and 3.6 percent less than in December, according to
Standard & Poor's S&P/Case-Shiller Home Price Indices. The year-to-year drop was the
12th straight record for the index, which goes back to the start of 1990, while the monthly
decline tied the record set in December.
Seattle ranked ninth out of 20 areas S&P tracks for annual decline and 13th for monthly
drop. Area prices have fallen 19.7 percent from their July 2007 peak.
S&P's 20-city composite posted a record annual decline of 19 percent and was down 2.8
percent from December. No area posted a monthly or annual gain, while 13 had record
annual declines, 14 fell by more than 10 percent and nine were down more than 20
percent.
"There are very few bright spots that one can see in the data," David Blitzer, chairman of
S&P's Index committee, said in a statement. "Most of the nation appears to remain on a
downward path."
Patrick Newport, U.S. economist for the analysis firm IHS Global Insight, called the
report "a reminder that housing is still in deep recession."
Recent reported increases in new and existing home sales, and housing permits and starts
covered February and March, after the period in the latest S&P report, Newport noted.
"Therefore, it is possible that the market hit bottom in January and is starting to
improve."
Seattle-area prices back to July 2005 levels Page 1 of 2
http://www.seattlepi.com/printer2/index.asp?ploc=t&refer=http://www.seattlepi.com/local/404450_housi... 3/31/2009
He said Global Insight was not ready to make that call, because recent weather swings
have distorted data.
The S&P report gauges market movement by tracking repeat transactions of specific
houses, rather than depending on what happens to sell in any given month. The latest
report from the Northwest Multiple Listing Service put the median King County house
sales price at $375,000 in February -- down 12.8 percent from a year earlier, 2 percent
from January and 22 percent from the peak of $481,000 in July 2007.
S&P's middle price tier, $271,524 to $395,118, posted the smallest drops, 2.6 percent
from December and 13.5 percent from a January 2008. The values of lower-priced homes
were down 3.9 percent from December and 17.4 percent from a year earlier. Moreexpensive
houses posted monthly and annual declines of 4.2 percent and 14.8 percent,
respectively.
S&P's 20-city index is now back to levels last seen in September 2003 and has fallen 29
percent from its peak in July 2006.
The smallest declines were 4.9 percent from a year earlier, in Dallas, and 1.2 percent
from December, in Charlotte. Phoenix posted the largest annual and monthly drops, 35
percent and 5.5 percent, respectively.
The only "marginally positive" trend S&P noted was that January's year-to-year drops
were smaller than December's in Cleveland, Los Angeles and Las Vegas, while Las
Vegas was one of six areas with somewhat smaller monthly declines.
Values have dropped more than 30 percent from their peak in nine areas and more than
40 percent in five: Las Vegas, Miami, Phoenix, San Francisco and San Diego.
Aubrey Cohen can be reached at 206-448-8362 or aubreycohen@seattlepi.com.
© 1998-2009 Seattle Post-Intelligencer
Seattle-area prices back to July 2005 levels Page 2 of 2
http://

State's Home Sales Drop Biggest in US

State's home sales drop biggest in U.S.
Median price in county is down 10%
By AUBREY COHENP-I REPORTER
Sales of existing houses dropped more in Washington than anywhere else in the nation last quarter, compared with a year earlier, according to a new report. King County's median sale price also dropped roughly 10 percent from a year earlier.
The state's sales were down 36 percent from the third quarter of 2007, the National Association of Realtors reported. The next-largest annual drops were in Vermont and Delaware, where sales fell 33 percent.
A big reason why Washington's annual drop is larger than other states' is that its decline started later, meaning other areas had much slower markets a year ago.
"Clearly it's a reflection of what had been happening in other parts of the country spreading up here," said Glenn Crellin, director of Washington State University's Washington Center for Real Estate Research, which reported similar numbers Tuesday. "It's a reflection of the fact that economic conditions have worsened in the state. Unemployment is going up. Access to credit is still very restrictive."
Statewide, sales were down 6 percent from the second quarter, putting Washington 32nd among states and Washington, D.C.
The Washington Center for Real Estate Research reported statewide sales of existing houses dipped 5 percent from the second quarter and 26 percent from a year earlier. King County sales fell 5 percent from the second quarter and 31 percent from a year earlier.
The quarterly and annual declines in King County and statewide were smaller than the drops in the second quarter, Crellin noted. "While it is premature to suggest the worst is over for the housing market, even modest favorable changes are encouraging."
King County has enough houses on the market to last 9 months at the current sales rate, Crellin reported. "This is consistent with modest price declines but nothing significant."
Most experts consider five to seven months of supply a balanced market between buyers and sellers.
The state has 10.2 months of supply, suggesting larger declines will continue, the Center for Real Estate Research said.
King County's median sale price for an existing house was $427,000 -- down roughly 10 percent from a year earlier, the center said. That's a bigger drop than the 4 percent annual decline in the second quarter and a record fall for the center's reports, which started in 1995. The statewide median was $281,500, down a record 10.4 percent from a year earlier.
The value of a typical home may well be falling faster than the median sales price, Crellin said. "Those households willing to buy in this market have more choices and opportunities to negotiate deals than in recent periods. As a result, they may be getting more house without spending more money, suggesting price depreciation on individual homes is more severe than reported here."
The price drops have made homes more affordable. The typical King County family made 77 percent of the income needed to buy a median-priced house in the third quarter, up from 74 percent in the second quarter and 65 percent a year ago, the Center for Real Estate Research said. First-time buyers typically made 43 percent of the income needed for a starter home, up from 41 percent in the previous quarter and 36 percent a year ago.
Rising interest rates offset price drops somewhat from the second to the third quarter, and King County's affordability percentage is still rather low, Crellin said. "I don't know that it has gotten high enough to make a tremendous difference."
Statewide, the typical family made 97 percent of the income needed for the median house, while first-time buyer income was at 57 percent.
Looking forward, the slow economy will hamper a housing recovery, Crellin said. "I think we're going to continue to see a soft housing market through 2009. That doesn't necessarily mean we're going to continue to see significant reductions in value, but that does mean we won't see significant increases either."
The National Association of Realtors reported that nationwide third-quarter sales of existing houses were up a seasonally adjusted 2.6 percent from the second quarter, but down 7.7 percent from a year earlier.
The median price of an existing house was lower in the second quarter than a year earlier in 120 of the 152 metropolitan areas the Realtors track. The nationwide median price was $200,500, down 9 percent from a year earlier.
The Realtors noted that foreclosure houses and short sales -- sales made to avoid an impending foreclosure -- accounted for 35 to 40 percent of transactions in the third quarter, pulling down median prices.
"A very large proportion of distressed home sales are taking place at discounted prices compared to more normal conditions a year ago," association President Charles McMillan said in a statement.
Metropolitan-area price changes ranged from a 13 percent annual increase in Elmira, N.Y., to a 39 percent drop in Riverside, Calif. Two other California metro areas, Sacramento and San Diego, posted the second- and third-largest drops, down 37 percent and 36 percent, respectively.
Such declines helped give California the second-largest quarterly sales increase, 28 percent, among states. A similar pattern occurred in No. 1 Arizona, where sales were up 28 percent, and No. 3 Nevada, up 26 percent. Nevada had the biggest annual increase, 76 percent, followed by California, up 58 percent, and Arizona, up 49 percent.
"A pattern of sharply higher sales in areas with large price declines is well-established," said Lawrence Yun, the association's chief economist. "Affordability conditions have consistently been a major factor in driving sales. Historically during recessions, buyers have responded to incentives, and it's important for government to keep that in the forefront of stimulus decisions."

Sales of preowned homes in West soared in Sept.

According to the Associated Press, sales of existing homes in the West took a huge jump in September. As a result of continued low interest rates and dscounting of foreclosed homes, sales of existing homes reached 100,000 units across the 13 state West Region.
Sales were up nearly 43 percent from the same month last year, but declined 9.6 percent versus August's total, according to the National Association of Realtors.
With sharply discounted foreclosures making up a larger slice of overall sales, the median price in the West plunged almost 19 percent from a year ago to $253,600 - slightly higher than what the median was five years ago, the association said.

To read the entire article by ALEX VEIGA of the Associated Press click on the link http://www.forbes.com/feeds/ap/2008/10/24/ap5604091.html

SEATTLE REAL ESTATE RATED #1

Survey of metropolitan areas reveals best investment value here
By DAN RICHMANP-I REPORTER
Among major metropolitan areas, Seattle's real estate is the best in the nation as a prospective investment, a national report released Tuesday says.
On an eight-point scale reflecting investment value, Seattle was ranked 6.2, according to the 30th annual study of emerging trends in real estate from PricewaterhouseCoopers and the Urban Land Institute.
That ranking reflects averaged ratings by more than 600 surveyed real estate professionals, who assigned a number of 0 to 8 to each the nation's top 10 regions. The better the location for investment purposes, the higher the rating.
"It's saying a dollar invested in Seattle real estate would be more likely to yield more than a dollar invested anywhere else -- but it says nothing about how much the yield would be, or over what time period," said Rick Kalvoda, a PricewaterhouseCoopers director.
Study participants -- including investors, developer and brokers -- supported their high rankings by pointing to the large and diverse types of companies that call Seattle home, singling out Amazon, Boeing and Starbucks.
Survey subjects also said low vacancy rates at Seattle-area shopping centers are buffering those malls against a possible consumer pullback. And they said the Puget Sound region's ports are the most attractive in the country, in part because of their low vacancy rates and low rents.
Despite Seattle's strengths, it should "brace for some buffeting," study participants said in comments they submitted along with their numerical ratings.
About 3.5 million square feet of new office space, plus increasingly tepid job growth, will increase the sub-10 percent downtown office vacancy rate, they predicted.
"Owners are scrambling to find tenants as Washington Mutual teeters and Starbucks downsizes," one respondent wrote. Though Bellevue's office-vacancy rate remains low, it's mostly because of Microsoft's massive presence there -- so that market is vulnerable to any future layoffs by the software company, others noted.
Housing demand in Seattle is slipping, and prices are dropping, while still remaining "well above the national averages." Condo sales are "falling dramatically," but the market is still rated a strong buy for apartments, with rents moving up, vacancies heading down and a limited number of new projects.
Ranked second as a real-estate investment was San Francisco, followed by Washington, D.C. New York City, which has traditionally topped the list, was ranked fourth this year, mainly because the Wall Street implosion cost jobs and created office vacancies there.
Chicago was ranked last among the top 10 markets, with apartments doing well but condos weakening as speculators leave the market.
Nationwide, real estate markets are expected to reach bottom in 2009 and to flounder in much of 2010, with ongoing drops in property value, more foreclosures and delinquencies and a "limping economy that will continue to crimp property cash flows," the study says.
"Commercial real estate was the last to leave the party, will feel the pain in 2009 and may be the last to recover," Tim Conlon, a partner with PricewaterhouseCoopers, said in a news release.
P-I reporter Dan Richman can be reached at 206-448-8032 or danrichman@seattlepi.com.

Global Banks Unite in Unprecedented Rate Cuts

Ben Bernanke and the Fed brought financial aid to the streets, lowering the Federal Funds Rate and Discount Rate by 0.50%. In an unprecedented emergency move, central banks across the globe joined in lowering interest rates.

This move follows Washington's passing of the $700 billion Rescue Plan. From Wall Street to Main Street, a common concern has been heard by Washington. "We need money... no, let me rephrase that...we need cheap money."

Rates Could Rise From Here! Home loan rates have benefited from the weakness in the financial markets. Fixed rate mortgages remain very attractive. However, the Fed lowers short term interest rates to shore up financial markets. This could cause home loan rates to rise in the coming weeks and months if confidence returns to the stock markets.

ARM Holders Take Notice! Anyone that has an Adjustable Rate Mortgage (ARM), take note. The London Interbank Offered Rate (LIBOR) has soared from uncertainty in financial companies...And six million home loans in the United States are tied to LIBOR which determines the interest rate at the time of adjustment.

If you know someone with an ARM, let them know potential trouble lies ahead and the time to act is now. What Should You Do Now? Call me. We can go over your situation to determine how you can benefit from the actions. I look forward to hearing from you.

BAILOUT - RESCUE PLAN APPROVED!

The House of Representatives passed (and President Bush promptly signed) a $700 billion plan that'll bail out the financial system, ushering in what many saw as the economy's only hope of living to see another day.
The passage came just four days after the House voted down the original bill, causing the market to drop nearly 800 points before partially rebounding the next day. It's been quite a week in the Equity and Credit Markets this week.

GOVERNMENT RESCUE PLAN EXPLAINED

Mortgage Success Source's Barry Habib shared his opinion on the turbulent financial market and the need for Congress to pass the Rescue Plan or as some people refer to it, the "Bailout Plan".

Here are his comments: "Hi everyone. Crazy times. Whatever the political posturing, a plan needs to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market". Each day lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle. Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this the opportunistic shorting done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process.
This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on".

Wild Markets, The Fed and Opportunities

Uncertainty in Financial Markets Could Cause Dramatic Rise in Existing ARMs at Next Adjustment If you or anyone you know has an Adjustable Rate Mortgage, this is an important point to consider. Many ARM loans are tied to the London Interbank Offered Rate (LIBOR). In fact, there are six million loans in the United States that use LIBOR to determine the interest rate and as the name suggests, many banks use this rate to lend money to each other.
But, today, banks lack confidence that the money they lend will be paid back. In light of what has happened with Lehman Brothers, IndyMac Bank and others, as well as AIG, banks are requiring much higher rates on LIBOR to offset the added risk.
The Federal Reserve Left Rates Unchanged but...The Federal Reserve met yesterday leaving the target rate unchanged at 2.00% but just like LIBOR the actual rate being charged by banks to each other is closer to 6.00%. This again suggests that those with ARM loans should consider a refinance into historically low fixed rates.
What Happened? Financial companies have been under attack. IndyMac was the largest bank to falter in twenty years. What brought IndyMac down was their exposure to defaulting loans. This sapped investor confidence and drove down the stock price until they filed for bankruptcy.
Following IndyMac, we saw Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch succumb and were either forced into conservatorship, to close their doors, or to sell themselves. AIG, the world's largest insurance company was also impacted, forced to make a deal with the U.S. government to stay in business.
What You Can Do Now?I'd be happy to go over your loan situation and help you understand how the recent events may affect you, and how you can best be protected. Additionally, chaotic times like these often present opportunities. I look forward to hearing from you.

Many will profit from Fannie Freddie failure - Will you?

Mortgages are in the news again today...but this time, the news is good! Especially for people looking to buy or refinance a home, as interest rates have dropped to the lowest levels seen since April.
You've probably heard that Fannie Mae and Freddie Mac were taken over or "bailed out" by the Federal Government over the weekend. The announcement came as the government felt that both of these institutions were potentially unable to meet their obligations. These agencies must pay off maturing Bonds every month, and they do so by selling new Bonds. But during the last twelve months, investor appetite to purchase new mortgage-backed security Bonds has deteriorated. As such, it has become more difficult for Fannie and Freddie to replenish capital to fund more loans. If both Fannie and Freddie became insolvent, the housing market as well as the mortgage market would come under further pressure.
With the Treasury stepping in to provide a "backstop" for the mortgage giants, investors now have confidence to purchase Mortgage Bonds. And the greater interest has helped lower interest rates today.
Call me today, so we can discuss what the news means to you and how you can benefit.