Home > Blatant Stupidity > The New & Unimproved Federal Housing Market.

The New & Unimproved Federal Housing Market.


Disclosure. I’ve been involved in residential and commercial mortgages as a mortgage banker and originator for over 15 years.

Folks, the residential housing market in the US is in the tank and it won’t be coming out anytime soon. The latest evidence of this is today’s AP story about US homebuilders and their “confidence” in the market.

The National Association of Home Builders said Monday that its monthly reading of builders’ sentiment about the housing market sank to 14 — the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market.

The weak job market and an increasing number of foreclosed properties have prompted builders to limit construction of new homes. A modest revival in sales over the past year ended in May after federal tax credits expired at the end of April.

As I noted, this is just the latest indicator. There are lots more. Like the fact that mortgage applications are at a 15 year low.

The economy is being led by a naked king and the only reason unemployment is down is because people have stopped looking and aren’t counted anymore. Real unemployment isn’t 9.5% it’s more like 18%.

Foreclosures are going up again. The only reason they leveled off is because banks are holding so much REO inventory they stopped holding trustee sales. They’ve started again, and the level of residential loans in default and over 90 days past due is well beyond all-time-highs. And those loans don’t cure.

Then there’s the little “shadow inventory” problem. Banks are holding property on their books that is not listed for sale in the MLS and the numbers are about equivalent to what’s list in MLS. Note: that doesn’t count the defaults discussed above.

That’s just the tip of the iceberg. Oh, and that stupid $8,000 rebate TheOne touted? It moved some sales forward from summer to spring and propped up pricing by about $8,000. It didn’t “sell” a single house anymore than “cash for clunkers” “sold” a car.

There’s a perfect storm coming in the financial markets. The big banks – Wells, BofA, JPChase, etc – are going to have to face up to the fact that they’re holding assets that are rapidly depreciating and they’re about to acquire a whole lot more. Sooner or later they are going to dump those assets and you can kiss a fond farewell to the value of your house because the net result will be to really depress housing values.

Should I talk about Fannie & Freddie? No, other than to say that we’ve already dumped $145B into propping them up and that’s potentially just a drop in the bucket.

When people were initially discussing TARP & stimulus I thought we’d have a double dip recession. I’m guessing that I was much too optimistic. As a key measure of people’s confidence in the economy, real estate is very important. Right now the question isn’t whether it’s going to get a whole lot worse but when.

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Categories: Blatant Stupidity
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