"Most Influential" List Revealing

The website Builder Online recently published an editors list of people of whom "when these individuals speak, do other people listen? More important, do they act? Each of the professionals who made the cut left no doubts".

I think it is telling that number one is Fed Chair Allan Greenspan who "can continue the current housing boom or grind it to a halt". And number two is Franklin Raines, who as CEO of Fannie Mae, signed off on financials that must be restated negatively to the tune of nine billion dollars. And who was forced out of that position today.

It would seem the editors saw the most influence from a central banker and a disgraced bureaucrat, not very comforting picks for the industry.

Annual Review Mortgages Due In UK

Rate increases this year are about to be passed on to homeowners. "Ed Stansfield at Capital Economics said: "The sharp rise in mortgage payments faced by borrowers can only add to the downward pressure on house prices". He thinks prices will drop 20% over the next two years".

UK Home Prices Fall Again, Inventory Up

For the second month this year, home prices fell in Britain "by an average of 1.7 per cent". Wales was down by 9%. The website Rightmove reported that "there were now 40 per cent more properties available than in January". Increases in housing are still in place for the year despite the pull back.

Mortgage Profit Tumbles

This is as scientific as we are going to get from the mortgage industry. In a comprehensive poll the profits are reported to be disappearing on many levels. That overall revenue is way down from the 2003 blowout is not news if you check out this blog. But if you go through the details you find that each mortgage processed has lower profit margins as well. "The average retail profit margin declined to 42 bps in the first half of 2004 from 100 bps in 2003. This translates into pre-tax net income of $760 per loan (annualized) in 2004 compared with $1,555 per loan in 2003. While retail revenues were flat in 2003 and 2004, the cost-to-produce (fully loaded) increased by 26 percent to $3,766 per loan".

November Housing Starts Down 13 %

This just in. "The number of housing projects builders broke ground on in November plunged by 13.1 percent from the previous month to a seasonally adjusted annual rate of 1.77 million units, the Commerce Department said. It was the lowest level since May 2003". Here you can get the regional breakdown at the bottom of the article.

The Unsustainable California Housing Market

The California Association of Realtors has put out a report on the gap between incomes and home prices in that state. "California households, with a median household income of $52,940, are $55,370 short of the $108,310 qualifying income needed to purchase a median-priced home at $462,510 in California, according to the...Homebuyer Income Gap Index".

Subprime Lending Surges

Pricing bubbles often end in a parabolic rise, which we probably saw last year. It is no surprise that what is holding up the market now is lending to so-called subprime borrowers. I view this as bad news for this market as these folks will be in financial trouble even faster. Consider that the risk to mortgage lenders increases, suggesting some desperation for borrowers. "Overall, new originations of subprime mortgages totaled an estimated $375 billion through the end of September, a figure that marked a 63 percent year-to-date rise. Putting that number into perspective, one out of every six new residential mortgages made this year has gone to a credit-impaired"..borrower.

British Real Estate Market Falling

Here is the link for the free market report in pdf format. Most of the charts agree that the market peaked late last year. Also that country has many economic ills in common with the US.

Las Vegas Graphs

Here are some interesting home sales/price graphs through October 2004.

Betting The House

Elliott Wave International has a good take on the things people are doing with the billions of refinancing bucks. "The consequences of this problem can be so devastating," said an NASD official, "that we'd really like to address this to keep it from becoming a big problem."

Fannie Mae Weakens Financially

A quick scan of Fannie Mae quarterly financial data can be an eye-opener. Of course, the most recent quarter isn't available due to the accounting problem, but lets use what is available; the four quarters from June 30, 2004 and back. Compared to the quarter ending September 30th, 2003, Net Income has declined 58%. And if the Securities and Exchange Commission rules against the mortgage giant on accounting for derivatives, the firm will have to post a 9 billion dollar charge. Investors have also upped the shares "short"; that is betting the stock price will fall, some 2.28 million shares in the past month.

Las Vegas Cools Off

"The "rapidly cooling" Las Vegas housing market could lead to a surge in foreclosures next year, according to Foreclosures.com. The Las Vegas market has been distorted by out-of-state speculators who bought new homes to "flip for fast profits," with some homes selling two or three times in a matter of months, said Alexis McGee, president of Foreclosures.com. "When you see year-over-year price appreciation of over 52%, you know that rate is unsustainable," she said. ".... The hotter the market, the steeper the price correction will be in order to get back to normal. It looks like the speculators have left town, and the housing supply has jumped from one month's inventory to five." When interest rates rise, increasing downward pressure on prices, homeowners who bought at the height of the boom with adjustable-rate mortgages will find themselves "upside down" in their property -- that is, owing more than the house is worth, Foreclosures.com said".

Rental Home Vacancies At All-Time Highs

Over ten percent of homes for rent are vacant. Yet the home building boom continues. I see this as proof the Federal Reserve has over stimulated the economy and set up the housing bubble.

Mortgage Lending Down

Home prices continue to soar, with Las Vegas climbing more than any metro area ever. So I wonder why there hasn't been much talk of a big drop in loans originated through the third quarter of 2004, when compared to the same point in the previous year? The top four lenders have seen drops of 42%, 46%, 25% and 38% respectively.