Monday, January 31, 2005

UK Mortgages At Five Year Low

The BBC is reporting on the December mortgage approvals, which came in 38% lower than year-ago numbers. The number of mortgages has fallen for seven straight months and "gross mortgage lending reached £14.2bn in December, 3% lower than November and 10% lower than in December 2003".

Census Bureau Sales Report

The US Census home sales report out today puts 2004 in the record books for the most homes ever sold. But the buying seemed to let up at the end of the year, with November to December sales flat. One item to watch for the future was an increase in the homes on the market. The December 2003 inventory was 370,000 homes versus 432,000 for sale at the end of 2004, a 16% increase.

Saturday, January 29, 2005

House Rich, Cash Poor? Bet The House!

One of the more disturbing trends to develop in the home loan debt boom is the reverse mortgage. House rich, cash poor is the "predicament" many older people find themselves in. Aside from the question of how many older folks would be just plain poor were it not for the real estate boom, one has to wonder why such a risky program is being pushed upon needy seniors. As CNN reports " the number of (reverse mortgage) loans originated in 2004 was more than double what it was the previous year. ..Demand for information on reverse mortgages has increased exponentially." said Bronwyn Belling, a reverse mortgage specialist for the AARP Foundation".

Indeed, the AARP has web sites dedicated to informing its members how to borrow against their home equity. The FHA will insure these loans, under certain circumstances. Like those who rushed into the stock market just before it collapsed, these elderly borrowers may come to regret the choice. " because you don't pay down your debt until you sell, move or die, the interest you owe could add up to quite a bit over time. Mandatory mortgage insurance ensures that you (or your heirs) don't end up owing more than the house is worth. But it's entirely possible to drain all or most of your home's equity".

Thursday, January 27, 2005

Bubble? What Bubble?

The web site from National Mortgage News has a new weekly data special. This one details overall mortgage production from 1980 into the beginning of 2005. In any bubble, one expects to see a parabolic rise at the peak. This data seems to show just that. From 1980 to year 2000, the dollar increase was 800%. Yet through 2003 the originated amount shot up another 365%, more than tripling the 20 year increase in a mere three years.

From that 2003 high, the market dropped $1.3 trillion, 31%, in one year. Further losses are predicted for 2005.

Wednesday, January 26, 2005

Refinancing Could Be Timebomb

The historic high levels of refinancing the last few years may have set a trap for homeowners due to inflated appraisals. In a study put out by the public action firm Demos, it stated "Households cashed out $333 billion worth of equity from homes between 2001 and 2003, the beginning of the refinancing boom--levels three times higher than any period since Freddie Mac started tracking the data in 1993".

"One of the most alarming findings in the report is the role that mortgage fraud, in particular appraisal fraud, plays in the refinancing process. There are growing numbers of third-party brokers pressuring appraisers to inflate home values in order to "close the deal" and reap larger fees or bonuses, according to the report. The consequence can be dire for homeowners who refinance and draw out more cash equity than their home is actually worth".

Subprime Foreclosure Woes

In a report out of a group at the University of North Carolina at Chapel Hill, it is revealed the boom in subprime loans is resulting in more foreclosure. Citing "abusive loans" in particular the Center for Community Capitalism noted "Subprime loan originations grew more than nine-fold, from $35 billion to $332 billion between 1994 and 2003". How big could the problem be? "For example, 20.7 percent of all first-lien subprime refinance loans originated in 1999 had entered foreclosure by December 2003".

Monday, January 24, 2005

2004 A Record Year For Home Equity Debt

Here is the report.. "Overall, home-equity originations climbed 35 percent last year to a record $431.3 billion, according to SMR Research Corp., a market-research firm in Hackettstown, N.J".

Saturday, January 22, 2005

International RE Investors To Cut US Purchases

"According to the results of a survey released today, members of the Association of Foreign Investors in Real Estate (AFIRE) say that while overall spending will increase both globally and in the US, they will reduce the US percentage of their total global real estate acquisitions from 71 percent in 2004, to 55 percent in 2005".

The Washington DC based group released this report today.

Thursday, January 20, 2005

Bubble Mostly In California: Economist

A report put out by an investment banking firm identifies 27 "urbanized areas" as experiencing housing price bubbles. "Economist Michael D. Youngblood, notes that 20 of the 27 UAs facing a bubble are in California. FBR determined the existence of home price bubbles by creating a ratio of median house prices to per capita income".

The analysis also expects the prices will not come down until "economic activity in each UA "has contracted for a minimum of four quarters."

Wednesday, January 19, 2005

Fed Gov Says Bubbles Can't Be Seen

WASHINGTON, Jan 12 (Reuters) - "Federal Reserve Board Vice Chairman Roger Ferguson said on Wednesday it may be impossible to know when an asset-price bubble is building". He goes on to say that it may be improper for the Fed to slow down asset bubbles.

Prechter Quotes On Real Estate

The Elliott Wave website has some quotes by Robert Prechter on RE.

Monday, January 17, 2005

Article Pinpoints Overheated Markets

In a piece by a Bloomberg columnist, some researchers for S&P identified the most overheated markets in the US. "The markets that Parisi and Mason predict will ``likely to suffer declines over the next two to three years in the event of an economic downturn'' based on U.S. housing data through the second quarter are a who's who list of sizzling U.S. markets: Los Angeles, San Luis Obispo, Orange County, Santa Rosa and Ventura, California; Brockton, Barnstable, and New Bedford, Massachusetts.; Fort Pierce and Miami, Florida; Nassau-Suffolk, New York; and Monmouth-Ocean and Jersey City, New Jersey".

"Only rate cuts can save us"

Here is a gloomy report from an economist in England regarding the housing downturn there.

Friday, January 14, 2005

EWI Report On Subprime Boom

Elliott Wave International has a good feature regarding the subprime loan boom, titled "Less A Secret Now, If No Less Dirty".

Thursday, January 13, 2005

Fannie Mae Facing Rare Earnings Decrease

Fannie Mae's financial woes are set to deal the mortgage giant its first earnings setback since 1985. reports "Earnings per share for Fannie Mae, the largest buyer of U.S. mortgages, will fall 3.4 percent this year, according to the median estimate of 19 analysts surveyed by Thomson Financial".

In addition to being forced to up capital reserves, the spread between what the firm pays and what it earns is shrinking. "Earnings are going down and there is nothing they can do about it,'' said Paul Miller, an analyst at Friedman Billings Ramsey Inc.

Another market factor working against Fannie Mae is the surge in adjustable rate mortgages which provide less profit than the fixed rate loans. "Adjustable-rate mortgages will grow to 37 percent of all home loans next year from 19 percent in 2003, according to the Mortgage Bankers Association".

Fed Gov Knocks Subprime Risks

USA Today reported that Federal Reserve Governor Edward Gramlich publicly warned that subprime lending may be a problem. "The subprime incidence of mortgage brokers without a lot at stake in the game is getting pretty high," the Fed official said.

He backed off of earlier statements that "that portion of the subprime industry was veering close to a breakdown", later stating that "phrasing too strong". But he did point out the higher delinquency with subprime borrowers.

Gramlich addressed the bubble issue, "It's certainly possible it's a bubble, but it's also possible, for various reasons, the cost of housing has shifted."

Wednesday, January 12, 2005

Warning On Home Equity Lines Of Credit

The FDIC's chief economist has a warning on the use of home equity lines of credit. "Richard Brown worries that home-equity lines could meet the same fate as credit cards did between 1982 and 1992. During that period, credit-card balances, adjusted for inflation, quadrupled -- as did consumer bankruptcies".

Read the story and be amazed at the recklessness of banks. Issuing credit cards and checks that are a direct draw on your homes equity! These borrowers are putting their home up as collateral for day to day spending. Note also that some banks build in measures to penalize customers for NOT spending enough and have rewards for bank employees if funds are drawn down quickly.

Property Tax Increases "Dark Side" Of Boom

This CNN website points out that RE taxes are rising much faster than tax on income and in one instance caused the owner to lose the property. The report adds some tips to appealing your tax bill.

RE Sales Continue Decline

The Mortgage Bankers Association reported their purchase index was down 5.8% last week and applications decreased 3% from the previous week.

Tuesday, January 11, 2005

Market Risk Soars In 2004

Countrywide Financial Corp. is trumpeting the "soaring" level of its December 2004 funding. But if you peek at the details what has exploded is the riskiest sectors of the market:

"Adjustable-rate loan fundings of $18 billion for the month were 91 percent greater than December 2003"

"Monthly home equity loan fundings of $3.1 billion were up 74 percent more than December 2003"

"Subprime loan volume for December rose 91 percent over December 2003"

The results of the fourth quarter had similar year on year percentage increases.

Monday, January 10, 2005

Liar Loans, Limited-Doc And Nina's Worrisome

Dominion Bond Rating Service issued a warning about mortgage companies in the coming real estate slowdown. Realty Times reports "mortgages underwritten (with) minimal documentation sometimes account for as much as 50 percent of mortgage pools" in the subprime arena.

Refinancing Boom To Boomerang?

The public policy website Demos has an interesting piece by Javier Silva addressing the many negative aspects of the refinancing explosion of the last few years. Such as collateralizing debt such as credit card balances and using home equity for current consumption. Overall a very fine analysis of this massive trend. The same site has another excellent writeup on the housing bubble by guest columnist Dean Baker.

Friday, January 07, 2005

Third Homes More Common

If there is a bubble forming in the housing market, one would expect to see ordinary people buying more home than they need. "I bought it purely as an investment," says the 58 year old. He plans to use the 2,200-square-foot house, also in Park City, as a rental property. Mr. Lieberman rented it out for two weeks over Christmas, and it is booked for the Sundance Film Festival this month".

Wednesday, January 05, 2005

Mortgage Ap's, Sales Fall

A Mortgage Bankers Association poll reveals continued weakness in the real estate market. "Overall mortgage applications fell again last week, dropping 10.6 percent on a seasonally adjusted basis from the week before, according to the Mortgage Bankers Association's weekly survey. During the holiday-shortened week, the MBA seasonally adjusted purchase index decreased by 13.7 percent to 417.3 from 483.8 the previous week. The seasonally adjusted refinance index decreased by 5.7 percent to 1,701.3 from 1,803.9 one week earlier".