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Archive for September, 2009

[Fierce Finance] Of Wall Street Bonuses And Crooked Estates

September 29, 2009 | 4:18 pm |

Discovered a new financial services web site today called Fierce Finance that has some compelling content and a cool name. Here are a couple of the items…

Wall Street bonuses if handled correctly, may not be that controversial.

If banks are not accepting even more in taxpayer funds and are making profits legitimately, I doubt anyone will have a problem with big bonuses.

It will be challenging however after what is anticipated to be fairly large profit reports from a few of the larger financial institutions. That has ramifications for stirring up the Main/Wall Street debate, compensation restrictions by Congress (and fanning the flames of housing demand in the NYC metro area).

And a slide show of the more “infamous” properties that were tainted in controversy in the past year.

Between the SEC’s post-Madoff hyper vigilance and the intense media coverage of the financial services industry, a great deal of scandal has surfaced over the last year.

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[Case Shiller 20 City Index] July 2009 Down 13.3% Y-O-Y, Up 1.2% M-O-M

September 29, 2009 | 12:03 pm | irslogo |


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Here’s the summary:

The S&P/Case-Shiller 20-city home-price index, a closely watched gauge of U.S. home prices, rose 1.6% in July from June in the third straight monthly increase, but prices remain below year-earlier levels.

For the sixteenth straight month, no area in the 20-city index posted a year-over-year price gain. That put nationwide prices at levels seen in 2003.

“These figures continue to support an indication of stabilization in national real estate values,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “But we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures.”

Whether or not we see a renewal in tax credits, its hard to imagine a housing market recovery with another year of increasing foreclosures. Perhaps the worst is over, but I would think the best we can hope for in the near term is stability.


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[Over Coffee] Quote: in either the high or low scenario, it’s all about making their clients happy

September 28, 2009 | 12:54 pm | nytlogo |

My coffee machine broke this morning but I’ll still consider this an [Over Coffee] post. Without that cup, I felt compelled to use my own quote because someone in SeekingAlpha cited my handiwork.

As Jonathan Miller explains, the irony of the NY Times’ cover story on the disarray in the real-estate appraisal market is that the same appraisers who were the source of overvaluation during boom times are now undervaluing because they think that’s what the lenders want (they probably do). “Remember that in either the high or low scenario, it’s all about making their clients happy.”

And this irony really ticks me off. They will profit on the both the cause and the effect side of the credit crunch.

How about a little neutrality in mortgage lending?



[NY Times Real Estate Cover Story] New York Appraisals Get Shortchanged

September 26, 2009 | 3:24 pm | nytlogo | Articles |

It is nice to see the appraisal process move front and center after being on the back burner for the past 7 years during the credit bubble. The appraisal process in mortgage lending is like politics and making sausage – its not pretty when you look at it up close (except for my photo, of course).

Vivian Toy pens a great article which talks about the disconnect between the ideals of the appraisal profession and what is being forced on the profession by the lending community and regulators in this weekend’s real estate section cover story called New York Appraisals Get Shortchanged.

And without a stockpile of comparable sales for reference, Mr. Miller said, “you have to really know the local market, so you can go beyond the raw sales data and use all the subjective factors you can to really tell the story about a property.”

Here’s a key issue affecting all mortgage lending nationwide: APPRAISAL MANAGEMENT COMPANIES (all caps for emphasis beyond using bold).

The potential pitfalls are not exclusive to New York. “The least qualified and least experienced people are doing appraisals across the country,” said Jim Amorin, the president of the Appraisal Institute, a national trade group that represents 26,000 appraisers. He estimated that appraisal management companies now handle about 90 percent of the appraisal market, up from about 30 percent before May 1.

Mr. Amorin said he had heard of appraisers in California who travel 150 to 200 miles to do an appraisal.

“It’s hard to believe that they could still be in their geographically competent area,” he said. “And in Manhattan it would be even harder if you have someone coming in from the suburbs, since things can be vastly different from one side of the street to another.”

When you commoditize the appraisal profession as appraisal management companies do, you really get poor quality at a higher cost. The costs are measured in risk exposure, lost revenue from killing transactions that shouldn’t be, and AMC fees are often higher (remember the appraiser only gets about half of the total appraisal fee).

The irony here is that many of the appraisers who were the source of overvaluation during the boom times – cranking out a high volume of reports, mainly for mortgage brokers – are now getting most of the work through appraisal management companies. They are undervaluing because they are unfamiliar with the markets they appraise in and think the lenders want them to be low (they probably do). Remember that in either the high or low scenario, its all about making their clients happy – in other words – insanity continues to be pervasive in mortgage lending…but now it is costing the consumer directly.

The New York Times ran an A1 (page one) story back in August called “In Appraisal Shift, Lenders Gain Power and Critics.” Which talked about how good appraisers are being forced out of business because of the Home Valuation Code of Conduct agreement between NY AG Andrew Cuomo and Fannie Mae. Banks have all the power now and they are showing that they don’t understand the problem at hand.


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[New Home Sales] Inventory Falls As Sales Flatten

September 26, 2009 | 12:37 pm |

Here’s a take on the Commerce Department’s New Residential Sales Report released on Friday.

Sales of new one-family houses in August 2009 were at a seasonally adjusted annual rate of 429,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.7 percent (±16.2%) above the revised July rate of 426,000, but is 3.4 percent (±13.3%) below the August 2008 estimate of 444,000.

(gotta love the +/- percentages)

The LA Times provides some additional perspective:

August’s sales pace was 4.3% below the same month a year earlier. Last year ended with 485,000 new homes sold, the worst year for new-home sales since 1982 and the third-worst year since the federal government began tracking the data in 1963. New-home sales peaked in 2005 at 1.23 million units.

Builders also have scaled back construction dramatically, cutting the inventory of new homes to a 7.3-month supply, down 34% from 11.1 months a year earlier. The reduction marks a return to a more normal market: a roughly six-month supply is the historical norm.

As does MarketWatch:

Despite a record drop in prices, sales of new homes flattened out in August after four months of strong increases, the Commerce Department estimated Friday. Sales of new homes rose a statistically insignificant 0.7% in August to a seasonally adjusted annual rate of 429,000 from a downwardly revised 426,000 in July, which was previously reported as 433,000. Sales were down 3.4% from a year earlier, but were up 30% from the low in January. Through the first eight months of 2009, sales were down 28% compared with the same period a year ago.

Bottom line is that new construction is competing with rising foreclosures and faces significant challenges with financing availability. New home sales data doesn’t include contract rescissions either so I have always felt it is very inconsistent (a lot more positive) than national home builders actual numbers.


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[Amherst Securities] 7 Million More Foreclosures To Pressure Housing Market

September 25, 2009 | 11:22 am | trulialogo |

In a decidedly bleek report on the state of foreclosures, Amherst Securities Group LP issued a report that concluded:

The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate. This creates a huge shadow inventory. We estimate this housing overhang at 7 million units, 135% of a full year of existing home sales. We look at the impact on a number of local markets, then look to the causes of the overhang: (1) transition rates are high, (2) cure rates are low and (3) loans are taking longer to liquidate. We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary.

The key issue is the fact that the number of housing units going into foreclosure is much higher than the amount being disposed. Of course all real estate is local and the report creates a compelling case study using listing data from Trulia.com and the Case-Shiller 20 City Index coordinated with the foreclosure process.

Amherst was the key source for the informative “Mortgage Meltdown” story back in December on 60 Minutes. They teamed up with investment fund manager Whitney Tilson. The 60 Minutes segment is in my earlier post but I also inserted it below.


Watch CBS Videos Online

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[The Housing Helix Podcast] Kelly Roark, Vice President of Interactive Sales & Development, Scripps Network Digital

September 24, 2009 | 10:30 pm | Podcasts |


I have a great conversation with Kelly Roark, Vice President of Interactive Sales & Development at Scripps Network Digital. We discussed the chart below which trends ratings against new home sales.

Check out the podcast

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

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Kelly was a great sport to come back for a second interview after one of the audio tracks in the first podcast didn’t cooperate.



[Interview] Kelly Roark, Vice President of Interactive Sales & Development, Scripps Network Digital

September 24, 2009 | 9:00 pm | Podcasts |

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[Existing Home Sales] Unexpectedly Drop 2.7%

September 24, 2009 | 1:59 pm | bloomberg_news_logo |


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After four consecutive months of seasonally adjusted gains, the

NAR existing home sales stats show a decline that was something unexpected happens.

The salient points:

  • July 09 to August 09 sales declined 2.7% (2nd highest total level in the last 23 months)
  • August 08 to August 09 sales up 3.4%
  • August 09 median sales price $177,700 down 2.1% from July 09 and down 12.5% from August 2008.
  • Inventory down 10.8% from July 09 to August 09 and down 16.4% from August 08
  • Months supply was 8.5 in August 09 from 10.6 in August 08

As Lawrence Yun, NAR Chief Economist, who is quite adept at cherry picking the data to show it in the best light (that’s his job).

Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process….

…actually says something the should resonate with most who follow this stuff:

…but the decline demonstrates we can’t take a housing rebound for granted.

UPDATE: Just a Blip? Why Housing Keeps Bouncing Around

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[Interview] Larry Sicular, Principal, Lawrence Sicular & Associates, Editor/Publisher of The Stamford Review

September 23, 2009 | 7:15 pm | Podcasts |

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