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Wall Street Journal

Visualizing US Distressed Sales – Katrina Edition

June 7, 2012 | 2:28 pm | |

The WSJ presented a series of charts on US distressed properties based on information from the St. Louis Fed (most proficient data generators of all Fed banks) and LPS.

Here are the first and last maps of the series. To see all of them, go to the post over at Real Time Economics Blog at WSJ.

A few thoughts:

  • The distress radiates out from New Orleans 7 months after Hurricane Katrina hit. There was relatively tame distressed sales activity in the US in 2006, the peak of the US housing boom.
  • The article makes the observation that distressed activity is seeing some improvement in 2010. However the “robo-signing” scandal hit (late summer 2010) and distressed activity entering the market fell for the next 18 months as servicers restrained foreclosure activity until the servicer settlement agreement was reached in early 2012. This is likely why the distressed heat maps show some improvement.
  • The music stopped when people couldn’t make their payments en mass circa 2006, the US national housing market peak. It’s quite astounding how quickly credit-fueled conditions collapsed across the US.

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Sweet! “Making The Donuts” (A Housing Market Theory)

May 30, 2012 | 9:43 am | |

Years ago, there was a Dunkin’ Donuts commercial with the catch phrase “got time to make the donuts” which has remained one of my regular phrases.

For the past few months I’ve talked a lot about housing markets with “a hole in the middle” in my speaking engagements. I’ve been surprised at the volume of in-person feedback on “Donuts” just from my Bloomberg TV appearance with Deirde Bolton a few weeks ago including a senior bank executive at a board meeting I was presenting, a WSJ editor and reporter and others.

For lack of a better description, many housing markets, especially along the coastal US, are like a donut (NYC’s version is more of a bagel than a donut – thicker but not as sweet). Incidentally, I made donuts at the bakery in college so I’m obviously more than qualified to use this weak analogy.

The “hole in the middle” pattern is something I’ve been observing in the various housing markets I follow or dabble in – i.e. Manhattan, Westchester, Hamptons, Brooklyn, Miami, SF, DC, to name a few. I’m not defining it by a specific price but the middle is more like the segment just above the middle in these markets. It’s placement is specific to the price structure of each market.

It goes like this:

  • Strength at the entry-level – due to record low mortgage rates and pricey rental market;
  • Strength at the upper end – less dependent on irrational lending standards with limited places to invest, foreign buyers, wealthy domestic buyers; but
  • Weakness (a hole) in the middle – relative to the top and the bottom.

The “donut housing economy” is holding back consumers from trading up in an orderly fashion. i.e. from the low to middle of the market, from middle to high (or the reverse).

By describing the middle as a “hole” I don’t see the middle as a stark barren wasteland (i.e. w/o sprinkles). I’m simply observing that it’s weaker relative to the top and bottom…for now.


[Interview] Gary Shilling, Economic Consultant, Founder, A. Gary Shilling & Co., Author, The Age of Deleveraging

December 3, 2010 | 1:08 pm | | Podcasts |

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[NAR] Existing Home Sales Decline 2.2%, But a ‘Northeaster’ Weighed Down the Results

June 22, 2010 | 12:55 pm | |


[click to expand]

NAR released its May existing home sales report today. This was one of the most bizarre existing home sale reports I can recall.

First of all, the expectation of a drop in sales activity was widely expected due to the end of the federal tax credit, yet economists surveyed were anticipating an increase in sales in May? Real estate professionals were bracing themselves for a decline in sales in May.

Economists surveyed by Dow Jones Newswires expected existing-home sales to climb by 5.0%, to a rate of 6.06 million. The surprise decline followed two increases driven by a tax incentive for first-time buyers that the government enacted to spur a housing sector recovery.

I viewed the impact of the tax credit as “poaching” sales from the next 60-90 days rather than a vehicle to jump start the housing market. We really need jobs first.

But if you look closely at the data, M-O-M sales were up or flat in each of the 3 regions except the northeast, which posted an 18.3% seasonally adjusted decline.

The report headline was generally accurate “May Shows a Continued Strong Pace for Existing-Home Sales” if you remove the northeast from consideration.

Sales price showed the same pattern. While US prices were up 2.7% M-O-M, the northeast prices declined 2.2%.


[click to expand]

My interpretation of this “Northeaster” centers around foreclosures. The south and west posted significant foreclosure activity and price declines nearly 2 years ahead of the northeast. The midwest hasn’t seen the same volatility as the other regions. Perhaps the west and south have been pummeled enough that they are actually seeing a bottom in both sales and prices trends. Foreclosure activity is flowing freely while the northeast seems to be lagging in that regard.

Ok, I’m reaching through generalizations but why the disparity by region?

Here are this month’s metrics:

  • existing-home sales fell 2.2 percent to a seasonally adjusted annual rate of 5.66 million units in May down from a revised 5.790 million in April
  • existing-home sales are 19.2 percent higher than the 5.1 million-unit pace in May 2009.
  • housing inventory fell 3.4 percent to 3.89 million existing homes available for sale from April 10 but is 1.1% above last year
  • there is an 8.3-month supply down from an 8.4-month supply in April and down from a 9.7 month supply last year.
  • national median existing-home price was $179,600 in May, up 2.7 percent from May 2009.
  • distressed homes accounted for 31 percent of sales last month, compared with 33 percent in April 10 and 33 percent in May 09.


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[The Assessor] The Differences Between High and Low End Absorption

June 22, 2010 | 12:03 pm | |


[clip to open article]

In today’s WSJ there is a chart I made covering Manhattan absorption market wide by price segment – inspired by my monthly report series.

The article sort of suggests that condos are doing better than co-ops as a generalization, which isn’t quite correct or I am over analyzing the results. However, one thing is certain:

Absorption for lower-end condos and co-ops is being driven by conforming mortgage financing being more readily available than jumbo financing.

My takeaways from the chart are:

  • Co-ops are taking longer to absorb than condos above $3M (not considering “shadow inventory” of new development.
  • Co-op and condo absorption is generally on par with the 10 year 9.9 month average overall rate of absorption.
  • Co-ops edge out condos (faster) below $1.5M
  • Co-ops over $10M are significantly higher than condos but this segment is about 1% of all sales so the results are easily skewed.
  • Lower priced property generally absorbs faster.

Absorption has greatly improved from last summer yet there is still a distinction in performance between the upper and lower end of the market.


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[Eye on Real Estate] WOR NewsTalk Radio 710 June 5, 2010

June 5, 2010 | 9:59 pm | | Public |

For each week’s Eye on Real Estate Show on WOR NewsTalk Radio 710, we include a segment called “The BlogCast” where I discuss several housing related (sometimes a stretch) posts from some of my favorite blogs. They cover topics that are current, funny or simply a “must read”.

Saturday’s BlogCast covered the following blog posts:

[Ezra Klein/WaPo] On jobs, watch the trend A lot of us have the tendency to look at each new month as a wholly separate slice of data and celebrate if it looks good and fret if it looks bad…So far this year, we have averaged about 100,000 new jobs each month with that rising to nearly 140,000 over the past three months. That is what many of us had expected when we talked about modest to moderate job growth this year.” In other words, “the trend is your friend.”

[Extraordinary Observations] Where the Smart People Live It’s becoming increasingly accepted that there is real economic value to bringing a lot of smart and entrepreneurial people together in the same place…The theory that there is economic value to having smart people together rests on the assumption that smart people collaborate with each other. Conclusion: smarter people live in areas with higher cost housing – but it sounds dumb, no?

[Curbed] New Identities Pitched for Troublesome Hudson Square Manhattan is famous for Manhattan neighborhood acronyms. SOHO, NOHO, TRIBECA, NOMAD, FIDI and MEPA How do you solve a problem like West Soho? Or is it the Lower West Side? Or Hudson Square? Whichever neighborhood name you choose, one thing’s clear: None are catchy enough to stick in the minds of tourists. Suggestions include North of the Holland Tunnel: “NoHoTu” and my favorite suggestion was Holland Tunnel Approach: “HoTunA”.


If you missed this past Saturday’s show or any prior show, you can listen to the podcast at any time or subscribe to it for free via iTunes to always get the latest show delivered automatically to your computer or handheld device. My Blogcast is usually in the first hour of the show.

Listen to the most recent Eye on Real Estate podcast.

Subscribe to the free weekly Eye on Real Estate podcast.

Become a fan on Facebook.

Or visit the Eye on Real Estate Website.


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[NAR] Pending Home Sales Index

June 2, 2010 | 2:16 pm | |


[click to expand]

NAR released its PHSI today and there were no surprises. The expiration of the federal tax credit for first time buyers and existing home owners (signed contract by April 30, close by June 30) showed its impact on sales trends.

By the way, my above chart shows how ridiculous seasonal adjustments are – the non-seasonal adjusted line better reflects whats going on.

The pending sales data set is about 20% the size of existing homes and is comprised of existing single family and condo sales. Its dubbed a forward looking index but it really is a current looking index. The “meeting of the minds” between buyer and seller occurs just before contract signing. Its forward looking in the context of closing data but it is not forward looking on the condition of housing.

Consecutive M-O-M Gains

  • Sales were up 6% from March to April and up 22% from April 09 to April 10. Last month
  • Sales were up 7.9% from February to March and up 8.3% from March 09 to March 10.

Analysts have expressed fear the housing market will suffer with the end of the government subsidy. But the job market has been improving. The Labor Department is scheduled this week to release employment data for May, and economists surveyed by Dow Jones Newswires are expecting a gain of 515,000 non-farm payroll jobs.

The same thing happened last fall as the initial tax credit within the federal stimulus plan was set to expire on November 30 only to be renewed and expanded a few weeks later. No renewal this time.

Regionally things were not so consistent. Month over month gains in

  • Northeast +29.5%
  • Midwest +4.1%
  • South -0.6%
  • West +7.5%

Buyers they better close by June 30th. Not an automatic assumption in today’s mortgage environment.


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[College Degree Sprawl] San Francisco and NYC are Bastions of Smart People

June 2, 2010 | 1:00 am | |

Source: Extraordinary Observations [click to expand]

In a newly discovered blog, Extraordinary Observations by Rob Pitingolo (ht: WSJ/Real Time Economics), I found a refreshing look at a key economic resource: “people” in his post “Where the Smart People Live”.

One of the trends I had observed during the housing boom was a move toward new urbanism. Re-purposed (my favorite new word) commercial buildings in urban centers to residential units and public spaces. It began to feel like urban areas were getting the better of the suburbs and perhaps, in theory, the more upgraded urban markets attracted talent from markets that didn’t adapt to the trend.

Rob’s analysis looked at city and urban density patterns and even “degree sprawl.” Really clever.

It’s becoming increasingly accepted that there is real economic value to bringing a lot of smart and entrepreneurial people together in the same place. This can be tough to measure, unfortunately. Perhaps best proxy we have available is educational attainment – usually measured as the number of people in a particular place with bachelor’s degrees or higher, as reported by the Census Bureau.

Where the Smart People Live [Extraordinary Observations]


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[Eye on Real Estate] WOR NewsTalk Radio 710 May 22, 2010

May 24, 2010 | 10:03 pm | | Public |

For each week’s Eye on Real Estate Show on WOR NewsTalk Radio 710, we include a segment called “Jonathan Miller’s BlogCast” where I discuss several housing related posts from some of my favorite blogs. They cover topics that are current, funny or simply a “must read”.

Last Saturday’s BlogCast covered the following blog posts:

[The Curious Capitalist] The hidden changes in financial reform The Senate passed its financial reform bill. Huzzah! What did the Senate wind up with after three weeks of such intense lobbying and debate?…

[Trulia Blog] Trulia RealtyTrac Survey: American Attitudes Towards Foreclosure Today, Trulia.com and RealtyTrac released the latest results of an ongoing survey tracking home buyers’ attitudes towards foreclosures. The new online survey conducted on their behalf from May 10-12, 2010 by Harris Interactive® showed a notable decrease in consumers’ willingness to buy foreclosed properties compared to one year ago…

[WSJ/Developments Blog] U.S. Mortgage Delinquencies Appear to Level Off The number of American households behind on mortgage payments appears to be leveling off at a high level, a survey showed Wednesday… I also discussed the MBA confusion over the results in a great New York Times article.


If you missed this past Saturday’s show or any prior show, you can listen to the podcast at any time or subscribe to it for free via iTunes to always get the latest show delivered automatically to your computer or handheld device. My Blogcast is usually in the first hour of the show.

Listen to the most recent Eye on Real Estate podcast.

Subscribe to the free weekly Eye on Real Estate podcast.

Become a fan on Facebook.

Or visit the Eye on Real Estate Website.


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[Newspaper Wars] Appraisers Finally Get Editorial Recognition

May 18, 2010 | 12:28 pm | | Public |

For a housing market obsessed by real estate coverage, residents of New York City are like drug addicts being given heroin (or like an appraiser being giving perfect sales comps) by the sheer volume of real estate market coverage.

But that’s not the point I’m trying to make here. The appraisal profession has entered the media fray by name in major publications.

A few months ago the Wall Street Journal announced they were expanding their news coverage to include the New York metro area to compliment their national coverage. They expanded their staff and made a commitment to a new section called Greater New York and includes local real estate market coverage.

To counter the move, the New York Times is beefing up its real estate coverage to supplement its iconic weekend real estate section.

Within WSJ’s new Greater New York section is a page devoted to real estate. Among one of the daily features is a section called “The Assessor” which includes a graphic and some factual housing tidbits. One of the early names under consideration for the feature was “The Appraisal” but eventually became “The Assessor” (same diff).

The New York Times added a weekly column: “The Appraisal” by Christine Haughney, a former real estate reporter for the Sunday real estate section and a current New York (Metro) section reporter, she provides weekly buzzworthy real estate articles of substance.

While the appraisal profession remains a mystery to many (including me), the coverage of real estate certainly doesn’t.

Well, that’s my appraisal of the situation, anyway.



[WSJ Appraisal] Professional Appraiser Stereotypes Proliferate

May 9, 2010 | 11:02 pm | |

In today’s WSJ has an article that was on the front page of the online edition (not sure about the print version) called “How to Appraise Home Appraisers

The core idea behind the article was that appraisers:

  • had little data to work with these days
  • make mistakes
  • are in an environment where a low appraisal is more likely to kill a deal
  • banks are seeing people appeal the value
  • lenders may appeal value with the appraiser
  • appraisers may have used foreclosure or short sales as comps
  • appraisers may not be from the area so request a local expert

Ok, my response to all of this is [Doh!]

  • had little data to work with these days [not true with robust sales activity in past 6 months]
  • make mistakes [moi?]
  • are in an environment where a low appraisal is more likely to kill a deal [why should that be any different now – should appraisers be more flexible now – seriously?]
  • banks are seeing people appeal the value [didn’t need to during the boom because values were higher through mortgage brokers]
  • lenders may appeal value with the appraiser [that’s rare – lenders aren’t interesting in pushing values higher now as they did during boom]
  • appraisers may have used foreclosure or short sales as comps [yes and why shouldn’t they, especially in a market where they are common? as long as condition and terms are adjusted for.]
  • appraisers may not be from the area so request a local expert [lenders are predominantly using appraisal management companies and national firms who DO NOT CARE about local expertise, only the fee and turn time.

This article reflects conditions of more than a year ago. Today with the advent of HVCC, the quality of appraisers has fallen precipitously due to the popularity of appraisal management companies. For the most part working for national retail banks as an appraiser is an abomination of the profession.

None of these checklist items have much to do with today’s mortgage process that rewards lenders for hiring a middleman (AMC) who simply finds appraisers who are certified in a state and can turn work around in 24 hours and often are hours away from the property working for nominal fees.

Lenders are afraid to lend right now and the disconnect between upper management and the front lines is bigger than ever. Apparently there is great comfort by national lenders for a poor valuation product in exchange for homogenous nationwide conveyor belt style ordering with rapid turnaround and nearly non-existent oversight. The appraisal process within the mortgage process is a complete joke – it makes me want to scream.

Can we all be so blind and so dumb? Haven’t we learned anything over the past 18 months? [Nope. Not a thing.]

Good grief.

To the media – please spare everyone the misleading portrayal of our industry as professionals willing to use their eraser on occasion when the banks ask us to reconsider. Thats a mischaracterization – we have no choice and no real voice in the mortgage lending process. I’d estimate that 20% of our profession is terrific. The remainder are not.

Garbage in [AMC’s], garbage out [their appraisal quality].


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I’m Sorry But Don’t Blame Me, I’m Neutral

May 4, 2010 | 8:45 am | |


(courtesy: CS Monitor)

Admittedly I am getting annoyed about the lack of closure on this credit crunch thing. Can’t we simply point fingers, have someone apologize but indirectly deny responsibility and then we can then get back to buying stuff and building extensions on our houses?

Make no mistake, the credit crunch is one big mistake. It’s called a systemic breakdown because so many in the economy played a role in our economic demise. Moral hazard, government backstops, bailouts, stimulus, bonuses, trillions, synthetic CDOs have been placed in the forefront of our thinking.

But no clear financial reform path is being taken – in fact it took an investment bank using swear words in an email to get Washington’s attention and break the political maneuvering. Each party is planning to oversteer the solution to their agenda which was part of the problem that lead to this crisis. While we all worry about “free markets” we have forgotten how important it is to create a level playing field. Without rules, free markets degrade to chaos and lack of investor participation. We are seeing this now within the secondary mortgage market, especially jumbos.

We can never remove the human factor from the problem since regulators were clearly asleep at the switch (since Clinton) compensation had perverse incentives favoring short term profits over long term viability, regulators were neutered by the prior administration (think prior SEC under Bush) so its dumb to have some sort of czar. It’s never one factor – it a combination of people, events, institutions and politics that light the fuse.

I am looking forward to some sort of meaningful financial reform. If neutrality isn’t baked into the system, then this is all a big waste of time. Regulators need authority and can not be influenced and investment banks can’t pick the regulator they want. Rating agencies should not be paid directly by the investment banks whose products they rate. Appraisers can not be fearful of their livelihood because they don;t hit the number, etc.

Here’s what it all boils down to now: blame and being sorry.

Blame
Another Jonathon Miller (no relation, but awesome name) and his wife are suing a large builder for not preventing flipping in their housing development which brought in “irreverent transients” who party loudly, park erratically and install unauthorized satellite dishes.

I’m not doubting those conditions exist and it appears to be a creative way to get your money back.

When the housing market collapsed, some contracted buyers abandoned deals. From the outset, the project exhibited “ghost-town-like” qualities, the suit says.

Looking back, the Millers say the developer should have worked harder to prevent so-called flippers from buying units. Buyers were supposed to stick around for at least 18 months.

Saying I’m Sorry
In particularly interesting Reuters Summit Notebook piece, People make mistakes, take Alan Greenspan and Captain of Titanic

Phil Angelides, Financial Crisis Inquiry Commission chairman, says he’d rather see some taking of responsibility than hear another “I’m sorry.”

“Personally I don’t see my role as … to obtain apologies. What I don’t hear is a sense of responsibility and self-assessment about what occurred. There seems to be a disconnect between the practices that people undertook and the financial collapse,” he said at the Reuters Global Financial Regulation Summit.

“I’m struck by the extent to which all fingers point away generally from the person testifying,” Angelides said.

When it gets to this point, its too late. Let’s try to be proactive with some sort of meaningful financial reform. Not more regulation, not fewer protections for neutral parties.

If we can’t do this as a country, well, don’t blame me.

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