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$8,000 Tax Credit + Low Mortgage Rates = Cash For Clunkers

August 4, 2009 | 8:01 pm | |

The Cash for Clunkers Program seems to be working…the kind of clunker you can live in.

For the fifth consecutive month, the number of signed contracts was higher than the previous month – this figure is seasonally adjusted so the increases are not due to the spring uptick.

NAR does not share it’s sample size and therefore why they present this metric as an index so I am always wary of a data set we don’t know the size of. Contract data is less prevalent than closed sales across the markets they cover so its a non-random sample by definition and therefore full disclosure is needed. But still…

The results are encouraging and supports the concept that if homes are priced correctly, they will actually sell. Buyers are out there.

I suspect a portion of the increase is a combination of the release of pent-up demand that caused people to freeze in their tracks at the end of last year, plus record low mortgage rates, lower home prices and the coming expiration of the $8k tax credit all played a part.

My concern is that the pace of foreclosures is expected to rise and there hasn’t been a “cash for clunkers” equivalent for the housing/mortgage market.

At the same time, personal income dropped 1.3% from last year, the largest drop in 4 years.

A weak labor market is one reason economists say a rebound in housing will be slow to develop. The unemployment rate, which reached a 25-year high of 9.5 percent in June, may exceed 10 percent by early 2010, according to the median forecast of economists surveyed by Bloomberg last month.

Housing trends are more likely to follow employment and income trends and this is good news. However, it doesn’t mean the keys has been turned in the ignition.

Still, it’s better than a “start.”


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[Over Coffee] Morning Quote From The Home Front

July 29, 2009 | 6:00 am | |

From Caroline Baum’s excellent column: Conan’s Couch, ‘Daily Show’ Ready for Bernanke:

Alan Greenspan prided himself on being opaque. The former Federal Reserve chairman used to joke that if the audience thought he was being clear, they probably misunderstood what he was saying.

Bernanke believes in transparency. With everyone hanging on every word of every report, every pundit, every TV show, every government official release etc., I’m not quite sure this doesn’t create a lot of more volatility. But if we could have the Fed Chairman on the Daily Show?

My life would be complete.

Aside: The IRS is more popular than the Fed.


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[Case-Shiller Index] 18.1% Becomes 17.1%, But M-O-M Is More Positive

July 28, 2009 | 1:35 pm | |

The May 2009 20-City Case-Shiller Composite Home Price Index fell 17.1% from May 2008, the fourth month in a row that the y-o-y rate of decline for the index gotten smaller. 17.1% is still a sharp decline.

We may be on the way to recovery,” said Maureen Maitland, vice president of S&P’s index services. “I say ‘may’ because it’s only been a couple months of data and home prices are seasonal … It will take a couple more months to see if we have turned around.”

This quote from S&P kind of confused me since, S&P/CSI has been seasonally adjusted since November 2008.

What’s got everyone so excited is m-o-m:

Looking at the monthly data, 13 of the 20 metro areas reported positive returns; and the 10-City and 20-City Composites reported positive returns for the first time since the summer of 2006. To put it in perspective, these are the first time we have seen broad increases in home prices in 34 months. This could be an indication that home price declines are finally stabilizing”.

WSJ/Real Time Economics has a nice summary of the release.

Remember, this index tracks prices only, not sales activity. Sales trends lead price trends.

I think the takeaway with the release is that the rate of decline is getting smaller which is a good thing and it does suggest the potential for improvement going forward. But this provides no support that the moment is at hand and its only up from here. Still, I’ll take what I can.

WET BLANKET UPDATE: Confidence among U.S. consumers fell more than forecast in July


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[Matrix: Worth Reading] Sunday July 26, 2009

July 26, 2009 | 10:14 pm | |

Here are a few things worth reading.


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[In The Media] Bloomberg TV: 7-9-09

July 10, 2009 | 10:35 pm | | Public |

Bloomberg called me to last minute to have a conversation with anchor Carol Massar and real estate reporter Oshrat Camiel on our just published Manhattan Rental Market Overview 2Q 09.

Watch the clip.

Always a pleasure – Bloomberg runs an efficient operation and you can’t beat their snack bar.


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[SEC] Suntan-Enabled-Countrywide

June 5, 2009 | 12:27 am | |

Ok, so I admit, I do wonder about the “tan” and how Mozilo (not to be confused with Mozilla) was able to maintain it 365/24/7. But more important issues are front and center in his life right now.

Here’s the SEC press release on today’s announcement. (Can you imagine former SEC Chairman Christopher Cox taking such an action?)

Here’s the actual law suit.

Basically the SEC is going after Mozilo for assuring investors that they were a prime loan lender when they were actually pushing very high risk loans. In fact they were the #1 subprime lender.

Former Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo and two other people were accused of fraud by the U.S. Securities and Exchange Commission following an investigation of the firm’s role in the subprime mortgage crisis.

“This is the tale of two companies,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk. Angelo Mozilo privately described one Countrywide product as ‘toxic,’ and said another’s performance was so uncertain that Countrywide was ‘flying blind.'”

This has been brewing for a while.

He has a number of other cases as well, although Countrywide (BofA) is covering his legal expenses.

Mozilo, a defendant in at least 115 other civil cases, already has in place a defense team from Irell & Manella (which is being paid by Countrywide and its insurers). Irell partner David Siegel issued a prepared statement on the SEC charges.

I am getting the feeling that there will be a number of other former executives with big paydays for dubious reasons that are going to get their own press releases. The SEC is trying to get it’s groove back.

Carl W. Tobias, a law professor at University of Richmond, said he expected to see more such cases brought by the S.E.C. “The S.E.C. would like to have back the reputation that many feel it has lost as an aggressive enforcer,” Mr. Tobias said. “I wouldn’t be surprised to see other cases.”

I’m not advocating rampant litigation but the US can’t restore investor confidence if it doesn’t regulate and enforce laws on the books.

This is simply part of the de-leveraging process.


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[Getting Graphic] Quality Is Not Job1: Why Home Mortgage Underwriting Is So Strict

June 1, 2009 | 11:23 am | |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Source: NYT

Click here for full sized graphic.

It’s 2 out of 3: GM joins Chrysler on the bankruptcy production line, so my take on Ford’s advertising slogan seems relevant.

Bank and automakers’ similarities end with GM and Citigroup being removed from the Dow Jones Industrial Average today.

Automakers WANT to sell cars.

Banks DO NOT WANT to make loans.

Here’s a compelling reason for banks’ recent need for self-preservation.

In Floyd Norris’ column this weekend titled Troubled Bank Loans Hit a Record High

OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation.

Bank underwriting is notoriously difficult right now and who can blame them? They have to make loans in an economic environment where:

  • Housing prices are declining
  • Mortgage defaults are rising
  • Unemployment is rising

Banks are in survival mode at the moment.


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[In The Media] Bloomberg TV 5-23-09

May 25, 2009 | 10:46 pm | | Public |

Both Hamptons sales activity and sales prices are down. Ok.

The looming Memorial Day weekend – summer, beaches, vacations, getaways – made The Hamptons a favorite topic.

Hamptons Homes Drop Most Since Realtors Kept Records [Bloomberg]

The Hamptons: Economic Downturn or Killer Tornado? [CityFile]

Bargains abound for well-heeled in the Hamptons [AP]


Trivial background stuff to ignore – down to the wire via remote

Thursday night I got a call from Bloomberg TV asking if I could come to their studios to do a segment and I begged off. I had opted to work from home on Friday because one of my kids was getting an award at school in the morning and I wanted work at home…plus it was the Friday before Memorial Day weekend. Wait, why am I justifying this? 😉

They offered to set up a remote interview (third party company) in CT so I didn’t have to commute into NYC. Easy enough. Google maps said the remote studio was 10 minutes away – I gave myself 25 minutes. The address wasn’t on my GPS unit so I used my iphone, following the pulsating blue dot.

15 minutes before air time
Forgot about heavy Memorial Day traffic.

10 minutes before air time
I got to the street, but there were no numbers on the building I was ultimately looking for but I ran out of street. There was a security booth at the end of the street and a woman without teeth in the booth grunted to go around the corner.

7 minutes before air time
I enter the parking garage, which connected multiple buildings, and of course none were identified with numbers. I guessed it was the farthest building away. I was right.

5 minutes before air time
The lobby security guard had no idea where a TV studio was, so I called the contact number and they told me what floor to go to.

3 minutes before air time
I took the elevator to the floor and no one is there – just a series of glass doors in 3 directions. I picked one and started walking around trying to find the studio. Nothing was labeled.

1 minute before air time
Some came out of an unmark door, took me to the remote studio, mic’ed me up with a minute to go. And then anchor Peter Cook in DC started speaking to me to get acquainted.

air time
We went live and the TV feed was Fox News for the first 30 seconds instead of Bloomberg – a bit confusing. But somehow it worked out.

And I made it to my son’s award ceremony.

Listen to the segment.


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[Public] Tonight’s Observer Living Real Estate/Tomorrow AM Bloomberg Surveillance

May 14, 2009 | 3:05 pm | | Public |

Fun tonight!

I hear that 1,000+ people are registered to attend the Observer Living event (although I think the room where we are speaking is half that size).

8:00 PM – Panel #3: State of the Residential Market
Moderated by: Tom Acitelli, Location Editor, The New York Observer

Featuring:

  • Ivanka Trump, EVP, The Trump Organization;
  • Dottie Herman, President/CEO Prudential Douglas Elliman;
  • Pam Liebman, CEO/President, Corcoran;
  • Jonathan Miller, CEO/President, Miller Samuel

Topics:

  • Pricing: The $1.8 Million Question
  • Refinancing
  • New Condos vs. Condos vs. Co-ops
  • State o’ Things: Misconceptions and Perceptions
  • Where to Buy in New York

Tomorrow morning at 7am on Bloomberg Radio am 1130 – I’ll be the first guest on Bloomberg Surveillence with Tom Keane and Ken Prewitt to kick off a show on the housing market. I listen to the show via podcast nearly every day – always interesting.


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Galluping To Thinking About Buying A New House

April 20, 2009 | 7:09 am | |

I’m not a big fan of confidence type surveys but because there is a dearth of activity and sentiment seems to be all there is to look at, I’ll digress from usual practice.

With affordability high because of mortgage rate drops and housing prices lower than in recent years, Americans are thinking it is a good time to buy a house according to a recent Gallup Poll:

Plunging housing prices combined with historically low interest rates have persuaded 71% of Americans that now is a “good time” to buy a house — up 18 percentage points from a year ago and the highest level of housing-purchase optimism in four years.

This seems like a bit of a disconnect or the fact that people think it’s a better time to buy doesn’t equate into actually doing it.

The last time this poll reached 71% it was circa 2005, at the height of the housing market fever , yet sales activity is about half the amount it was last year. The Treasury department reported in February that there was a 35% increase in mortgage lending, but mainly due to to a surge in refinance and home equity loans.

However, other types of lending has dropped off sharply in February:

Loan origination for other consumer lending products, including auto, student and other consumer loans, decreased by 47% from January to February.

Even builders are feeling better.

It seems like this better news on housing related attitudes is more of a warm and fuzzy sign for the distant future than a tangible improvement right now. Still, thats not a bad thing.



[Pretty Vacant] Shoots of Green Are Blossoming In The Metaphor Business

April 13, 2009 | 12:57 am | |

The weather is improving and I’m feeling the “this time of year optimism” where we get out of our log cabins after a long cold winter and admire the greenery around us.

The first thing you notice is that 1 in 9 houses in the US are currently pretty vacant:

According to an article today in USAToday, census numbers show:

  • More than 14 million housing units are vacant. That number does not include an estimated 4.8 million seasonal or vacation homes, most of which are occupied part of the year. The combined vacancy rate of almost 15% is higher than during previous recessions: 11% in 1991 and 9.4% in 1984.
  • About 3% of owned homes are vacant. In normal times, “maybe 1% should be vacant,” Myers says.
  • More than 9% of homes built since 2000 are vacant compared with about 2% for older homes.
  • Homes priced at $500,000 or more are just as likely to be empty as homes that cost less than $100,000.

But the spring metaphor favorite is Shoots of Green or simply Green Shoots.

Here are some warnings about its use:

Caroline Baum at Bloomberg, one of my favorite economic columnists said in her Wall Street Swaps Zegna for Denim, Tool Belts piece:

Like crocuses poking their heads through the soil, straining toward the sun, the U.S. economy is sending out the slenderest of shoots.

Justin Lahart at WSJ, in his Fed Chairman Chauncey Gardiner: You Must Believe In Spring

The combination of signs that the economy may have begun to recover and the arrival of spring has led to the overuse of a metaphor that could use a little pruning. We’re talking about those “green shoots” (sometimes “shoots of green”) that keep showing up in policymakers’ speeches, economists’ notes and, unfortunately, reporters’ stories.

But more mundane, weed-like uses on the presentation of economic news are more like these (no offense meant to the authors):

Manufacturing, Retail Reports May Disappoint:

As economy-watchers everywhere continue their desperate search for green shoots — little signs that the recession won’t last too much longer — this week could bring some sobering news.

The shoots of recovery look pale green at best:

We have former Tory Chancellor Norman Lamont to thank for the term “green shoots” to describe the first signs of a post-recession return to growth. In the depths of the last downturn, in December 1991, he told a Tory party conference: “The green shoots of economic recovery are appearing once again” – only to be greeted with ridicule and contempt.

Dallas Fed chief points to ‘green shoots’: A few signs of life are sprouting in the U.S. economy, but it’s too soon to say whether these “green shoots” will lead to a sustained recovery, said Richard W. Fisher, president and chief executive of the Federal Reserve Bank of Dallas.

Green shoots and tea leaves

One is that even in the Great Depression, things didn’t head down all the time. The chart above, from Eichengreen and O’Rourke, shows world industrial production in months from the previous peak, in the Depression and in the current crisis. Notice that there were several upturns along the way; each of those could have been — and was! — heralded as the beginning of recovery.

I’m thinking a Green Jacket is even better than a Green Shoot – or shooting on the Green is better than being green with a regular jacket on.

Shoot!


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[In The Media] Bloomberg Surveillance 4-6-09

April 6, 2009 | 11:10 pm | | Public |

This morning I had the honor of appearing with Ken Prewitt and Tom Keene on the Bloomberg Surveillance radio program. I listen to their show regularly via podcast so I eagerly accepted their invitation to appear.

Here’s this morning’s interview [mp3]. “Miller Says NYC Housing Prices Down 25% From September 2008” – a state of New York housing interview for a national audience. It’s not painful to listen to – I promise.

When I got to the studio, Tom and I began talking about his entré into the world of Twitter and the show’s Facebook fan page. He plugged my own Twitter page to his audience and my new podcast – The Housing Helix. Nice!

My friend Rudy, Social Media Guru (and Maven) at Trulia, who is a big fan of the Bloomberg show, blogged about my interview and used Twitter to interact with the show. Thanks Rudy!

Fun!




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