Thursday, November 11, 2010

Shadow Inventory may take Years to Clear

Shadow Inventory are houses that need to be sold, that want to be sold, but the owner of the house has basically given up on selling it untill situations improve with the housing market.
Say it is a couple like myself and my wife who own a 1-bedroom condo and want to buy a house. However, we are underwater on our condo, so we are trapped there untill the market improves. Even though we desperatly want to move up to a larger house and have the income and credit to do so, the condo is an albatross.
As soon as prices improve, that condo will be going up on the market, making it one of many shadow inventory properties waiting to be sold. It is not listed now in current supply, but it is lurking in the shadows waiting to join the supply as soon as economically possible.

Check out this blurb about Shadow inventory below...

If you thought the U.S. housing market is showing any signs of improvement, a
new report by New York City-based Fitch Ratings puts the damper on that view.

Fitch says seven million homes in the "shadows" will take 40 months to

The agency defines the shadow supply of properties as loans that
are delinquent, in foreclosure, or real-estate-owned (REO) by the servicer.
Fitch says based on recent liquidation trends, it will take at least 3 ½ years
to clear this existing distressed inventory. reports that
according to the ratings agency, the number of months between the date of the
borrower's last payment and the date of liquidation has steadily increased over
the past several years, and is now at more than 18 months on average.

Fitch says that is the highest figure on record.

Clearly there is a ton of inventory on the market, but even more awaits in the shadows. This blog will continue on untill the housing market returns to normal and my condo is sold. Housing Fear is still alive!

HousingFear Humor

Wednesday, November 10, 2010

Ben Bernanke’s Worst Nightmare: Chairman Ron Paul

There is a great article written in written in the New American discussing the very real possibility that Ron Paul will be Chairman of the Subcommittee for Domestic Monetary Policy and Technology.

Paul is currently the ranking member of the House Subcommittee for Domestic Monetary Policy and Technology and is, therefore, in line to become chairman of the subcommittee when the 112th Congress commences. If he does indeed assume the chairmanship, “Paul said his first priority will be to open up the books of the Federal Reserve to the American people,” “We need to create transparency there. To see what it is they are buying and lending, and who it is they are dealing with,” Paul said.

Auditing the Fed is only the beginning, as one might expect from the author of End the Fed. Carney writes that Paul told NetNet, “I will approach that committee like no one has ever approached it because we’re living in times like no one has ever seen.” Among his other objectives: using subcommittee hearings to educate the public about Austrian economists view of the business cycle, namely that it is a result of central banks’ shenanigans rather than something inherent in the free market, and auditing the US gold reserves in preparation for monetary reform, either by legalizing competing currencies or by returning to the gold standard (or both). Also on his agenda is scrutiny of the International Monetary Fund and other global financial institutions, probably as part of monetary reform.

For people like me who live and breath this stuff this, I feel like I am on cloud nine. This is going to be the most entertaining, groundbreaking, and possibly game changing next 2 years in American financial history.

An Audit of the Federal Reserve, Return to the Gold Standard. These are things that will return America to the constitution and possibly save this country from bankruptcy.

RON PAUL is a patriot, an American hero, and I cannot wait to watch him make some real waves in Washington.

Monday, October 18, 2010

Dollar Collapse and Hyperinflation

For those of you who have read this blog from the start, I have been writing about hyperinflation since 2007. I was a strong advocate of buying Gold and those who have followed my advice have made a killing.

If you look at the recent rise in the stock market, huge gold price increase and huge drop in the dollar....You have to wonder if this worst case scenario beginning to occur....A dollar collapse.

America is Greece. The only reason why we are not having the same crisis is because we are the worlds reserve currency and we can simply print more money, and monetize more debt. Greece did not have that luxury.

I actually sold my Gold around July and I am now regretting it seeing what is going on right now. My feelings were that when the conservatives won the mid term elections it would bring about an era of fiscal responsibility and a stabilization of the US Dollar.

The question is...Is it already too late? Have we already spent and taxed so much that our prosperity as a nation is now irreversibly in peril.

What do you think?

Tuesday, October 5, 2010


I don't know what I like more...the first time home buyers tax credit space or the debtors prison :)

Tuesday, September 28, 2010

Housing is Still Flat

Home sales rose over 7% from July's record lows....good news correct?
...NOT REALLY...August is still the second worse month for existing home sales on record.

Even though home sale prices are up...actual home sales are down and there is an 11.6 month supply of inventory.

The interesting question is how much shadow inventory is there on the market. You would assume that there are a bunch of people who have capitulated and are not even listing their house for what they owe on it because they know it won't sell. You would think as price do rise that loads of new inventory will be dumped on the market by people who want to leave the state, or move up in house thus increasing inventory and lowering prices.

We may have reached a bottom....but with all this inventory... we will be bumping along it for a long time.

Monday, September 20, 2010

Housing Data Not Expected to Sparkle

This is a big week for housing Data, and its not expected to be good.

I will write later this week with an analysis on the data and what I think it means for the housing outlook.

Tuesday, August 24, 2010

July Home Sale Numbers Keep Dropping

WASHINGTON (Dow Jones)--Existing home sales plunged to their lowest level in 15 years in July as inventories soared, painting a grim picture for the housing market absent government support in a stubbornly sluggish economy.

Home resales dropped a record 27.2%--nearly twice as much as analysts had expected--to an annual rate of 3.83 million in July, the National Association of Realtors said Tuesday. Meanwhile, inventories rose to 12.5 months from 8.9 months in June, pressuring already depressed home prices. Inventories are at their highest level in more than a decade.

"Historically July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun said.

Economists surveyed by Dow Jones Newswires had expected existing home sales to fall by 14.3% to an annual rate of 4.6 million.

Tuesday's data drove the Dow Jones Industrial Average down more than 100 points and pulled down yields on 10-year Treasury notes.

"The report shows the housing industry has hit more turbulence, is not leveling off and is worried about a nosedive," said Mitchell Hochberg, a principal at Madden Real Estate Ventures in New York. "Unemployment, foreclosures and shadow inventory are keeping consumers on the sidelines waiting for prices to drop further."

The realtors revised their existing home sales figures for June downward, saying existing home sales dropped to a 5.26 million annual rate instead of the initially estimated 5.37 million annual rate.

"The question is whether this pause is a temporary pause," Yun said. The National Association of Realtors is expecting sales to remain soft for much of the rest of the year.

The steep decline in sales in July reflects both a souring in the U.S. economic recovery and the expiration of a government tax credit program that has been supporting the housing market for more than a year.

The tax credits offered certain buyers up to $8,000 to sign a contract by April 30. Deals originally needed to close by June 30, but lawmakers pushed that deadline to Sept. 30.

Still, the tax credit's expiration drove pending home sales down 30% in May and caused a double-digit dive in mortgage application volumes even as interest rates hovered near their lowest levels in generations. July's existing home sales data reflects the May plunge in pending sales, which typically become existing sales within a couple of months.

Mortgage rates remain low, but lingering troubles in the labor market continue to restrain the nation's housing recovery. That trend likely will continue for some time.

The Federal Reserve, in its latest forecast, scaled back its growth projections, saying it expects the soft job market to continue to hold back economic progress.

In July, existing home sales dropped 29.5% in the Northeast, 22.6% in the South, 25% in the West and 35% in the Midwest.

On a year-over-year basis, July existing home sales were down 25.5% from an annual rate of 5.14 million in July 2009.

A growing number of the existing homes sold across the U.S. in July were distressed properties.

Median home prices in July rose 0.7% to $182,600.

The last sentance is what I want to focus on...In Michigan, Realtors are trying to claim that the housing market has bottomed. They say that home prices are rising since 2009 even though sales are way down. Realtors are trying to flaunt the price increase as a good sign of housing recovery while ignoring the fact sales are way down.

All this proves to me is that people are overpricing their houses. Banks are listing foreclosures as too pricey. The price has risen but not many people are biting because they know it is not a good deal in this economy.

Drop the price and sales will rise again. Thats the bottom line.

Housing Fear Quote of the day

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

Friday, August 20, 2010

Wednesday, August 18, 2010


If this is true, this is earth shattering. This will drastically change how mortgages are issued in the United States. I am shocked this is not the number 1 story on the news right now.

News Flash: Fannie, Freddie Kaput
By Lauren Tara LaCapra (THE STREET)

WASHINGTON (TheStreet) - For the first time in almost two years, some actual news came out of Washington about Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB).

The Treasury Department held a press-and-policy-maker event on Tuesday to start the discussion about housing-finance system reform. High-profile experts representing the government, borrowers and various parts of the industry were featured speakers in panel discussions.

The crib notes are thus: The Fannie-Freddie model of housing-finance is kaput; the new system will almost certainly include (explicit) guarantees on certain types of residential mortgage-backed securities to help middle-class borrowers; and low-income borrowers will be incentivized to rent until they can afford to buy.


These are the kinds of things that have been vaguely suggested by the power set in Washington and the bankers on Wall Street for the past couple years of uncertainty. But now they've nearly been said explicitly, and with the molasses-like speed of Capitol Hill progress, that's saying a lot.

"This is a test for Washington," said Treasury Secretary Tim Geithner, after his keynote speech. "The stakes are high."
Most of the official news on policy came from reading between the lines of Geithner's speech. The Treasury Secretary indicated that Fannie and Freddie will die -- albeit with an "elegant funeral" -- and their legacy portfolios will be wound down. While he didn't outline any explicit policy objectives, he said "I believe there is a strong case to be made for a carefully designed guarantee."
With widespread industry support for such a move, it's nearly certain that Fannie and Freddie will be replaced by a system that's similar but with important distinctions: No "hybrid" structure where shareholder gains are subsidized by taxpayer support; an explicit guarantee on debt, rather than an assumed one; pricing on guarantees that's more favorable to taxpayers; and capital requirements that give private players a chance to compete in the mortgage-buying space.
Beyond that, in group sessions after the main panel discussion, conversation was dominated by the various interests who have a stake in housing reform.

Representatives from Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), PNC (PNC), Citigroup (C), U.S. Bancorp (USB), Morgan Stanley (MS), Blackrock (BLK), State Street (STT) and a variety of other firms were there to offer the "industry"'s side of the story. Then there were the buyers of mortgage bonds outside the banking industry, like Bill Gross, chief investment officer of Allianz's (AZ) PIMCO, who manages its most prominent bond fund; and Bill Irving, who manages a big fixed-income fund for Fidelity. The Chamber of Commerce was there to represent the non-bank industry side, which will see economic effects of major housing-industry changes as well....

What do you think? Will average Americans still be able to get good mortgage rates after this goes though? will they even be approved at all? Pretty big news.

Sunday, July 11, 2010

Mortgage Rates at 50 Year Lows and Houses Still are not Selling.

Mortgage rates are now at 4.5% for a 30 year mortgage and houses are still not selling.

As I wrote last year, the first time home buyer tax credit would simply force all the demand to occur during the tax credit period leaving a dead zone in its aftermath and I have once again been proven correct.

The thing that most troubles me is that normally, low interest rates tend to cause a house purchase boom as we saw back in 2001-2004. Of course this is the worse time to buy a house because house prices will rise sharply as financining, affordability and demand increase due to lower monthly payments.

When interest rates rise, most people avoid buying houses because affordability decreases due to a higher interest rate and higher monthly interest payment. It simply cost more money in financing to buy the same home. This normally causes house prices to drop so that affordability remains the same for buyers.

experts say, even though this is contrary to what most people do, to buy a house when interest rates are high and house prices are low. because you can refinance the house at a lower rate down the road while enjoying your lower principal payment.

They say to not buy in a low interest, high home price enviroment (circa 2005) because that is simply a bad financial choice even though that is when the house boom mania and quickly rising house prices entices everyone to get in on the action.

Now we have a situation with low interest rates, low house prices. Perfect time to buy?...........Right?......right?

What happens when interest rates start rising?

historically this would mean house prices have to drop even further in order for affordability to stay constant.

Ex. A $100,000 mortgage at 4.5% cost you $507 dollars a month. If interest rates rise to 6.5% the same $100,000 mortgage costs you $632 a month.

If someone can only afford a 507 a month payment then the house price must drop to $80,000 for affordability to remain the same.

The question is....
is now the best time to buy houses due to low interest rates and house it the worse time to buy because an inevitable rise in interest rates will cause house prices to drop even further.

I really don't know.

Saturday, July 10, 2010

Double Dip in House Prices Forcasted

Home values slide again in 2010, with few exceptions.
The final figures for the U.S. housing market's performance thus far in 2010 won't be officially released for several weeks. But a review of the best preliminary data available indicates that the recovery in home values that began in early 2009 has stalled. A second dip is clearly underway in some places, if not across the entire, a Seattle-based real estate data provider, is preparing to release figures for May and expects them to show a 1.7% decline in home values nationally through the first five months. The pain is spread unevenly across the landscape, with home values in cities like San Diego, Los Angeles and Boston rising 2% to 4% while prices in Las Vegas, Miami and elsewhere tumbled 6% to 7%.

New York-based data firm Radar Logic, which tracks values by sifting through housing transactions in the 25 largest U.S. cities, reports that through April 30 values were up 1.9%. It warns, however, that values may have merely received a boost from the spring season (home values typically have their best stretch as the weather warms) and the extension of the first-time-buyer tax credit that expired last month. Its index will likely hit new lows in the second half of the year, Radar Logic says.

In a report released last month, analysts at investment bank Goldman Sachs said their own review of housing data available at the time showed 2009's recovery in values had stalled. U.S. housing values will fall 3% in the coming year, with the heaviest blows dealt to Las Vegas, Portland, Ore., and Seattle, Goldman predicts. With an eye toward high home vacancy rates or rising mortgage delinquencies in these cities, the bankers projected values there would drop 4% to 12% in the coming 12 months.

Even if the darkest forecasts don't come true, the slippage so far this year is discouraging. Many homeowners had been hoping that home values would rise again this spring like they did in the spring of 2009 (they rose 8% between March 30 and mid-August, by Radar Logic's measure). That clearly hasn't happened during the most recent home-hunting season.

"Some metro areas did pretty well," says economist Stan Humphries, noting that Los Angeles, San Francisco and San Diego were up 3% or more through the end of May, and that Boston and Denver also were both up year to date. "It's an otherwise dreary backdrop," Humphries adds.

In the housing downswing that plagued the U.S. in the early 1990s, home values fell in real terms, but inflation rates ran between 3% and 5%, which helped camouflage the modest retreat. No such luck now. With Inflation running at just 2%, any slip in value greater than that is painfully apparent to homeowners.

"In nominal terms, we haven't had a price drop like this nationally since the Great Depression," says Humphries.

"I'm not sure you can even call this a double-dip, because I'm not sure we ever got out of the first dip," says Radar Logic Chief Executive Michael Feder. "Last year I think buyers moved in because prices were so low, but we've seen such a massive inflow of supply because of foreclosures and the big inventory of foreclosures to come. It's really affecting the comfort that buyers have in the prices they're paying."

Barclays Capital has estimated the number of homes in the hands of lenders, whether Fannie Mae, Freddie Mac or any of the large private banks, is approaching 500,000. More than 200,000 of those homes are in the hands of the government lenders.

"They're the fastest-growing seller of foreclosed homes in the country right now," notes Feder.

Alarmed by the 11 million or so mortgages that are reportedly delinquent, Feder and others have been lobbying government officials to consider alternative plans to rescue housing. Feder favors a plan that would allow Fannie, Freddie and other banks to convert their underwater mortgages to shared-appreciation mortgages that would carry lower monthly payments and give banks and homeowners shared equity stakes in the homes' future appreciation.

One way or another the market must clear, and as it has so often in the past, California appears to be leading the way. Los Angeles, San Diego and San Francisco have all had respectable years thus far. Part of the reason is that state law enables the parties involved to work through foreclosures in as little as 90 days.

"Contrast that with Florida, where getting possession can take several more months," says Humphries.

Prices in Miami are down 6.9% this year, according to Zillow.

5 Cities Facing a Double Dip
El Centro, Calif.
Average home price: $113,400
Down year to date: -2.3%

Las Vegas, Nev.
Average home price: $126,800
Decline year-to-date: -6.6%

Miami-Ft. Lauderdale, Fla.
Average home price: $152,300
Decline year-to-date: -6.9%

Orlando, Florida
Average home price: $123,200
Down year to date: -7.3%

Detroit, Mich.
Average home price: $85,300
Decline year-to-date: -8.9%

Housing Double Dip Appears To Be Underway
Stephane Fitch,
Jul 7, 2010

Wednesday, July 7, 2010


This is the most beautifully done, easy to understand video on the economy I have ever seen. It is a must watch for everyone.

Thursday, May 20, 2010


I am renting the condo out to my sister who is paying on time every month.

I am leasing an apartment while we currently search for houses. We are approved for a $120,000 dollar mortgage. The reason it is such a low amoung is due to the fact I already have a mortgage on a condo weighing me down.

$12o,ooo in the suburbs of Detroit Michigan still gets you a 3 bedroom, 2 bathroom, 1500 sq foot home in a nice area.

If I put an offer in on the house I will let you all know!

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