THE HOUSING DOUBLE DIP IS HERE
This could have enormous macro impacts if this becomes a protracted decline (via Clear Capital):
Clear Capital’s latest data through October 22 shows even more pronounced price declines than our most recent HDI market report released two weeks ago. At the national level, home prices are clearly experiencing a dramatic drop from the tax credit-induced highs, effectively wiping out all of the gains obtained during the flurry of activity just preceding the tax credit expiration.
This special Clear Capital Home Data Index (HDI) alert shows that national home prices have declined 5.9% in just two months and are now at the same level as in mid April 2010, two weeks prior to the expiration of the recent federal homebuyer tax credit. This significant drop in prices, in advance of the typical winter housing market slowdowns, paints an ominous picture that will likely show up in other home data indices in the coming months.
Source: Clear Capital
Great chart. Can’t believe the market is ignoring this. This is probably the most important story in the market right now.
A new report by Florida-based bank analyst Martin Weiss shows that JPMorgan Chase, Wells Fargo and Bank of America each have at least $20-billion (U.S.) in single-family home mortgages that are in foreclosure proceedings.
The tally: $21.7-billion for JPMorgan Chase, $20.5-billion for Wells Fargo and $20.3-billion for Bank of America. Each has tens of billions more in past-due mortgages. Bank of America leads the pack with nearly $75-billion worth of mortgages either in foreclosure or at least 30 days past due.
“These figures tell us the biggest players are not only in deep, but could sink even deeper into the mortgage mayhem,” Mr. Weiss says.
Measured a s a percentage of banks’ Tier 1 capital, Mr. Weiss gives most of the banks a D, or “weak” rating for their portfolios of bad mortgages. Foreclosed or past due mortgages equal 75.4 per cent of Tier 1 capital at Wells Fargo. JPMorgan Chase, Bank of America, Sun Trust and U.S. all have ratios of 50 to 60 per cent.
I just wonder if most of impact of housing is already done. Most people can’t sell if they need to and realize that. Another 10% down from here gonna freak anyone out? I doubt it.
Certainly not disputing that another leg down in housing is imminent, just wonder if the psychological tsunami has already done its work.
I would expect noisy data on this front for the foreseeable future, as the animal spirits oscillate.
William Black on bankers acting in “good faith”
http://www.huffingtonpost.com/william-k-black/foreclose-on-the-foreclos_b_772434.html
Banks are still holding toxic mortgage assets at less than par hoping for a price rebound. Another 10-15% drop puts a ton of pressure on their balance sheets. Paulson is on record saying a bottom in housing is near..so far the data does not back it up.
I wonder if this calculation can be made…. does the wealth effect of a bubbled-up stock market offset the negative equity effect of declining house prices?
Does anyone else feel like Toto just pulled the curtain back on the Wizard of Oz?
Another problem is all the 2nd mortgages (Line of Credit) that get vaporized in these foreclosures. It has been my suspicion from the start the Banks have been ‘pacing’ the foreclosures each quarter to slowly work them off while maintaining profitability.
i.e. Each quarter they decide beforehand how much of a loss they can take on the home loan mess. They foreclose on the ‘number’ needed to match that, and then delay and defer the rest. The regulators looked the other way with ‘market to model’
I’m sure this is the case. There is precedence:
http://en.wikipedia.org/wiki/Latin_American_debt_crisis
Soros talked about this in his book, Alchemy of Finance. The PTB simply ignored the big bank’s balance sheets until they became whole. Took about a decade, if I remember correctly.
Rinse, repeat. Nothing changes.
There is definitely some funny business going on at the banks in order to maintain profitability. Look at the loan loss provisions declared by BAC and JPM this quarter. BAC set aside 8.1B last quarter then this quarter they only set aside 5.4B. That’s a difference of 2.7B. Their entire quarterly profit was just 3.1B (not counting a goodwill writeoff).
i am also getting a very sick feeling in my stomach in regards to how BAC is handling this mortgage putback scenario. they set aside 872M this quarter for repurchases despite getting hit with a letter from the monolines saying they will owe over 10B and then getting hit with the PIMCO request just a few hours after their conference call. they are way to glib about this IMO. expect to see at least 10B added to their reps and warranties next quarter (if not before).
Great data series…it certainly confirms what is happening on the ground.
One comment above made the excellent point about how this next down wave may not elicit the same psychological response as the first wave. That is certainly true but one needs to keep in mind that most “investors” in this market are heavily geared (in some cases over 100%). That magnifies further drops both for the investor (homeowner) and the bank/S&L/fund that holds the paper on the home. A 10% drop from here is going to cause real pain all around the financial system.
The only question is how long the Fed will continue to pretend there isn’t a problem.
this can’t be right…….we’re in a bull market…..oohhhh……
It takes an idiot to make a village (of collapsing tax valuations):
http://www.cnbc.com/id/31388528/site/14081545
Cramer: Housing Has Officially Bottomed
Tuesday, 16 June 2009 6:34 PM ET
Here’s how you trade it.
Source: cnbc.com | By: Tom Brennan
TPC
You have an MMT convert running for Congress!
http://www.businesswire.com/news/home/20101022005577/en/Senate-Candidate-Bets-Congress-100-Million-U.S.
Notice how he explains that this money created exists merely as electronic entries on a computer somewhere then he proceeds to use these electronic entries to create 20 million jobs, make SS payments…etc
Free Lunch
Mosler claims that the government can never run out of money due to the fact that these are merely electronic entries but he is technically incorrect because the government could actually run out of electronic hard disk space to hold all of the 0′s
You people just love bad news, don’t you? You’ll look under every rock and at every chart and scare the bejeesus out of people. When will you so-called financial “experts” and columnists just learn to shut up and let the economy work its way through. The most important fact about economics is “state of mind.” The economy will not recover, and will get worse, if the mental state of its participants is fearful. Wallets will stay in pockets, savings will stay in banks, people will sell assets in panic —- jeez, wake up … and shut up.
I’ve been saying all of this for several years. Welcome to the site.
TPC
Wishful thinking wont solve anything
Pete
Sorry Pete but the most important fact about economics is mathematics.
If you can explain where 300k jobs a month, every month, for the next five years will come from, then I will be willing to stick my head in the sand.
Jobs disappear when companies stop hiring or lay off —- they stop hiring because they’re fearful — consumers stop buying when they’re fearful. It’s a vicious circle and it’s not that complex; it’s pretty fundamental. A little good news goes a long way once in a while. If we look hard and long enough, there will always be a chart or an indicator that shows a negative trend. However, look a little harder and you might see the odd positive trend worth focusing on.
I tune in to sites like this because I’m hoping and waiting to see some good news and some optimism once in a while. Because when that becomes a trend, then we have some good things to look forward to. Until it does, human nature being lemming-like, pessimism will reign. And the human psyche has the most powerful effect on the economy — an undeniable fact for all you chart-nerds.
I get it Pete…Don’t Worry….Be Happy, right? We have woken up from our ‘current state of mind’ induced by Americans drug of choice; cheap debt, lame government and our conviction that the consumption lifestyle we lead is we a god given right.
Saving is a good thing and besides what the hell else do I really need to buy now? A $4000 watch? A new car?! Why?
Pessimism is more then a ‘state of mind’, its the ‘green shoots’ of action and anarchy. If you want to join the lemmings, so be it but the fact your here means…….?
Never been a better time to buy!