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Tuesday, May 27, 2008

Housing/Subprime/Credit Roundup — May 27, 2008

Items of Interest:

New-Home Sales in the U.S. Rose 3.3% to 526,000 -- New-home sales in the U.S. unexpectedly rose in April after readings for the prior month were revised down, signaling a worsening housing slump is still a threat to the economy.

Sales increased 3.3 percent to an annual pace of 526,000 from a 509,000 rate the prior month that was the lowest in 17 years, the Commerce Department said today in Washington. A separate [S&P/Case-Shiller] report today showed home prices dropped in the first quarter by the most in at least 20 years...

comment: the consensus estimate was for 520,000 new-home [annualized] sales in April.
April 2008 new home sales 526,000Barron's Econoday:
New home sales improved in April, up 3.3 percent but against a downwardly revised March level. The current annual rate of 526,000, next only to March's 509,000, is the lowest since the early 90s with the year-on-year percentage decline of 42.0 percent the worst since the early 80s.

But prices steadied in the month, up 9.1 percent to a median $246,100 for an actual year-on-year increase of 1.5 percent and the best level since November. The year-on-year rate had been declining in prior reports, down 13.3 percent as recently as March. Supply remains heavy at 10.6 months vs. 11.1 months in March. But one positive is that the number of houses for sale, apart from the sales rate, is at 456,000 units, the lowest level in nearly three years. Year-on-year, homes for sale are down 16.9 percent for the biggest drop in 11 years. The supply of existing homes, in data released last week, stood at 11.2 months.

This report is mixed with sales troubling but the rise in prices a big positive that could limit pressure on the consumer and the degree of foreclosures. But the improvement will have to be confirmed by future reports and the appearance of strength in existing home sales. The markets reacted favorably to the report which has offset a dismal report on consumer confidence....
Historical New Home Sales Chart -- While New Home Sales did rise 3.3% in April, it was a month over month comparison. The real story is that sales declined 42% year over year.

S&P/Case-Shiller U.S. Home-Price Index Fell 14.4% in March -- Home prices in 20 U.S. metropolitan areas fell in March by the most on record, pointing to continued weakness in the housing market that will further drag on the economy.

The S&P/Case-Shiller home-price index dropped 14.4 percent from a year earlier, more than forecast and the most since the figures were first published in 2001. The gauge has fallen every month since January 2007.

Prices continue to slide as record foreclosures put more homes on the market and stricter lending standards make it harder to get loans. Falling home values are slowing consumer spending, threatening to halt the six-year expansion.

``Many households are putting their home-buying plans on hold, given the expectations that the house price corrections will persist,'' Celia Chen, an economist at Moody's Economy.com in West Chester, Pennsylvania, said before the report. ``The housing downturn remains in full swing.''
S&P Case-Shiller National Index off 6.7% in Q1 - Calculated Risk
Single-family home prices tumble - Reuters
Case-Shiller: Prices Fell 14%, Most on Record - The Big Picture
Kevin Depew / Minyanville:
Real Estate: Good News/Bad News/Worse News -- First the good news: New Home Sales rose 3.3% in April off the prior month's 17-year low watermark, according to the Commerce Department. That was quite a bit more than most economists had forecast. As well, inventories fell to 10.6 months' worth of homes at the current pace of sales, down from March's 11.1 months' of inventory.

Now, the bad news: The S&P/Case-Shiller index showed home prices fell 14.1% in the first quarter. Nineteen of the 20 cities in the index showed a year-over-year decrease in prices for March, led by a 26 percent slump in Las Vegas and a 25 percent decline in Miami. Eighteen of 20 showed monthly declines in price.

And finally, worse news: Although new home sales upticked between March and April, year-over-year home sales were down 42% from 2007 levels, the largest year-over-year decline since September 1991. Also, keep in mind that new home sales account for just a sliver of the overall real estate market, about 15%. Previously-owned homes account for 85%.
Buffett: Banks Are to Blame For Subprime Debt Crisis -- Blame for the sub-prime crisis lies at the feet of banks who took too many risks in mortgage lending, U.S. billionaire investor Warren Buffett told newspaper El Pais in an interview published on Sunday.

"The banks exposed themselves too much, they took on too much risk .... It's their fault. There's no need to blame anyone else," he said.

Buffett, dubbed the world's richest person by Forbes magazine, said he believed the situation in financial markets would not deteriorate further.

"I don't think the situation will get worse in financial markets. General conditions in the business world will get worse, but it will only last a while," he said, adding he had no idea when an upturn would come....
NY Times:
At Least a Start on Housing’s Revival -- while many industry analysts agree that home-buying conditions have improved somewhat from a year ago, they say that any talk of a recovery for the housing market over all, and for homebuilders in particular, is a bit premature...
NY Times:
A C.E.O. Hits ‘Reply,’ and Now It’s Regret -- His multimillion-dollar compensation package and appearances at Congressional hearings have made Angelo R. Mozilo, Countrywide Financial’s chief executive, the public face of the subprime mortgage crisis. That face may have turned crimson after he mishandled an e-mail message from a Countrywide customer asking for an adjustment to the terms of his mortgage.

Mr. Mozilo wrote that the e-mail was “unbelievable” and “disgusting,” but instead of forwarding this assessment to a subordinate, he hit “reply” by mistake.

Apparently it was not the request itself that bothered Mr. Mozilo — he must be used to those by now — but that it had been crafted from a fill-in-the-blanks template on a Web site that coaches distressed mortgage holders.

The homeowner, Dan Bailey, wasted no time posting the exchange on the Web site, loansafe.org.
NY Times:
Macklowes Sell G.M. Building For $2.9 Billion -- A group led by Mortimer B. Zuckerman, chief executive of Boston Properties, a publicly traded real estate company, is buying the General Motors Building and three other Midtown towers from the financially troubled Macklowe family for $3.95 billion.

The deal, which had been brewing for months as the Macklowes sought to get out from under more than $7 billion in debt, is a victory for Mr. Zuckerman, owner of The Daily News, and his partners, Goldman Sachs and the nations of Qatar and Kuwait, who paid about $2.9 billion for the 50-story, white marble G.M. Building on Fifth Avenue at 59th Street. It is the highest price ever paid for an American office tower...

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

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Washington's Blog

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