Items of Interest:
The House-Price Bust Has A Long Way To Go -- SOUNDING more like a cartographer than a central banker, Ben Bernanke this week showed off the Federal Reserve’s latest gizmo for tracking America’s property bust: maps that colour-code price declines, foreclosures and other gauges of housing distress for every county. His goal was to show that falling prices meant more foreclosures, and to urge lenders to write down the principal on troubled loans where the house is worth less than the value of the mortgage. His maps—where hotter colours imply more trouble—also make a starker point. The pain of America’s housing bust varies enormously by region. Hardest hit have been the “bubble states”—California, Nevada and Florida, and parts of the industrial Midwest. The biggest uncertainty hanging over the economy is how red will things get.
The answer is not simple. It is hard to be sure how much house prices have fallen. America has several house-price indices and they tell different stories. Widely cited, but least useful, are monthly figures showing median home prices produced by the National Association of Realtors (NAR). These indicate that median prices are down some 13% from their peak, but since these averages do not adjust for the mix of homes changing hands, which fluctuates from month to month, they are inevitably distorted...
Subprime In Sheep's Clothing -- Personal credit scores used to be a pretty accurate indicator of the odds that American borrowers would pay off their mortgage loans. But in the past few months--far too late to do anything about it--lenders are finding that the amount of equity people have in their homes is a better determinant for the risk of default.
That is a ticking time bomb as U.S. home prices weaken in the wake of the subprime loan crisis because it means that relatively affluent borrowers might not stick around once their equity turns negative, potentially beginning a vicious circle of home abandonments that push down prices and encourage new defaults...
- Subprime Mortgages: America's Latest Boom and Bust - Barry Ritholtz
- Signs of a Housing Bottom? - Barry Ritholtz
- House Passes Permanent Increase to Conforming Loan Limits - Housing Wire
- Why Did the Mortgage Crisis Happen, Part 2 - Bill Conerly, Businomics
- FNM Inadvertently Predicts Housing Bottom - Kevin Depew, Minyanville
- It’s Feast Or Famine In California - Housing Bubble blog