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Wednesday, June 25, 2008

Housing/Subprime/Credit Roundup — June 25, 2008

Items of Interest:

New-Home Sales in the U.S. Fell 2.5 Percent in May -- Sales of new U.S. houses fell 2.5 percent in May, signaling the real estate slump will keep weighing on the economy.

Purchases dropped to a 512,000 annual pace, as forecast and the second-fewest in almost 17 years, from a revised 525,000 rate in April, the Commerce Department said today in Washington. A separate report showed demand for long-lasting goods stalled last month...

``You are seeing sales now stable at a roughly low level,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who forecast sales would drop to a 510,000 pace. ``There is very slow progress on inventories.'' ...

U.S. MBA's Mortgage Applications Index Fell 9.3% Last Week -- Mortgage applications in the U.S. last week declined to the lowest level in more than six years as recent increases in mortgage rates caused Americans to shy away from refinancing loans.

The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan fell 9.3 percent to 461.3, the lowest level since December 2001, from 508.4 the prior week. The group's purchase index decreased 7.4 percent and its refinancing gauge lost 12.1 percent.

Prospective buyers are hesitant to purchase homes as rising foreclosures add to the glut of properties on the market and push down home values further. Sales may keep dropping as lenders restrict credit, and concern over inflation boosts mortgage rates.

``Until housing deflation ebbs, the risk of more foreclosures and renewed financial instability will remain high,'' Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report. ``Falling prices are sinking household confidence.'' ...
Housing Wire:
Falling Mortgage Rates Fail to Spur Borrower Interest; Applications Lowest Since End of 2001 -- Despite mortgage rates that it said fell nearly 20 basis points last week, the Mortgage Bankers Association said Wednesday morning that the number of borrowers applying for a new or refinanced mortgage last week fell to levels not seen since the end of 2001...
Texas Real Estate Slump Gives Mexicans a Chance to Take It Back -- More than a century and a half after Mexico lost Texas to the U.S., Virgilio Garza wants a piece of it back.

A ``Texas for Sale'' sign and cowgirls in boots and white hats greeted Garza at the Convex center in Monterrey, Mexico, earlier this month. A Monterrey developer and investor, Garza was in search of foreclosed U.S. property to buy.

``Texas is like our home,'' said Garza, 45, who joined hundreds of Mexicans poring over lists of Texas properties at the four-day event. Garza, who owns manufacturing sites and other land in Mexico, said he and five partners may invest as much as $8 million in Texas. ``We believe there can be some opportunities,'' he said.

A rising peso and an economy growing faster than the U.S. have given some Mexicans the buying power to take advantage of the housing slump in Texas, which became part of the U.S. under an 1848 treaty that ended a three-year war between the two countries...
S&P/Case_Shiller April home pricesBeSpoke:
Plotting the April Case/Shiller Housing Numbers -- Chalk it up to seasonal factors, but it's good to see some green in the month over month readings of the S&P/Case-Shiller Housing indices. As shown at right, 8 of the 20 cities that Case-Shiller track showed increases in home prices from March to April. Cleveland saw the biggest month over month increase at 2.94%, followed by Dallas (1.12%), Denver (0.83%), and Seattle (0.72%).

There were plenty of declines in April as well, however. Miami fell another 4% in just one month, while Las Vegas, Tampa, Minneapolis, LA, San Fran, San Diego and Phoenix all fell by more than 2%.

And the year over year numbers are still quite depressing. The Composite 10-City index was down 16.3% from April 2007 to April 2008. And Charlotte, which was the last city to hang onto year over year price gains, finally turned negative versus a year ago....
Andrew Ross Sorkin / NY Times Dealbook:
A ‘Bonfire’ Returns as Heartburn -- Almost exactly a year ago, Tom Wolfe, the author of “The Bonfire of the Vanities,” was wandering the floor of the New York Stock Exchange. Dressed in his trademark white suit, he darted around traders and whisked past trading booths, shaking hands and waving, just before the market was about to open...

CNBC reporter pulled Mr. Wolfe aside to ask him what he made of all the hubbub. Mr. Wolfe paused for a moment to contemplate his answer.

And then, with a wry smile, he delivered a prophetic declaration: “We may be witnessing the end of capitalism as we know it.” ...

“It has always interested me that the word ‘credit’ comes from the word ‘credere,’ which means ‘to believe,’ ” Mr. Wolfe said. “It only works if people believe in it.” He’s right, of course: one reason the credit markets have tanked is that people don’t believe anymore...


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