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Thursday, July 24, 2008

Housing/Subprime/Credit Roundup — July 24, 2008

Items of Interest:

Housing Wire:
Existing Home Sales Continue Freefall -- Sales of previously-owned U.S. homes fell to a 10-year low in June, according to data released Thursday by the National Association of Realtors. Existing-home sales — which include single-family, townhomes, condominiums and co-ops — fell 2.6 percent to a seasonally-adjusted annual rate of 4.86 million units in June from a pace of 4.99 million in May, and are 15.5 percent lower than the 5.75 million-unit rate recorded one year earlier.

Gloomy numbers, to be sure. But there are hordes people just waiting to buy on the sidelines, realtors say.

“A recent online survey of realtors shows nearly a quarter of potential home buyers are waiting on the sidelines,” said NAR President Richard Gaylord. “However, timing the market can be very tricky, which is why home buyers should always have a long-term view to build wealth.” ...

The Big Picture:
Existing-Home Sales Fall to 10 Year Low; Shadow Inventory Grows -- Now for the really scary part: Shadow Inventory. The glut of homes for sale is likely much larger than reported. Inventory counted by the Realtors group only includes foreclosures that have been listed on the multiple listings service. The enormous number of REOs, auction properties, defaults and foreclosures not listed ARE NOT IN THIS DATA.

Because foreclosures aren't included in the data at all (they are not sold through realtors' MLS service) it is likely that the total inventory of houses for sale is APPRECIABLY HIGHER THAN REPORTED.

I expect we will be hearing more about the Shadow Inventory over the next few quarters . . .

Realty Check, CNBC:
Existing Home Sales: A Look At Numbers That Weren't There

Stocks Crushed After Existing Home Sales Hit 10-Year Low

2.2 million vacant homes for sale -- Census Bureau report shows percentage of vacant houses available for sale and of Americans who own homes were relatively unchanged in 2nd quarter. . .

Some 2.8% of homes, excluding rental properties, were empty and on the market from April through June . . .
This Can't Be Helping Real Estate -- Bankrate.com's 30-year average US fixed mortgage rate was at 6.5% yesterday, which is the highest it has been since April 2002. New highs for rates can't be tempting potential home buyers to pull the trigger.

US fixed mortgage rate was at 6.5% on July 23, 2008----
Editorial / Wall St. Journal:
The New Housing Bill Hammers Taxpayers -- Combine a housing meltdown with election-year politics and the results were not going to be pretty. Add a crisis in confidence in Washington's favorite quasipublic companies and what we're getting is a rout for taxpayers, especially those who kept their heads during the housing mania.

The House yesterday passed a housing bailout by 272-152. The White House has thrown its reservations overboard and is begging to sign this boondoggle, despite the less-than-veto-proof majority. A few brave souls in the Senate are threatening a filibuster, which is where the last hope lies for stripping the most egregious and expensive provisions from this monster.

Even conservative estimates by the Congressional Budget Office say the cost for this bailout will run to $41.7 billion, with $16.8 billion offset by higher taxes. No one has any idea of the real cost. . .
Colin Barr, Fortune: Why We Tolerate Bailouts
Maya Jackson Randall / Dow Jones Newswire:
Group Sees $40.3 Billion FY09 Budget Gap For US States -- The cumulative fiscal-year 2009 budget shortfall for U.S. states is projected to triple to $40.3 billion as the economic slump makes it more difficult for states to collect revenue, according to a report released Wednesday.

The National Conference of State Legislatures (NCSL), which authored the report, said the cumulative budget gap previously has been higher than the 2009 projection - in 2003 and 2004, for instance, in the wake of the 2001 economic downturn.

Still, the group - which represents legislators of states, commonwealths and territories - sees the latest data as a worrisome sign that state finances are deteriorating faster than expected as the nation grapples with turmoil in U.S. financial and housing markets. . .
Fannie and Freddie rescue, a bailout for whom? -- The rhetoric from the Washington backers of the Fannie Mae-Freddie Mac rescue effort has been consistent on one front: this is no shareholder bailout.

But that message seems to have been lost on the stock market, particularly holders of Fannie Mae and Freddie Mac shares. After being on an apparent trajectory toward zero just over a week ago, both stocks have more than doubled since the beginning of last week when the Bush administration unveiled its plan to shore up the two lynchpins of the U.S. housing market.

"The real winners are the investors who bought Fannie and Freddie shares last week," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey...

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia