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Friday, July 25, 2008

Housing/Subprime/Credit Roundup — July 25, 2008

Items of Interest:

Timothy R. Homan / Bloomberg:
New-Home Sales in the U.S. Fell 0.6% to 530,000 Pace in June -- New-home sales in the U.S. in June were higher than forecast and the number of properties on the market dropped by the most in four decades, indicating builders are making some headway in clearing out inventories.

Purchases decreased 0.6 percent to a 530,000 pace, from an upwardly revised 533,000 in May, the Commerce Department said today in Washington. A separate report showed orders for durable goods unexpectedly rose in June.

Builders are offering more incentives and lower prices to attract buyers and help reduce a glut of unsold properties. Still, stricter lending rules and rising mortgage rates may prevent sales from rising much more in coming months.

``We may have not touched bottom yet in the housing market, but we're clearly not in any freefall,'' Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report.

Economists forecast sales would decline to a 503,000 pace, from a previously reported 512,000 for May, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from 480,000 to 530,000. . .

Infectious Greed:
Mortgage Market Week in Review

Realty Check:
New Home Sales: Why Revisions Keep Housing Picture Unclear

Foreclosure filings up 120% -- 220,000 homes were lost to bank repossessions in the second quarter, and the annual forecast for 2008 will have to be revised upward.

As foreclosures continue to soar, 220,000 homes were lost to bank repossessions in the second quarter, according to a housing market report Friday issued by RealtyTrac.

That's nearly triple the number from the same period in 2007.

A total of 739,714 foreclosure filings were recorded during that three-month period, up 14% from the first quarter, and 121% from the same period in 2007. That means that one of every 171 U.S. households received a filing, which include notices of default, auction sale notices and bank repossessions.

"Most areas of the country are seeing at least some increase in foreclosure activity," said James Saccadic, CEO of RealtyTrac, an online marketer of foreclosed homes. "Forty-eight of 50 states and 95 out of the nation's 100 largest metro areas experienced year-over-year increases in foreclosure activity." . . .
Steve Forbes, Forbes:
Bust Up Fannie Mae and Freddie Mac -- The Treasury/Fed/Congressional rescue of Fannie Mae and Freddie Mac is only a stopgap. Unless fundamentally restructured, these two debt-bloated giants will sooner or later blow up. The once implicit, now explicit, government guarantee for these two quasi-government entities was the reason that they could be leveraged to the hilt, with a debt-to-equity ratio of almost 25-to-1. Instead of just packaging mortgages and selling them off, the companies kept hundreds of $billions in these instruments in their own portfolios to fatten profits--and enrich their politically connected managers and political allies. They also went into the junk mortgage business, buying more than $170 billion worth of dodgy paper.

The Bush Administration should vigorously push to have Fannie and Freddie recapitalized and broken up into 10 to 12 new companies, with their ties to the government completely severed...

Current shareholders could ultimately recover their losses, and taxpayers could eventually get most, if not all, of their money back. In fact, Uncle Sam might even make a profit. . .
Joseph Stiglitz, Financial Times
Fannie and Freddie's Free Lunch - Much has been made in recent years of private/public partnerships. The US government is about to embark on another example of such a partnership, in which the private sector takes the profits and the public sector bears the risk. The proposed bail-out of Fannie Mae and Freddie Mac entails the socialisation of risk – with all the long-term adverse implications for moral hazard – from an administration supposedly committed to free-market principles. . .
Infectious Greed:
The Top 7 Things Every Home Buyer Should Know..... -- everyone who is looking to buy or sell in today's market needs to know:

4. Any interest rate that starts with a 6 is a good number...

6. Don't buy a house today if you aren't going to stay there at least 7 years.

7. It really is a good time to buy a house. No, I'm not turning into a National Association of Realtors choir boy. . .
Housing Doom blog:
Cramer: “You Have To Buy A House”
-- "The Federal Housing Authority will put $300 billion to work to help homeowners with exotic loans and that will put a bottom in housing. “I was the first guy that said torch your house for the insurance money. I am now telling you that between now and the next six months you have to buy a house."

CNNMoney: 10 house-selling secrets --Secrets of a house stager. . .
Wall Street Journal: Cashing In on Real Estate, It's Still Possible
Mish's ... Trend Analysis:
FDIC Chairman Sheila Bair Is Out Of Control -- In a sad twist of irony Sheila Bair is accusing blogs of being "out of control".

Sadder still is the fact that San Francisco Business Times writer Mark Calvey agrees. Please consider the incredibly inane article FDIC learns it ignores bloggers at its peril.
The federal agency insuring bank deposits learned that it can't afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s.

"The blogs were a bit out of control," Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week. . .

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