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Tuesday, July 29, 2008

Housing/Subprime/Credit Roundup — July 29, 2008

Items of Interest:

Home prices down 15.8% in past year, S&P says -- Seven of 20 cities tally monthly price gains in May, Case-Shiller data show . . .

Home prices in 20 major U.S. cities have fallen a record 15.8% in the past year, as prices dropped in all areas tracked by the Case-Shiller home price index, Standard & Poor's reported Tuesday.

Prices in 10 cities fell 16.9% in the past year.
Prices thus are at the same levels as they were in the summer of 2004, which means four years of appreciation have been effectively wiped out. Prices are down 18.4% from peak levels seen two years ago.

Home prices fell 0.9% in May compared with April, although seven of the 10 cities showed a month-to-month increase, which David Blitzer of S&P termed a "possible bright spot." The pace of the monthly decline has slowed for three months in a row, having peaked at 2.6% in February.

Prices in the so-called bubble regions continued to plunge at a rapid pace in May.
Prices in Miami fell 3.6%, while prices in Las Vegas and Phoenix fell by more than 2.5%. On the other hand, prices rose 1% in Atlanta, Boston, Denver and Dallas...

The Big Picture:
Record Low Annual Declines for Case Shiller Index -- Home price data continued to worsen in the US through May 2008. Unlike some of the foolishness heard from the perennial bottom callers, prices are actually accelerating to the downside. . .
Case-Shiller home price index thru May 2008----
May Case-Shiller Housing Numbers -- Probably the most disheartening of the data is how much of the gains from '04 to now have been given up. The Composite 10-City index is now at its lowest levels since June 2004 . . .

May 2008 Case-Shiller Housing Numbers----
Wall Street Journal:
Amid Housing Slump, Glut Eases Slightly -- Rising Foreclosures, Tighter Credit Still Pushing Down Prices; Economists Don't Expect Big Boost From Congressional Package

The number of homes on the market is finally falling in much of the U.S., but tight credit and a flood of foreclosures are still pushing home prices down.

Making things worse, a sputtering economy is destroying jobs. That means even more foreclosures and fewer potential home buyers.

Mark Zandi, chief economist at Moody's Corp. Economy.com, says he doesn't expect a major rebound in home sales and prices before the spring of 2010. "The recovery will vary considerably across the country, with California recovering quickly and Florida much more slowly," Mr. Zandi says. . .

Wall Street Journal:
Housing Inventory Falling, But Outlook is Bleak -- WSJ's quarterly survey of housing data ...

WSJ: quarterly survey of housing data----
Wall Street Journal:
Merrill Aims to Raise Billions More -- Firm Dumps Mortgage Assets as Crisis
Drags On; Another Big Write-Down

Merrill Lynch & Co. agreed to sell more than $30 billion in toxic mortgage-related assets at a steep loss, hoping to purge its balance sheet of problems that continue to plague the giant brokerage firm.

The move was described by a person close to Merrill as an effort to "lance the boil" that has resulted in more than $46 billion in write-downs since June 2007. Dumping the assets for just 22 cents on the dollar will result in a write-down of $5.7 billion. That is an ominous sign for other Wall Street firms and commercial banks trying to get rid of loans and securities in a market flooded with distressed assets.

Faced with another leak in its balance sheet, Merrill also announced late Monday it would sell $8.5 billion in new common stock. The sale will dilute existing Merrill shareholders by about 38% -- and is additionally painful because the firm will have to make extra payments to an investor that bought shares at a much higher price in an offering last December...
Housing Wire:
Merrill Makes Latest Mortgage Purging Attempt
Can Merrill Make It Out Alive?
Wall Street Journal:
Banks Act to Aid Mortgage Lending -- 'Covered Bond' Plan Of Four Firms Seeks To Boost Financing

Four of the nation's largest banks will begin issuing a type of debt the Bush administration has been pushing as a way to help reinvigorate the housing market.

On Monday, Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co., said they would begin issuing so-called covered bonds, a popular method of financing in Europe that could make more mortgage financing available in the U.S.
NY Times:
Worried Banks Sharply Reduce Business Loans -- Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

Two vital forms of credit used by companies — commercial and industrial loans from banks, and short-term “commercial paper” not backed by collateral — collectively dropped almost 3 percent over the last year, to $3.27 trillion from $3.36 trillion, according to Federal Reserve data. That is the largest annual decline since the credit tightening that began with the last recession, in 2001...
Kevin Depew / Minyanville:
The Credit Crunch, What's Next? -- The New York Times got in on the action as well, noting that banks are curtailing loans to American businesses, "depriving even healthy companies of money for expansion and hiring."

Scanning the Times piece caught the following: "credit tightening . . . scarcity of credit . . . access is restrained . . . struggle to secure finance . . . loan growth slowing . . . back to basics . . . new era of caution"

Welcome to the reality of the ongoing Credit Crunch. This is stage two; the Main Street impact from the unwinding of the Wall Street debt bubble. . .

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