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Tuesday, August 19, 2008

Housing/Subprime/Credit Roundup — August 19, 2008

Items of Interest:

Housing Wire:
Single Family Housing Starts Hit 17-Year Low -- U.S. home builders may be cutting back sharply on the number of new homes built, but it may not be fast enough for a housing market moving even more quickly in reverse. Single-family housing starts fell 2.9 percent to a seasonally-adjusted annual rate of 641,000 in July, the lowest level since January 1991; but completions remained well above starts, at a rate of 791,000, according to data released Tuesday morning by the Commerce Department.

In other words, builders are frenetically pulling back on starts but still completing far more homes than they’re starting each month; with anemic demand tied to rising foreclosures and tighter credit standards, an elevated completions number relative to new single-familly starts suggest that builders may yet be pushing too many homes out onto the market despite efforts to pull back.

“The data paints a picture of buidlers pulling back, but not enough and not fast enough,” said one source, a senior executive at a commercial bank that asked not to be named...

Barry Ritholtz / The Big Picture:
Housing Starts -- We’ve come a long way...

Housing Starts
but barely dented inventory stockpile...

Large U.S. Banks May Fail Amid Recession, Rogoff Says -- Credit market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, said Kenneth Rogoff, former chief economist at the International Monetary Fund.

``The worst is yet to come in the U.S.,'' Rogoff, a Harvard University professor of economics, said in an interview in Singapore today. ``The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.''

The U.S. housing slump has triggered about $500 billion in credit market losses for banks globally and led to the collapse and sale of Bear Stearns Cos., the fifth-largest U.S. securities firm. Bonds of regional banks such as National City Corp. and Keycorp are under pressure on expectations of more fallout. Rogoff, 55, said the government should nationalize Fannie Mae and Freddie Mac, the nation's biggest mortgage-finance firms.

Freddie Mac and Fannie Mae ``should have been closed down 10 years ago,'' he said. ``They need to be nationalized, the equity holders should lose all their money. Probably we need to guarantee the bonds, simply because the U.S. has led everyone into believing they would guarantee the bonds.''
Kevin Griffin / Mortgage News Clips:
Calling it a Subprime Crisis is Sooo Last Year -- What began as a Subprime Crisis last summer has taken many twists and turns, claimed so many victims. History books may end up calling this crisis the Subprime slash Deleveraging slash LIBOR slash Auction-Rate Securities Crisis. One could easily add a few more slashes/names (TOBs, ABCP, Alt A, Prime, Moral Hazard, Too Big to Fail). How about we simplify things a bit and just call it the Hydra Crisis. You recall Hercules vs. the Hydra, the nine-headed monster from Greek Mythology. When Hercules cut off one of its heads, two heads would grow back. That visual accurately portrays this crisis...

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