September 2007

‘Keeping Current’
more riveting stats ….

Value
8/06/2007 Homeowners across America were more likely to report declines in their home values than at any time since 1992, according to the Reuters/University of Michigan Surveys of Consumers for August released on Friday.

Value
7/2007

In your area, what are your expectations for home prices over the next year?
 61.1% Home prices will rise 0-5%  8.5% Home prices will rise 5-10%  0.7% Home prices will rise 10-20%  0.0% Home prices will rise greater than 20%  29.7% Home prices will fall

http://www.realtor.org/Research.nsf/pages/ REPS?OpenDocument&WT.mc_t=LS080807&WT.mc_n=Rsrch

Value
8/28/2007 "I think we’re yet to get to the main event," said Gary Shilling, president of A Gary Shilling, a moneymanagement firm. "We continue to look for a 25% decline in median single-family house prices. I think this is really just getting started.”

.com

Value
8/28/2007 The S&P/Case-Shiller U.S. National Home Price Index fell 3.2 percent in the second quarter, compared with the same period in 2006. This was the sharpest decline since the index was created in 1987, S&P said in a statement….“The pullback in the U.S. residential real estate market is showing no signs of slowing down," Robert Shiller, creator of the index and chief economist at MacroMarkets

Value
8/31/2007 “The housing market’s correction is incomplete and may prove to be long drawn given the soft growth environment in the U.S. economy, the tightening of mortgage standards, and the unsettled financial market situation.” - Paul L. Kasriel, director of economic research

Inventory
8/2007 The supply of all homes for sale at the end of the July climbed 5.1 percent to 4.59 million. At the current sales pace, that represented 9.6 months' worth, up from 9.1 months' worth at the end of the prior month. The inventory of single-family homes represented a 9.2 months' supply, the most since October 1991.

http://www.realtor.org/Research.nsf/files/ EHSreport.pdf/$FILE/EHSreport.pdf

Inventory
8/2007 “The run-up in house prices has led to a predictable oversupply of housing; an oversupply far beyond anything the country has ever experienced, with the inventory of unsold new homes 70 percent above its previous record.” - Dean Baker

Inventory
8/27/2007 “We are very likely to see home sales continue to drop through the year,” said Ethan Harris, chief economist at Lehman Brothers Inc. in New York, who accurately the forecast the July sales rate. “There's a big imbalance between supply and demand with lots of people who want to sell and lots of hesitant buyers.”

Vacancy Rate
9/5/2007 “There are in excess of three and one half million vacant homes in the country.” - Ronald J. Peltier, President, HomeServices of America, at RISMedia Conference in NYC

Vacancy Rate
8/2007 “The number of vacant ownership units is nearly twice the previous peak.” - Dean Baker

Mortgage Crisis

Mortgage Crisis
9/1/2007 Ameriquest Mortgage Co., the largest U.S. subprime lender as recently as 2005, is closing.

Mortgage Crisis
“Since late 2006, 151 major lenders have ‘imploded’.” 9/9/2007
The "imploded" status is somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or a "firesale" acquisition. The Companies include all types (prime, subprime, or a mix of both; retail or wholesale; subsidiaries and entire companies).

- from the front page of the website Implode-o-Meter

http://ml-implode.com/

Mortgage Crisis
3/2007 “The phenomenon of reset has already begun, and is expected to increase in strength over the next two to three years, even if fewer new teaser and sub-prime loans are done in the future and stricter underwriting and valuation guidelines are used. The impact of reset will extend over several years, into the early years of the coming decade.”

MORTGAGE PAYMENT RESET STUDY

Foreclosures

http://realestate.yahoo.com/Foreclosures

Foreclosures

http://www.realtor.org/subprime_lending.nsf/pages/ subprime_lending_issue_in_depth?OpenDocument

Restrictions
The problems may be most acute in the markets for lower-end homes, which tend to go to less credit-worthy borrowers, and for higher-end homes that require buyers to take out socalled jumbo loans. Jumbos are loans of more than $417,000, the limit observed by Freddie Mac and Fannie Mae, the government sponsored enterprises (GSEs) that buy loans in the secondary markets. Freddie and Fannie don't buy loans above that cap. Rates for such loans, which exceed $417,000, jumped sharply this month.

Restrictions
How is the tightening credit situation impacting your market?
 31.4% Significant impact of shutting out many would-be buyers with marginal credit  43.0% Moderate impact as some borrowers look to other loan products like the FHA and VA loans and/or for lower loan amounts  23.5% Little impact since I deal primarily with prime borrowers  2.2% I don't know

http://www.realtor.org/Research.nsf/pages/ REPS?OpenDocument&WT.mc_t=LS080807&WT.mc_n=Rsrch

Restrictions
8/06/2007 “Because loan standards are now much tougher, at least 10% to 15% of the people who could have qualified for a home-purchase loan last year can't do so now”, says Jan Hatzius, chief U.S. economist at Goldman Sachs.

X X X

Restrictions
9/2/2007 Jumbo 30-year fixed-rate loans last week were being offered for an average of around 7.4%, or about 0.9 percentage point above those on conforming loans, according to HSH Associates, a financial publisher that surveys lenders daily. Usually, jumbo rates are only around a quarter point above conforming.

Keeping Current
At the beginning of 2007, I said: • • • • • • We would lose about 10% of our fellow realtors House prices would fall 10-15% in many parts of the country Commissions would increase as our job got more difficult There would be an avalanche of foreclosures all over the country The number of foreclosures would rattle the mortgage industry The agents who accepted the first five premises would make small fortunes this year!!

The next six months
8/15/2007

The "Fair Mortgages Practices Act, " H.R. 3012
U.S. Rep. Spencer Bachus introduced a bill in the House of Representatives that would authorize the Federal Appraisal Subcommittee to regulate state appraisal licensing agencies.

The next six months
8/16/2007 Christopher Cagan, director of research at First American CoreLogic, a housing and mortgage data supplier in Santa Ana, recently found that less than 7% of 32 million U.S. households studied as of December owed more than their homes were worth, based on computer estimates of the property values. An additional 4% had home equity of 5% or less.

The next six months
In recent years, FHA lost market share as the market for subprime loans exploded and home buyers of all income levels were offered a range of exotic loan products, such as no-money-down mortgages and interest-only payments. While FHA-insured loans once accounted for roughly 15% of the mortgage market, that number has fallen below 5%. The next eighteen months will see a return to historical market numbers.

Subprime

% in $ volume

FHA

2001

2006

2009

The next six months
8/18/2007 Jan Hatzius, chief U.S. economist at Goldman Sachs “The ratio of the median-price home to the median family income is 32% above above the mean ratio of the previous 25 years mostly because of rising home prices.”

The next six months
9/2007 Year Median Household Income (2005 Dollars) 2000 $47,599 2001 $46,569 2002 $46,036 2003 $45,970 2004 $45,817 2005 $46,236

The next six months
8/27/2007 “Credit card borrowing was up 11 percent in May and June, likely because homeowners are using plastic to pay for daily expenses to free up more cash to make their mortgage payments. Moreover, while borrowers previously have tapped into mortgage equity to produce the money needed to resolve credit-card and other debt, a Goldman Sachs report notes that "cash-outs" peaked during the fourth quarter of 2005.”

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