The number of foreclosures started in February rose to 243,000 from 217,000 in January. About 87,000 homes were repossessed by banks during February, a 28% jump from the 68,000 foreclosures completed in January. ...Again, month-over-month numbers tend to be highly volatile, but these numbers are a countercurrent to the rosy month-over-month spin we got a lot of last week. The S&P/Case-Shiller 20-City Home Price Index numbers that come out today should help provide a clearer view of the short-term housing trend.
February was the second straight month of sharply higher foreclosures; prior to January, the problem appeared to be easing.
Tuesday, March 31, 2009
Foreclosures rising again
The number of foreclosures increased in February, compared with January:
Monday, March 30, 2009
DC-area house price changes in 2008, by the numbers
From The Washington Post:
No local jurisdiction except the District was spared from falling home prices, and some of the hardest hit Zip codes in the suburbs had declines of more than $100,000.Washington, DC:
Region-wide, the median sales price for single-family houses and townhouses fell 8 percent, to $382,500 from $417,000, in 2007, according to a Washington Post analysis of government sales records. The median price for condominiums also fell 8 percent, to $268,000 from $289,900.
— The District fared the best out of all the jurisdictions in the region, according to The Post's analysis. While sales volume slid 30 percent, to 2,239 homes from 3,212 in 2007, the median home price rose 8 percent, to $520,000, from $480,000.Northern Virginia:
The biggest price increase occurred in Georgetown's 20007 Zip code, one of the District's most expensive neighborhoods. There, the median home price shot up 18 percent, to $1,075,000 from $909,150, even as the number of sales decreased to 199 from 237. ...
Meanwhile, the Zip code with the biggest drop in median home price was 20011, which includes parts of Petworth and Columbia Heights. There home prices fell 10 percent, to $375,000 from $415,000, and homes sales dropped to 290 from 433. Data for the District and the other jurisdictions in this story exclude condos.
— Prince William County, plagued by foreclosures stemming from the subprime meltdown, had the region's steepest price decline. The county's median home price fell 23 percent, to $300,000, in 2008, down from $390,000 in 2007. Volume also plummeted, with 4,961 homes sold compared with 6,755. ...Maryland:
— In Loudoun County, demand picked up as prices fell. The median home price dropped 17 percent, to $410,000 from $492,000, and the number of homes sold jumped to 4,885 from 4,034. The falling prices are a legacy of Loudoun's ambitious growth during the boom years. ...
— In Fairfax County, the median home price fell 14 percent, to $445,000 from $520,000, and volume declined to 9,852 homes sold from 10,851. Several Zip codes had six-figure drops.
The median home price for a house in Herndon, Zip code 20170, for example, fell 34 percent, to $309,000 from $469,900, but home sales jumped to 499 from 317. ...
— In Alexandria, the median home price fell 5 percent, to $550,000 from $580,000, while the number of homes sold fell to 832 from 1,315. It remained the region's priciest jurisdiction. ...
— In Arlington, the median home price fell 7 percent, to $543,000 from $581,000, while the number of homes sold fell to 1,375 from 1,713.
In South Arlington's Zip code 22204, the county's least expensive area, prices fell 11 percent, to $385,150 from $435,000, while home sales also decreased to 288 from 310.
— Montgomery County experienced the steepest drop in home prices among the suburban Maryland jurisdictions, a sharp reversal for a county that had otherwise withstood some of the worst of the housing bust.
The median home price fell 11 percent, to $440,000 from $495,000, and sales volume plummeted to 7,195 from 8,598.
While prices declined in the majority of Zip codes, some of the steepest drops were in the northernmost areas.
Germantown, Zip code 20874, posted an 11 percent decline, falling to $314,990 from $353,750. Nearby Gaithersburg, Zip code 20877, posted a 20 percent decline, to $350,000 from $438,060. ...
— The housing market in Prince George's County continued to erode. The median home price fell 7-percent in the county, to $314,910 from $340,000, while sales volume fell to 3,831 from 7,993 in 2007. ...
Other Maryland jurisdictions also took a hit.
— In Anne Arundel County, the median price fell 5 percent, to $322,500 from $339,000. Home sales fell to 4,928 from 6,479.
— In Charles County, the median price fell 5 percent, to $309,990 from $325,000. There were 1,170 sales, down from 1,918.
— In Calvert County, the median price fell 5 percent, to $315,000 from $332,800. Sales fell to 500 from 782.
— In Frederick County, the median price fell 8 percent, to $300,000 from $324,900. Sales fell to 1,490 from 2,473.
— In Howard County, the median price fell 3 percent, to $391,903 from $402,500. Sales fell to 2,369 from 2,972.
— In St. Mary's County, the median price fell 7 percent, to $285,000 from $305,000. Sales fell to 899 from 1,080.
Robert Shiller on CNBC now!
Robert Shiller is a guest host on CNBC's Squawk Box from 7:00-9:00 AM today.
Sunday, March 29, 2009
Saturday, March 28, 2009
Rahm Emanuel's oversight of Freddie Mac
An interesting article about President Obama's chief of staff and his former high-salary, do-nothing job overseeing Freddie Mac:Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.
One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort. ...
On Emanuel's watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.
Friday, March 27, 2009
History suggests housing doesn't overshoot
Apparently, many bubbleheads (and economists who have recently discovered the bubble, e.g. Martin Feldstein) believe this housing bubble will overshoot on the way down. They base this belief on the incorrect assumption that the real estate market behaves like the stock market. It does not; housing reacts much more slowly and is usually resistant to decline.
For the bubbleheads, overshooting is a thing to be embraced. After all these years of being priced out of the housing market, they say, we will finally be able to buy houses for pennies on the dollar. For the economists, overshooting is a thing to be feared because it would prolong and deepen the recession.
I would love it if housing would overshoot. Who wouldn't want to buy a dollar's worth of house for 50¢? However, predictions should be based, not on hope or fear, but on historical data. Those who predict overshooting do not have history on their side.
The two most prominent examples of previous housing bubbles come from Japan and Los Angeles in the late 1980s and early 1990s. Here is Japan. Notice no overshooting:
Here is Los Angeles. Notice inflation-adjusted prices fell right back down to where they were in 1987, with no overshooting. Nominal prices never fell back to their 1987 level:
People who predict overshooting—especially the professional economists—have a responsibility to back up their predictions with actual historical data. Martin Feldstein, especially, has been using a baseless fear of overshooting as an excuse to justify propping up the bubble.
I challenge people who believe in overshooting to back up their belief with actual historical data. It is certainly possible that housing will overshoot—Las Vegas and Phoenix are looking like they will—but in most parts of this country, it is far from probable.
For the bubbleheads, overshooting is a thing to be embraced. After all these years of being priced out of the housing market, they say, we will finally be able to buy houses for pennies on the dollar. For the economists, overshooting is a thing to be feared because it would prolong and deepen the recession.
I would love it if housing would overshoot. Who wouldn't want to buy a dollar's worth of house for 50¢? However, predictions should be based, not on hope or fear, but on historical data. Those who predict overshooting do not have history on their side.
The two most prominent examples of previous housing bubbles come from Japan and Los Angeles in the late 1980s and early 1990s. Here is Japan. Notice no overshooting:
Here is Los Angeles. Notice inflation-adjusted prices fell right back down to where they were in 1987, with no overshooting. Nominal prices never fell back to their 1987 level:
People who predict overshooting—especially the professional economists—have a responsibility to back up their predictions with actual historical data. Martin Feldstein, especially, has been using a baseless fear of overshooting as an excuse to justify propping up the bubble.
I challenge people who believe in overshooting to back up their belief with actual historical data. It is certainly possible that housing will overshoot—Las Vegas and Phoenix are looking like they will—but in most parts of this country, it is far from probable.
Thursday, March 26, 2009
Lawrence Yun comments on the increase in home sales
On Monday, the mainstream media made a big deal about the fact that month-over-month existing home sales were up in February. The Dow Jones Industrial Average rallied almost 500 points on Monday, mostly because of Tim Geithner's already-expected financial stability plan, but also because of the increase in home sales.
Here is what NAR economist Lawrence Yun had to say about the increase in February existing home sales:
Here is what NAR economist Lawrence Yun had to say about the increase in February existing home sales:
The latest reading on home sales further confirms stabilizing trends. Existing home sales increased 2.9 percent in February to a 5.03 million unit pace from a 4.89 million unit pace in January. ...Sounds like a possible housing bottom, doesn't it? There's only one problem: the quote is a year old. That's right, exactly one year ago this week NAR reported that month-over-month home sales had increased in February, and an economic recovery was expected in the second half of the year. It's déjà vu all over again.
The economy is also anticipated to pick up momentum in the second half of the year, which will help lift consumer confidence.
In summary, today's rising sales data is encouraging in at least hinting that we are very close to the low point for home sales.
Roubini: Further 20% decline in home prices
NYU economist Nouriel Roubini predicts a 20% decline in home prices over the next year-and-a-half:
With “deflationary forces” lingering for as long as three years, Roubini said U.S. government bond yields were going to remain relatively low and that American house prices would fall as much as 20 percent more in the next 18 months. While the dollar will benefit as investors seek safe havens, it will ultimately decline as the U.S. trade deficit has to shrink, he said.
The need for governments to issue more public debt to fund stimulus and bank-rescue packages risked more downgrades to sovereign debt and the failure of more government auctions as happened in the U.K. yesterday, Roubini said.
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