Banks helping more troubled homeowners than Obama

That's the claim made by CNNMoney:

Remember how everyone complained that banks weren't doing enough to help troubled borrowers?

Well ...

Banks have realized that foreclosing on home after home after home may not be in anyone's best interest — least of all their own. So they've ramped up the number of loan modifications they're handing out to their delinquent clients.

Banks are doing nearly twice as many modifications under their own foreclosure prevention initiatives than under the Obama administration's signature Home Affordable Modification Program, known as HAMP.

But before homeowners rejoice, they should take a close look at the terms of their bank modification offers, consumer advocates say. Many may not be as good as HAMP, which lowers monthly payments to 31% of pre-tax income.

Homeownership fetish harmful

Washington Post columnist Robert J. Samuelson writes:

The relentless promotion of homeownership as the embodiment of the American dream has outlived its usefulness.

Historically, the pursuit of homeownership dates to the Great Depression of the 1930s, notes historian A. Scott Henderson of Furman University. In some ways, it's a great success story. In 1940, 44 percent of households owned a home; by 1985, the rate was 64 percent. The size and quality of homes have increased dramatically. Owning a home contributes to neighborhood stability and encourages property improvement.

Unfortunately, we let a sensible goal become a foolish fetish. Not everyone can become a homeowner. Some are too young and footloose; some are too old and dependent; some are too poor or irresponsible. Some don't want a home. ...

Tax breaks for homeowners ... exceeded $120 billion in 2009, reports the Congressional Budget Office. These benefits go heavily to higher-income borrowers, who are encouraged to buy bigger and more expensive homes that generate larger tax savings. This is both unfair and unnecessary. By contrast, government subsidies for lower-income renters are skimpier...

The single-minded promotion of homeownership failed and, paradoxically, undermined the American dream. It contributed to the housing "bubble" and favors housing investment over new industries and technologies.

CNBC housing market discussion

Graphs: The decimation of the home-building industry

New housing permits:


New housing starts:


New single-family home sales:

New home sales hit all-time low

New home sales in July hit the lowest number ever recorded:

New home sales unexpectedly fell in July to the lowest level on record as the housing market continued to suffer from the end of the homebuyer tax credit boost.

New home sales dropped 12.4% to a seasonally adjusted annual rate of 276,000 last month, down from a downwardly revised 315,000 in June, the Commerce Department reported Wednesday. Sales year-over-year fell 32.4%.

Commerce started tracking new home sales in 1963.

Existing home sales continue their death spiral

More evidence that the housing bubble will keep deflating when government doesn't prop it up:

Existing home sales fell sharply in July, declining for a third straight month, as the effects of the expired homebuyer tax credit continued to add turbulence to the housing market.

The National Association of Realtors reported that existing home sales sank 27.2% last month to a seasonally adjusted annual rate of 3.83 million units, down from the downwardly revised rate of 5.26 million in June. Sales year-over-year were down 25.2%.

Analysts surveyed by Briefing.com were looking for resales in July to fall to an annual rate of 4.72 million units.

The sales pace of all homes — single-family homes, townhomes, condominiums and co-ops — is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.

Economist Andy Harless asks "What housing bubble?"

It's 2010. Economic events have proven us bubbleheads right. Yet, we still have professional economists arguing there was no housing bubble.

Housing no longer a wealth builder

From The New York Times, via CNBC:

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.

The end of housing as a wealth builder is especially true in areas where the bubble has not fully corrected, like Washington, D.C., New York City, and Boston. Nominal prices there will likely remain flat for a long time.

5 economic 'new normals'

Fortune Magazine lists five "'new normals' that really will stick":

1. Long-term unemployment
2. Renting over owning
3. Saving over spending
4. Staycations over vacations
5. Higher taxes for 'the rich'

I just got back from violating #4.

Bits bucket

I'm on summer vacation. I'll be back in about ten days. In the meantime, consider this a bits bucket post. Leave any housing news or thoughts in the comments.