A Housing Crash Update

[Crewleader]

April 24-26, 2009

Bulletin From the Hindenburg

A Housing Crash Update

By MIKE WHITNEY

Why is the press misleading the public about housing? The housing market is crashing. There are no "green shoots" or "glimmers of hope"; the market is worn to a stump, it's kaput. Still, whenever new housing figures are released, they're crunched and tweaked and spin-dried until they tell a totally different story; a hopeful story about an elusive "light in the tunnel". But there is no light in the tunnel; it's dark as pitch as far as the eye can see. There’s no sign of a turnaround or a "bottom" in housing at all; not yet, at least. The real estate market is freefalling and it looks like it’s got a long way to go. So why are the media still peddling the same "rose-colored" claptrap that put the country in this pickle to begin with? Here's an example of media spin which appeared in Bloomberg News on Wednesday:

"US home prices rose 0.7 percent in February from the month before, the Federal Housing Finance Agency said in Washington today, a sign that low interest rates may be moderating declines in real estate values....Housing market data indicates prices are starting to “stabilize,” and households’ available cash should improve through each quarter of 2009 and into 2010." (Bloomberg)

This report is complete gibberish. The only way to get a fix on what's really happening with housing is to compare prices year over year (yoy) not month to month. Clearly, the journalist decided to spin the story from this angle because it offered the one flimsy sign of hope in a sector that's been reduced to rubble. But, don't be fooled, housing isn't staging a comeback. Not by a long shot.

This is from Marketwatch:

"The Case-Shiller index of 20 major cities fell 2.8 per cent in January, the fastest decline on record. The Case-Shiller index rose more than the Federal Housing Finance Agency (FHFA) index did during the bubble, and it's fallen faster since the bubble burst....The index was down 19 per cent year-over-year in January."

http://www.counterpunch.org/whitney04242009.html

[angstlessk]

1. well, we just bought a house in Detroit for $4,000 whose last owner took out a loan for $120,000

and skipped...seems if this is not the bottom in Detroit...there is none! There must be a massive destruction of homes in order to make those worth keeping worth the bricks used to construct them? Hell mansions go for well under $10,000 cause they have been stripped inside..but the cost to replicate them is not feasible in this city! to allow this to continue is the shame of Detroit!!!

[pokercat999]

2. It's happening in other places also. I read an article about

Lehigh Acres (?) near Fort Myers, FL. Seems there is no real local government just county and they are weakened due to the decrease in the tax base. Homes build in just the last couple of years, many never sold, are empty and being stripped of any valuables like AC units and appliances. Mean time the few people that still live there have seen their property values collapse as their neighbors pack up and flee. One resident told about having only a couple of neighbors left on her street, she thought the neighbor across the street was going on vacation but they never returned leaving a car in the driveway. She called the county to have the vehicle removed and they said they would .....that was eight months ago and it's still there.

Housing values are way down from their peak and still have as much as 40% to go down according to some Florida economists.

We are preparing to move from VA to the Melbourne, Fl area but will rent for at least a year to see what happens to the market before we buy.

[customerserviceguy]

3. Whenver you see some rosy housing statistics

look for "National Association of Realtors" in the story.

You remember them, the people who took the word "tiny" and turned it into "cozy", or "noisy" and turned it into "conveniently located". Etc.

[upi402]

4. RE agents are trained to only HYPE the market

and never downgrade it. They must be natural republicans.

[grasswire]

5. I was just reading about big tall new condo buildings in Portland...

....on the river front area -- some floors have only one resident; the building is nearly vacant because they haven't sold the condos. I find that the makings of a horror movie. Shiver!

[notesdev]

6. There is a light at the end of the tunnel

it's an oncoming train...

[wuvuj]

7. a good overview....

http://www.hussmanfunds.com/wmc/wmc090427.htm

In order for U.S. financial institutions to earn their way out of the losses, they will have to accrue and retain an amount on the order of 25% to 35% of GDP. If banks were able to sustainably charge high interest rates on loans and pay low interest rates on deposits, the earnings of the banks would come at a cost to corporate borrowers and private savers, who would earn very low returns on their savings. To accrue 25-35% of GDP to cover the debt losses, you would have to depress non-financial corporate profits and personal savings by about 25% for well over a decade.

...

To a large extent, the funds to defend these bondholders will come by allowing U.S. businesses and our future production to be controlled by foreigners. You'll watch the analysts on the financial news channels celebrate the acquisition of U.S. businesses by foreign buyers as if it represents something good. It's frustrating, but we are wasting trillions of dollars that could bring enormous relief of suffering, knowledge, productivity, and innovation in order to defend bondholders of mismanaged financials, and nobody cares because hey, at least the stock market is rallying. If one thing is clear from the last decade, it is that investors have no concern about the ultimate cost of the wreckage as long as they can keep a bubble going over the short run.

For my part, I remain convinced that without serious efforts at foreclosure abatement (ideally via property appreciation rights), mortgage losses will begin to creep higher later this year, surging in mid-2010, remaining high through 2011, and peaking in early 2012. To believe that we are through with this crisis or the associated losses is to completely ignore the overhang of mortgage resets that still remain from the final years of the housing bubble.

[Crewleader]

8. Mike's article on The Market Oracle

New Home Sales Update: On Friday, stocks skyrocketed on news that new home sales did not fall as far as expected. Once again, the story was presented in a way that suggested the housing market is "stabilizing". But a closer examination of today's data reveals how bad information is manipulated by the media to create the impression that things are getting better. They are not. Here is a summary of today's "good news":

1--The median price of a new home fell $201,400 year over year (YOY)

2--Sales of new homes were down 31 percent from March 2008. They reached a record 1.389 million in July 2005.

3--Distressed properties accounted for about 50 percent of all sales.

4--Inventory (new homes) is still bulging at 10.7 months

5--Foreclosures are at record highs

By Mike Whitney

http://www.marketoracle.co.uk/Article10244.html

[stanleycup1]

9. Blame GSE's and the FED

well ya the prices have to go down! with the FED lowering interest rates and fannie and freddie getting printed money from the FED to buy up mortages from the banks, so inturn the banks could then give loans to people who would not normally get one! This drove up housing prices to what the Free Market would not normally set them at!

[fasttense]

11. stanley - you need to read up and educumate yourself on some

real economy!

[FlyingTiger]

10. Look up "seasonal adjustments"

The numbers the Fed/Treasury are reporting aren't worth the paper they're printed on.

[tdavis]

12. interesting

interesting