Housing Bubble Bursting?

[Terrel L. Shields]

14-year high in the number of homes for sale in April is sapping consumer confidence

And why wouldn't it? Sooner or later those people have to sell and they are going to have to sell a lot cheaper..Some simply cannot so long as they owe what they do. There are going to be a lot of work outs between short sellers and mortgage companies willing to 'eat' a few bucks to get a better owner in the house.

 

[Pamela Crowley (Florida)]

http://www.bloomberg.com/apps/news?pid=20601103&sid=az6U3XR1enLU&refer=us

NAR is continuing its party line of looking backwards and the data is not matching their forecast. Gee, there's a first.

And not that long ago NAR and members were complaining about appraisers only looking backward instead of at what was really happening.

 

[Mike Kennedy]

"memories............light the corners of my mind"

 

[Dee Dee]

And not that long ago NAR and members were complaining about appraisers only looking backward instead of at what was really happening.

Too funny!
I almost forgot about that.

 

[Randolph Kinney]

Benchmark Treasury yield rises above 5%

http://www.marketwatch.com/news/story/yield-10-year-treasury-note-climbs/story.aspx?guid=%7B76BB4096%2D0090%2D424F%2DA2AC%2DA3DDEFFE306B%7D&siteid=bnb

Rate hikes in New Zealand and euro zone trigger move higher

NEW YORK (MarketWatch) -- Treasurys closed with heavy losses Thursday, after the benchmark yield hurtled above 5% for the first time since August 2006, on the heels of a global sell-off of government bonds triggered by foreign interest-rate hikes.


Selling pressure was intensified by the hedging strategies of many mortgage-backed securities portfolio managers that force them to unload Treasurys. There also is a trend among foreign central banks to diversify away from long-term Treasury notes.

Thursday's Treasury rout came on the heels of heavy overnight sales of German and other government bonds. The sell-offs were linked to mounting evidence that interest rates in many countries will stand pat or head higher.

The first factor is global growth and inflation, he explained, as illustrated by both the recent rate hikes and strong data reports in many countries. Marta singled out unexpectedly brisk Australian labor-market data that sparked much of the overnight bond selling.


In addition, there's mounting evidence of a structural demand problem, as foreign central banks diversify their currency reserves away from longer-term Treasurys, Marta said.

The third heavy pressure on Treasury prices as cited by Marta is linked to the deterioration of the subprime lending market. As loans made to less creditworthy borrowers go sour, managers of portfolios of mortgage-backed securities are forced to sell off Treasurys to hedge their weakening loans, he said.


This, in turn, is a phenomenon that feeds on itself. "As yields go up, the mortgage-backed securities guys have to adjust their hedges," Marta said. "This means they have to keep ramping up their sales of Treasurys."

Hey folks, it looks like the perfect storm is brewing. Interest rates are rising for a variety of reasons as noted in the above. The movement is being amplified by the hedge funds holding subprime mortgages. It appears that the world is falling out of love with the US dollar and other interest rate hikes are competing with Treasury yields.

This is just what NAR is afraid of. Affordability stinks as shown with falling sales volume and falling prices. A rise in interest rates offsets the lower house price.

Strap your belt on kiddies, we are heading for that hard landing in the housing market.

 

[Randolph Kinney]

Stocks in U.S. Plunge the Most in Three Months on Outlook for Higher Rates

http://www.bloomberg.com/apps/news?pid=20601087&sid=axGlzWEGU5Rc&refer=worldwide

June 7 (Bloomberg) -- The U.S. stock market plunged, pushing the Standard & Poor's 500 Index and Dow Jones Industrial Average down the most in three months, after a jump in bond yields fueled speculation the Federal Reserve will raise interest rates.


Banks and brokerage firms led by Citigroup Inc., Goldman Sachs Group Inc. and Merrill Lynch & Co. pushed stocks to a third day of declines. All 16 homebuilders in S&P's indexes dropped on concern that demand for mortgages will diminish. Wal-Mart Stores Inc., Macy's Inc. and J.C. Penney Co. retreated after May sales trailed estimates.


This week's slump ended three months of gains that sent the S&P 500 to a record. Higher interest rates may lower profits, make takeovers more expensive and reduce the appeal of dividends.

Benchmark 10-year note yields increased to 5.13 percent. Bond yields are increasing worldwide on signs global growth will accelerate. Pacific Investment Management Co.'s Bill Gross, manager of the world's largest bond fund, reiterated his forecast that 10-year yields may climb as high as 6.5 percent between now and 2011.

U.S. stocks fell yesterday following a government report that showed labor costs rose more than forecast, increasing the odds companies will increase prices and fuel inflation.


Fed Chairman Ben S. Bernanke and Fed Bank of Cleveland President Sandra Pianalto this week warned that prices are rising too quickly. Pianalto said rising energy and commodity prices may boost inflation.

Place your bets; either she will or she won't; bet the come or the don't; place your bets. FED may not have to hike interest rates; they seem to be rising all by themselves. :new_smile-l:

 

[Randolph Kinney]

Turkeys fall back to earth

Alas, the Fed is out of time stalling on a response to the inflation threat, and the dissonance between the reality on the street and Fed jaw boning is starting to develop a Twilight Zone quality. The bond market, smelling an inflation rat, started to push up long bond yields.

 

[Greg Bell]

were broke............

The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows.

The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006.

"We're on an unsustainable path and doing a great disservice to future generations," says Chris Chocola, a former Republican member of Congress from Indiana and corporate chief executive who is pushing for more accurate federal accounting.

Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later.

The federal government does not follow the rule, so promises for Social Security and Medicare don't show up when the government reports its financial condition.

Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.

Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest.

This hidden debt is the amount taxpayers would have to pay immediately to cover government's financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years.

The Financial Accounting Standards Advisory Board, which sets federal accounting standards, is considering requiring the government to adopt accounting rules similar to those for corporations. The change would move Social Security and Medicare onto the government's income statement and balance sheet, instead of keeping them separate.

The White House and the Congressional Budget Office oppose the change, arguing that the programs are not true liabilities because government can cancel or cut them.

Chad Stone, chief economist at the liberal Center on Budget and Policy Priorities, says it can be misleading to focus on the government's unfunded liabilities because Medicare's financial problems overwhelm the analysis.

"There is a shortfall in Medicare and Medicaid that is potentially explosive, but that is related to overall trends in health care spending," he says.

 

[Randolph Kinney]

Will housing bubble resemble Japan?

There has never been a housing bubble in the US as big as this one, on a national scale. Perhaps some international bubbles have been as big. Vancouver Canada is going to implode like Florida did. Spain and the UK are huge problem areas right now. The bubble in Japan was arguably bigger and it took 18 years to unwind.

 

[Randolph Kinney]

Subprime fallout will worsen