Housing Bubble Bursting?

[moh malekpour]

The Federal Home Loan Banks (FHLBanks) are an essential source of stable, low-cost funds to financial institutions for home mortgage, small business, rural and agricultural loans. With their members, the FHLBanks represent the largest source of home mortgage and community credit.

The three basic parts of the FHLBank System are the 12 banks, the Federal Housing Finance Board which regulates them, and the Office of Finance, which acts as a liaison with Wall Street. Over 8,000 community financial institutions are member/shareholders in the FHLBank system.

Securities were key sources of money during the housing boom. Now that investors have stopped buying, many institutions have been forced to seek out alternative sources of mortgage funding.

A number of banks have turned to the Federal Home Loan Bank (FHLB) system. The 12 FHLBs are cooperatives first created during the Great Depression to boost mortgage lending and revive the struggling housing market.

In August and September, lenders borrowed an unprecedented amount of money. During September alone, loans made to banks from the FHLB system increased nearly 30 percent since the beginning of this year.

In order to meet the demand from lenders who were teetering on the edge of financial ruin, the FHLBs sold $143 billion worth of short term debt, pushing outstanding debt up to $1.15 trillion--half of which comes due before the end of 2008.

The concern is that the FHLBs are taking on too much debt in their attempt to bail out lenders. If investors lose confidence and begin to get rid of FHLB debt (in the same way they dumped mortgage securities), one or more banks could collapse and leave taxpayers with the financial burden.

One major different between FHLB and fannie or freedie is that the share holders of FHLB are member banks so, if FHLB encountered a loss; that loss is not going to be on the public share holders but on the other members.

 

[moh malekpour]

Existing-home sales decrease in 46 states

Sales of existing homes fell in 46 states during the July-September quarter in a worsening of the housing market's slump, a real estate trade group reported Wednesday.

The third-quarter figures from the National Assn. of Realtors underscore the severity of the housing market's slump, which has economists increasingly pessimistic about the economic outlook.

Vermont and North Dakota were the only two states to show sales increases. Existing-home sales in Vermont rose 0.8% from the same quarter a year earlier, and sales in North Dakota rose 2.9%. No sales figures were available for Idaho and New Hampshire.

The Realtors, though, saw a silver lining in the data, noting that home prices rose in 93 of the 150 metropolitan areas surveyed.

Yet big price drops plagued formerly booming parts of the country. Median prices fell by more than 10% in parts of Florida and California compared with the third quarter of last year.

 

[Randolph Kinney]

Existing-home sales decrease in 46 states

I just did a neighborhood comparison of resale values and last sale value versus listed price on all properties within this one small area near the coast which indicated values are declining. If you used median sales price of all homes in the neighborhood, there is no clear trend and one would conclude the values were holding. This is for a property tax appeal. This property sold for $885,000 in 2004. It is worth maybe $850,000 today.

NAR's data is meaningless because they don't analyze the data. They just report the median value of all sales and state values are increasing or decreasing on a year over year comparison. But, it sure makes the real estate market look better than what it is.

You can be sure if the current way of reporting was showing declining values are widespread across the nation, they would change their methodology to soften the decline.

 

[airphoto]

Ran a summary for our poor county .. compared most recent 90-days with same perior a year ago, then most recent 12 months with 12-month period from the prior year. Twelve month data showed reduction from 890 to 750, and 90-day comparison was reduction from 350 to 250 'arm's length' transactions. Small change in value (average) was noted, however graph of comparative sales values supported what I've always said: the 'poor' folks are out of the market, thus the median sales price reported is used to show that values continue to increase when, in fact, the lower (under $100,000 in this area) market disappeared when compared with the prior periods.

 

[Riick]

What does this tell us?

The current TOP Selling item on the NAR website is:

http://www.realtor.org/prodser.nsf/products/126-126?OpenDocument

TITLE: "Learn How to Avoid Foreclosure and Keep Your Home" Item #126-126
.

 

[moh malekpour]

Best And Worst U.S. Housing Markets

Behind The Numbers
A few things to understand about NAR's numbers: They are reported in quarterly year-over-year terms, due to the highly seasonal nature of the housing market, as prices and volume almost always peak in the second quarter and trough in the third and fourth.

What's more, in some markets, the median home sale price can be skewed. For example, in a foreclosure capital like Los Angeles, slow sales volume in the bottom of the market could artificially enhance the median price, because more expensive homes are selling better.

Los Angeles is also a costly market; the median home price there is $588,400, which means potential buyers are the hardest hit by the tightening of credit. In places where a high share of buyers rely on "jumbo loans"--those above $417,000, which cannot be insured by government lenders Fannie Mae (nyse: FNM - news - people ) or Freddie Mac (nyse: FRE - news - people )--potential homeowners with good credit have had a hard time getting a loan--or have had to accept the most inflated jumbo-loan interest rates of the last 20 years.

The good news? Economists are expecting more diverse mortgages to return to the market. This means buyers with good credit in healthy markets on the coasts will have an easier time getting loans.

"The first thing to come back will be [loans for] prime jumbos, to borrowers of good quality," says Doug Duncan, chief economist at the Mortgage Bankers Association. He also notes that slumping markets will have to wait longer: For lenders, "when prices are falling, you don't know if the collateral is going to hold up, which is why the securitization hasn't fully returned."

 

[Randolph Kinney]

Best And Worst U.S. Housing Markets

What's more, in some markets, the median home sale price can be skewed. For example, in a foreclosure capital like Los Angeles, slow sales volume in the bottom of the market could artificially enhance the median price, because more expensive homes are selling better.

My bold.

Los Angles is far from being the foreclosure capital in California. What an exaggerated statement.

But, even acknowledging the data is not valid because it is skewed, NAR rolls it up and reports the market as increasing and not declining, after excusing itself by telling you there are lots of foreclosures.

Really, NAR cannot be trusted to report data honestly and meaningfully.

 

[Randolph Kinney]

How rich or poor is the housing market over time?

GOLD
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HOUSEHOLD NET WORTH
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HOURLY EARNINGS
​

 

[Restrain]

The local boards finally admitted that the DFW market is declining, showing a 3% loss in the third QUARTER, NOT YEAR. What wife's seeing is problems with new home subdivisions, investor properties, upper dollar properties (McMansions), etc. Some areas are still increasing, but these are pocketed areas. Condominium developments are now on the back burner, being converted to apartments.

At least there's still an in-migration into the area which helps the excess inventory. If we start seeing significant layoffs, all bets are off.

 

[Terrel L. Shields]

"Learn How to Avoid Foreclosure and Keep Your Home"

Did you conclude like I did that a lot of Realtors eat their own cooking? I would bet that a bunch of folks who sell real estate are pretty much upside down.
My best friend has a sister in law who sells RE and her husband sells building supplies and has a RE license. They were making large commissions on $350,000 homes and decided they could afford one. The hubby 'fessed up to Butch that "I sure wish I had my old house payment." Wifey went on to say that they probably would lose $30,000 if they sold the house. She recently bought a used Volvo cash and said, "Beats another payment."
I always heard that a con artist was the easiest person to con. Guess the same goes for Real Estate "Enthusiasts"