Meredith Whitney: Unequivocally I See A Double Dip In Housing

 Meredith Whitney is on CNBC this morning, and true to form remains bearish on the banks and the overall economy.
Her specific concern at the moment? State and local governments, which continue to cut jobs, a trend that will soon have a meaningful effect on the economy.
She acknowledged the $50 billion state bailout proposed by Obama, but described that as a drop in the bucket.
On housing, she says: "Unequivocally I see a double dip."
We'll update as she says more...

Central Bank Hid Housing Market Crash Forecast

 New revelations concerning how the Irish Central Bank hid data in a 2006 report indicating that a housing market crash was imminent underscores once again how financial elites covered-up signs of the coming economic turmoil in order to exploit the crisis at the expense of the people.
Months before the Irish housing market started to crumble in early 2007, which was followed by a wider collapse in the UK property market, the Irish Central Bank buried data from a crucial report which suggested that a 15 per cent fall in house prices was around the corner.
“It was decided in 2006 to exclude from the main text of the report data and references to a likely 15 per cent house price overvaluation that was contained in a themed research paper,” states Professor Patrick Honohan’s report.
The Central Bank refused to release the minutes of the meeting where the report was discussed but then “deliberately” left out of the final review document.
The story mimics elements of how Goldman Sachs were secretly betting against the U.S. housing market in 2006 and 2007 while peddling to its clients more than $40 billion in securities backed by at least 200,000 risky home mortgages.
As Greg Gordon of McClatchy Newspapers reported last year, the clandestine move,”enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.”
According to a report by the Senate Permanent Subcommittee on Investigations, Goldman Sachs made billions betting on a housing market collapse, not just through its short positions against the mortgage market, but “also against securities that Goldman Sachs had assembled and marketed to its customers”.
The Goldman cover-up, allied with new revelations of how the Irish Central Bank similarly conducted itself, goes right to the heart of how financial elites were aware of the imminent economic crisis and positioned themselves fully to exploit it while leaving millions of unwitting homeowners to pick up the tab as the value of their assets shrunk and their houses entered negative equity.

Foreclosures shifting to affluent ZIP codes

 Mortgage distress has moved upstream in part because of economic conditions such as unemployment and stock losses. Also in play is a different type of risky loan called option ARM (adjustable rate mortgage) that's just beginning to cause problems. "In high-end areas, (default notices), which started at super low levels, have grown 50 percent to 100 percent higher, It definitely seems like the focus is shifting,"
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Home Owners Stop Paying Mortgages

 ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.
Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.
“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”
A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
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Mortgage Foreclosures Hit Record as Job Losses Strain Budgets

 May 19 (Bloomberg) -- A record share of U.S. mortgages were in foreclosure in the first quarter as job losses caused homebuyers to fall behind on monthly payments, thwarting government efforts to stem property seizures.

The inventory of homes in foreclosure rose to 4.63 percent from 4.58 percent in the fourth quarter, the Mortgage Bankers Association said in a report today. The combined share of foreclosures and mortgage delinquencies was 14 percent, or about one in every seven U.S. mortgages.

Job losses have strained budgets, making it difficult for households to pay monthly bills, said Jay Brinkmann, the Washington-based trade group’s chief economist. U.S. unemployment in the second half of 2009 -- when people now in foreclosure would have first fallen behind on their payments -- reached the highest levels since 1983, according to the Bureau of Labor Statistics. The unemployment rate declined to 9.7 percent in the first quarter of this year from 10 percent in the last three months of 2009.

“The unemployment rate is the major factor driving the numbers,” Brinkmann said today in an interview. “We’re seeing the states with the biggest unemployment problem, like Ohio, Illinois and Michigan, showing the biggest increases.”

Ten percent of U.S. mortgage holders had payments 30 days or more overdue, on a seasonally adjusted basis, up from 9.47 percent in the previous quarter, Brinkmann said. On a non- adjusted basis, the rate fell to 9.38 percent from 10 percent, possibly an early sign of improvement as job losses abated, he said.

Foreclosure Action

Foreclosure actions were started against 1.23 percent of the loans, up from 1.2 percent in the fourth quarter. The share of mortgages entering foreclosure held by prime borrowers with fixed rates, traditionally the best-performing type of home loan, rose to 0.69 percent from 0.63 percent.

The administration’s primary anti-foreclosure plan, the Home Affordable Modification Program, or HAMP, resulted in 295,348 permanent modifications by the end of April, the U.S. Treasury said on May 17. In addition, 637,353 trial modifications were under way. The Obama administration set a goal of up to 4 million modifications by December 2012 when the program was announced last year.

HAMP lowers mortgage payments to about a third of borrowers’ income by reducing interest, lengthening terms and deferring principal payments.

In addition to modifications, the government’s Making Home Affordable program has been responsible for refinancing more than 4 million loans in the portfolios of government-run lenders Fannie Mae and Freddie Mac, according to the Treasury report.

The refinance program, known among mortgage brokers as Obama refis, allows some people with balances higher than their home’s value to renew their loans at lower rates. More than a fifth of U.S. mortgage holders owed more than their homes were worth in the first quarter, according to Zillow.com, a Seattle- based real estate data provider.

Detroit To Destroy 10,000 Abandoned Homes

 DETROIT—Wrecking crews are preparing to tear down a landmark 5,000-square-foot house in the posh neighborhood of Palmer Woods in the coming weeks, a sign that Detroit is finally getting serious about razing thousands of vacant and abandoned structures across the city.
In leveling 1860 Balmoral Drive, the boyhood home of one-time presidential candidate and former Massachusetts Gov. Mitt Romney, Detroit is losing a small piece of its history. But the project is part of a demolition effort that is just now gaining momentum and could help define the city’s future.
Detroit is finally chipping away at a glut of abandoned homes that has been piling up for decades, and intends to take advantage of warm weather and new federal funding to demolish some 3,000 buildings by the end of September.
Mayor Dave Bing has pledged to knock down 10,000 structures in his first term as part of a nascent plan to “right-size” Detroit, or reconfigure the city to reflect its shrinking population.
Full story here.

Toledo Man Streams Foreclosure Occupation Over Internet

There’s A World of Pain Ahead

The brief period of stabilization in housing appears to be over and the next leg-down has begun. Mortgage rates are edging higher, foreclosures are on the rise, and the government programs that supported the sector, are being phased out. The uptick in bank-owned properties (REO) is adding to surplus inventory and pushing down prices. A recently released report from First American CoreLogic shows that “distressed sales accounted for 29 per cent of all sales nationwide.” Nearly one-third of all home sales are distressed REOs. Also, according to a report from Clear Capital, “Home prices nationally have dropped 3.9 percent quarter to quarter, the first quarterly drop in nine months. (Thanks to Diana Olick, Realty Check, CNBC) Bottom line: More people are being forced from their homes, the banks are facing bigger losses, and the housing market is on the skids.
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Foreclosure actions spike despite aid

 U.S. home foreclosures actions spiked in March and set a quarterly record despite federal programs to combat the unrelenting pace that homeowners are defaulting on mortgages, RealtyTrac said on Thursday.
The government aid, intensified in late March, has so far failed to overcome the staggering effects of nearly double-digit unemployment and wage cuts on borrowers.
Foreclosure activity jumped 19 percent to a monthly record in March, driving first-quarter actions up 7 percent from the prior quarter and 16 percent from a year ago to a record of more than 932,000 properties.
One in every 138 U.S. households got a foreclosure filing in the quarter such as a notice of default, auction or bank repossession.
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Foreclosures Hit Rich and Famous

 The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes.
Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.
Just this week, a Tudor mansion in Bel-Air belonging to film star Nicolas Cage was in foreclosure auction and reverted to the lender. On Wednesday, Richard Fuscone, a former top Wall Street executive, declared personal bankruptcy, forestalling a foreclosure auction that had been scheduled this week on his 14-acre Westchester mansion. Last month a Manhattan condominium owned by Italian film producer Vittorio Cecchi Gori was sold in a foreclosure auction for $33.2 million.
In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.
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Hey America, Check Out How Much More Aussies Are Paying For Mortgages Now That Rates Are Rising

 Australia hiked its key interest rate
on Tuesday for the fifth time during the current economic up-cycle.

Australia has had more robust economic data than the U.S, plus suffered far less during the downturn, so has been able to tighten monetary policy substantially already.

We're still of course waiting for the U.S. to follow suit on the interest rate front.

Yet despite Australia's relative economic strength, homeowners
their are starting to feel the bite of higher interest rates since mortgage costs have surged as a result of monetary tightening.

According to the Sydney Morning Herald, many homeowners are paying $3,250 more per year (3,500 Aussie dollars) on their mortgages than just a year back. This is before considering the latest hike, or expected future ones. Australia's interest rate up-cycle is already well under way, thus is well ahead of the U.S., but one has to wonder -- when will the U.S. economy be strong enough that Americans with adjustable rate mortgages will be able to handle such huge added mortgage costs? Even with a rather benign economic outlook, it has to be many, many years away.

More Than 4 Million Families Face Foreclosure

 Data published by ForeclosureListings.com comparing February 2010 to January 2010 shows that Texas has witnessed the highest increase in foreclosures with a rise of 35.3%, followed by Michigan at 17.54%, California at 11.93%, and Florida at 4.71% increases. Georgia actually showed a decrease of 5.55% and Arkansas showed the largest drop in foreclosures down 28.6%.
The nation is struggling with a lack of jobs and continued pressure on home values leaving many homeowners with mortgages higher than their homes' value. Several states are creating emergency funds to help the temporarily unemployed from being foreclosed upon. But the numbers continue to paint a bleak picture.
Even with additional funds from the government there are too many people facing unemployment and weak housing values to enable many to borrow the necessary amount to prevent foreclosure or to purchase a home in foreclosure.
Full article here

Greenspan Claims Fed “Failed to Grasp” Magnitude of Housing Bubble

 In his most detailed examination of the causes of the financial crisis, Alan Greenspan, the former Federal Reserve chairman, acknowledged that the Fed failed to grasp the magnitude of the housing bubble but argued that its policy of low interest rates from 2002 to 2005 did not cause the bubble.
In a 48-page paper that he is to present on Friday at the Brookings Institution, Mr. Greenspan, who stepped down as Fed chairman in January 2006, expressed some remorse but stood by his conviction that little could be done to identify a bubble before it burst, much less to pop it.
“We had been lulled into a sense of complacency by the only modestly negative economic aftermaths of the stock market crash of 1987 and the dot-com boom,” Mr. Greenspan wrote. “Given history, we believed that any declines in home prices would be gradual. Destabilizing debt problems were not perceived to arise under those conditions.”
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How Can Anyone Claim That The Housing Crisis Is Over When The Delinquency Rate On U.S. Mortgages Continues To Explode At An Exponential Rate?

 Housing prices have stabilized and are actually slightly increasing in some areas.  The tax breaks passed by Congress have encouraged more first-time home buyers to get into the market.  So is the U.S. housing crisis over?  Will the real estate market be back to normal in no time?  Well, if you listen to many of the talking heads on the news channels, you might be tempted to think that the worst of the housing crisis is behind us and that we are headed towards recovery.  But that is not what is happening.  The truth is that we are just now getting ready for round 2 of the real estate nightmare.
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Meredith Whitney: Housing Will Surely Double Dip, And Banks Will See DRAMATIC Writedowns

 Meredith Whitney was a guest host on Worldwide Exchange this morning, as we she was live in the London studio.
Here's some of the notes we took:
So far she hasn't seen anything huge -- the topic has largely been the FOMC minutes that are due to come out today.
But she notes that it's foolish to think that banks will restart lending so long as their model is broken, and by that she means, without the ability to profit from the securitization market, the banks don't know how to make affordable loans to consumers anymore.
Update 5:25: Now she's talking like the Meredith Whitney we know and love.
--Housing prices will take another leg down due to all the shadow inventory and banks need way more capital she says.
--Will we see another double dip? It depends on housing, which as she just said is probably going down again. But she calls it a "light" double dip.
-- On Fed MBS buying, she argues there's no other buyer at current prices, so basically Bernanke will have to keep buying. "They've boxed themselves into a very difficult position... if they stop buying, there really is no substitute buyer."
5:56: Weird moment. When asked how to trade bank stocks, she responds "That's advice I reserve for my clients." (Not interested in having anything too definitive on record, perhaps?)
6:05: Asked again what would make her turn bullish, she says she's bullish on some financials and likes the payment industry (mentions Wal-Mart (WMT) of all companies. She was also asked (a little awkwardly) about her lagging performance -- as per Bloomberg -- but she didn't respond to that.
Her view on commodities and the dollar? No answer. She passes. But she reiterates in her final line: "The housing market will surely double dip.. you'll see dramatic writedowns across the banks."

New round of foreclosures threatens housing market

 The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.
Entire article here

Detroit family homes sell for just $10

 Family homes in Detroit are selling for as little as $10 (£6) in the wake of America’s financial meltdown. The once thriving industrial city has suffered a dramatic decline following the global economic crisis.
According to Tim Prophit, a real estate agent, the crisis has led to a unprecedented portfolio of homes, but they are failing to sell.
He said there were homes on the market for $100 (£61), but an offer of just $10 (£6) would be likely to be accepted.
Speaking on a BBC 2 documentary, Requiem for Detroit, to be screened on Saturday, Mr Prophit said: “The property is listed by the city of Detroit as being worth $35,000 (£22,000), but the bank know that is impossible to ask.
Full article here

Program to pay homeowners to sell at a loss

 In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.
This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.
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Fast evictions adding to pain of Phoenix home foreclosures

 Homes that fall into foreclosure in Phoenix are sold at a public auction. The highest bidder becomes the new owner. The former owner then has to move out.
Departing owners have five days under Arizona law to vacate the property. But in the overheated foreclosure market that has come in the wake of the metropolitan Phoenix housing crash, some people are being told to get out the same day their house is sold at auction.
Full article here

January home sales fall 7.2 percent

 The sales of previously owned homes slumped in January for the second month in a row, raising fresh concerns about the housing market's potential for rebound, according to industry statistics released on Friday.
Sales of existing houses, townhouses, condominiums and cooperatives fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million in January from December, the National Association of Realtors reported.
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