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Archive for July, 2011

The State of the Real Estate Market

July 4th, 2011

TUESDAY, JULY 5TH, 2011

What Do Americans Think About Homeownership Today?

The recently released book Reckless Endangerment (How Outsized Ambition, Greed and Corruption Led to Economic Armageddon) by Gretchen Morgenson and Joshua Rosner highlights how the American dream of homeownership was hijacked by powerful people in both the public and private sectors in Washington and on Wall Street to help them further their own personal goals and become wealthy while doing so.  While the book targets many politicians, regulators, financiers, companies and institutions, it takes particular aim at Fannie Mae and its former chief James A. Johnson’s initiatives to promote homeownership which the authors contend were designed to deflect challenges to Mr. Johnson’s stewardship of the agency.  This well researched book describes in details the comfortable relationships between those in power and the lack of oversight by regulators such as the Federal Reserve Board which did little to stem unprecedented financial fraud and the impending collapse of the financial and real estate markets.  A link to a review of Reckless Endangerment written by Kathryn Canavan for USA Today on June 20th is found here: Book Review: Reckless Endangerment by Gretchen Morgenson

AppraiserNews.com has discussed the declining homeownership rates and concerns that Americans have about homeownership in the aftermath of the collapse of the housing market and price declines not seen since the Depression.  Surprisingly, a recent New York Times/CBS News poll finds that almost 90% of Americans still feel that homeownership is essential to the American dream and most are intent on seeing that it stays that way for them and all Americans.  Writing in the New York Times on June 30th, David Streitfeld and Megan Thee-Brenan discuss this latest poll with its somewhat surprising finding that more Americans support helping people in financial distress over housing than support the long term unemployed.  Mr. Streitfeld and Ms. Thee-Brenan report that the poll finds most people blaming financial institutions as the main culprit, reversing the findings in early 2008 when the crisis was developing at which time regulators received more blame.  A link to the New York Times report is found here: Despite Fears, Owning Home Retains Allure, Poll Shows

While AppraiserNews.com has criticized the National Association of Realtors (NAR) many times for faulty research and positive “spins” on the state of the real estate market that lack credibility, it appears as though they may be taking some steps to regain respect under current President Ron Phipps.  AppraiserNews.com is impressed with the more measured tone of recent press releases which highlight issues such as the importance of homeownership in our society without mindlessly acting as overly optimistic cheerleaders in the face of strong negative headwinds.  On July 1st, heading into the Independence Day weekend, the NAR put out a press release titled “Celebrating America’s History of Homeownership” in which Mr. Phipps intelligently reminds us of the historical importance of homeownership in the U.S. and addresses some of the challenges facing us today in opposing dangerous proposals by staunchly conservative legislators:

“The mortgage interest deduction was introduced as part of the federal tax code nearly a century ago, and the Federal Housing Administration, Federal Home Loan Banks, and Fannie Mae were all created during the worst economic crisis our country ever faced in the Great Depression.”

While many conservative commentators acting in sync with the editorial page of the Wall Street Journal continue to call for the quick privatization of Fannie Mae and Freddie Mac in light of the abuses depicted by Ms. Morgenson and Mr. Rosner, these critics offer no credible solutions to the deep problems we are facing, instead suggesting a withdrawal of government support which would deepen the problems faced by so many Americans.  Any suggested changes to the tax code or to the GSE’s (Fannie Mae and Freddie Mac) and FHA must first and foremost promise to help homeowners and those in distress, which includes a growing number of Americans as declining property values create a larger pool of underwater homeowners.  As the New York Times/CBS News poll suggests, many Americans are now becoming aware that while they may not face the severe problems of those homeowners facing foreclosure, the declining real estate market impacts their ability to refinance, obtain home equity loans for needed renovations and restricts their mobility (as when they cannot move to obtain a new job since they cannot sell their existing home).  On June 30th, 24/7 Wall St. posted information on the CoreLogic study “The States Where Underwater Mortgages Are Sinking Home Values” and a link to this is found here: The States Where Underwater Mortgages Are Sinking Home Values

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A Few Recent Reports on the Real Estate Market

If you take the time to review some of these reports, you might find some parts that are not completely bad. 

On June 30th, CoreLogic released its May Home Price Index which showed a month to month increase nationally of 0.8% along with a year to year decrease of 7.4% and a link to this report is found here: CoreLogic Home Price Index Shows Second Consecutive Month-Over-Month Increase

Bloomberg discussed the pending home sales report released by the NAR and the Case-Shiller data in reports on June 28th and 29th and links to both of these articles are found here:
Home Prices in 20 U.S. Cities Fall by Most in 17 Months, Case-Shiller Says

Pending Sales of U.S. Existing Homes Rise by 8.2%, Almost Triple Forecasts

On June 27th, CNBC’s Diana Olick reviewed information from Case-Shiller and Capital Economics which clearly showed the fastest market declines in the low end of the market in comparison with the high end (surprise, surprise) and a link to this report is found here: Low-End Housing sees Higher Losses

The next day, Ms. Olick summed up her feelings about the days when the various real estate reports are released and the various “spins” made of this data and a link to this is found here: Home Price Headlines Hide the True Picture

On June 27th, Janet Tavakoli writing in the Huffington Post discussed her thoughts on “Why Some Housing Prices Are Still Falling and Subprime Loans Are Still Sliding” and a link to this report is found here: Why Some Housing Prices Are Still Falling and Subprime Loans Are Still Sliding

An optimist amongst us! No, I’m not speaking of Lawrence Yun, chief economist for the NAR, we are giving him this week off.  We are speaking of no other than HUD Secretary Shaun Donovan who offered his upbeat thoughts to CNN, an analysis of which was given by Kim Chipman of Bloomberg on July 3rd, a link to which is found here:
U.S. Home Prices Poised to Climb as Foreclosures Wane, HUD’s Donovan Says

Countrywide: The gift that keeps on giving.  The New York Times reported on June 29th that Bank of America was completing a settlement agreement in which they would pay $8.5 billion to settle claims by investors who purchased mortgage securities that soured when the real estate market declined.  The article reported that the affected securities came from Countrywide Financial which Bank of America purchased in 2008.  Bloomberg’s Dawn Kopecki and Hugh Son discussed this on June 29th and a link to their article is found here: Moynihan Opts to ‘Rip Off Band-Aid’ From Bank of America’s Mortgage Wound

One final report: On June 29th, CNBC and Lending Tree released a slideshow on the ten states with the healthiest housing markets (hint: N. Dakota is #1) and a link to this slideshow is found here: States With The Healthiest Housing Markets

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Solutions, Anyone?

In her final Senate hearing last week as F.D.I.C. chairman, Sheila C. Bair called for additional steps to revive the real estate market and for close supervision of large mortgage servicers over improper home foreclosures. 

Writing in the Huffington Post on July 1st, Peter Dreier goes up against much of the thinking regarding the benefits of the mortgage interest deduction in an analysis which suggests a different approach to helping middle and lower income Americans.  A link to his report is found here: Want to Help Homeowners? Replace the Mansion Subsidy and Require Banks to Act Responsibly

On June 27th, also writing in the Huffington Post, Dean Baker discusses the “right to rent” as one tool in fixing the housing crisis and a link to this report is found here: Right to Rent: Will the Obama Administration Finally Fix Housing?

Writing in the Wall Street Journal on June 30th, David Wessel offers his “Prescriptions to Revive Recovery” and has the following suggestion regarding housing:
“It’s time for a rethink, in light of the persistently sour housing market.  Perhaps state-owned enterprises Fannie Mae and Freddie Mac should be deployed more aggressively to refinance credit worthy underwater borrowers.  Perhaps the federal government should buy foreclosed homes from banks and give them to local governments to fix up and rent”.

Finally, in a Huffington Post video on June 21st, Robert Reich offers his economic thoughts and solutions in just two minutes: Robert Reich Solves The U.S. Economy In Two Minutes

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Rates & Dates

Freddie Mac and the Mortgage Bankers Association (MBA) had mixed results in their most recent weekly reports.

Freddie Mac reported that rates for 30-year fixed-rate mortgages were essentially unchanged at 4.51% for the week ending June 30th in comparison with the 4.50% rate reported on June 23rd .  

The MBA in its most recent Weekly Mortgage Applications Survey for the week ending June 24th reported a drop in its average to 4.46% from the previous week’s rate of 4.57%.   

In their press release of June 29th, the MBA also reported a 2.7% decline in mortgage applications during this most recent week with refinance activity constituting 69.5% of applications.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

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Ask Angie

We want to congratulate our most recent winner: Joseph Randazzo, a Certified Residential Appraiser with Alta Associates Appraisals Inc. of West Orange, New Jersey. Joe was the first to accurately answer that Winston Churchill was the author of the quote “The pessimist sees difficulty in every opportunity.  The optimist sees opportunity in every difficulty”, Denis Waitley noted that “Everything is something you decide to do and there is nothing you have to do” and that Edgar Allen Poe said that “The best place to hide anything is in plain view”. 

Today’s questions:

1. Who Said: “Those who have cultivated the habit of persistence seem to enjoy insurance against failure."

a) Winston Churchill
b) Napoleon Hill
c) Dale Carnegie
d) Lady Gaga
e) None of the above

2. Who said: “We are what we pretend to be, so we must be careful what we pretend to be."

a) Sarah Palin
b) Charlie Sheen
c) Tina Fey
d) Kurt Vonnegut
e) None of the above

3. Who said: “I believe in a long, prolonged, derangement of the senses in order to obtain the unknown."

a) Jim Morrison
b) William Blake
c) Bob Marley
d) Alice Bailey
e) None of the above

The first person to respond with the correct answers wins a choice of one of the below:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the 12/10 UPDATED Directory of Appraisal Management Companies (Available Now to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

One Free Trade Show Pass to Valuation Expo 2011 in Las Vegas

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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