Where is your number, especially the exsiting home prices, coming from? Beware that the OFHEO home price index is not highly regarded. The Shiller/Standard &Poor index on exisiting home sales is much more reliable though it only covers 10 cities.
The best explanation I have heard is that the high end of the residential housing resale market is still moving, whereas the mid and low end market has all but seized. This causes median sale prices to rise, since more expensive houses are disproportionately represented in sales. The Case/Shiller index matches current sales with prior sales of the same property, which eliminates this statistical anomaly. As a result it is much more reliable. Home builders do not have the luxury of waiting for better prices. They can't postpone the sale the way many homeowners can. They are selling whatever inventory they have, as fast as they can. Hence new home sales are probably more representative of true market conditions. Martin
NAR. I know about the OFHEO tracking of only conforming conventional mortgages on single family properties that are limited at $417k. That index showed a 4.25% Q1 yoy gain. OFHEO. Looking at the 3 indexes, there seems to be quite a divergence.
And this proves what exactly? That when looking through the rear view mirror that the sky is blue and that all is well? Big whoop. And listening to the NAR is like asking the American Assoc. of Waterbed Showroom Owners how the sales of water beds is doing....ie:a giant waste of time and confused statistics. And you might end up all wet anyway... If you look through the windshield you will see some ugly stuff coming... http://marketplace.publicradio.org/shows/2007/08/03/AM200708033.html "Tom LaMalfa is an economist who advises mortgage companies. LaMalfa: I almost fell out of my chair when I was going through Countywide financial statements last week. Countrywide is one of the largest mortgage companies in America. Right now, almost one-quarter of its subprime loans are delinquent â and subprime lending represents almost half of Countrywide's total business. To me, that's shocking â we have never seen numbers like that. And LaMalfa expects home prices to fall by as much as 30 percent before this is all over." http://online.wsj.com/article/SB118609866621886776.html "âJittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records.â âLenders are tightening standards and âraising rates like crazy,â said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week.â http://www.bloomberg.com/apps/news?pid=20601087&sid=a2Rnaf9tZJbA&refer=home âThe U.S. subprime-market rout that wiped out $2.1 trillion from global share values last week has âgot a long way to go,â said Jim Rogers.â ââThis was one of the biggest bubbles weâve ever had in credit,â Rogers, chairman of New York-based Beeland Interests Inc., said.â ââThis is the only time in world history when people were able to buy houses with no money down and in fact, in some cases, the builders gave them money for a down payment,â Rogers said. âSo this bubble is the worst weâve had in housing and itâs going to be the worst before its over cleaning it out.ââ Price follows volume...the volume is down as much as 70% in some markets, price will follow. And if you look at price per square foot, not the stats presented by the NAR, price already has fallen a bit. Onewaypockets
NEW YORK (AP) -- U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor's began its nationwide housing index in 1987, the research group said Tuesday. The decline in home prices around the nation shows no evidence of a market recovery anytime soon, one of the architects of the index said. MacroMarkets LLC Chief Economist Robert Shiller said the declining residential real estate market "shows no signs of slowing down." The report came a day after the National Association of Realtors said sales of existing homes dropped for a fifth straight month in July while the number of unsold homes shot up to a record level. The S&P/Case-Schiller quarterly index tracks price trends among existing single-family homes across the nation compared with a year earlier . A separate index that covers 20 U.S. cities fell 3.5 percent in June from a year earlier. A 10-city index fell 4.1 percent from a year earlier. Housing is among the economic indicators closely watched by Federal Reserve policymakers. After five years of rapidly rising home prices, the market stalled last year, with prices holding steady or falling as sales slowed. Since then, lenders have made it more difficult for some people to get mortgages by tightening standards just as foreclosures rise and some who borrowed at adjustable rates facing higher payments they can't meet. Problems have spread from those with poor credit repayment histories to more creditworthy borrowers. The Fed has taken a number of steps aimed at stabilizing the situation, and market watchers look further for a possible cut in the federal funds rate, which is the rate commercial banks charge each other for short-term loans. That rate has been kept steady at 5.25 percent for more than a year. The Fed has its next regularly scheduled meeting on Sept. 18. Fifteen of the cities surveyed for S&P's 20-city index showed a year-over-year decline in prices in June. Prices in Boston dropped in June at a slower rate than they did in May, continuing a trend that started at the beginning of the year. In April 2006, Boston was the first metropolitan area to show a year-over-year decline, so any turnaround there could be an early sign of recovery. S&P said it needed more data to determine whether Boston would be the first area to improve. Detroit led the cities with the biggest price declines, with an 11 percent drop from June of last year. Other cities with falling prices included Tampa, Fla., San Diego and Washington, D.C., which all recorded drops of at least 7 percent. Seattle and Charlotte, N.C., were on the small list of cities that saw prices rise in the same period. Seattle prices rose 8 percent in June while Charlotte saw a 6.8 percent increase. In Monday's report, the National Association of Realtors said sales of existing homes dipped by 0.2 percent in July from June to a seasonally adjusted annual rate of 5.75 million units. The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined, a record stretch. http://biz.yahoo.com/ap/070828/home_price_index.html?.v=3
I found this article on Implode O Meter site: Subprime Borrower Refi Options Bank of America's RMBS Desk has a research note out (not publically available) that attempts to estimate the realistic refinance options, if any, for outstanding subprime ARMs that are facing reset in the immediate future. The analysis looks at both credit standards and current interest rates on alternative loans, and concludes that refinancing into a new subprime loan or, for those borrowers whose credit profile has improved since loan origination, a new Alt-A loan, is essentially not an option. The interest rates on new subprime and Alt-A, given the current environment, are simply too high to offer any improvement in the monthly payment. Therefore, the report concludes that FHA and Fannie Mae's "Expanded Approval" program (EA, its existing program for "near prime") are the only realistic options, given pricing structures. BoA estimates that approximately 18% of outstanding subprime ARM borrowers could qualify for an FHA refi (on both credit guidelines and rate reduction), and approximately 36% could qualify for Fannie Mae's EA. (That's best understood as 36% qualifying for either FHA or EA, not a total of 54%.) The larger bucket of loans qualifying for EA is mostly a matter of the larger GSE maximum loan amount compared to the FHA maximum, as well as a slice of the highest-credit class for which EA, at least in theory, offers 100% financing in contrast to FHA's 97% maximum. Still, BoA's analysis is assuming an effective interest rate (including FHA or private mortgage insurance premiums) of around 8.50% for FHA and 8.50%-9.50% for the EA loans. In other words, the refi rate for these borrowers, at best, is enough to keep them at pre-reset payment levels. It isn't enough to bail out anyone who cannot carry the pre-reset payment. It is always possible to change the eligibility and qualifying rules on either FHA or EA so that more borrowers can be accommodated, and there are certainly demands out there, especially for FHA, to do this. How, exactly, we will price the risk so that these borrowers are in the money is, as far as I can tell, the unmentioned part that probably matters.