I know people that just love these HGTV housing shows.

 

"House Hunters:" Subjects say it's fake

"The blog Hooked on Houses is giving fans a dose of reality about the HGTV series "House Hunters." According to an interview with a former participant, Bobi Jensen, much of the popular show, which has been on the air since 1999, is faked."

http://shine.yahoo.com/at-home/8216-house-hunters-8217-fake-172000660.html

 

I enjoy House Hunters International.  In House Hunters it always seems like the couples end up buying the cheap house, miles from their jobs, family, etc.  They seem to always base their decision on outdoor space.

 

Wow, you live. You must have stopped watching House Hunters and ventured onto the web. HAHA

We live in a very sad economic environment when the stock market rises on 'hope' that the economy is getting so bad again that the FED and other central banks will have to print another large amount of 'stimulus'. They then hope this will juice the stock market and commodities speculation once again. This then will cause main street to feel another large round of inflation.

 

U.S. stocks rise on central-bank hopes

"NEW YORK (MarketWatch) — U.S. stocks climbed Friday, extending weekly gains on continued optimism about potential coordinated action by global central banks to stabilize markets if needed after Greek elections."

http://www.marketwatch.com/story/us-stocks-rise-on-central-bank-hopes-2012-06-15

 

 

Consumer sentiment lowest since December

"WASHINGTON (MarketWatch) — Consumer sentiment fell this month to the lowest level since December, with gloomier views on current and future conditions, according a gauge released Friday by the University of Michigan and Thomson Reuters."

http://www.marketwatch.com/story/consumer-sentiment-lowest-since-december-2012-06-15-101032356

 

 

Factory activity cools in New York region

Empire State gauge downshifts to 2.3, weakest since November

"WASHINGTON (MarketWatch) — Manufacturing growth in the New York region slowed in June to the worst reading in eight months, according to data released Friday — the latest piece to add to concerns over the weak pace of expansion of the U.S. economy."

http://www.marketwatch.com/story/factory-activity-cools-in-new-york-region-2012-06-15

 

 

Industrial production slips 0.1% in May

"WASHINGTON (MarketWatch) — Industrial production weakened in May as output of cars and other items slowed, according to data released Friday that show the impact of a deteriorating global economy."

http://www.marketwatch.com/story/industrial-production-slips-01-in-may-2012-06-15

 

 

IMF: Spain likely to miss 2012 deficit target

http://www.marketwatch.com/story/imf-spain-likely-to-miss-2012-deficit-target-2012-06-15-11913013

Gordon Brown: France and Italy may need a bail-out

"Gordon Brown has warned the euro is reaching its "day of reckoning" and suggested France and Italy would follow Spain in needing a bail-out as the eurozone crisis deepens."

http://www.telegraph.co.uk/finance/financialcrisis/9334866/Gordon-Brown-France-and-Italy-may-need-a-bail-out.html

 

 

Debt crisis: UK recovery hopes dealt export blow

"Hopes that Britain’s exporters will drag the country back to growth have been dealt a blow by the worst trade deficit in almost seven years."

http://www.telegraph.co.uk/finance/financialcrisis/9333487/Debt-crisis-UK-recovery-hopes-dealt-export-blow.html

 

 

IMF urges Europe to help refinance Irish bank bail-out

"The International Monetary Fund on Friday urged Europe to help Ireland refinance its crippling bank bailout and consider taking equity in state-owned banks to help Dublin return to bond markets and avoid a second bailout next year."

http://www.telegraph.co.uk/finance/financialcrisis/9334550/IMF-urges-Europe-to-help-refinance-Irish-bank-bail-out.html 

If France and Italy need a bailout, it's over.  Not even Germany has that kind of cash--given that if France and Italy need it, it will mean that Greece, Spain, Ireland, Portugal, and who knows how many others need one as well.

 

Honestly, long-term, I don't see how the euro can survive ... and short-term, I don't see how many countries can survive the death of the euro.

If France and Italy need a bailout, it's over.  Not even Germany has that kind of cash--given that if France and Italy need it, it will mean that Greece, Spain, Ireland, Portugal, and who knows how many others need one as well.

 

Honestly, long-term, I don't see how the euro can survive ... and short-term, I don't see how many countries can survive the death of the euro.

 

I think you are right. There is a lot of pain coming in Euroland (and it will impact us as well) but how long they can keep 'kicking' the can is probably the real question.

Fed expected to twist again

"The move would serve several purposes, but would mainly show the Fed’s resolve to act and help shore up confidence, said Millan Mulraine, economist at TD Securities.

The current $400 billion Twist program is set to expire at the end of June. It gets its name from the Fed trying to twist the yield curve by selling short-term securities that it holds while buying longer-term securities."

http://www.marketwatch.com/story/fed-expected-to-twist-again-2012-06-17

 

 

G20 summit: Greece must 'get on with it' or face dangerous consequences, warns David Cameron

"David Cameron has warned Greek politicians that a delay in forming a new Government “could be very dangerous”.

http://www.telegraph.co.uk/finance/g20-summit/9338840/G20-summit-Greece-must-get-on-with-it-or-face-dangerous-consequences-warns-David-Cameron.html

 

 

G20: Merkel says no to new bailout terms for Greece after election

"German Chancellor says any relaxation of Greece's bailout terms would be unacceptable, as the crisis in Spain worsens."

http://www.telegraph.co.uk/

 

 

Greek agony drags on as Asphyxiation Bloc wins

"Europe’s establishment is delighted by the victory of New Democracy and pro-asphyxiation bloc. This relief is unlikely to last much beyond today, if that.

Greece’s new leaders have a mandate from Hell. Almost 52pc of the popular vote went to parties that opposed the bail-out Memorandum in one way or another. There is no national acceptance of the Troika’s austerity policies whatsoever.

The hard-Left Syriza party of Alexis Tsipras is arguably more dangerous in opposition, now fortified with big bloc of seats in Parliament. He can lacerate the government without responsibility as the state sheds 150,000 public sector workers, a fifth of the total."

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100017978/greek-agony-drags-on-as-asphyxiation-bloc-wins/

I posted a few weeks ago that this summer was looking to be the best in years for new home construction. The question really is what will happen in the fall and next spring as the foreclosure numbers climb.

 

U.S. housing starts fall in May, but permits surge

 

"WASHINGTON (MarketWatch) — U.S. builders started work on new homes in May at a slightly slower pace, but permits for future construction jumped to the highest level in nearly four years, the Commerce Department said Tuesday.

 

Housing starts fell 4.8% last month to an annual rate of 708,000 — below the 720,000 forecast of economists surveyed by MarketWatch. The data are seasonally adjusted."

http://www.marketwatch.com/story/us-housing-starts-fall-in-may-but-permits-surge-2012-06-19

 

 

Job openings fall to 3.42 million in April

 

"WASHINGTON (MarketWatch) -- The number of job openings in April fell to 3.42 million from 3.74 million in March, the Labor Department reported Tuesday, as there were fewer openings in manufacturing, professional and business services, and state and local government. The number of openings was 1.0 million higher than at the end of the recession in June 2009. The quits rate, which can serve as a measure of workers' willingness or ability to change jobs, was unchanged for total nonfarm, and essentially unchanged for total private and government. The ratio of unemployed people to available positions was 3.65 in April, down from postrecession highs but still above prerecession levels of around 2/"

http://www.marketwatch.com/story/job-openings-fall-to-342-million-in-april-2012-06-19

 

 

Spain pleads for ECB rescue as bond markets slam shut

 

"Europe's leaders have vowed to mobilise all possible means to counter the region's escalating crisis after Spain's borrowing costs threatened to spiral out of control.

Yields on 10-year Spanish bonds surged to a record high of almost 7.3pc as investors ignored the victory of pro-bailout parties in Greece's elections.

The closely-watched two-year yield rocketed by 65 basis points in a matter of hours, signalling a near-total collapse of confidence in Spain's €100bn (£80.3bn) rescue from the EU last week to shore up its banking system.

Cristobal Montoro, the economy minister, warned that Spain is now in a "critical" condition and pleaded with the European Central Bank to act with "full force" to defeat markets hostile to the euro project.

Bank of America said Spain may need a second rescue to tide it through the next three years, pushing the total loan package towards €450bn – a sum that would test the EU bail-out machinery and cause serious knock-on effects for Italy."

http://www.telegraph.co.uk/finance/financialcrisis/9340073/Spain-pleads-for-ECB-rescue-as-bond-markets-slam-shut.html

 

 

Should be interesting to see if the FEDs do another round of QE tomorrow, since the market is anticipating it. Of course if they do then the FEDs will be signaling that things are getting really bad again.

 

G20 Summit and debt crisis: live

 

"World stocks and the euro gained as Europe's worsening debt crisis and its impact on global growth encouraged talk of a policy response by the world's major central banks.

Despite the terrible Spanish debt auction figures – a clear sign that borrowing costs are rising sharply and that a bailout will be necessary soon if relief does not come. The progress made by Spanish debt can be attributed to two hopes: first that the European Union will give leeway to Greece and work more closely for a mutually acceptable political path; and that the Federal Reserve will introduce another large quantitative easing package tomorrow."

http://www.telegraph.co.uk/finance/debt-crisis-live/9340387/G20-Summit-and-debt-crisis-live.html

Those in debt are going to help others in debt by going into more debt. What a great long term strategy.

 

So we have $750 billion, plus $100 billion (to spain last week) and $210 billion to Greece and others. That would bring the current total new debt obligation for the Eurozone countries at just over $1 TRILLION in the last year or so. WOW! I guess a trillion is not what it use to be. Germany and France better have some really strong growth to flip this bill. Maybe our FED will announce QE3 tomorrow and all will be well again. The world will be awashed with money once again? Maybe they will just move all their debt into the ECB and then have it default on trillions and call it a day.

 

Debt crisis: EU leaders set to announce €750bn Spain and Italy bailout deal

 

"European leaders are poised to announce a 750 billion euro deal to bailout beleaguered Spain and Italy by buying the countries’ debts.

Pan-European Government funds are set to be used to buy Spanish and Italian bonds, which have recently hit record highs – in a move which will send a strong signal to financial markets that the German administration is prepared to back its weaker economic neighbours.

Angela Merkel and other European leaders have come under intense pressure at this week’s G20 summit to take radical action to stem the growing euro crisis which has pushed up the cost of Spanish bonds to unsustainable levels.

 

Under the proposed deal, two European rescue funds – the 500 billion-euro European Stability Mechanism (ESM) and the 250-billion euro European Financial Stability Facility (EFSF) – will be able to buy bonds issued by beleaguered European countries.

 

Previously, money in these funds – which has been provided by members of the single currency – has been used to bailout smaller European countries such as Greece, Portugal and Ireland. Governments in these countries are offered money direct in return for agreeing to austerity programmes.

 

Under the new plan, the money in these funds will not be given directly to governments but will instead be used to buy up debts on the financial markets. The European Central Bank previously bought about 210 billion euros of bonds in this way but stopped last year."

http://www.telegraph.co.uk/finance/financialcrisis/9342727/Debt-crisis-EU-leaders-set-to-announce-750bn-Spain-and-Italy-bailout-deal.html

 

 

Germany to allow Europe funds to buy debt: reports

 

"WASHINGTON (MarketWatch) -- Germany is going to allow the euro zone's bailout funds to buy the sovereign debt of troubled European nations, according to reports in British news outlets including the Guardian and Sky News, without attribution. The money would come from the 500 billion euro European Stability Mechanism and the 250 billion euro European Financial Stability Facility, the reports say. The move would be a reversal from the stance previously held by Germany's Angela Merkel."

http://www.marketwatch.com/story/germany-to-allow-europe-funds-to-buy-debt-reports-2012-06-19?dist=countdown

 

 

But then again, maybe not? Even if its not true it helped buy another day or two and spike the stock market higher.

 

Germany says did not discuss EU bond buying plan at G20 summit

 

"(Reuters) - There was no discussion at a G20 summit in Mexico this week about using Europe's rescue funds to buy up the bonds of stricken members of the euro zone, a German government official said."

http://www.reuters.com/article/2012/06/19/us-g20-europe-bonds-idUSBRE85I1F620120619

 

 

State manufacturing heading for slowdown, expert says

 

"The robust rebound Indiana’s manufacturing sector has enjoyed the past 12 months is likely to fade during the next year amid more economic uncertainty, according to an annual report released Tuesday by Conexus Indiana."

 

“We’re now in the fourth month of declining retail sales and declining job growth, said Michael Hicks, director of Ball State University’s Center for Business and Economic Research. “So, I’m sad to say, here we are, 36 months after the last recession, that we’re near, or at, the cliff of another recession.”

 

"Most manufacturers, however, should be better prepared to ride out the economic turmoil this time because many built up stockpiles by not going on spending sprees during the recession and subsequent recovery, he said."

http://www.ibj.com/state-manufacturing-heading-for-another-slowdown--expert-says/PARAMS/article/35075

 

Economy is running out of gas

Rex Nutting Commentary: Recession lurking with demand still weak

 

http://articles.marketwatch.com/2010-10-27/commentary/30734154_1_economy-recession-savings

 

 

 

Philly Fed factory gauge plunges in June

"The Philly Fed’s business outlook survey fell to negative 16.6 from negative 5.8 in May. This is the weakest reading since last August when economists were worried that the economy might stall.

Details of the report were weak. The indexes for new orders, shipments and unfilled orders worsened to their lowest readings of the year. The price index dropped, showing that inflation pressures continue to ease."

http://www.marketwatch.com/story/philly-fed-factory-gauge-plunges-in-june-2012-06-21

 

 

Sales of U.S. existing homes fall 1.5% in May

Distressed sales at lowest level since at least 2008

"WASHINGTON (MarketWatch) — Sales of existing homes fell 1.5% in May as fewer cheap homes were sold, a trade group said Thursday."

http://www.marketwatch.com/story/sales-of-us-existing-homes-fall-15-in-may-2012-06-21?link=MW_story_insert

 

 

Claims actually went up a 1,000 for the two weeks not down.

 

U.S. jobless claims edge slightly lower

Latest report continues to reflects weaker hiring trends

"WASHINGTON (MarketWatch) — The number of Americans who applied for unemployment benefits fell slightly last week but remained at a level indicating virtually no improvement in hiring trends or labor market conditions, according to the latest federal data.

Jobless claims declined by 2,000 to a seasonally adjusted 387,000 in the week ended June 16, the Labor Department said Thursday. Claims from two weeks ago were revised up to 389,000 from an original reading of 386,000, based on more complete data collected at the state level."

http://www.marketwatch.com/story/us-jobless-claims-edge-slightly-lower-2012-06-21

Not to sure he really makes a strong case why it would not happen (execept for his comment about the Philly index) but its a different point of view.

 

Despite slowdown, recession not inevitable

Commentary: Gloomy headlines are simply more of same bad news

 

"WASHINGTON (MarketWatch) — There’s little to cheer about in today’s headlines about the global economy. From China to Europe to Philadelphia, the news is grim."

http://www.marketwatch.com/story/despite-slowdown-recession-not-inevitable-2012-06-21

New-home sales at highest level in two years

Low interest rates, warmer weather, attractive prices boost demand

"WASHINGTON (MarketWatch) — Sales of new single-family homes rose 7.6% in May to reach the highest level in more than two years, the U.S. Commerce Department reported Monday."

http://www.marketwatch.com/story/new-home-sales-at-highest-level-in-two-years-2012-06-25

 

 

The banks are working hard to alter the natural supply and demand process.

 

Housing inventory plunges in some places

But there’s plenty of shadow inventory waiting in the wings

“The banks have dialed back the foreclosure spigot,” said Tim Ellis, real-estate analyst for Redfin. As lenders have become more thorough in processing foreclosures, it has taken longer for homes to complete the foreclosure process. Plus, there’s a sense that banks are withholding some foreclosure inventory, not listing it as markets struggle to recover.

Another reality of the market affecting housing inventory: Millions of borrowers are currently underwater on their mortgages."

http://www.marketwatch.com/story/housing-inventory-plunges-in-some-places-2012-06-25?pagenumber=2

 

 

Spain sends official aid request to EU

"MADRID (MarketWatch) -- The Spanish government on Monday made its request for aid for the banking sector official, with a letter from Finance Minister Luis de Guindos to Eurogroup President Jean-Claude Juncker."

http://www.marketwatch.com/story/spain-sends-official-aid-request-to-eu-2012-06-25

"Working hard to alter the natural supply and demand process?"  In other words, not foreclosing on hundreds of thousands of homes at once and selling into the teeth of a liquidation frenzy?  That's not altering the supply and demand process, it's respecting it.  Every time a bank orders a sheriff sale (they can foreclose without actually ordering the sale), it increases the supply of homes on the market.  An actor choosing not to increase supply when it perceives a glut in the supply of that good is not "altering the natural supply and demand process."

But the natural state would be a glut in supply so huge it brings housing costs back in line with wages.  Banks are preventing that by hoarding supply.

That would be the state if banks ordered sales all at once, but I still don't know if I'd call that the "natural" state.

 

Don't get me wrong, I'm no fan of any policy that keeps housing prices out of reach for millions without government subsidies (including the mortgage interest tax deduction).  I've written extensively on these boards about how I consider the special treatment the mortgage industry gets to be the product of one of the longest-lasting marketing campaigns in history (the "American Dream" that must necessarily include an owner-occupied residence).  I favor ending the mortgage interest tax deduction, requiring at least a 10% down payment on all residential real estate purchases, and prohibiting Fannie, Freddie, and the FHA from securitizing any mortgage without at least 20% equity, all of which would restrain prices.  That doesn't mean that I'd be inclined to force banks to take properties REO and/or sell them back on the market, though--and I certainly wouldn't call such a glut the "natural" state of the market.  Not unless and not until it happens organically, anyway (i.e., the banks just can't wait any longer).

I guess I'm confused as to what's organic and what's not.  The banks' actions are artificially restricting supply in an effort to artificially raise prices.  Without such activity, those prices would surely plummet.  To me, "organic" would mean unfettered supply and demand. 

 

The current glut isn't an "organic" or "natural" state; it was caused by similar efforts to artificially raise prices during the bubble.  The bubble wouldn't have happened naturally because supply kept outpacing wage growth, and demand is ultimately tied to income.  High supply + low demand = falling prices, per the invisible hand. 

 

But prices ignored these downward pressures due to bank-ordered fraudulent appraisals and ridiculous financing schemes, many of which also involved fraud.  The only way to get back to a natural state, one that doesn't include the economic waste of all these empty houses, is to let supply and demand bring prices back down.  The natural organic state of the market is wherever it ends up... sans intervention.

Sans government intervention, yes.  However, banks choosing not to list houses on the market is really no different than private owners (after all, banks are still private owners themselves--just not owner-occupiers) choosing not to list their homes when they don't feel the market is sufficiently friendly.  It would be the same concept as a company perhaps thinking about drilling for natural gas choosing not to do so because of the drop in natural gas prices based on the exploration already completed, or someone considering opening an Indian restaurant in a given area choosing not to do so because of there already being too many Indian restaurants in that area.

 

Remember that there are always selling pressures on banks.  Homes cost money to maintain as inventory, and generally cost money even to leave in the hands of the delinquent borrower, because the borrower not paying his mortgage is also likely not paying his property taxes, which will simply pile up on the property and ultimately get paid ahead of the bank.  The property may well be physically depreciating as well.  Banks hold at risk and expense to themselves.  Eventually, they'll start selling even though prices may not have recovered.

Sans government intervention, yes.  However, banks choosing not to list houses on the market is really no different than private owners (after all, banks are still private owners themselves--just not owner-occupiers) choosing not to list their homes when they don't feel the market is sufficiently friendly.

 

It's completely different, because banks own a sizeable portion of the nation's inventory.  Enough to effectively control the market.  No individual owner has that power.  I daresay banks own more houses than the government does, so I don't see how their intervention is somehow of a lower order than that of the government.  I find that distinction quizzical.  What's worse, the banks are keeping their inventory empty and no they're not maintaining it.  Cities have to drag them into court to get basic tasks accomplished. 

 

Are you expecting prices to "recover" to bubble levels?  Do you really think those prices were legitimate?  Do you think current prices, supported by all this bank hoarding, are legitimate?  Even though the banks are simultaneously letting their inventory fall to ruin?  Everyone from Adam Smith to Abraham Lincoln has warned us about this very problem.

Sans government intervention, yes.  However, banks choosing not to list houses on the market is really no different than private owners (after all, banks are still private owners themselves--just not owner-occupiers) choosing not to list their homes when they don't feel the market is sufficiently friendly.

 

It's completely different, because banks own a sizeable portion of the nation's inventory.  Enough to effectively control the market.  No individual owner has that power.  I daresay banks own more houses than the government does, so I don't see how their intervention is somehow of a lower order than that of the government.  I find that distinction quizzical.

 

The "order" of the "intervention" begs the question as to whether it's an intervention in the first place.  No one disputes that private decisions can have significant market impacts.  Wal-Mart has significant power to affect markets, but that doesn't mean that its decision not to build 1,000 new stores is somehow a market intervention.  Likewise, even a single local government choosing to exercise its legal power to prevent a Wal-Mart from coming in where it would otherwise choose to locate is an intervention.

 

What's worse, the banks are keeping their inventory empty and no they're not maintaining it.  Cities have to drag them into court to get basic tasks accomplished.

 

Trust me, I'm aware.  Most of my practice revolves around commercial insolvency, restructuring, and workouts, which includes a fair amount of work in the foreclosure and short sale areas.

 

Are you expecting prices to "recover" to bubble levels?  Do you really think those prices were legitimate?  Do you think current prices, supported by all this bank hoarding, are legitimate?  Even though the banks are simultaneously letting their inventory fall to ruin?  Everyone from Adam Smith to Abraham Lincoln has warned us about this very problem.

 

Again, I don't consider what the banks are doing to be "hoarding," any more than I consider the aggregate population of would-be sellers (who are probably holding many times what banks are holding) were the market a seller's market to be "hoarding."  Absent the invocation of eminent domain, no one is under any legal obligation to sell his or her property--and I don't think that exercising that right not to sell is "illegitimate," either.  I don't see what legal or moral rule would posit that the only legal or legitimate course of action would be for a bank to foreclose on a delinquent borrower as fast as possible, then take the property to auction as fast as possible, and then (if the bank is the only bidder at the auction and the property thus becomes REO, as frequently happens) liquidate the property as soon as possible after the auction.

Mixing legal/moral rules with economics is prickly thing, so I'll avoid it here.  But I would reiterate that when anyone corners a substantial part of any market, they gain control over that market, control that is proportionate to their ownership of the total supply.  This is not some goofy theory I'm positing, it's 101-level econ and it's the basis of many century-old laws.  So to compare the banking industry with individual homebuyers-- or individual purchasers of anything-- is simply not valid.  Again leaving moral issues aside, the banks' unprecedented acquisition of America's housing supply, ownership of which had previously been dispersed, undeniably has wide-ranging effects.

Without weighing in one way or the other, I would note that the "banking industry" is not a single entity

I'm with Gramarye on this point. Banks, while heavily regulated, are still non-governmental in nature, so are seeking to maximize profits...or more importantly in this case, minimize losses. I would agree that if every bank put their complete inventory on the market, the flood of available housing would cause an artificial drop in housing prices (if the market could even absorb it all). The banks would have to re-assess the inventory they didn't sell at the new lower prices, and that would have a tremendous negative impact on their capitalization. It would impact not only REO inventory, but performing mortgages as well. That's not something anyone wants, except for doom porn aficiondados.

I'm with Gramarye on this point. Banks, while heavily regulated, are still non-governmental in nature, so are seeking to maximize profits...or more importantly in this case, minimize losses. I would agree that if every bank put their complete inventory on the market, the flood of available housing would cause an artificial drop in housing prices (if the market could even absorb it all). The banks would have to re-assess the inventory they didn't sell at the new lower prices, and that would have a tremendous negative impact on their capitalization. It would impact not only REO inventory, but performing mortgages as well. That's not something anyone wants, except for doom porn aficiondados.

 

My only quibble here is the use of the term "artificial."  Just like I think it's a "natural" market result at the moment with banks slowing down taking delinquent properties to sheriff sales, I don't think it would be "artificial" if they chose to speed up tomorrow, unless they were doing it in response to government compulsion.

 

And I second Hts' point, which was part of my own point that I should have been clearer about.  The banking industry may be more concentrated than the aggregate market of individual prospective sellers, but it's not exactly monolithic.  They ("they" being the banks and a great many individuals) are just all reading the tea leaves roughly the same--quite possibly because the fact that the housing market is not currently seller-friendly is a lot easier to read than fortunes in tea leaves.

Without weighing in one way or the other, I would note that the "banking industry" is not a single entity

 

+1.

 

More fundamentally, "the sense" that "banks" are holding back inventory is most likely off base (with all due respect to the "experts" quoted in articles).  The number of properties actually held in REO (not jut the number being marketed) is down significantly from several months past in many markets. Private equity has mobilized billions ready to purchase properties, especially in the last year, and so far it's had trouble finding the inventory it wants.  Bloomberg had a nice piece on this a couple weeks ago.

 

The great unknown is how much the flow into REO will ramp up now that robo signing issues have settled down and the AG settlement is in place.

My only quibble here is the use of the term "artificial."  Just like I think it's a "natural" market result at the moment with banks slowing down taking delinquent properties to sheriff sales, I don't think it would be "artificial" if they chose to speed up tomorrow, unless they were doing it in response to government compulsion.

 

IMO, that would largely be the reason banks decided in unison to unload inventory - regulatory pressure, or outright legislative mandate. Former is more likely than the latter. Much of the actions banks are 'encouraged' to undertake are interpretations of the regs relayed through the audit process. Those interpretations can become more flexible or more rigid depending on the 'mood' of the regulatory agencies (OCC, OTS, Fed, etc.)

While each bank is obviously a separate entity, their interests on this matter are pretty tightly aligned.  None of them want plunging values to hurt their capitalization so it's rational, from their perspective, to do whatever it takes to prop up prices.  That hasn't changed since the bubble days.  Banks prefer higher home prices and the bigger loans that accompany them.  And to the extent that they're holding inventory, they're doubly concerned with keeping prices up.

 

It isn't hard to discern what's in the banks' individual and collective self-interest.  Clearly they're acting with that in mind, as is proper.  The question then becomes what external effects arise from their behavior, and how those effects are evaluated.  Individual homeowners would also take a bath if prices dropped, while potential buyers would benefit.  But there are other externalities to consider, like the condition of our neighborhoods, and the effect that has on economic development in general.  There comes a point when the self-interest of the current owner of a given property, or of ten thousand properties, is not the only issue. 

And I second Hts' point, which was part of my own point that I should have been clearer about.  The banking industry may be more concentrated than the aggregate market of individual prospective sellers, but it's not exactly monolithic. 

 

You think that is "clearer"? ;)

 

 

^^ I guess the question then is the demand for homes high enough to absorb this inventory if it was released into the market. There's been a lot of conversation on this board, and elsewhere, about how home ownership may not be the ideal for the next generation(s) for a variety of reasons. If we're going to put every available house on the market, what's the absorption rate going to be. Is it going to take years, decades? And is the economic development that arises from this churn sufficient to offset the drop in valuations for the remaining home owners?

 

I don't know the answers to those questions.

I think, in line with what StrapHanger said, that if that many houses went onto the market in a rapid liquidation, dramatically increasing quantities and dramatically reducing prices, the largest buyers of the inventory would likely be other institutional buyers, e.g., private equity.  I don't know if I'd consider that a good thing, a bad thing, or an essential non-event.  How much difference would a real-life neighborhood resident care if many bank owners were replaced with private equity owners?  Well, if the private equity firms were more inclined to fix properties up and rent them or re-sell them, or demolish derelicts and start over, then that would be encouraging and a real-world development that people outside the world of finance would actually see.  I'm not sure why PE would necessarily be more inclined to do that, though.  They might be more inclined to just sit there and hope that a broad-based market turnaround (or just inflation) in the 3-5 year window lifts the value of their hard asset investment without them having to do all that much more with it.  I honestly don't know.

I would guess that demand isn't there for homes at propped-up prices... but the gist of market theory is that if prices are allowed to float, they will find a natural balance with wages, and then there won't be so much unused inventory.  Then regardless of who snatched them all up, be it private equity or the Chinese or the Klingons, their asset would be a lot more liquid.  Eventually homes would find their way to individual owners.  Corollary effects would be the repopulation of neighborhoods, as well as a possible uptick in demand for paint.

FWIW, probably 30-50% of sales out of REO (which have been sizable) have already been going to non-owner occupants, including some private equity, but mostly to small scale investors.  The disconnect between homeownership and REO liquidation has already been underway for a few years now. Single family homes are already a major component of the nation's rental housing stock.  It's not good or bad thing, it's just a thing.

Indeed, there will probably be more rented s-f homes going forward.  That's the reality of an economy demanding more flexibility from everyone.  But at least if they're rented, they're not sitting idle.

Without weighing in one way or the other, I would note that the "banking industry" is not a single entity

 

I have no proof that banks are working together to control the flow of foreclosures onto the market to maintain a certain level of pricing. I have posted and read many articles that hint that this is happening, but no proof. I can tell you that people in the re industry that do foreclosures sales act like banks have organized the release of the 'shadow market' to maintain higher values of this inventory.

 

I think both opinions discussed here have their place. It's very much like having a discussion about oil. If oil prices drop then oil companies start reducing the supply of oil in an effort to maintain certain prices points. Unfortunately the end user is the one getting hit with the 'artificially' created price.

 

The difference/problem with banks trying to maintain certain prices points is that in general most residential prices are still not historically in line with incomes in America (no more than 30% of income going to housing). Thus, more people are purchasing homes that are requiring more than 30% of their income to cover the cost or being shut out of home buying (there are many opinions on this). This means more households have less room to take in financial 'shocks' when they come.

One item missing from this discussion is that banks received significant taxpayer 'bailouts', cheep money at the fed discount window, and QE+ that were intented to cover there loses from failing prices on their balance sheets related to foreclosures. So are the banks double dipping by taking the 'bailouts' and trying to re-inflate the price of their foreclosure balance sheets as well?

Many banks have already realized a significant portion of the losses from the housing collapse.  Remember, the collateral is nice, but from the bank's perspective, the real asset they want to have is the performing loan.  When the loan stops performing, I'm pretty sure that the bank has to recognize some hit (not 100%, of course) to their portfolio then, not just years later when they finally sell the underlying collateral and apply the proceeds to the loan balance.  Likewise, even if they pursue the borrower for the deficiency judgment for the two years that Ohio permits such deficiencies to be pursued, I'm pretty sure they still have to recognize some losses even before then.

I think it is still early to call the end of the european union, but things currently continue to get worse.

 

The end of the road for Europe

"After two years of "kicking the can down the road," Europe seems to have now come to the end of the road."

 

"Here are the recent developments in this fast moving saga:

 

1. Thursday's and Friday's European summit in Brussels will be another pivotal event in the ongoing debt crisis as leaders try to get a handle on the rapidly deteriorating situation across the European Union. Italian Prime Minister Mario Monti last week said that Europe has a week to save the euro zone, and we can expect more volatility as the meeting approaches."

(see all 12 items on this list at)

http://www.marketwatch.com/story/the-end-of-the-road-for-europe-2012-06-25

 

Many banks have already realized a significant portion of the losses from the housing collapse.  Remember, the collateral is nice, but from the bank's perspective, the real asset they want to have is the performing loan.  When the loan stops performing, I'm pretty sure that the bank has to recognize some hit (not 100%, of course) to their portfolio then, not just years later when they finally sell the underlying collateral and apply the proceeds to the loan balance.  Likewise, even if they pursue the borrower for the deficiency judgment for the two years that Ohio permits such deficiencies to be pursued, I'm pretty sure they still have to recognize some losses even before then.

 

And lest we forget, most of these "bank-owned" homes are actually NOT owned by banks.  The GSEs own a big chunk, HUD owns another (as a result of FHA/VA defaults), another big chunk is owned by securitization trusts (the beneficial ownership of which is diffusely held by banks and plenty of non-bank investors).  The only REO properties owned outright by banks are the result of loan put-backs by the GSEs and previously portfolioed loans, which, during the height of the booms, was well less than half of all mortgage originations.  This is why, with all due respect to people on seller side of the real estate industry, I don't think they know as much as they think they know.  They deal with servicers that have their own incentive structures which often do not line up with those of the beneficial owners of the loans/REO properties.

Lower expectations drag down consumer confidence

"WASHINGTON (MarketWatch) — U.S. consumer confidence has declined for a fourth month, with gloomier views in June on future business conditions and income, the Conference Board reported Tuesday."

http://www.marketwatch.com/story/lower-expectations-lead-consumer-confidence-down-2012-06-26

 

 

We had month over month gains last year that happened during the main selling season. Year over year prices are still falling.

 

U.S. home prices jump 1.3% in April: Case-Shiller

"WASHINGTON (MarketWatch) — U.S. home prices shot up in April to post the first monthly gain since last autumn, according to a closely followed index released Tuesday.

The S&P/Case-Shiller 20-city composite index gained 1.3%, with 19 out of 20 cities registering gains, to take the year-on-year drop from 2.6% to 1.9%."

http://www.marketwatch.com/story/us-home-prices-jump-13-in-april-case-shiller-2012-06-26

 

 

EU’s fiscal union road map gets cool reception

"FRANKFURT (MarketWatch) — A document outlining a path to tighter fiscal integration across the euro zone and a European banking union got a cool reception from Germany and economists on Tuesday as European leaders prepare for a summit meeting later this week."

http://www.marketwatch.com/story/eus-fiscal-union-road-map-gets-cool-reception-2012-06-26

Maybe he should give Bernanke some honestly lessons.

 

Recovery still five years away, Mervyn King warns

"The British economy will not get back on track until at least 2017, the Bank of England Governor has warned in his bleakest outlook for the recovery yet.

Sir Mervyn King’s comments, which extended his previous prediction for a fully-fledged recovery by three years, reflected the scale of problems in the eurozone as well as his fears for the global recovery.

Addressing MPs at the Treasury Select Committee (TSC), Sir Mervyn said: “When this crisis began in 2007, most people did not believe we would still be here. I don’t think we’re halfway through this. I’ve always said that and I’m still saying it.

“We have to regard this as a long-term project to get back to where we were, but we’re nowhere near starting that yet. We’re in a deep crisis with enormous challenges.”

http://www.telegraph.co.uk/finance/economics/9356628/Recovery-still-five-years-away-Mervyn-King-warns.html

 

Psssst -- sometimes when I have a few extra copies of Mario 3 at work I hide some of them rather than lower their price.

 

You didn't hear that from me.

The housing industry should do what college professors do: Put out a new, barely-revised edition of their tract every 2-3 years so that people who can't afford it are forced to upgrade to the latest version and older editions lose a large amount of their secondary market value, even if they might still have been perfectly serviceable.

 

Oh, wait ...

Psssst -- sometimes when I have a few extra copies of Mario 3 at work I hide some of them rather than lower their price.

 

You didn't hear that from me.

 

And you can do that.  It only becomes an issue when the whole market is affected.  With all due respect, that's probably not an option for you. 

 

Restricting supply is also a core purpose of unions.  They're actually allowed to affect their whole market, as a counterbalance.  Well, not so much anymore, but that's the general idea behind it. 

I'm still not really seeing the "restricting supply" paradigm here.  Am I restricting the supply of used 2001 Altimas by not listing mine on Craigslist?  Why does it make any qualitative difference if I had 5,000 used 2001 Altimas and was refusing to list them, or was only listing them in batches of 50 so as not to flood the market at once?  If I'm willing to pay the upkeep costs on the other 4,950 and watch them depreciate, isn't that a legitimate economic choice (regardless of its wisdom)?

Psssst -- sometimes when I have a few extra copies of Mario 3 at work I hide some of them rather than lower their price.

 

You didn't hear that from me.

 

And you can do that.  It only becomes an issue when the whole market is affected.  With all due respect, that's probably not an option for you. 

 

LOL, don't I wish it was!

I'm still not really seeing the "restricting supply" paradigm here.  Am I restricting the supply of used 2001 Altimas by not listing mine on Craigslist?  Why does it make any qualitative difference if I had 5,000 used 2001 Altimas and was refusing to list them, or was only listing them in batches of 50 so as not to flood the market at once?  If I'm willing to pay the upkeep costs on the other 4,950 and watch them depreciate, isn't that a legitimate economic choice (regardless of its wisdom)?

 

That example of the Altimas is a lot smaller than what we're talking about, and I find it hard to believe you're unfamiliar with these concepts.  Is this some sort of Columbo thing?  The whole of the banking sector acting in concert, whether orchestrated or not, is a large enough player to alter a national market.  A used car distributor probably isn't, although 5k 2001 Altimas is an impressive figure.  But it's just one model year of one car, and we're talking about homes generally.  Now, something on the scale of Cash-4-Clunkers can and did impact the used car market.  That was done to serve (questionable) political ends.  But if a private actor took millions of cars off the market for its own purposes, eyebrows would be raised to say the least.

U.S. orders for durable goods climb in May

First increase in three months led by aircraft, heavy machinery

"Durable-goods orders rose a seasonally adjusted 1.1% last month, the Commerce Department said. Economists surveyed by MarketWatch had expected orders to be unchanged.

The increase was led by the commercial-aircraft sector, whose orders rose 4.9%. Orders for motor vehicles increased by 0.5%.

Excluding the transportation segment, orders rose a smaller 0.4%.

While the increase in May is a positive sign, the manufacturing sector has clearly fallen off last year’s rapid pace. In the first five months of 2012, durable-good orders have fallen 5.7%, the worst performance since the end of the last recession."

http://www.marketwatch.com/story/us-orders-for-durable-goods-climb-in-may-2012-06-27

 

 

Pending home sales climb to two-year high in May

"Pending home sales climbed 5.9% in May, with an index reaching 101.1, the National Association of Realtors said Wednesday. The index matched the best level since the initially planned expiration of the home-buyer tax credit and was 13.3% above May 2011 levels."

http://www.marketwatch.com/story/pending-home-sales-climb-to-two-year-high-in-may-2012-06-27?link=MW_story_insert

Here is another proven 'conspiracy' moment related to the banking industry and it looks like Barclay was not the only one involved. Just another day for the world banking organizations. Of course no one is going to jail for this and it will probably be like many of the other articles that are in the MSM about the banks illegal actions, in the news for one day and then gone.

 

Bob Diamond forgoes bonus as Barclays fined for Libor manipulation

"Barclays took part in an international conspiracy that could have meant customers paid millions more than they should have to borrow money from banks.

The British and US authorities said they had found evidence Barclays had attempted to manipulate a key borrowing rate for years, meaning that home owners could have paid millions more in mortgage payments than they might otherwise have had to.

Traders at the bank were discovered to have engaged in regular attempts to determine the London Interbank Offered Rate (Libor) from as early as 2005.

The manipulation of Libor saw the bank make submissions to the setters of the rate that they knew to be wrong as they attempted to influence the level at which it was fixed.

Barclays also attempted to suppress Libor, which means that savers could have potentially lost out on millions in interest due to the rate being lower than it should otherwise have been."

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9359362/Bob-Diamond-forgoes-bonus-as-Barclays-fined-for-Libor-manipulation.html

Actually the two week total went up by 4,000, there was no decline.

 

U.S. jobless claims remain near 2012 high

Applications for benefits top 380,000 mark for fifth straight week

"Initial claims declined by 6,000 to a seasonally adjusted 386,000 in the week ended June 23, the Labor Department said. Economists surveyed by MarketWatch had projected they would fall slightly, to 385,000.

Yet claims from two weeks ago were revised up to 392,000 from an original reading of 387,000, based on more complete data collected at the state level."

http://www.marketwatch.com/story/us-jobless-claims-remain-near-2012-high-2012-06-28

 

 

Something tells me it will get deeper.

 

Britain's recession deeper than feared

"Britain's second recession in four years is deeper than originally feared as figures showed a sharper decline in the economy during the final quarter of last year."

http://www.telegraph.co.uk/finance/economics/9361353/Britains-recession-deeper-than-feared.html

 

Something tells me it will get deeper.

 

Britain's recession deeper than feared

"Britain's second recession in four years is deeper than originally feared as figures showed a sharper decline in the economy during the final quarter of last year."

http://www.urbanohio.com/forum2/index.php?action=post;topic=17905.3780;last_msg=628005

 

FINALLY, a reliable and unbiased source for your updates! ;)