The Housing Crisis: Round Two (Up Dated)

(10 am. – promoted by ek hornbeck)

The housing bubble and mortgage crisis is far from ending. The mess that has been left by the Federal Reserve and the Treasury Department refusal to regulate the banking policy is now hitting homeowners wit good credit

Jan. 4 (Bloomberg) — Homeowners with the best credit are the next big risk for the U.S. housing market.

An increase in mortgage defaults among prime borrowers in 2009 is likely to accelerate this year, slowing the real estate recovery even as Americans become more optimistic about the economy, said Robert Shiller and Karl Case, the economists who created the S&P/Case-Shiller Home Price Index.

“There will be continuing foreclosures, and not just subprime, it will be prime mortgages,” Shiller, a professor at Yale University, said in an interview. “This is creating a huge shadow inventory of homes that are still owned, but they’re going to be on the market in the next year or so.”

The number of prime mortgages overdue by at least 60 days more than doubled in the third quarter from a year earlier to 838,000, according to a Dec. 21 report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Unemployed homeowners struggling to pay their bills will default on their home loans and increase foreclosures, Shiller and Wellesley College’s Case said.

Employers have cut more than 7.2 million jobs in the last two years, the biggest employment loss since the Great Depression. Measured annually, the U.S. jobless rate probably will average 10 percent in 2010, according to the median estimates of economists surveyed by Bloomberg. That would be the highest rate in government records dating to 1948, after rising to a 26-year high of 9.3 percent last year.

This is just really bad

Silicon Valley ‘Bloodbath’ Leaves Entire Office Buildings Empty

Jan. 5 (Bloomberg) — Silicon Valley is beset by the biggest office property glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents.

More than 43 million square feet (4 million square meters) — the equivalent of 15 Empire State Buildings — stood vacant at the end of the third quarter, the most in almost five years, according to CB Richard Ellis Group Inc. San Jose, Sunnyvale and Palo Alto have 11 empty office buildings with about 3 million square feet of the best quality space.

“There is a bubble bursting in much the same way as the residential market burst,” said Jon Haveman, principal at Beacon Economics, a consulting firm in San Rafael, California. “None of those towers will fill up anytime soon.”

Unemployment in the San Jose-Sunnyvale-Santa Clara metro area that includes Silicon Valley was 11.8 percent in November, down from the August record of 12.1 percent, according to California’s Employment Development Department. Applied Materials Inc. and Sun Microsystems Inc. in Santa Clara and Adobe Systems Inc. in San Jose announced more than 5,000 job cuts since October amid falling sales of computer chips, software and equipment.

Commercial property foreclosures will at least double in 2010 and job growth won’t return for two years after that, held back by U.S. consumers who are saving more and “getting back in line with sustainable spending habits,” Haveman said.

Maybe the Obama Economic advisors had better wake up and listen to people like Krugman, Stiglitz anf Roubini.

This Year’s Housing Crisis

The financial crisis and Great Recession have their roots in the housing bust. When it comes, a lasting recovery will be evident in a housing rebound. Unfortunately, housing appears to be weakening anew.

Figures released last week show that after four months of gains, home prices flattened in October. At that time, low mortgage rates (courtesy of the Federal Reserve) and a home buyer’s tax credit (courtesy of Congress) were fueling sales. That should have propped up prices. But it was not enough to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes – about a seven-month supply.

The situation, we fear, will only get worse in months to come. Rates already are starting to rise as lenders brace for the Fed to curtail support for mortgage lending as early as the end of March. The home buyer’s tax credit is scheduled to expire at the end of April. And a new flood of foreclosed homes is ready to hit the market.

It is increasingly clear that the Obama administration’s anti-foreclosure effort – which pressed lenders to reduce interest rates – isn’t doing nearly enough. High unemployment rates also mean that many borrowers who did qualify for aid have been unable to keep up with even reduced monthly payments.

I thought Bernanke was an expert on the Great Recession. So far he and Geithner are ignoring what needs to be done. Those Senator that have a hold on Bernanke’s re-appointment as Fed chief need to stick to their guns and tank his nomination. Send Obama a message that he is off the track with his economic policies and his advisors.

Up Dated 18:46 One more thing to ice the cake for the banks and screw Main St.

Bankers Get $4 Trillion Gift From Barney Frank

Dec. 30 (Bloomberg) — To close out 2009, I decided to do something I bet no member of Congress has done — actually read from cover to cover one of the pieces of sweeping legislation bouncing around Capitol Hill.

Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of Financial Services Committee Chairman Barney Frank, the House bill is meant to address everything from too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from greedy lenders.

I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the “Wall Street Reform and Consumer Protection Act” is a real slog. And yes, I plowed through all those pages. (Memo to Chairman Frank: “ystem” at line 14, page 258 is missing the first “s”.)

The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At least, that is, if you are a taxpayer hoping the bailout train is coming to a halt.

If you’re a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue banks and Wall Street if the need arises.

Nuggets Gleaned

Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork:

— For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.

— Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.

— Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.

Thanks, Barney