The Daily Soak - November 24

NAR: "Absurd Cheerleaders & Idiot Naifs"

That's the spin from the New York Times chief financial correspondent, Floyd Norris, following the National Association of Realtors' release of regional home sales data for the month of October. As usual, the data varies greatly by region, but the West posted the most head-turning double-digit gains and losses: Sales up 33%, Prices down 27%. In the release, NAR added one footnote regarding falling prices: “There remains a significant downward distortion in the current price from a large number of distress sales at discounted prices." To which, one rather astute blogger replied, "Funny, I do not seem to recall NAR warning about upward distortions of prices due to the combination of absurdly easy credit, ultra-low rates, and the appraisal fraud some of their membership helped to promote. That the NAR refuses to acknowledge this only further reinforces their image as absurd cheerleaders and idiot naifs. They have a significant degree of culpability in the entire housing debacle."



Now Homebuilders Want To Bask In The Bailout Love

The Wall Street Journal notes the Big 3 automakers left Capitol Hill empty-handed last week, but that hasn't deterred the nation's largest home builders from queuing up for a $250 billion federal bailout bonanza they're calling, "Fix Housing First." While it would fit nicely on a bumper sticker, the Journal notes the program "strikes an all-too-familiar refrain of 'build more homes.' Housing economist Thomas Lawler implores builders to "stop building." He and others argue that effectively setting a floor for home prices will prolong the pain because it will keep supply and demand out of sync." Harvard economist Edward Glaeser goes one step further, "The government does not have the tools to rewrite the laws of supply and demand. By artificially increasing prices, we are encouraging more building."



"And You Think Housing Is Bad Now..."

Should have been the theme of the National Economists Club meeting in Washington yesterday. Some of the country's best-known economists shared the following eye-opening bullet points: 1.) There are now 12 million homes in the United States with a loan-to-value ratio greater than 100 percent. That’s one mortgage in four. The aggregate amount of that is some $2 trillion...2.) As of September 30, 7.5 million mortgages, or 18 percent of all properties with a mortgage, had negative equity...3.) If home prices fall another 10 to 15 percent, as measured by the Case/Shiller Home Price Index, then four out of every 10 mortgages in the U.S. could be underwater, and finally 4.) The next problem is the $60 billion of adjustable-rate Alt-A mortgages, which fall between sub-prime and prime loans. Millions of these loans are scheduled to reset next year to higher interest rates.