Keeping You Current November 2008

keeping you current

By Madeleine Romanello

Mortgage Rates – 30 year fixed

Before

May 22

During

Result

Sept 26

Associated Press “By purchasing mortgages en masse from banks and other lenders, the U.S. Treasury will have more power to stop the cascade of foreclosures and help more Americans keep their homes, which will act as a brake on falling prices.”

Source: AP 9/22/08

Wall Street Journal "You've got the entire United States government focused on fixing housing. It's not a good time to bet against that effort… We could see some positive data points in the next few months. The world's view on housing in the United States is going to start to turn. " - Paul Puryear, a home-building analyst at Raymond James & Associates

Source: WSJ 9/24/08

Source: Tim Iacono, Seeking Alpha 9/24/08

Home Depot “We don’t think we’re at the bottom yet, but we think you can see it from here.” - Home Depot Inc. CEO Frank Blake

Source: WSJ 9/03/08

Wall Street Journal “Wellesley College economist Karl Case, the ‘Case’ in the widely followed S&P/CaseShiller index of U.S. housing prices, says he thinks that the housing market may be near a bottom.”

Source: WSJ 9/12/08

Inventory “Total housing inventory at the end of August fell 7.0 percent to 4.26 million existing homes available for sale, which represents a 10.4-month supply at the current sales pace, down from a revised 10.9-month supply in July.”

- NAR

Source: Global Insight 9/08/08

Source: Global Insight 9/08/08

Source: ForeclosurePulse.com

Associated Press “As the economy falters and home prices keep falling, concern is building about a second wave of mortgage defaults flooding the market through 2010.”

Source: AP 9/05/08

Mortgage Resets

Foreclosures

Source: Credit Suisse

Fitch Report “We expect 90-day plus delinquencies to more than double after recast for 20042007 vintage loans. We also estimate that the potential average payment increase on the re-casting loans to be 63 percent, representing on average an additional $1,053 due each month.”

Source: www.fitchratings.com/ 09/22/08

Bloomberg News “The biggest jump in the London interbank lending rate in at least seven years could wreak further havoc on the U.S. housing market. About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California….. Many Libor-linked U.S. mortgages don't limit the size of a loan's first adjustment, with caps of 2 percent on subsequent changes. That means a monthly mortgage bill could double or even triple when it first resets.” Source: Bloomberg News 9/16/08 and WSJ 9/27/08

Prices Index

Year over Year

OFHEO Case Shiller NAR IAS360 Census Bureau

(New

Homes) Source: Macro Markets, IAS, OFHEO, Census Bureau, NAR

-5.3 -15.8 -9.5 -11.4 -6.1

Real Trends “The more prices have declined the faster sales are recovering. There is a key point here. The longer that sellers and real estate sales professionals put off pricing homes at today’s market the longer the period of time it will take for a market to recover. Listings that are overpriced result in the continuation of a stagnant market.” - Steve Murray Source: Real Trends 9/08

Sales up 4.9% in the West

List Prices “Asking home prices resumed their downward trending in August. The data, an early indicator of actual selling prices, suggests that sellers are again dropping their asking prices. Prices of properties listed for-sale fell in 20 of the 25 major MSAs tracked in the report.” - Report by research firm Altos Research and market analysis specialist Real IQ.

Source: Altos Research & Real IQ 9/04/08

JP Morgan “JP Morgan said it expects home prices nationwide to fall another 8 percent from current levels.”

Source: Housing Wire 9/26/08

Wall Street Journal “Mr. Zandi says that while the takeover of the mortgage giants won't immediately stop the home-price slide, it should limit price declines to 5% to 10% over the next year, rather than the doomsday scenario of additional declines of 15% to 20% that some economists were predicting if Fannie and Freddie failed or pulled back dramatically.” Source: WSJ 9/08/08

Freddie Mac “U.S. home prices probably will tumble through 2010, Freddie Mac said in a forecast yesterday. The S&P/Case Shiller Home Price Index likely will drop 13 percent this year, 4.3 percent next year, and 2 percent in 2010.” Source: Bloomberg News 9/16/08

Radar Logic “The curve suggests weakness through 2009, stability in 2010, and a recovery in 2011. This is in contrast to some industry economists who are calling for a bottom in 2009.” Radar Logic publishes price-per-square-foot data used as the basis for the Residential Property Index, or RPX market, used by most hedge funds and institutional investors to hedge their mortgage-related bets. The 2011 estimate is not the company’s own, but is based on a forward curve produced from futures trading in the RPX market.

Source: www.radarlogic.com/productsservices_research.html 9/27/08

% Appreciation in 5 Year Increments Source: Brookings Papers 9/08

Leadership Conference Back to basics? Be careful! Previous success was at the time of an uneducated consumer.

We must do things differently!

KCM “At its most volatile time in US history, the US housing market demands something more from its experienced industry professionals; a closer look.” - Integrated Asset Services, LLC

Any questions? Contact me at [email protected] We’ll bend over backwards to try and help!