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Wednesday Housing News: That's a wrap!

My last entry for 2005 is quite a mixed bag. Lots of stuff going on around the real estate world!

Home mortgages take a tumble. Even David Lereah is flat-out saying that it's a wrap.

But wait! According to the wise sage, housing prices will continue to appreciate in 2006, "due to favorable demographic and population trends." Hmmm...wonder what he means by that. It couldn't possibly be the great leap inward, could it? Y'know, one of the regions of the country where consumers are more concerned with cheap housing than environmental and energy efficiency?

These guys just don't know the meaning of the word "shame," do they? Trying to exacerbate a collapsing bubble market by pushing for construction in the middle of the country and claiming that we want cheapness and convenience over livability. Ok, maybe that last part's true, but I'm an idealist. Sue me.

Aid continues to pour in for Katrina victims. Throwing money at the catastrophe is needed, but it's got to be properly managed and disbursed if it's to have any real effect. We're talking in the tens of billions of dollars here, spread out over many years. After reading this story about what FEMA considers "widespread and significant" damage, I don't have a lot of hope. This sad tale doesn't help matters much either.

FEMA is completely overwhelmed, understaffed, incompetently managed, and cash poor. By that I mean that it's spent all its money on things like unnecessary trailers, contracting snafus, and so on.

Still, I have hope that 2006 will bring us better things. The pace of the reconstruction effort in the Gulf Coast will bring thousands of new jobs and new investment, and a more relaxed housing market will give buyers more chances to negotiate price without being forced into "creative" mortgages.

Actually, this promising news about increased consumer confidence tells us all we might need to know:

In the December Conference Board survey, consumers said they were more likely to buy a car and major appliances in the next six months than they did in November, but less likely to buy a home.

Whoops!

See you all in 2006!

Posted at 06:03 PM | TrackBack

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Housing News: Wind from the East

An interesting piece from Business Week via Yahoo about the the new innovations in Chinese architecture.

I've discussed the influence Chinese markets are having on the American economy before, specifically why John Snow is a cretin. It's fascinating to watch the nascent markets of China take on the construction craze with the same wild-eyed fervor we have.

I'm sure it would be a bitter pill to swallow, but perhaps they're taking some lessons from Japan on how to get out of a slump. What's chilling about that is that you could swap out "Japan" for "America," and that article would read no different than any recent domestic news. Money quote:

The Bank of Japan has kept its low interest-rate policy for four years to help spur a recovery after nearly 15 years of slow or no growth. Lower interest rates make it easier for businesses to borrow money to expand.

Sound at all familiar to you? I wonder how they're handling their spate of no-document, interest only loans. This may well be a portent of where our own economy is going, for good or ill, over the next few years.

Posted at 04:50 PM | TrackBack

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Architecture & Design: Inside the Glidehouse

The January '06 Wired had a fascinating article about architect Michelle Kaufmann and her trailblazing concepts of prefab architecture, including the Glidehouse.

The article itself isn't on the Web yet, but I definitely recommend checking out her work and what it can offer.

One of the problems modern homebuilders face is the simple lack of usable land for designing homes. People want their cake to eat and have--affordability, luxury, convenience, and usability all-in-one. Now that the market is beginning to flatten out, people are (hopefully) going to be less interested in McMansions and mini-castles, simply because they're out of their price range. Speaking only for myself, I don't care if my house rolled off a factory line or got built by a team of Albanian sheepherders, as long as it's a nice place to live.

One advantage that prefabbers can take hold of is that the Midwest housing boom is tailor-made for them (excuse the phrasing :)). Lots of available land, not many landmarks or much congestion to deal with. If buyers take more of a modernist view and push for something a little better than trailer parks or cookie-cutter sh%$tbox condos, the Glidehouse could be the wave of the future, both economically and aesthetically.

Worth pondering over, eh?

Posted at 11:08 PM | TrackBack

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Hurricane Housing: Holiday Gloom

I hope everyone out there had a safe and happy holiday, full of good cheer and things you'll get teased about thirty years down the line. ;)

Unfortunately, for many Americans, the holiday season is especially dark this year, as homeowners and families continue to negotiate the rebuilding of their lives after the onslaught of the hurricane triple-threat. Amazingly, there are stories of holiday cheer and perseverance out there. It's astonishing how resilient the human spirit is at times.

But there are just as many stories of infighting, bureaucracy, and delays plaguing the Katrina cleanup. It's the old struggle--you can do something slowly and meticulously, and have it cost more, or you can do it quickly and cheaply, and have to pay costs of other kinds down the road. Of course, given that the states who are paying for cleanup are suffering tremendous losses of economic revenue as it is, that money is not going to be recouped very easily, so they'll have to go back to the Feds and ask for help anyway. It's a tough call. Given how horribly mismanaged the government cleanup has been, most people will probably hire their own contracting companies.

Thankfully, some of that money is now going directly to the states, and is out of FEMA's control.

Speaking of money going to the states, your "Grinch Who Stole Christmas" nominee for the season is Sen. Ted Stevens (R-AK), who decided to play "Hide the salami" with home heating funds in order to get oil drilling in the Alaskan National Wildlife Reserve (ANWR) approved. He failed, so he's taking his ball and going home, with millions of dollars in home heating subsidies in tow. I mentioned this before, but like the White Stripes, it bears repeating.

In other words, Merry f&$!in' Christmas from Ted Stevens.

Posted at 04:38 PM | TrackBack

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Housing Bubble Vs. FEMAVille: Death Match Friday

There's a lot of interesting news about FEMA today, including the agency turning its aid disbursements into the equivalent of a loan application. Seriously...look at how they're making the decisions:

Under the new plan, evacuees will have to apply for FEMA's individual assistance program. FEMA will examine each applicant's income, expenses, damages and debt load.

Fabulous idea--let's have a bunch of people who've lost most or all of their identifying documentation try to apply for grants from an understaffed, overburdened, and horrifically mismanaged government agency that's relying on inexperienced call-center staffers and volunteers to process expansive (and expensive) claims. Hell, FEMA can't even draw maps right, and you want to trust them to handle loan assistance applications? Would you like fries with that?

Montana is suffering the twin terrors of sky-high heating prices and playing politics with the attempts to get more funding. Expect to see a lot of stories like this as the winter wears on.

Oh, hell--I just saw this: The bottom drops out of new home sales. Despite the attempts of the major media and the industry to minimize this, flippers, speculators, and adjustable-mortgage owners are going to be in for a very rough few years. Ben Jones speaks upon it.

The Real Estate Journal has a thorough overview of what high housing prices have brought us to. Money quote:

Many borrowers have embraced creative mortgage products, such as interest-only loans, mortgages with teaser rates of as low as 1% and "piggyback" loans aimed at buyers who don't have the money for a down payment. In the third quarter, borrowers could boost their purchasing power by 26% by taking out an interest-only mortgage, which allows a home buyer to put off repaying principal for several years, instead of a standard mortgage, according to Moody's Economy.com...But rising short-term interest rates have made many affordability mortgage products more expensive and the flow of new, creative mortgage products has begun to lose steam. On Tuesday, bank regulators proposed controls that would limit the mass marketing of some creative mortgage products.

It's about to become a buyer's market, if it hasn't already. Be prepared to negotiate with brokers, realtors, and agents from a greater position of strength than at any time in the past six or seven years. Start saving, refinance to a 30-year-fixed, and do all you can to get your monies in order. Come late 2006 or early 2007, you may find a much flatter market, and much better bargains if you have your ducks in a row.

Good luck, and Merry ChrismaHanaKwanzaYule to you all! :)

Posted at 06:13 PM | TrackBack

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Home Buying: The Great Leap Inward

Here's an interesting look at how nationwide shifts in population can change the boundaries of political power. What I find interesting about this is that it correlates perfectly with the housing boom refocusing on--wait for it--the Midwest.

The invisible hand at work, eh? As home prices just get too big in the blue coast states, people will push inward and buy up property in the flyover states, thus pushing prices up there too and causing the market appreciation boom to continue. The serpent devours its own tail, or as I once said, everything is connected.

Of course, once happy homebuyers realize that there isn't a heck of a lot to do in the Sun Belt and Rust Belt, and that it's a two-hour drive to the nearest bar, that triple-digit appreciation may not look so sexy. :)

The Senate has approved $29 billion in hurricane relief. As the article points out, that's a minor dent in the scope of the disaster, but any dent is better than none. The money quote:

Most of the hurricane aid - $24 billion - has already been approved by Congress as part of a federal Disaster Relief Fund. The money now will be diverted from the fund, overseen by the Federal Emergency Management Agency, and sent directly to Gulf Coast states and victims.

You catch that? FEMA has done such an abominably bad job managing the recovery that the Senate is taking the money and giving it right to the states.

Waiter, I'll take a bitch slap and a Brownie to go. By the way, you're doing a heckuva job. ;)

Posted at 05:50 PM | TrackBack

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Wednesday Housing News: Housing Bubble Beat Down

An array of government agencies and associations have issued joint "guidance" on the dangers of "creative mortgages". Here's the press statement from The National Credit Union Association, and another headed up by the Office of the Comptroller of the Currency.

My first reaction was "Where the %$#! were you guys two years ago when the bubble was first blossoming?" Greenspan was cutting rates like the Iron Chef to spur the economy through home buying and price appreciation, and now it's a problem?

Sigh. Day late, dollar short, closing the barn door after the tornado hits, pick your cliche. Still, at least they're actually paying attention now.

No doubt the OCC realizes that its mandate to raise minimum credit card payments will probably cause many stretched homeowners to default on at least one payment area, so they're trying to soften the blow by ending the reliance on no-document loans and ARMs to keep the market propped up. But, as a certain f$!ked borrower points out, as long as there's money to be made by pushing those loans and brokers earning their 6 percent, the increasing creativity of mortgages will continue.

This's another reason why I champion discount brokers and Internet sellers. Not only do we cut out the middleman, but we save you more money on the front and back end. Brokers don't pressure you into making a deal because they like you...it's because they want their pound of flesh. And in this market, it's Venice and everyone is Shylock.

Posted at 04:51 PM | TrackBack

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Housing Bubble: Crunching the Numbers

Business Week gives us a view of the Fed's rate-tightening moves and what that can mean for housing. The "Conflicting signals" paragraph is of particular interest to me:

There has been a drop in the median new home price over the last three months, which may be more meaningful. The weakness that we're seeing seems concentrated in high-end homes -- which we had expected in a period of rising interest rates. Mortgage rates are rising, so it's expensive to trade up. But with rates still far below their historical average, first-time homebuyers continue trying to get in before they rise further. The result is a shift in the mix of home sales toward smaller homes.

What's that about mixed messages? And the shift towards the trend towards smaller houses?

What's probably going to end up happening is that buyers who continually push for larger homes will find themselves dangerously overextended, particularly if they're first-time buyers, and even more so if they're using "creative loans" to get in on the house in question. Although I'm generally disdainful of the phrase "living within one's means," this is one situation where it applies. Does a family of three or four need a house that can comfortably seat seven or eight? :)

One of my trusted sources clued me in to a case of a large banking concern's mortgage subsidiary getting customer data lost. Even though they claim it's been found and untampered, I'd sure as hell be hesitant about dealing with these guys again. And note that this news isn't anywhere on their front page, like it should be. Granted, if I worked for this company, I'd be embarrassed about that, but there's such a thing as "sucking it up." Identity theft is a serious concern of everyone, and mortgage applications are a key way to provide enterprising thieves with all the info they need to make your life a living hell.

Disclaimer: Mortgage.com and Housing.com? Not related. That's probably obvious, but it never hurts to restate it.

Posted at 03:54 PM | TrackBack

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Friday Housing News

Forbes has a list of the most expensive home sales for 2005. As you might expect, there are a lot of big name players on the list, but not as many as you'd expect. It's hilarious to see the commenters talk about throwing around sums in the eight-digit range and then say "It's become a buyer's market." The (ahem) money quote:

Though most of the country is watching where mortgage rates are heading, and many experts predict a slowdown in the real-estate market, the super-rich don't operate the way the rest of us do. They are not hindered by high interest rates, since all-cash deals are the norm.

I wouldn't exactly use this as a bellwether for how the market is going to go, would you?

For an idea of how things fare at the other end of the spectrum, here's a look at the bidding war between Ole Miss and Louisiana for Katrina aid. To give you some perspective, you'd have to sell twenty of Rupert Murdoch's new triplex apartment before you could even put a dent in the amount needed to fix the Gulf Coast. At least the casinos are getting their cut, eh?

Speaking of getting one's cut, courtesy of Captain Obvious and The Unsubtle Rangers, did you know that the hot housing market led to increased mortgage fraud?

Shocked, SHOCKED, I tell you. ;)

Posted at 10:13 PM | TrackBack

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Wednesday Housing News: The High Cost of High Price

There's more news that high rental prices are pushing affordable housing out of reach. The article cites the difficulty of Hurricane Katrina (and Rita, AND Wilma) evacuees to find housing. But as I've mentioned before, and will do so again, the housing is out there....it's just bureaucracy and mismanagement getting in the way.

Even without the Herculean task of sheltering and housing the thousands displaced by the hurricanes, the luxury housing market has put a lot of people on the defensive when it comes to maintaining their standard of living. Here's another take on the difficulties facing affordable housing tenants these days.

Some markets are responding to this by pushing for more workforce housing. Other low-income residents chose to join the "ownership society" on their own terms. Great story, this. I'm definitely going to follow it and share it with my wonderful readership.

Speaking of which, I passed 100 posts a while back and didn't even realize it. :) I've really been enjoying chronicling the ups and downs of the housing industry, as it's something that requires a lot of care and constant attention. Kind of like having a supermodel for a wife, except without the supermodel. :)

Posted at 04:45 PM | TrackBack

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Housing News: Ex Miscellanea

I'm genuinely beginning to think that the Fed governors have fetishes for self-mutilation, given their latest cutting spree. All this arcane buzzing about "measured growth" just seems to be code for "Ok, we made it through Katrina and the high gas prices, so let's go spending again!"

Here's a hint...you can't get blood from a stone, and all the rate cutting in the world isn't going to entice consumers to buy or mortgage more if they're already tapped out.

Our "CSI: Housing Market" team has an interesting look at the downside of the Las Vegas housing boom. (From Boston.com--free registration required.) It really gives you a perfect view of the mindset of the housing market. What's more important--short-term growth or long-term sustainability? More simply, you can build all the houses and offices you want, but if there's no one around who can work in them, what good does it do?

If I were Grissom, I'd have some kind of Zen quote about all this, but I'm not, so I don't. ;)

Here's another winner from the Boston Globe--FEMA aid going to the rich primarily. It just doesn't end with these guys, does it? Every single day brings a new story of how they can't get even the smallest task right. As I've pondered before, I wonder if the intent of these continual screwups is to get people so disabused of the notion of gov't help that they'll willingly ask to "drown it in the bathtub," Grover Norquist-style. Unfortunately, that bathtub already drowned right into the Ninth Ward of New Orleans, and big business alone won't be able to clean it.

None dare call it conspiracy, as they say. (Hey, maybe that's my Grissom quote!)

Finally, here's a fantastic ad from Craig and his list that I have to share: No experience required!

The blatant misspelling of "buy" totally makes it for me, but this whole thing is just like a Branch Davidian meeting invite coupled with a Royal Prestige seminar. Where's my free toaster? I'd love to find someone who went to this event and ask them what they thought of it. I bet I'd get a lot of Zen quotes out of that. ;)

Posted at 07:44 PM | TrackBack

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Sunday Special: FEMAVille Update

As the deadline to leave the Katrina hotels extends a little while longer, the New York Times has a passionate editorial on why we can't let New Orleans die.

People talk about how illogical it is to live in a city that's so vulnerable to flooding and hurricanes. "Why live somewhere that's so dangerous?" they ask. Well, I got news for ya--it's dangerous everywhere in the world. Fires, floods, earthquakes, riots, gang violence--no matter where you go, every city in the world has an Achilles heel to it. Heck, even the flyover states keep it interesting with crystal meth labs and tornadoes. ;)

New Orleans has given our country immeasurable history, culture, entertainment, and life. Imagine an America without Mardi Gras, or Jazzfest, or the French Quarter. Can you? If so, you're a colder man than I, Gunga Din.

Of course, if many of the developers jockeying for reconstruction rights get their way, the whole Gulf Coast may end up not resembling anything like its old self, if this article is any indication. Money quote:

"A casino owner wants people to stay on the property," said Bernie Burkholder, president and chief executive of the Treasure Bay Casino, in Biloxi.

"As running-dog capitalist casino owners, we need to understand that the community fits together," he added, "but we need an economic unit that will hold the customer."

Don't you remember when fat cats at least made the effort to hide their ulterior motives? They're not even trying anymore.

(As an aside, the Times seems to be working supremely hard when it comes to FEMA/Gulf Coast coverage. If you can ignore a little name like Judy Miller, the Gray Lady could almost seem like its old self.)

Here's some good news from the Louisiana Weekly regarding the potential cutting of debt to FEMA. I swear, after the monumental cock-ups FEMA committed beginning with Mike Brown's heckuva job, they better take every opportunity imaginable to ease the burden on state and local officials.

It'll be years before anyone takes FEMA seriously as a useful agency again, but it shouldn't take years to pay the debt owed to it for something that wasn't entirely the state gov't's fault. If FEMA came calling for debt payments after some of their screwups, and I were Mary Blanco, I'd give secession a second look.

Posted at 01:20 AM | TrackBack

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Wednesday Housing News: Workforce Housing

A possible solution to the looming housing market crash rests in markets' renewed attention to workforce housing, the new buzzword for developing homes and condos for markets that aren't "affordable" (poor) or "luxury" (rich). In other words, the middle class.

Truly, the innovation of the real estate market is without peer. I might cry.

Still, it's well past due that analysts, realtors, and pundits started paying attention to the needs of people who make too much for welfare, but too little for jumbo mortgages. Washington, D.C. looks like it's getting the message The Oregonian has a similar view. Let's hope these initiatives represent the wave of the future, or to use another cliche', they aren't too little, too late.

Because you know you love it, here's a particularly brutal stab at FEMA's incompetence to send you on your way. Money quote:

FEMA could have called in its own paper pushers from around the country for this task. For some bureaucrats, it could have been a first experience with actually helping someone else directly.

Oh, SNAP.

Posted at 08:05 PM | TrackBack

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Housing Bubble: Time Bomb

The Anderson Forecast issued its economic predictions for 2006 today, leading to some very interesting--and very different--reports.

Take these two stories about the predictions for housing, one from AP and one from Reuters. The AP report emphasizes the sheer number of jobs that may be lost when the housing market stops its pronounced deceleration and comes to a standstill. The Reuters report, by contrast, notes that a weak housing market by itself won't be enough to get us tipped into a recession. Same data, same guys cited, but two very different conclusions. :)

Way I see it, they're both right. In an era where we're supposed to be ecstatic over an anemic 215,000 jobs being added to the November payrolls (and much of that from the Katrina disaster cleanup), the loss of 800,000 jobs is not something our paper-thin economy can absorb easily. But simply having slow housing markets isn't the whole picture. The answer is here, specifically this line: mostly driven by a robust rebound in home refinancing volume even as interest rates rose.

That's the key. Homeowners are refinancing in bigger and bigger numbers, using riskier and riskier mortgages, and having fewer and fewer dollars available. And what's gonna happen when they can't pay those nasty ARM loans? Well, the Washington Post calls it mortgage stress. I like to think of another word or two, both of which start with the letter "F."

Posted at 07:35 PM | TrackBack

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FEMAVille Tales: More Mistakes, More Mulligans

Proving that Mike "Fashion God" Brown's priorities were no isolated incident, MSNBC has the sad tale of FEMA's internal discussions over Katrina. I'm glad to see the major media picking up on this story and carrying it onward. We can't let this fall out of the proverbial consciousness. This isn't something folks can just blow off like an ill wind.

The article mentions Chertoff's desire to reorganize FEMA. The Baltimore Sun has more on that. Of course, if Chertoff's boss hadn't deemphasized FEMA and made it the gofer boy of DHS, they might have had the resources necessary to provide a better response to Katrina. Money quote:

Also yesterday, the former 9/11 commission issued the Homeland Security Department a grade of D, noting that the department has failed to produce an assessment of the top threats facing the nation and the areas of the country that are most vulnerable to an attack from terrorists or nature, even though Congress required it to do so last summer. Asked about the grade, Chertoff said, "I'm not sure what they're referring to."

Oy gevalt. If I had a boss this dumb, I'd be getting beefed-up security too. In all seriousness, the level of discontent and hatred of FEMA is reaching epic proportions. You can't blame God or Nature for the hurricane itself, but it's damn sure easy to blame FEMA for its failure to do its job with any level of professionalism or concern for those who they were supposed to be helping.

On a more positive note, MSNBC reports that the Feddie Gov is paying Katrina mortgages. Here's the official announcement from HUD. I don't find the requirements overly stringent, and it's much less of a sting than private lenders demanding that the hurricane survivors start paying on loans for destroyed houses. Intellectually, I know it's necessary for banks to maintain their capital, but emotionally, it's just foul. If we're gonna spend $200 million, let's use it to put people back in homes, not in trailer parks or Motel 6's.

Posted at 06:27 PM | TrackBack

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Mortgage Rates: Greenspan Flips Again

According to the Big Giant Fed Head, America's deficit is reaching unsustainable levels. Well, there's an astute and timely observation if I've ever seen one. Maybe if he hadn't been cutting interest rates like he was Edward Scissorhands, there wouldn't be so much cheap cash on the market.

Don't get me wrong--I'm happy to see Greenspan stop drinking the Kool-Aid and demonstrate some economic sense. I just wonder if it's too little, too late. And more importantly, will Bernanke pay heed?

I drove by a luxury apartment complex on Wisconsin Avenue in D.C. yesterday, and found that it was now a luxury condo complex. Now, I've been in this place. I've visited it numerous times. You can't tell me that those cramped 1-bedroom apartments are suddenly going to morph into $500,000 luxury condos because they're under new management. It looks like we've reached the bottom of the barrel in the price appreciation sweepstakes. The folks over at Patrick.net have a particularly brutal assessment of the condo conversion craze.

The inward turn of the housing boom continues. Bankrate.com quotes a report saying that Arizona is the leading market for home appreciation. ("I like you, house! I really do!") The report cites Indiana as one of the slowest states for price appreciation, which conveniently makes it the nation's most affordable housing market. I wonder if they'll get Daylight Savings Time once their prices start to climb...

It's interesting that analysts are forecasting a dip into the ARM realm as the future of Fannie and Freddie. Now that the housing market is stretched to the limit, lenders will be pushing more and more consumers to take on riskier mortgage products, and conveniently enough, Bush has been calling for more divestment of the mortgage giants' assets. The invisible hand at work...what these guys don't reckon with is that people are becoming more and more cognizant of the dangers of ARMs, and have less and less desire to risk their financial futures in a fickle market.

Here's a chilling Doomsday prediction as to what may happen if we don't stop. Also the source of the best story of the week.

Using your credit card to pay your mortgage? I liked that a lot better when we called it "Robbing Peter to pay Paul." :)

Posted at 09:35 PM | TrackBack

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