Mortgage and Housing at Seeking Alpha

• Did Economists Miss the Housing Problem?
  

  A reporter called Tuesday for a retrospective on my forecast of a year ago. I groaned, thinking the headline would be "Gotcha!" but the actual quotes he had weren't so bad. Apparently I said that we had overbuilt housing and that it would take a couple of years at least to work off the excess supply. Boy, that sounds right.

  Confirming that is an interesting article from the Wall Street Journal's Real Time Economics which says in 2005 there was a burst of stories about a housing bubble. Here's their chart, based on 50 major daily newspapers and how often stories refer to a housing or real estate bubble. (Hat tip to Arnold Kling at EconLog.)

  
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• More 'Hope for Homeowners'? GSEs Suspend Foreclosures into January 2009
  Anthony M. Freed submits:

  More “Hope for Homeowners” facing foreclosure, or just more hot-air from Washington, DOA?  Well it appears that Fannie Mae (FNM) and Freddie Mac (FRE) - the semi-defunct, quasi-government holders of trillions in mortgage debt announced yesterday, November 20, 2008, that they will suspend foreclosure proceedings into January 2009, obviously the very, very least they could do. 

  The suspension will affect as many as 16,000 families facing a Holiday heave-ho.

  
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• O.C. Housing Market: Sales Are Booming, Prices Are Not
  

  The Orange County residential real estate market—which we semi-obsess over around here because it’s so close to ground zero of the real estate crunch, and because the Orange County Register helpfully publishes copious amounts of data about it—keeps bouncing back. Home sales rose by 66.6% last month from a year ago. That compares to a 62.3% rise in September, and a 18.7% rise the month before that. Sales have now been running at pre-crackup levels for four straight months. Take a look:

  

  
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• Home Buyers in Southern California Ignore Bad Financial News
  Tim Plaehn submits:

  October home sales data is starting to come in for the California markets and the positive trends are continuing. I had read several articles predicting that home sale would stall as buyers' fear was incited by the stock market crash.

  Southland home sales up, prices down; foreclosures now half the market.

  
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• Housing Market Forecast: Storm to Continue
  Money Morning submits:

  By Don Miller

  The U.S. housing market is already being pounded by the “perfect storm.” And the outlook for the New Year is for the stormy weather to continue – and probably to get worse.

  
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• Is the Real Estate Plunge Really That Shocking?
  IndexUniverse submits:

  By Jim Wiandt

  With the Dow down 40% this year is it really a surprise that the driver of this downturn, real estate, could end up down 30%?

  
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• Futures Show Home Prices Continuing To Plummet
  IndexUniverse submits:

  By Matthew Hougan

  I spent some time looking at the Chicago Mercantile Exchange's housing futures this week.  The futures are tied to the S&P Case-Shiller Home Price Indexes, and are the only liquid way to bet on where house prices are heading.

  
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• Homebuilder Confidence Hits Record Low: What This Means for Investors
  

  The National Association of Homebuilders released their survey asking homebuilders for their level of confidence in a near term recovery of the housing market. As you might imagine, the results were not good. In fact, the survey which has been conducted regularly since 1985 reflected the lowest level of confidence that it has ever recorded. During the most recent quarter, the Associated Press reports, fully 40% of all homes sold were bank sales of foreclosed properties. This contributed to a 9% decline in the median price of all homes sold during the period.

  What does this mean for the average American? If you own a house, it is probably worth less than it was a year ago. If you are planning on staying in the home, this isn’t a big deal. If you’re planning to sell, it may mean that you have much less equity, if any, than you planned. If you’re in the market to buy a house, you are negotiating from a position of strength, especially if you are considering a bank-owned property. For others, it means that we can expect the homebuilder industry to be the next in line to ask for a government bailout.

  
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• Why Housing Dragged Down Stocks
  Casey B. Mulligan submits:
  The housing crash is one of the fundamentals our economy inherits from the past. This is boom time for the nonresidential sector because, after a long wait, the housing sector no longer absorbs so many resources. If you are young with new business ideas -- good news: you no longer have to compete with the housing sector for funding.

  
  Although business capital and GDP will grow (my detailed predictions are here), old capital has to compete with the new projects. That's part of why the stock market falls when we learn that housing investment is lower than expected. The chart below (click to enlarge) is from my NBER wp "Market Responses to the Panic of 2008" showing how housing investment appears to discourage non-residential investment.

  
  
  
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• An Optimum Government Policy to Aid the Financial Crisis
  Harry Long submits:

  What would an optimum government policy for helping the financial crisis look like? On each side of the political spectrum, we can all agree that it should be transparent, targeted, provide patient capital to the financial markets, help with deleveraging, and minimize government payouts.

  The number one thing the government would need to do is create market incentives for investors to provide patient capital to the debt market. Otherwise, most investors may keep their wallets zipped.

  
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