Mortgage and Housing at Seeking Alpha

• Reality Check for Bank Investors, Mortgage Investors and Home Buyers
  Reggie Middleton submits:

  Last week I posted a Bloomberg news article supporting my suspicions that investors are putting bad loans back to the banks at an increasing rate. I used JP Morgan (JPM) as a specific example - Banks Swallow Another $30 billion or So in More Losses as Their Share Prices Surge (Again).

  A few commenters on syndicated sites appeared to have really underestimated the significance of this development. In the article, it is alleged that Freddie (FRE) and Fannie (FNM) are forcing banks to eat up to $30 billion in soured mortgages under the warranties and representations clauses of the sales contract. To highlight the significance of this development, let me remind all that Fannie and Freddie are benchmarks for mortgage lending in the US.

  
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• E-House Holdings: Beats Earnings Estimates, Raises Guidance
  Trader Mark submits:

  E-House Holdings (EJ), despite stellar earnings, seemed to go into a tailspin a few months ago due to fears of a percolating real estate bubble in parts of China. While the pace of news stories on that front has only increased of late (NYT - Skyrocketing Prices May Point to Real Estate Bubble in China) the stock has rebounded with the return of speculators into the US-listed Chinese small and mid cap stocks the past few weeks. It certainly seems that, based on these corporate results, the stock was unfairly hit the past few months, once more showing the market is less about reality and more about perception of reality. Companies in far worse fundamental shape have been skyrocketing for months without a care in the world. (Click to enlarge)

  

  Earnings reports for both E-House, and its subsidiary China Real Estate Information (CRIC) were released yesterday and were quite good. The full report for E-House is available here.

  
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• MBA Application Survey for March 10, 2010 Shows Limited Affects of Quantitative Easing
  Sold At The Top submits:

  The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.

  The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

  
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• Sources of Leverage in a Rational Housing Market
  Casey B. Mulligan submits:

  Houses are valuable because people like to live in them, or at least (as with many second homes) know that space is available for them to live in. The fundamental value-added of a house over, say a year's time frame, therefore depends on how effectively a particular structure satisfies that demand, as compared to alternative structures that existed that year.
  
  There are two fundamental, yet universally ignored, reasons why the purchase price of a house might vary more than the flow of value-added.

  
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• Barney Frank on Second Lien Mortgages: Time to Shoot the Messenger?
  Bruce Krasting submits:

  Monday, Barney Frank came out with a letter addressed to some of the big banks putting some muscle on them. He wants them to write off their second lien mortgages. He thinks the seconds are junk. His words:

  Large numbers of these second liens have no real economic value.

  
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• China's Housing Bubble Spells Trouble
  Rob Abbanat submits:

  I am loath to rent. I just can’t stomach the idea of paying for someone else’s mortgage. When I first arrived in China back in 2006, I fully intended to buy property once I got the lay of the land. But when I started looking, I quickly realized that residential real estate was pricey, even by Boston standards.

  And since then, it has only gone up. Conversely, rents are very reasonable and have increased only modestly. Renting here always seems to make more sense than buying. Anyway, after nearly four years in China, I spent the last two weeks looking for a new apartment to rent in a better part of town, which has opened my eyes to what appears to be a frighteningly large bubble. While I haven’t done any formal research, there is a tower of anecdotal evidence that suggests that the current market prices of residential real estate are unsustainably high, at least in Shanghai and other first-tier cities.

  
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• Addressing Second Lien Writedowns
  Rortybomb submits:

  R.A. (Ryan Avent!) writes in response to my previous entry:

  [Mike's thesis] places the government in a bind. If it forces banks to write down worthless second mortgages to clear the way for new modifications, then the banks suddenly look shaky again. If it doesn’t, then lots of homeowners are stuck in loans they can’t modify and may not be able to afford.

  
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• Analyzing the Real Forces Behind Current Housing Supply and Demand
  Jeff Miller submits:

  OK, here I go with another educational concept that has no immediate and actionable investment advice. I heard a couple of uninformed comments about housing. One was that the market needed to push prices down so that it would clear. This reflects ignorance. Markets clear at the current price.

  The other was about shadow supply. Let's take a closer look.

  
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• Two Years Until Market-Clearing Prices Hit Housing - Dan Alpert
  Edward Harrison submits:

  Ann Lee and Dan Alpert joined Bloomberg’s Pimm Fox Tuesday to talk about the housing market recovery. Lee, a professor of finance at New York University, was sceptical that population growth predicts any substantial increase in housing transactions and prices simply due to the continued pressure on wages and disposable income. and Dan Alpert, managing director at Westwood Capital LLC, said we are not looking at market-clearing prices in the near-term because home ownership percentages need to drop. This process will take two to two and a half years in his view.

  Short clip below.

  
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• Did Anticipated Government Subsidies to the Mortgage Market Magnify the Housing Price Cycle?
  Casey B. Mulligan submits:

  In 2008 I was of the opinion that easy monetary policy cannot explain much of the housing boom. When Professors Krugman and Delong came to agree with me, I immediately realized that I was likely wrong.

  Here was my reasoning in 2008:

  
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