Mortgage, loan and property. What is a mortgage?


A mortgage is putting a property as a guarantee to a lender as a security for a mortgage loan.

While a mortgage in itself is not a liability or a dept, it is evidence of a debt. It is a transfer of an interest in property, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the property when the terms of the mortgage have been satisfied or concluded.

In other words, the mortgage is a guarantee for the loan that the lender makes to the borrower. In all but a very few states, a mortgage creates a lien on the title to the mortgaged property.

Tuesday, December 30, 2008

Record fall in house prices in the U.S.

Housing prices in the United States have registered a new record fall in October, falling 18% on a year, according to the S & P / Case-Shiller measuring prices in the 20 largest U.S. cities and published Tuesday.

The price index in the 10 largest cities in the country has also recorded an unprecedented decline, from 19.1% over a year.

In monthly slide, the monthly prices fell by 2.2% in 20 major cities in October, while they fell by 1.8% in September compared to August.

In the ten largest cities, prices fell by 2.1% in October compared to September, against a decrease of 1.9% a month earlier.

Compared with the peak in mid-2006, housing prices are down 23.4% for the 20 largest cities and 25.0% for the ten most important.

Monday, December 29, 2008

Wall Street will be healing its wounds in 2009

Bloodless end to a nightmare year that saw it erase more than five years of ascension, the New York Stock Exchange will soon touch 2009, by hoping it has hit bottom, but without illusion when facing an economic crisis which will be deep and prolonged.

"I would like to pretend it never happened!" Says Gina Martin, an analyst at Wachovia Securities.

However, just a few days before the end of 2008, the flagship index of Wall Street, the Dow Jones, was down 36% since the beginning of the year. At the bottom, on 21 November it had lost 47% from its all-time high reached a year earlier, in October 2007.

The Nasdaq, mainly for technology, has lost 42% and the S & P 500 41% since January 1st 2008.

The Dow Jones suffered its worst year since 1931. No wonder, for Gina Martin, since the market has faced "the greatest financial crisis in the United States since the Great Depression” of the 1930s.

Bleeding is global and affects the World economy

According to Lewis Alexander, chief economist at Citigroup, stock markets around the world have shrunk by about 25,000 billion dollars, which represents 40% of global gross domestic product.

"It's as bad as a market can be, in all forms and all ways: destruction of jobs, devastated economies, carnage on the stock market and real estate," said Art Hogan, head of market strategy at Jefferies.

The market has also started to count its victims, first with the smallest investment bank Bear Stearns in March, before his big sisters do the same in the fall: Lehman Brothers and Merrill Lynch, and big financial institutions in mortgage refinancing Fannie Mae and Freddie Mac.

In early October, it’s the collapse: the Dow Jones falls by 22% in ten days. The extreme volatility is a sign of the nervousness of investors.

Forfeited its stars, its former stars have lost some 90% of their value, Wall Street returned to its level of 2002-2003.

According to Art Hogan: “In view of the cataclysm of 2008, the feeling is that next year will necessarily be better".

Sam Stovall, of Standard and Poor's, believes in a recovery in 2009 after the massive waves of sales observed. "There's a good chance to see a recovery next year, but certainly in a limited range,” says the analyst.

Sam Stovall expects the S & P 500 to be 1025 points at the end of next year, against 870 points today. The bank Credit Suisse predicts 1050 points, an increase of 20% from its current level. But very few really want to throw or give a prognosis.

"Making predictions about the level of shares at the end of 2009 is almost impossible. They are far from normal market conditions,"says Gina Martin.

For this analyst for Wachovia Securities, who expects no recovery for the U.S. economy into recession before the second half of 2009, the first three to six months of the year will look like the end of 2008.

Specialists of the market, hoping that it has found a strong enough floor, are also waiting see the effects of the government plans.

"The markets will take all the signs of revival of the economy to try to get ahead," said Gregori Volokhine of Meeschaert New York.

But some are skeptical about this new picture offered by Wall Street, a now dented icon of free enterprise.

"The shares are cheap when they are valued in the context of an economy based on finance and formerly dominated by debt, cheap financing and even tax rate on small companies," says William Gross, Executive Director of the Investment Funds Pimco (Allianz Group).

"This world, however, belongs to our past, not our future," he adds.

Tuesday, December 16, 2008

Historical decline in consumer prices in the U.S.

The index of consumer prices in the United States fell by 1.7% in November in seasonally adjusted series, registering its largest decline since its first publication in 1947.

Analysts relied on a decline in the index by 1.3%.

This fall, published while the U.S. Federal Reserve (Fed) should review its rate today, follows, on a scale unprecedented, the decline already recorded the previous month (-1%).

However, excluding food and energy, the index of consumer prices remained stable in November compared to October, after falling 0.1% the previous month, said the U.S. Department of Labor, which publishes the index.

The sharp monthly decline in consumer prices leads to a sharp slowdown in inflation over the year, the rate fell in November to 1.1%, against 3.7% in October.

The price increase was 5.6% in July, said the ministry.

The decline in the index is mainly explained by falling energy products. They plunged 17% in November compared to October, their largest decline since that statistic is established (1957), after a fall of 8.6% in October.

The energy prices are now falling over one year at 13.3% (they were still up 11.5% the previous month).

Gasoline prices had their largest decline ever, falling 29.5%. This had a direct influence on transport prices, which have also declined by 9.8%, thereby heightening their record drop in the previous month (-5.4%).

The prices of food have slowed their growth to 0.2% instead of 0.3% the month before. Since last year, the prices of food has increased by 6.5%.

The price decline is not yet felt on wages. According to the ministry, the real average weekly earnings grew by 2.3% in November after rising 1.6%. The real average hourly wage gained 0.4% after rising 0.3% in October.

Friday, December 12, 2008

Retail sales slow down for the fifth consecutive month in the U.S.

Retail sales in the United States in November fell 1.8% for the fifth consecutive month. Producer prices in the United States have also showed in November a steep decline of 2.2%, due to declining market for energy materials.

Retail sales in the United States in November fell 1.8% for the fifth consecutive month, according to seasonally adjusted data published by the Department of Commerce in Washington. Analysts relied on a downturn more important than 2%.

In October, the decline in retail sales was 2.9% (revised), the largest decline since the publication of statistics in 1992.

In addition, producer prices in November showed a steep decline of 2.2%, announced Friday the U.S. Department of Labor. Analysts predicted a decline of just 2%. This is the fourth consecutive month the indicator fell. It reached (ok, dropped) in October a record decline of 2.8%. But over the year, producer prices are still rising slightly, by 0.4%.

This new setback in November is attributable to the markets of energy raw materials, where prices fell by 11.2%. Producer prices of food (oils, meat, dairy products, vegetables) remained stable, although they had slightly fell the previous month. Producer prices of crude oil fell by 12.5%.

Inflationary pressures are significantly reduced, since excluding food and energy, producer prices rose by 0.1% over the month, against 0.4% in October. Over a year, the increase is 4.2%. The rise in producer prices, which had been 7.2% over the first seven months of the year, was stopped by the reversal in the oil market. The price of a barrel of crude, in the short span of five months, has lost about $ 100.

Thursday, December 11, 2008

According to Wells Fargo the U.S. real estate market is stabilizing

The U.S. housing market shows signs of stabilization, said Wednesday John Stumpf, CEO of Wells Fargo (WFC), one of the largest mortgage lenders in the United States.

Real estate prices, whose collapse has triggered the current crisis, may have reached the bottom, said Stumpf at a conference to analysts. He added that the difficulties now focused mainly on employment.

Wells Fargo is the second largest mortgage lender in the United States, behind Bank of America (BAC), who just swallowed the former leader, Countrywide Financial.

In October, Wells Fargo has managed to take bank Wachovia, then threatened with bankruptcy. Their merger creates the country's largest bank by deposits and extending the influence of Wells Fargo on the east coast of the United States, including New York and Florida.

"We love this transaction simply," said John Stumpf, considering that it was "the best possible operation," even if economic conditions have worsened since its announcement.

Mr. Stumpf assured that the present conditions were pushing customers to "the quest for quality." "Wells Fargo has it," he ruled.

Requiring new funding to swallow the biggest rival it, Wells Fargo has managed to raise a total of U.S. $ 12.6 billion, an amount never before reached outside an IPO, recalled Mr. Stumpf .

At the New York Stock Exchange, the Wells Fargo lost 3.25% to U.S. $ 29.51 in the morning.

Friday, December 5, 2008

1 in 10 real estate borrowers threatened in the U.S.?

One in ten real estate borrowers is potentially threatened with expulsion from his home in the United States, said Friday the Mortgage Bankers Association MBA.

The rate of outstanding mortgages in the United States jumped to 6.99% in the third quarter, after 6.41% in the second, the MBA said.

But the proportion of owners in difficulty in near 10% when adding those who are already the subject of a foreclosure: they were 2.99% during the quarter, against 2, 75% in the previous.

Among subprime households, considered from the outset as having a greater risk of default, the rate of unpaid reached 21.3% (against 21.0% in the quarter), if the loan is variable rate; it is still at 18% (against 16%) for fixed rate.

The rise of unpaid is also found among the most creditworthy households: the rate of arrears among those who chose a variable rate reached 8.2% (against 7.5% in the previous quarter), while it was 3.3% (against 3.1%) for those with a fixed interest rate.

Wednesday, December 3, 2008

Tough November for the private sector in the U.S.

The deterioration of the market continues to accelerate in the U.S., where the private sector has lost (destroyed!!) 250 000 jobs in November, according to a study made by the human resources firm ADP, released Wednesday.

The decline was much greater than analysts predicted, which was 200 000 job cuts.

ADP nevertheless says that his study does not take into account the impact of the return to work of 27 000 workers mechanics of the aircraft manufacturer Boeing, after an agreement ended their strike at the end of October.

The November survey "provides proof that the weakening labor market continues," says ADP.

The firm has revised its estimate of the number of destroyed jobs in the private sector in October to 179 000 (instead of the originally announced 157 000).

Tuesday, December 2, 2008

U.S. construction is spending less than expected

Construction costs in the United States fell by 1.2% in October compared to the previous month, extending the black series of economic statistics this month, according to figures released Monday by the Department of Commerce.

The decline in seasonally adjusted data, is more marked than expected by analysts, who relied on a decrease of 0.9%. But it is two times less than it was in July (-2.4%).

The evolution of spending in September was revised to stable from the previous month, instead of declining 0.3% like previously announced (good news!).

On a year, construction spending in October showed a contraction of 4.6%.

Private construction costs (71% of the total) are down 2% from the previous month and 8.8% in one year.

The residential construction costs (32% of the total and 45% of private construction), which fell by 3.5% over the month and 23.6% in one year, continue to weigh on the overall trend.

Expenditures for non-residential construction (hotels, commercial or industrial buildings, offices ...) are however virtually stable over one month (-0.1%) and up 8.3% year on year.

Among the non-residential private construction, spending on commercial construction rebounded (+1.2% on a month, -11.3% on a year), and offices continue to rise (+1.1% over one month 4.4% year on year).

The expenditure of public construction (29% of the total) are near their historic record of August, up in October by 0.7% from September and 7.4% in one year.

Those of the federal state grew faster (+5.5% compared to the previous month) than those of states and local communities (0.3%).

Monday, November 24, 2008

Unemployment claims reach a high in the U.S.

New claims for unemployment United States last week reached their highest level for 16 years.

This is evident in the figures released Thursday by the U.S. Department of Labor, a new sign of the rapid deterioration of the labor market in the country.

According to the Labor Department, new unemployment claims rose to 542 000 in seasonally adjusted data instead of 515 000-a figure that was revised downwards-the previous week.

It is much more than expected in Wall Street, which expected a figure of 505 000, according to a study by Thomson Reuters.

This is the highest figure since July 1992, according to the Department of Labor. At that time the U.S. economy was emerging from a recession.

Monday, November 17, 2008

Large economic decline expected in the U.S.

The gross domestic product of the United States should drop by 2.6% in the fourth quarter at an annual rate, and is expected to increase only 0.7% over the full year 2009.

This is a survey of corporate economists association NABE published Monday.

The 50 professional forecasters surveyed by the National Association for Business Economics estimate that on average the U.S. gross domestic product is expected to decline further to 1.3% in the first quarter of 2009.

After the decline in GDP of 0.3% annual rate in third quarter (first estimate by the Department of Commerce), it would mark a decline of the wealth produced by the country for the third quarter in a row, which did not happen in the United States since 1975.

The study predicts a resumption of growth (0.5%) in the second quarter of 2009.

The NABE economists' have become decidedly more negative about economic prospects for the coming quarters due to intensifying tensions on the credit market and evidence of their impact on the real economy," said Chris Varvara, President of the Association, quoted in the press release.

On average, economists surveyed by the study now believe that U.S. growth is projected to reach 0.2% in 2008.

If their forecasts prove accurate, measured growth in 2008 and 2009 will be lower over a period of two years since the early 1980s, noted Mr. Varvara.

However, he added, "inflation should moderate" with the contraction of the economy and maintain oil prices at relatively low levels compared to what they were even a few months ago.

Friday, November 14, 2008

Freddie Mac asks for money to the Treasury

The American group of mortgage refinancing, Freddie Mac, under supervision of the government, recorded a huge loss of over U.S. $ 25 billion in the third quarter and asked for money to the U.S. Treasury.

On the three-month period completed by the end of September, the net loss of Freddie Mac has swelled to U.S. $ 25.3 billion, against a loss of U.S. $ 1.2 billion a year earlier, weighed down by heavy depreciation and provisions exceptional.

Reported the number of shares, the loss amounted to 19.44 dollars, against 2.07 dollars in the third quarter of 2007. Analysts who establish their forecasts excluding exceptional items, relied on a loss of 89 cents.

Faced with growing losses, Freddie Mac also said to have asked the U.S. Treasury the sum of U.S. $ 13.8 billion, which it hopes to receive by 29 November 2008.

Freddie Mac and the other pillar of mortgage refinancing in the United States, Fannie Mae, undermined by the deterioration of financial markets and real estate were placed under the supervision of the government in early September.

The Treasury plans to invest up to U.S. $ 100 billion in each of the two companies to consolidate their finances.

Wednesday, November 5, 2008

Lower spending in construction in the U.S.

Construction spending in the United States fell by 0.3% in September compared to August, falling to its July level.

These are the figures released Monday by the Department of Commerce.

This figure is less bad than feared analysts, who relied on a fall of 0.8%.

Moreover, changes in spending in August was revised upward to 0.3%, instead of the previously announced stability.

On a year, construction costs are down by 6.6% in September.

The private construction costs (71% of the total) were up 0.1% from the previous month, the decline in residential construction spending (-1.3% on a month, -27.1% yoy ) Being offset by higher costs non-residential construction, 1.2% over one month and 8% over a year.

Among the non-residential private construction, spending on commercial construction continued to decline (-2.9% on a month, -10.9% yoy), whereas offices are up (+1.7% on a months, 12.1% year on year).

The expenditure of public construction (29% of the total) were down in September by 1.3% over the previous month.

This figure is explained mainly by the drop in federal government spending, which fell 7% over one month, the state and local governments decreased by 0.8%.

Tuesday, October 28, 2008

Sales of new homes make a small come back in the U.S.

Sales were at 464 000 units at an annual rate, according to initial estimates by the U.S. Department of Commerce published Monday.

Analysts were forecasting on an almost flat sales level, at 458 000 units. The poor figures in August were further revised downwards to 452 000 units, against an initial estimate of 460 000.

In a year, new home sales were down at 33.1% annualized in September. In seasonally adjusted data, 394 000 new homes were for sale at the end of September, representing 10.4 months of marketing at the rate of sales during the month (against 10.9 months in August).

The median sales price stood at U.S. $ 218 400, down 0.9% from the previous month and down 9.1% in one year.

Thursday, October 23, 2008

Washington is preparing a plan to protect real estate owners

The Assistant Secretary temporary U.S. Treasury, responsible for financial stability, Neel Kashkar, said Thursday that his administration was working on a plan to protect property owners in difficulty.

"We started working with the Department of Housing and Urban Development and Hope Now (a structure to help troubled owners set up by banks) to maximize opportunities to help as many owners as possible while protecting taxpayers," said Kashkar at a Senate hearing on the implementation of the law of emergency economic stabilization.

"When we buy mortgages and securities backed with these claims, we will seek every possible opportunity to help owners of those homes," said Kashkar, which is responsible for leading the buy-back program of doubtful assets of banks .

"We hired Donna Gambrell, director of local development finance institutions fund (government agency to provide credit to those who are excluded from the commercial distribution), to oversee this effort and to fill the post of Director of the preservation of property," said Deputy Secretary.

Mr. Kashkar has also pleaded for the rescue of the American banks, saying that "every American depends on the flow of money into (the) financial system."

"He depends on it for its loan to buy a car, a house, his studies and to provide for his household. Employers rely on credit to pay their employees," he recalled.

Friday, October 17, 2008

U.S. construction lowest in 17 years

The market for housing construction continued its descent into hell in the United States, where housing starts have declined again in September, reaching their lowest level since January 1991.

Housing starts of dwellings fell by 6.3% in September compared to August, reaching 817 000 (annual rate), according to seasonally adjusted figures published by the U.S. Department of Commerce.

This decline, even more important that the figures in the previous months were revised downward (to 872 000 units, instead of 895, 000), embeds the forecasts of analysts, on average, which builds on a decline in index 870 000 units.

Building permits fell in September by 8.3% to 786 000 units (annual rate), their lowest level since November 1981, added the ministry.

This is much worse than what analysts predicted that table in a whole on a decline in the index 840 000 permits issued.

The figure of the previous month was revised up slightly, to permit 857 000 (instead of 854, 000).

Compared to September 2007, housing starts of dwellings fell by 31.1% and building permits by 38.4%, according to the ministry.

These figures are in line with the forecasts of the International Monetary Fund (IMF) or more officials of the U.S. Federal Reserve, which recently estimated that the housing market had not yet hit bottom.

The decline in both indicators, however, slowed its pace: the 6.3% decline in housing starts of dwellings in September following a decline of 8.5% in August and 12.9% in July. The 8.3% of building permits had been preceded by a decline of 8.1% in August and 17.9% in July.

The decline in housing starts in September was driven by a fall in new construction of houses by 12% compared to August.

Thursday, October 16, 2008

The infernal spiral resumes on the Stock Exchange

Fear appears to confirm its strong return on the stock markets, as evidenced by Thursday's second largest loss in the history of the Tokyo Stock Exchange.

Indeed, the Nikkei lost 11.41% to 8458.45 points at closing. Only the crash of 1987 was worse for the Japanese stock market, which had lost 14.9%.

The Shanghai Stock Exchange has also suffered significant losses at the end of the meeting, while the main index has cut 4.25% to 1909.94 points.

In Europe, the German DAX fell 2.69% to 4730.98 points around 6:06 pm New York. Meanwhile, London lost 3.14% to 3951.37 points and the CAC 40 lost 4% to 3245.87 points in Paris.

The renewed confidence that followed the adoption of plans to rescue the United States and Europe was fragile. Some brokers are not surprised by the decline in block Thursday.

"After the second largest drop in history on Wall Street, it is inevitable that Japanese shares plunge," said Hiroaki Hiwat, strategist at Toyo Securities. "The future will depend on the attitude of investors, if they fix their attention on the financial health of Japanese companies or on external factors," he predicted.

When its bad, its bad all over. I am starting to wonder when we will see a little sunshine in the world of mortgages. When the economy is so bad, who wants to invest in the future?

Wednesday, October 8, 2008

Mortgage crisis: Wall Street has a scapegoat

Wall Street has found a scapegoat for the credit crunch, which comes from the excesses of the housing market, particularly high-risk mortgages. It is the Community Reinvestment Act (CRA). They created the mortgage crisis!!

Even in Canada, bankers like Louis Vachon, President and CEO of National Bank of Canada, accrediting this thesis.

The law adopted by Jimmy Carter in 1977 and amended by Bill Clinton in 1995 aims to prevent discrimination against poor neighborhoods, preventing banks to lend only to rich communities. According to the banking industry, this bill would have had a perverse effect, forcing institutions to provide loans to people who do not really means.

Some, however do challenge that interpretation. Michael Barr, a law professor at the University of Michigan, calculates that more than half of high-risk mortgages were granted by independent lenders who escaped controls established by the Act. Another 30% of "subprime" has been made by subsidiaries of financial institutions that the government was not evaluating on a regular basis, compliance with the Community Reinvestment Act.

Thus, only a loan at high risk in five has actually been issued by a company subject to CRA, the professor explained in his testimony delivered in February to the Financial Services Committee of U.S. House of Representatives.

"While reasonable people can discuss how to interpret this data, he said, my personal opinion is that the greatest abuses and widespread occurred in financial institutions where the mortgage practices escaped scrutiny the federal government."

Tuesday, October 7, 2008

Financial crisis: Bush calls for patience until the effects of the plan start

Responding to plummeting economy around the world, George W. Bush estimated Monday that it would take "some time" for the rescue of the U.S. financial system to bear fruits.

The U.S. president, traveling to San Antonio, Texas, explained that the $ 700 billion plan passed by Congress and enacted Friday aimed at unblocking the credit crisis and make new move money would take time. "We do not want to rush” he added. "It will take a little time" before the plan is fully implemented and in full action.

Fervent advocate of liberalism, Mr. Bush has assured that the U.S. government intervention was necessary because otherwise the U.S. economy would be "much worse".

Between you, my readers, and me, wtf is he talking about! Take time! The banks made billions out of our pockets and now... they want to make more billions out of our pockets. Be patient? Bull shit!

Thursday, October 2, 2008

Real estate crisis: falling prices are still falling

Las Vegas is at the top of the list (or should I say at the bottom), with a fall on a year of 30%.

The price of residential properties in 20 U.S. cities fell in July with a record pace, signaling the worst real estate recession in recent decades, even before hitting the credit crisis of September.

The index of U.S. home prices S & P / Case-Shiller has lost 16.3% last year, more than forecast after a decline of 15.9% in June. According to Bloomberg, the index plunged every month since January 2007.

The fall of real estate prices is at the center of the crisis on financial markets, while demand declines and leads to lower property values and thus an increase in the number of property seizures.

Banks will probably continue to tighten credit conditions in the coming months in order to limit losses, which suggests that the housing sector will continue to fall and consumer spending continue to decline, reports Bloomberg.

"The fact that house prices accelerated its slide before the worst of the credit crunch hits this month is a bad omen," said Scotia Capital economist Derek Holt.

House prices fell by 0.9% in July from the previous month, after losing 0.5% in June, according to a report. Prices have experienced a decline in 13 cities, compared to 11 cities in June.

The 20 regions showed a drop in prices in July compared to the previous year. Las Vegas is at the top of the list, with a fall on a year of 30%. Phoenix follows with a loss of 29%. The home crisis is far from over!

Monday, September 29, 2008

Injection of liquidity: Intervention by the Federal Reserve and other central banks

The U.S. Federal Reserve announced today new measures, together with other central banks including the European Central Bank (ECB), to address the financial crisis.

According to the Fed, these measures are designed to "significantly increase" the cash available to financial institutions and banks. The U.S. Federal Reserve did not provide figures but says the ECB have made available with the Fed at least $ 240 billion.

The Federal Reserve cited "ongoing tensions" on the need for short-term financing. In New York, the stock market opened today down 3%. The Dow Jones core values fell by 333.88 points to 10809.25 points.

These measures are happening while European states come to the rescue of their banks. The giant Belgian-Dutch banking and insurance Fortis said it was confident (today) after the rescue plan was announced the previous day by the three governments of Benelux (Belgium, Netherlands, Luxembourg), who decided to inject 11, 2 billion euros to prevent the establishment of being sunken by the financial crisis.

Thursday, September 25, 2008

The resale of homes fell by 2% in the U.S.

The resale of homes in the U.S. fell slightly more than anticipated in August to an annualized 4.91 million units.

This is a decrease of 2.2% when compared to July's revised level of 5.02 million units.

This is a result below expectations as economists were anticipating data stopping at 4.94 million.

Since August 2007, the rate of resale homes has declined by 10.7%.

The stock of homes fell to 10.4 months in August, down from 10.9 in July.

At issue of data, spokesman for the National Association of Realtors (NAR) have urged Congress to act to help potential owners.

"We urge Congress to restore access to a healthy mortgage system so that people can have the ability to make and keep long-term investment (...) and home ownership. Congress must take care of Main Street and not only save Wall Street, "said Richard Gaylord, president of the NAR.

My 2 cents: this is getting so bad, that I wonder if people should own homes. Maybe we should own banks... Government save banks, what about people.

Friday, September 19, 2008

Financial crisis: What will the impact be on American families?

Investors see with a good eye the rescue plan set up by the American authorities to cope with the stock market crisis, but what will be its impact on American families?

This morning, George W. Bush has sought to reassure the population. "Significant amounts of taxpayer dollars are at stake," admitted the American president. However, he added: "we expect that this money will be repaid."

Washington's plan aims to buy the assets of dubious banks.

It could cost the U.S. taxpayer "hundreds of billions of dollars," said Henry Paulson. Nevertheless, it’s cheaper to American families than a series of bankruptcies of financial institutions, said the U.S. Secretary of Treasury.

Wednesday, September 17, 2008

The construction of new U.S. homes fall by 6.2%

The construction of new homes fell in August to its lowest level in more than 17 years in the U.S., according to figures announced Wednesday by the Department of Commerce.

In total, 895 000 new housing units were constructed in August, on an annualized basis, representing a fall of 6.2%.

This is the lowest figure since 1991, proof of the magnitude of the real estate crisis that continues to weaken the U.S. economy.

Analysts expected a decline of 1.6%. The home crisis is far from over.

Sunday, September 14, 2008

Unexpected decline in retail sales in August

Retail sales in the U.S. have accused an unexpected decline of 0.3% in August, and fell for a second consecutive month after the revised 0.5% number in July, according to data released Friday by the Department of Commerce .

Economists polled by Reuters and Bloomberg were expecting an average of 0.2% increase in retail sales.

Sales of cars and auto parts rose by 1.9% last month, which is their first increase since January.
Excluding the auto sector, retail sales reflected a decline of 0.7%, against -0.2% which was due.

The gasoline sales fell by 2.5% last month - their biggest monthly decline since mid-2007 - after rising 0.2% in July.

With all those negative numbers and both Fannie Mae and Freddie Mac being in the hands of the government, one is wondering if the Mortgage market will come back to more reasonable terms.

Monday, September 8, 2008

Mortgage Crisis: The U.S. government takes control of Fannie Mae and Freddie Mac

As expected, and to avoid a major crisis, the U.S. government today announced he was taking control of the two mortgage giants who where on the brink of bankruptcy, Fannie Mae and Freddie Mac.

This operation designed to save the property market from a crash of enormous proportion is expected to cost billions of dollars to taxpayers. The US Treasury Secretary Henry Paulson has stressed that the financial consequences of a bankruptcy affecting Fannie Mae and Freddie Mac would be far more serious than one might expect.

Freddie Mac and Fannie Mae guarantee about 5000 billion dollars in loans, more than half of U.S. residential loans.

Having taken on their shoulders the weight of the subprime crisis while other credit corporations collapsed one after the other, Fannie Mae and Freddie Mac have lost between them 3.1 billion dollars between April and June. More than half of losses come from non-repayment by debtors of high risk mortgages.

Wednesday, September 3, 2008

July: Construction spending went down in the U.S

The construction costs the U.S. in July fell by 0.6% over the previous month, after increasing by 0.3% in June, said Tuesday the U.S. Department of Commerce.

Analysts were predicting a decline in these expenditures by 0.4%.

The figures for June were revised upwards; the ministry had initially issued a decrease of 0.4%.

Annualized, spending on construction fell by 4.8% in July.

Spending on private construction fell by 1.4% in July after increasing by 0.2% in June.

As in the previous month, the decline was mainly in the residential sector, down 2.1% in one month, after a lower decline of 1.3% in May.

Spending on non-residential construction in the private sector (hotels, offices, shops, etc.) slowed their progress, rising by 0.2%, against 1.1% in June.

Public expenditures have also increased by 1.4%, after rising by 0.4% in June.

Tuesday, August 26, 2008

Record declining prices in the housing market still affect the U.S.

The housing prices have registered a record decline in June, reaching now 15.9% over a year, according to the S & P / Case-Shiller, measuring prices in the 20 largest U.S. cities published Tuesday.

This is the 18th consecutive month of decline for this index.

The price index in the 10 largest cities in the country has declined even more, dropping 17% in one year. This is also a record decline. However, the pace of decline has a tendency to slow down.
In just one month, the decline has reached 0.5% in the 20 largest cities in June and 0.6% in the 10 largest.

"Even if there is no new trend nationally in housing prices, we may see the beginnings of a recovery in some areas which resulted in a moderation of lower prices, "said David Blitzer, chairman of the committee issuing the index at S & P.

Thus eight cities have managed to show an increase over the previous month in May.

For the third consecutive month, prices have fallen (over one year) in all cities under review, and the decline exceeded 20% in several of them: Las Vegas, Los Angeles, Miami, Phoenix, San Diego, San Francisco and Tampa.

Friday, August 22, 2008

The financial crisis continues to weigh on the U.S. economy

The financial crisis continues to weigh on the economy of USA, said Friday the president of the U.S. Federal Reserve Ben Bernanke.

Despite improvements in some markets, "the financial storm did not stop and its effects on the wider economy become apparent in the form of mitigation of economic activity and rising unemployment," he explained at a conference on the economy in Jackson (Wyoming, north-west of the USA).

He welcomed the recent decline in oil prices and raw materials, and believes that inflation will remain moderate in 2008 and 2009. Beyond, the outlook remains uncertain, he said, stressing that the U.S. central bank remains vigilant and will act "if necessary" to contain inflation.

Looks like the home crisis will be with us for a while.

Monday, August 18, 2008

The decline in the U.S. housing is far from finished

Economists at the Canadian Bank of Nova Scotia believe that it is still really too early to announce the end of the decline in the housing sector in the USA, they also believe that in Canada, the recovery in residential construction is in its infancy.

According to the latest report "Prospects for the property sector", published Monday by Economic Studies Scotia, although sales of new and existing properties in the USA have reached a new cyclical low of 5.4 million units annualized in June and that they have declined by about 35% from their peak in late 2005, the decline has lessened since the spring.

Economists at the Scotia also highlight a modest resumption of sales observed in some regions and that the fall in house prices has also experienced a slowdown.

"However, the possibility that there is a significant recovery in residential sales is limited, given that soaring gasoline prices and rising unemployment exert considerable pressure on household credit," said Adrienne Warren, Senior Economist, Economic Studies Scotia.

"Real wages continue to fall by one year to another since last November and consumer confidence remains at its lowest point since 16 years."

In its report, Economic Studies Scotia suggests further that the recent rise in mortgage rates for the long term mortgages coupled with loan conditions increasingly restrictive will leave potential buyers on the sidelines.

The report also concludes that the return of residential construction to acceptable levels has only just begun in Canada.

Between 2001 and 2006, the Canadian market in housing starts had an average of 222 000 units annualized, far more than the number of households who are trained or 175 000. This oversupply has continued in 2007 and the first half of 2008.

"It is clear that a growing gap between the number of new construction and the formation of households exists. This gap has contributed to the gradual increase in the number of unsold new houses in recent years. "

However, it is noted in the report that, contrary to the situation prevailing in the USA, little evidence suggests a significant oversupply situation in Canada.

"The inventory of all new homes completed but unsold, whose number is growing in most major markets, remains relatively low from a historical point of view for the construction of single-family homes and buildings."

Friday, August 15, 2008

Resale of homes at their lowest in 10 years in the U.S.

The residential housing market slows down

The real estate recession worsens in the U.S., where sales of existing homes fell to their lowest in 10 years and the median price of a single-family home declined by 7.6% during the second quarter.

The median price slipped from U.S. $ 223 500 to U.S. $ 206 500 in a year, unveiled yesterday the National Association of realtors. Sales of single-family homes and apartments fell by 16% and amounted to 4.913 million units in volume annualized.

Prices have plummeted in 115 of 150 metropolitan areas surveyed, while sales by mortgage default and sales at a loss have represented a third of all transactions of the quarter. The banking seizures have almost tripled in July compared to last year, stated RealtyTrac, an agency that specializes in the market for properties sold by mortgage default.

"In several regions with a high proportion of sales by mortgage defaults, people buy houses below the value of the replacement cost," writes in his report the chairman of the association of brokers, Richard Gaylord.

The largest declines were observed in Sacramento, California’s capital (36%) and in the metropolitan area surrounding Cape Coral-Fort Myers, Florida (33%).

Prices show a decrease of 32.7% in Riverside and San Bernardino, California, and 30% in Los Angeles, according to the report.

Banks repossession of residential properties for non-payment jumped by 184% in July and reached 77,295, according to RealtyTrac. This is the most abrupt increase ever recorded since the California firm began disclosing such data in January 2005.

Failure to Pay

More than 272,000 properties, which represents one household out of 464, have been the subject of a notice of default, threats of arrest or effective repossession, unveiled RealtyTrac. It is in Nevada, California and Florida that recorded the highest proportion of one or other of these measures.

At the end of June, there were 4.49 million houses to sell the U.S., a number never seen in a year, according to the association of brokers. The current volume of homes for sale is equivalent to 11.1 months of work for a broker compared to an equivalent of 10.8 months at the end of May, the association said in a report unveiled on July 24.

Seizures depress the residential market, causing job losses and slowing consumption because fewer people can borrow on the value of their homes, declared on August 7 analysts of Lehman Brothers Holdings in New York.

Monday, August 11, 2008

The mortgage crisis will persist well beyond 2008

The crisis in the real estate sector will continue well beyond the end of 2008 the USA before being overcome, said Sunday U.S. Secretary of the Treasury Henry Paulson.

"I think we need to go much beyond the end of 2008 before we can forget about the problems of housing," he said from Beijing in an interview with NBC television, reiterating statements made late July.

"I think the main question (for the economy) is that of knowing when the greater part of the correction in real estate will be behind us, because until we know we will continue to experience instability in our markets," said Paulson.

He commented the heavy losses announced last week by Fannie Mae and Freddy Mac, the two major U.S. facilities in mortgage refinancing.

"They account for approximately 70% of financing loans to the USA and thus are a key to ending the crisis in this sector and restore stability in mortgages," said the Treasury Secretary, he also stressed that "the correction of the mortgage market was really the heart of the current American economic problems. He did not consider it necessary to inject more public money into these two bodies.

Mr. Paulson also said on NBC that he would not remain at his post at the Treasury whoever is the next president elected in November.

He recently met with the likely Democratic candidate for the White House Barack Obama, feeding speculation that Mr. Paulson could stay at the Treasury in January 2009 to ensure continuity in the current financial crisis.

"No, I will not stay," he said categorically in response to a question from a journalist.

"Whoever the next president-elect is, John McCain or Barack Obama, I will do my utmost to ensure a smooth transition by working closely with my successor," said Paulson.

Friday, August 8, 2008

Unsold U.S. homes still at their highest since 1982

Hovnanian Enterprises Inc. Most important builder of homes in New Jersey, has reduced its number of unsold houses more than 50% over the past two years after it slashed its prices, and yet it still had over 1500 units to sell last April.

"At the moment, we begin to build a house only when we have a contract signed by a buyer who wants to have one," said Larry Sorsby, chief financial officer of the company, during an interview in his office in Red Bank, New Jersey.

In the north-east of the U.S., prices of houses that are the subject of a sales contract had fallen by 7.4% in April compared with a year earlier. "We do not build more houses in the hope that buyers will come," adds Mr. Sorsby.

In the U.S., there are 3.9 million unsold single-family homes, the highest since at least 1982, when the National Association of Realtors (NAR), of Chicago, began to compile statistics in that area.

The stock of houses and condos has to come down by nearly 50% if we want to see stable prices, argues William Wheaton, professor of economics at the Massachusetts Institute of Technology (MIT) in Cambridge. At the current pace of sales, there is a stock of 11.1 months of unsold existing homes, up from the 4.6 months reported in September 2005, according to data from the NAR.

We must now count on average 10 to 12 weeks to sell a house, compared to four to five weeks at the peak of real estate boom, which lasted five years, says Walter Molony, a spokesman for the NAR.

Confidence is down

The builders of homes face a record number of seizures, declining consumer confidence and higher standards that apply to mortgages.

During the first quarter of this year, nearly 10% of mortgage loans in the U.S represented a dubious claim, the highest since 1979 according to the annals of the Mortgage Bankers Association, an organization with headquarters in Washington.

The defaults on loans or mortgages whose payments are overdue 30 days or more, represent 6.35% of all mortgages in force while the percentage of houses in a situation wher they can be seized rose to 2.47%.

"It will take several years to get rid of all the over stock of unsold houses, said Eli Broad, philanthropist and founder of KB Home, in Los Angeles. The Builders are therefore forced to sell at a discount," he said.

Thursday, July 17, 2008

Bernanke: Fannie Mae and Freddie Mac are not in danger

The refinancing of mortgage giants Fannie Mae and Freddie Mac are "not in danger of default”, has assured Washington Wednesday to the chairman of the U.S. Federal Reserve, Ben Bernanke.
The central bank and the Treasury Department intervened Sunday to save the two institutions, weakened by the crisis in property loans and rumours about their financial health.

The plan enables the two companies to borrow money at the same rate that commercial banks and large financial institutions on Wall Street.

The Treasury is considering meanwhile of upping its line of credit and invest in these two pillars of the U.S. mortgage market if necessary.

But Treasury Secretary Henry Paulson said Tuesday that the plan was intended to be implemented only when and if needed. Any financial support from the Treasury will be "under conditions that protect the American taxpayer," he assured.

To save Fannie Mae and Freddie Mac, which hold or guarantee $ 5300 of real estate mortgages, representing about half of all the USA, President George W. Bush, called on Congress Tuesday to quickly adopt another plan that provides for the modernization of the federal government's property management.

He also called for the creation of a new governor and tighter controls on Fannie Mae and Freddie Mac.

President Bush has, however, sought to reassure public opinion. "I think the system is fundamentally sound" he said.

Fannie Mae and Freddie Mac are "adequately capitalized," said Wednesday Mr. Bernanke, although the lack of "market confidence has an effect on both companies, which have difficulty raising capital”.

Like he said earlier at his hearing before the Senate Banking Committee, the chairman of the central bank has again highlighted the current difficulties of the U.S. economy: crisis in the property market, market volatility, high energy prices and food.

The tightening of credit conditions may have negative consequences for growth in 2008. As for inflation, it remains high and it is "likely" to increase again, "temporarily" in the next quarter, he explained Tuesday.

Friday, July 11, 2008

Factors Of Mortgage Approval

When applying for a mortgage, the lender you have selected will take many factors into account. These factors not only influence what type of loans you can qualify for but also what your monthly or by-monthly payments will be and how many years you will take to pay the loan off completely.

Knowing what these factors are and doing what you can to improve them all can make a remarkable difference when you go and see your lender and start the process that will get you your new property.

Some of the fundamental factors apply for just about any loan but are particularly important if you are trying to get a mortgage. The big one is, yep, credit.

How good is your credit?

Get copies of all of your credit reports from the 3 major consumer reporting companies and check each one for possible errors.

Many times they have small errors that can be corrected in just a few weeks (after a simple phone call) and that helps boost your score. If you have many credit cards, pay them all off as well as any other outstanding bills.

If you can, make a nice large down payment, it will always improve your chances of being approved. If your credit isn’t completely top notch, the bigger the down payment, the more likely you will get approved.

If your credit is good, you can still put down as much as possible to lower the monthly payments or decrease the total loan time.

Above all else, never lie to your lender. If you tell your lender that you are a university teacher and they find out you are a shoe sales man who has only had the job for 6 months, you will be totally screwed. Be honest with your lender and your lender will do his best to work with you, not against you.

Thursday, July 10, 2008

Home selling: Resales of houses lower than expected in the U.S.

The contracts to buy existing homes in the USA have declined more than expected in May, a sign that prices are still declining (after more than two years) and have not yet reached their level.

The index of resales of homes under negotiation fell to 4.7% following a revised gain of 7.1% in April, a result better than what was indicated previously, said yesterday in Washington the National Association of Realtors.

The prospect of even higher lower prices (or should I simply say of still lower prices), this prospect is likely to discourage bids while mortgage rates are rising and it is more difficult to obtain loans, whose conditions have become more demanding.

The record number of defaults on mortgage raised concerns that Fannie Mae and Freddie Mac, the two largest U.S. mortgage financing, from being forced to increase their capital another 75 billion U.S.

"The houses are much more affordable, but they will probably even be more in six to twelve months, so that people are reluctant to plunge immediately," says Nigel Gault, chief economist at Global Insight Inc., Lexington, Massachusetts.

During an interview with Bloomberg Television, Mr. Gault said: "The message is that the big rise last month was not a sign that the market was being reversed. We had a big correction this month."

Economists had expected the index resales of houses being negotiated would decline by 3%, according to the median forecast of 38 economists surveyed by Bloomberg News.

Resales of houses under negotiation fell by 14% compared to home selling in May 2007, according to the report published yesterday.

The index was declining in all regions of the U.S., and the worst decline, or 7.1%, was in the South. Resales of houses under negotiation fell by 6% in the Midwest, 2.9% in the Northeast, by 1.3% in the West. Compared with a year earlier, the signatures of the contract were up 2% in the West when they were down in other regions.

The report on resales of houses under negotiation is considered a key indicator because it bears the signatures on the contract.

Sunday, July 6, 2008

Record Annual Foreclosure Rate Increases in Q2 in many US cities

Foreclosure rates where higher during the second quarter, so high in fact that new records were broken in many cities: Los Angeles, Seattle, Miami and New York amongst others, according to a report published by PropertyShark.com.

Los Angeles led the four cities with an increase of 282.01% in the second quarter compared to last year's Q2. Los Angeles reported a record 14505 new residential foreclosures according to the report published by PropertyShark.com. The estimated new trustee sales rose 63% over the previous year.

" The foreclosure chart is unfortunately starting to look like a ski jump", said property Product Foreclosures Shark team member, Adina Dumitru " with the current number of new trustee sales this quarter increasing at one of the highest rates we have seen over the last two years".

New York City reported 961 new households foreclosures in Q2 2008, an increase of 49.22% compared to Q2 2007. Single-family houses located in Queens and Brooklyn were the biggest part of the properties that were auctioned, noted the report.

Miami had 2677 new foreclosures in Q2 2008, an increase of 108.81% from the previous year. Seattle has reported 493 foreclosures in Q2 2008, an increase of 47.60% compared to Q2 2007.
Those numbers are not very reassuring!

Friday, July 4, 2008

Adjustable Rate Mortgage

A common form of home loan is the adjustable rate mortgage or ARM. With this type of finance, the interest rate will fluctuate depending on the 6 different real estate indexes.

The interest rate changes so the lender of the loan gets a correct margin. That’s due to the fact that the indexes influence the price tag of funding the loan in the first place.

Basically, your lender lets you take on a little bit of the interest risk instead of just the lender like it is in a fixed rate mortgage loan. This type of mortgage can be great if the interest on your home loan consistently falls for a long time.

You don’t have to worry that much about the interest rates because even if they jump drastically, there are limits on how much your monthly payments will increase.

These limits are usually called caps and mean that no matter the size of the interest jump, you won’t pay more than a certain increase in a certain time period.

As an example, let’s say a bank (or lender) gives you an adjustable rate mortgage. It has a 1 percent cap for any 6 month time frame and a 4 percent total cap for the entire length of the loan.

Your payments can increase by as much as 4 percent at the maximum until the loan is paid off. That’s not too bad if you consider that when interest rates drastically drop, you save a ton of money.

Every region in the country has different interest rates so you should read up on it before you opt to go with an adjustable rate mortgage.

Local newspapers frequently include interest rates and predictions so that should be a great place to go to keep an eye on things.

Wednesday, July 2, 2008

The Good and the Bad of Subprime Mortgages

Subprime home mortgage
It sounds horrible: Subprime Mortgage. But in reality it has many different benefits that other loans do not possesses.

A subprime loan typically has a higher interest rate than other loans because the people who need it frequently have a poor credit history or very low credit score.

These high interest loans do make people pay a lot more for a house they want but actually have some benefits.

There are many financial institutions that specifically deal with subprime lenders. This means they know how to help those with poor credit.

Some banks also offer prime and subprime mortgages because they know their community well and some areas just don’t have the types of jobs that prime mortgages will need to ensure their monthly payments.

It can be embarrassing to go to a local bank if you live in a relatively small town so you may want to choose a subprime only lender.

A good benefit of a subprime mortgage is that you don’t have to take the time to raise your credit score. This can take years of payments and credit building and many people just don’t have the time for all of that.

They realize they made some late payments here and there but are past that and want to own a home. Not everyone with bad credit got it by not paying their bills on time.

Many times, wives and husbands who are irresponsible can annihilate their significant other’s credit and even after divorce, it’s still bad.

A subprime mortgage to many people is a chance for a new beginning. But you still have to note that this type of mortgage make you pay more for your loan.

Wednesday, June 25, 2008

Consumer Confidence Drops (again) and Home Prices Drops (again)

Did consumer confidence drop (again) because of the home prices drops (again), or did the home prices decline because of the falling consumer confidence?

The American consumers hit by falling home prices and elevated gasoline prices are at their darkest for decades, raising fears that they could reduce spending later this year and bring the economy into a recession.

Consumer confidence droped in June to its lowest level since 1992, and house prices declines accelerated in April, according to data released Tuesday. The renewed signs of economic weakness highlighted why Federal Reserve policymakers, who wrap a two-day meeting Wednesday, are likely to keep the objective of their benchmark interest rate unchanged at 2%.

Expectations of consumers in the economy for the next six months fell to the lowest level since the Conference Board (based in New York) began to conduct its investigations in 1967.

The economic slowdown last year was led by the collapse of home construction and flattening business investment. But growth has remained slightly positive: The economy grew by 0.9% annual rate in the first quarter of this year and should post a similar gain in the current April-June. It is in large part because consumers, whose spending represents two-thirds of the economic output of the USA, have resisted.

But the most recent evidence the collapse of their confidence combined to falling house prices suggests that Americans' willingness to keep spending is being tested, and the chances of avoiding contraction of the economy have fallen.

Following home prices

Do you think house prices in your area have yet hit bottom? The S & P / Case-Shiller index shows a greater decline in prices in part because it follows the metropolitan areas where prices are more responsive than in rural areas. Ofheo, on the other hand, May underestimate the weakness, because it tracks so-called agency-backed mortgages, which leaves out houses purchased with subprime loans.

Both surveys show that lower prices vary widely across regions. Las Vegas and Miami continue to be the largest drops (over a year span) of 26.8% and 26.7% respectively. Los Angeles, San Diego, San Francisco and Tampa, Florida, have also experienced a decline of over 20%, according to the S & P / Case-Shiller data.

Friday, June 20, 2008

A desperate home seller: the bank

Here are 3 useful tips on buying a foreclosed home

Who would have known? The latest desperate home seller is the bank. According to Realty Trac, over 197,800 homes were repossessed by lenders in the first four months of 2008 vs. 90,800 in that period last year.

Banks are not in the real estate business, and it looks like they don't want to be in the real estate business also! So much that sometimes they'll accept much less than you might think to get the those properties off their hands (and their books) - especially in markets having lots of trouble. But purchasing such properties from the banks has drawbacks. Here is what you need to know.

1. Specialized websites can help you find foreclosed homes. On Redfin.com, you can do a search (free) for so-called real estate owned (REO) properties - those for which the bank holds the deed – in many cities Boston, Los Angeles, Baltimore, San Diego, San Francisco, Seattle and Washington, D.C. Or you can locate them nationwide on Foreclosures.com or RealtyTrac.com for a paid subscription of $49.95 a month.

2. It's a good idea to go through a real estate broker. Disregard the idea of buying directly from the bank or at an auction (you will probably be bidding more than you should). The best thing to do is to work with brokers; the banks use them to sell the majority of homes. Once you have identified which properties are Real Estate Owned (REO), you will be a go position because you will know those are the ones for which a small offer is more likely to be accepted. Also, look for properties that have been on the market for more than 90 days and offer at least 10% to 30% less than the asking price.

3. Be careful, some repair costs may be heavy. Bank-owned houses typically need a lot of repairs: People who face foreclosure often neglect maintenance. Only buy an REO property after an inspection, and be sure to calculate repair and remodelling work into your price.

Friday, June 13, 2008

U.S. inflation: fuelled by gasoline prices

Consumer prices have accelerated in May in the U.S., rising by 0.6% compared to April, due to the surge in energy prices.

Meanwhile, the index of the core consumer prices (excluding food and energy) “increased by 0.2%,” said the Department of Labor on Friday.

The rise in consumer prices is higher than analysts' expectations, which was forecasted at over 0.5% for the overall index and 0.2% for the core index.

The changes observed in May were the highest since November for the overall index, and since March for the core index.

On a year, consumer prices rose by 4.2% in May and the core index by 2.3%.

Tuesday, June 10, 2008

Another setback for U.S. households: homes seized in the last quarter grew at the highest level in nearly three decade

In the first quarter, the wealth of American households had its worst drop in more than five years.

Borrowings fell in a context where the value of houses and stock markets have dropped and where lenders have limited credit, indicate data from the U.S. Federal Reserve - the Fed.

The net worth of households has fallen by 1700 billion U.S. compared with the previous three months, the second decline in a row and the highest since the third quarter of 2002, according to a report by the Fed published yesterday. The assets related to real estate fell by 328.9 billion U.S., the highest since data began to be collated in 1952.

Another report published yesterday also indicated that the number of homes seized in the last quarter grew at the highest level in nearly three decades, indicating that the decline in the value of houses and reduced access to loans hurt the owners. A decline in consumer spending, which forms two thirds of the U.S. economy, threatens to push the U.S. into recession.

"Households continue to face difficult conditions, including a decline in home prices, a less active labor market, a tightening of credit and higher energy prices," noted this week in a speech Ben S. Bernanke, the Fed chairman.

"As long as the property market, particularly the prices of homes, do not show obvious signs of stabilization, the risks affecting growth remain," he added.

In the first quarter of this year, the net worth of owners expressed as a percentage of their total property dropped to 46.2% in the USA, the lowest level since the quarterly data began to be collected in 1951, compared to 48.9% during the previous quarter.

The Fed calculations are based on an index of home prices published by the Office of Federal Housing Enterprise Oversight. If the U.S. central bank had used a measure developed by S & P / Case-Shiller, the decline in net worth probably would have been even more marked.

The decrease in net worth property of American households from last October to December followed a decline of about 530 billion U.S. during the preceding three months. The annual rate of mortgage loans contracted by households rose by 3%, the lowest increase since 1970.

The total loans made by consumers, businesses and government agencies have grown at an annual rate of 6.5% in the last quarter compared with an increase of 7.5% over the previous quarter. Each category has declined, except loans to entities within the federal government.

Thursday, June 5, 2008

OECD predicts a sinking growth and a 10% drop in home prices by the end of 2009

The U.S. growth will "almost wedge" by the end of 2008 and it will even fall in the red in the second quarter, said Wednesday the OECD in lowering its forecasts again.

It has revised its growth forecast to 1.2% for 2008. In March his chief economist Jorgen Elmeskov had said that growth would be 1.4%.

Growth is expected to become negative in the second quarter to -0.5%, before returning painfully over the red line +0.7% in the third quarter and +0.2% in the fourth.

"The gross domestic product (GDP) is expected to sink further until the end of 2008, despite the positive contribution of the trade balance," says the Organization for Economic Cooperation and Development (OECD) in its biannual report forecasts.

The job market has deteriorated for five months in a row, "a trend that in the past has coincided with the start of recessions," says the report.

The OECD is quite pessimistic about the housing market and predicts a 10% drop in home prices by the end of 2009. This should cut consumer spending already being hurt by soaring prices of raw materials like gas and food.

Moreover, "the tightening of credit conditions, coupled with stagnant incomes and declining confidence, is likely to weigh heavily on household spending," said the OECD.

As for inflation, the organization expects an increase of 3.2% this year and 2% next year.

It recommends to the Central bank to leave its key interest rate unchanged, currently set at 2%, "until the recovery is installed."

"But interest rates should be raised quickly once conditions are normalized," the report added.

Saturday, May 31, 2008

U.S. housing surprises everyone in April

Sales of new homes rose by 3.3% in April compared to March the U.S., reaching an annual rat of 526,000 units, announced Tuesday the Department of Commerce.

Analysts were expecting 520,000 sales.

The numbers for March, however, were revised down to 509,000 sales, which is the lowest level since April 1991, instead of 526,000 initially announced.

In only one year, decreased sales of new homes has reached 42.2%.

This report was published four days after the home resale one. Home resales fell by 1% in April.

On the new housing market side, the median price rose by 1.5% in April (over one year) to reach $246,100.

Compared with March, prices rose by 9.1%.

The number of new homes for sale fell by 2.4% in April to reach 456,000, which represents the equivalent of a stock of 10.6 months of homes to sell at the pace April sales (against 11.1 the previous month).

The increase in sales in March is due in part by a jump of 41.7% of activity in the north-east, and by increases of 8.3% in the west and 5.8% in Central (Midwest). However a decrease of 2.4% was registered in the south.

Finally, the Case-Shiller index measuring property prices in the 20 largest U.S. cities went down 14.4% in the first quarter of this year compared to the same period in 2007. In the 10 major urban areas of the country, the decline has reached 15.3%.

Friday, May 30, 2008

Housing Index indicates Home crisis will last "an awful long time"

According to Joel Naroff, president of Naroff Economic Advisors and chief economist with Commerce Bank, the latest S&P/Case Shiller Index showing a 14 percent yearly dive in home prices is an indication that the housing downturn will run "an awful long time." The housing slump is therefore far from over.

Joel Naroff says it's an extremely large decline - the biggest he's ever seen. He predicts the home crisis will last through this year and maybe through the first half of next year.

He also says that the increase in foreclosures is putting a downward pressure on prices. He finally says that buyers are beginning to think there's still a long way to go before the real bottom is hit, so they will be holding back on making offers on homes.

U.S. consumers slow down their spending pace

"Consumers still spend, but just enough to follow the price increases and nothing more," said independent economist Joel Naroff.

The household consumption expenditure slowed in April, rising by 0.2% compared to March. Their incomes also rose by 0.2%, indicated Friday the Department of Commerce. These increases are in line with analysts' expectations.

For March, the increase in expenditure was left unchanged at 0.4% but the revenue was revised upwards to 0.4%. The disposable income after taxes increased by 0.2%, which is the lowest increase since April 2007. It was also the first time since that date that wages decreased.

"Consumers still spend, but just enough to follow the price increases and nothing more," said independent economist Joel Naroff. "Maybe the rebate checks will boost the figures for May and June, but it is difficult to say to what extent," he added.

Inflation has also went down, the price index linked to the consumption expenditure (PCE) rising by 0.2% in April against 0.3% in March. The index measured excluding food and energy, which is the one preferred by the central bank, increased by 0.1% (after +0.2%), an increase in line with analysts' expectations.

For both indices, it is lowest increase since February.

On a yearly basis, inflation reached 3.2% for the overall index in April and 2.1% for the index base (as in March for both indices).

Adjusted for inflation, the figures show that disposable income has stagnated in April like is has in March. Actual expenditures also remained stable (after +0.1% the previous month), households buying fewer goods (-0.2%) but more services (+0.1%). The savings rate increased to 0.7% of disposable income, like in the two previous months.

Tuesday, May 27, 2008

Still No Joy In British Home Prices

According to Forbes.com the slump in property prices that began nearly a year ago in Britain is showing no signs of slowing down, a gloomy survey showed on Monday.

The Hometrack’s House Price Survey showed a uniform downturn in the British housing market in May, with prices dropping 0.5% from April and 1.9% from the previous year.

A decrease in interest rates by the Bank of England would help the housing market by easing payments for holders of adjustable mortgages and for new buyers, but at the risk of a greater inflation level.

The current deteriorating sentiment heightens the risk that house prices could plunge sharply over the next couple of years.

While new housing data in Britain seems dire, only those homeowners who made their purchases around the market's peak last summer are expected to face the dire condition of owing more on their homes than they paid for them.

Saturday, May 24, 2008

In just one year, the median price of U.S. homes fell by 8.5 percent

Sales of existing homes fell in April, in the USA, for an eighth time in nine months, the number of unsold single-family homes reaching its highest level in over two decades, revealed Friday the National association of real estate brokers.

According to the expert panel, sales of single-family homes fell by one percent compared to March, and reached 4.89 million units, which equals the historic low of January 2008, according to data dating back to 1999.

The median price of existing homes has declined by 8.5 per cent in April compared to last year, falling to $ 200,700.

Home prices

Analysts expect further loss of value for homes, because of the enormous quantity of unsold houses – if the actual real estate business selling trend continues, it should take 10.7 months to sell those homes. Their number of unsold homes has reached its largest level since June 1985.

Thursday, May 22, 2008

Record decline in home prices is only the beginning

Home crisis - looks like a great puzzle
Home prices fell 1.7% in the first quarter of 2008, with California, Nevada seeing the sharpest drop revealed a government study today.

The prices of home properties sold in the first quarter of 2008 posted a unsurpassed decline, according to a new report from the Office of Federal Housing Enterprise Oversight.

Compared to the first quarter of 2007, home prices fell 3.1%, the largest drop in the purchase-only index, which excludes refinancing, since the agency began keeping records more than 15 years ago.

First-quarter home prices dropped 1.7% from the fourth quarter, the largest quarterly fall ever.

According to Peter Schiff, president and chief global strategist at Euro Pacific Capital, "It's not going to be the largest decline on record for long. Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."

On a year-over-year basis, the inflation-adjusted price of homes fell 7.7%. At the same time, the prices of other goods and services went up by 4.6%, according to OFHEO.

"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation. Houses are becoming a less valuable asset relative to the cost of living." Schiff said.

The Office of Federal Housing Enterprise Oversight reported that prices dropped in 43 states, with 8 states seeing quarterly price declines of more than 3%. California and Nevada were the major losers, with home prices falling more than 8% in each state.

Prices on all homes sales and refinancing, fell 0.2%year-over-year and remained flat compared to the fourth quarter, OFHEO reported.

California, Nevada, Florida, Arizona and Michigan showed the greatest price decline in all transactions in the first quarter. Wyoming, Utah, Montana, Texas and Alabama all saw an increase in prices for all transactions.

Tuesday, May 20, 2008

Home affordability improves

With prices falling across the nation, home affordability price has improved significantly in many U.S. cities.

Accordingly, 53.8% of all new and existing homes sold the country during the first three months of 2008 were affordable to families earning the median household income of $ 61,500, according to the latest Housing Opportunity Index published Tuesday by Wells Fargo and the National Association of Home Builders (NAHB).

That's up from 44% during the first three months of 2007 with more affordable prices they have ever been since the three-month period that ended June 30, 2004.

"Three factors combined to increase housing affordability," said Sandy Dunn, NAHB President, in a press release accompanying the report. "Mortgage rates returning to near the record low levels of a few years ago, a $2,500 rise in family income nationwide (from 2007 to 2008) and lower house prices."

Home prices have dropped by about 8% compared to a year ago, according to NAHB, but that does not mean that buyers are running back on the market.

Wednesday, May 14, 2008

Home loan requests climb 2.9% last week as interest rates fall

Home mortgage applications rose 2.9% during the week ending May 9, according to trade group Mortgage Bankers Association's weekly application survey.

Finally good news: The MBA's application index increased to 674.4 during that week, compared with 655.4 one week earlier.

Refinance level increased 6.5% during the week, while purchase volume fell 0.7%. The refinance volume accounted for 48.7% of total mortgage requests during the week ending May 9.

The MBA's application index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume obtained on March 16, 1990, the first week the MBA tracked application volume. A level of 674.4 means mortgage application activity is 6.744 times higher than it was when the MBA began tracking the data.

The MBA's application index provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all home retail mortgage originations each week.

The application volume rose a little as interest rates declined during the week. The average rate for a traditional, 30-year fixed-rate mortgage fell to 5.82% from 5.91% the previous week.

The 15-year fixed-rate mortgage, a popular option for refinancing a loan, fell to 5.38% from 5.49%.

The average interest rate for a one-year adjustable-rate mortgage fell to 6.6% from 6.77%.

Tuesday, May 13, 2008

The worst part of the subprime crisis could be history!

The nastiest part of the subprime crisis, which has prompted banks to tighten credit and led the U.S. Federal Reserve (Fed) to come to the rescue of Bear Stearns, could be history if we rely on what the short-term borrowing rates is showing us.

The difference between the yield of treasury bills of three months and the rate of loans denominated in U.S. dollars in London, an indication of credit risk, has narrowed by 7 basis points to 0.93 basis points, the smallest gap since February 25 last. This gap had risen to 2 percentage points on March 19.

"It indicates that at the very least, the worst is past," said Theodore Ake, head of trading in treasury bills at Mizuho Securities USA in New York, one of 20 brokers doing business in the primary market and trading directly with the Fed.

"There was a lot of panic integrated into these transactions, and it will continue to unwind, he adds. There has been a massive movement towards quality "

Ben S. Bernanke, Fed chairman, supports confidence in the credit markets after cutting interest rates seven times since last September, supported the takeover of Bear Stearns and injected over 900 billions US in the financial system.

These measures have helped to ease disruptions while there was loss and impairment losses related to mortgage-backed securities and loans disclosed by banks to the tune of 329 billion U.S. dollars.

Mr. Bernanke has reduced the target rate loans a day between banks by 3.25 percentage points since last September, including two cuts by three quarters of a point this year.

The Central bank has provided U.S. $ 29 billion of funding to ensure that JP Morgan Chase buys Bear Stearns. Loans were also offered to brokerage houses as part of the largest credit expansion since the Great Depression.

Monday, May 12, 2008

1 new rule for home buyers

My wife can't keep a secret!!!

It’s written with large letters, but people don’t seem to be able to read it: The house you purchase today will more than likely be worth less next year (ouch).

That could get you thinking about trying to time your purchase with the bottom of the curve. Resist. It's harder to do than you think, and right now... is the best buyers have had it in two decades, with inventories up and mortgage rates low.

Pace yourself, find the perfect place and make a super hard bargain: Pay no attention to the seller's asking price and bid over 10% below what comparable properties are selling for. If the seller complains, just move on.

Remember that if you're selling too, your home could sit. So make sure you sell before you buy, home prices are et their lowest now.

Tuesday, May 6, 2008

Real estate seizures: The Fed's chairman asks Congress to react

The chairman of the U.S. Federal Reserve Ben Bernanke warns against the dangers that cast on the economy the late payment of mortgage loans and increasing real estate seizures in the USA. He urges Congress to take additional steps to defuse the problem. Foreclosures are not the solution.

"High levels of delinquency and seizures may have significant negative effects on the real estate market, financial markets and the economy in general," said Ben Bernanke in a speech Monday evening. "It is in everyone's interest" to do what is necessary to avoid preventable seizures, "he added.

The Fed's chairman was speaking at the Superior School of Commerce, Columbia University, New York.

Monday, May 5, 2008

According to Warren Buffett: The enterprises victim of the financial crisis deserve their fate

OMAHA, Nebraska - The American billionaire Warren Buffett and Charlie Munger believe that the difficulties faced by many financial institutions because of the credit crunch are well deserved.

The chairman and vice-chairman of the holding company Berkshire Hathaway (BRK.A) reported Sunday that financial companies who abused mortgages at high risk and who now record large losses do not deserve much sympathy.

Buffett said that the current financial crisis was a consequence of a system that encouraged managers to "make nice drawings."

Buffett and Munger spent almost three hours to answer questions from reporters Sunday, during their only press conference scheduled for this year. The press conference was part of the annual meeting of shareholders of Berkshire Hathaway held Saturday in Omaha, Nebraska and attended by 31 000 people.

Wednesday, April 30, 2008

Home Foreclosures: at year-end, over a million bank-owned homes in the market

RealtyTrac quarterly report on “foreclosure activity,” shows some pretty nasty numbers nationwide, as expected, with activity up 23 percent quarter to quarter and 112 percent year over year.

What is surprising is when you break down the sub-categories, you see that the number of bank-owned properties is rising faster than ever before. “Typically you’ll see about 20 percent of the foreclosure filings being bank-owned,” RealtyTrac’s Rick Sharga told in an interview this morning. “We’re getting to a point now where it’s well over 1/3 and aiming at 40 percent, so that just suggests that a lot of these homes can’t even be sold to investors at auctions” Why? Because there’s just no equity in the properties.

Some estimates that by the end of this year there will be over a million bank-owned homes in the market. That's a million of about four million properties listed on the Multiple Listing Service (MLS), so a quarter of the homes would be bank-owned. Last week a casual survey found that 18 percent of the homes on the MLS are foreclosed homes.

It is very interesting, with all the programs supposedly helping owners in default and all the banks claiming that they are doing what they can to help them, a growing number of homes are still going back to the bank.

Wednesday, April 23, 2008

U.S. Home Prices Plunge Like a Rock

If the remedy for America's housing crisis is a big enough drop in prices to stimulate the real estate demand, the market got a big dose of over the counter and under the counter medicine on Tuesday.

The National Association of Realtors reported a much worse-than-expected 2.0% drop in sales of single-family homes and condos in March, compared with February, to a seasonally adjusted yearly rate of 4.93 million units. That was 19.3% under the year-ago level. The middle price of an American home sold last month dropped to $200,700, a decline of 7.7% from the middle price a year ago.

Joseph A. LaVorgna, a chief economist at Standard & Poor's, said in a note to investors yesterday that falling home prices are not such a bad thing, "On one hand they are causing negative wealth effects and forcing some new mortgages underwater; but on the other hand, this is a necessary, albeit unpleasant, prescription for restimulating housing demand," he said.

Sales were expected to drop another 1.6% to a seasonally adjusted annual rate of 4.95 million units, down from 5.03 million in February, according to the last forecast of Wall Street economists surveyed by Thomson Financial.

On a personal note, I wonder if M. LaVorgna owns a house (or a condo)? How happy would he be if he learned that the value of his home dropped 40% just before he wanted to sell it? How many foreclosures can we have?

Tuesday, April 22, 2008

Buy your home at a fire-sale price!

To a small but growing number of buyers across the country, the depressing housing recession offers a exciting upside: They can get a home at a fire-sale price. In some metro areas, price declines are galvanizing bargain hunters — mainly first-timers, foreign investors and out-of-state buyers looking to rent properties they hope to sell later for a premium.

Those buyers are forming isolated pockets of real estate movement, especially in cities where foreclosure rates are high but jobs remain available to attract potential property buyers.

In some areas, such as Charlotte and Detroit, property sales are ticking upward, following a trend of upward sales as far back as 2006. In other markets, bargain-hunting movement is still too sporadic to fuel an overall rise in sales.

Few economists expect the intermittent purchases to signal a bottom to the housing market's slump, but the bargain-hunting for home deals is a hopeful sign amid all the bad news about the troubled housing market.

Monday, April 21, 2008

If your HELOC hasn't been frozen, it might be time to panic!

Be familiar with your risk. Areas where home prices have fallen by 10% or more are major targets for freezes, says Susan McHan, president of Opes Advisors, a mortgage banking firm in Palo Alto, Calif. Because of new lending norms, your home-equity line of credit (HELOC) might also be in risk if you bought your home in the past few years with little money down. Be careful.

Last year consumers could without difficulty borrow up to 100% of a home's value through a combination of a HELOC and a first mortgage. Today you'd be lucky to obtain up to 90%; 60% is the max in areas hit hardest by home-price declines.

Lenders are starting to apply the same norms to existing HELOC clients. Call your bank and ask what the loan-to-value cap is on new HELOCs. If your home debt is above that, your line could be at risk. A change in credit score or a missed payment could also put your account at risk. Reread your contract to see if such factors permit the lender to cut you off.

Access your cash now. If your line of credit is in danger and you need the HELOC to finish a renovation, you could draw a lump sum. The drawback: you'll cut your equity; you'll owe interest now; and if home prices keep falling, your loan values could top your home's value. Therefore borrow only as much as you need and place the cash in a high-yielding savings account or CD until the renovation bills come due.

Wednesday, April 16, 2008

Residential construction plunged in March

Residential construction fell to its lowest level in 17 years in March in the United States.

According to the monthly report published Wednesday by the department of Commerce, the number of new home constructions in March moved back by 11.9% compared to its level of February and down 36.5% compared to that of March 2007.

The number of completed constructions last month dropped by 2.7% compared to February and 24.5% compared to March 2007.

As for the building permits, they were 5.8% less in March than in February. Compared to March 2007, the fall is an incredible 40.9%.

Monday, April 14, 2008

Higher-income who don't qualify for rebates are getting a better deal than those who do!

According to an article published on money.cnn.com, if you do not qualify for rebates because you have adjusted gross income of more than $174,000 ($87,000 for singles) you are arguably getting a better stimulus deal than the 130 million taxpayers to whom Uncle Sam is sending payments.

The government stimulus package moves up the maximum size of a "conforming" mortgage to $729,750 from the previous high of $417,000. A conforming mortgage is a mortgage that can be sold to Fannie Mae (FNM) or Freddie Mac (FRE, Fortune 500), and it carries a lower interest rate than the big loans that exceed those limits. Note also that the maximum mortgage that can be insured by the Federal Housing Administration has also risen to $729,750. For people in high-home-price areas, these new maximum mortgages are now high enough to matter.

This new higher limit translates into cheaper refinancing or a higher sales price, because the lower interest rate means buyers can presumably afford to pay a higher price.

More on cnn.

Friday, April 11, 2008

Foreclosure bill passed by the Senate

The plan contains tax breaks for builders, credit for the acquisition of foreclosed property and grants to buy and repair abandoned homes.
On Thursday the Senate passed a bipartisan package of tax breaks and other items designed to help businesses and homeowners go thru the housing crisis.

The measure passed by an impressive 84-12 vote, but even supporters of it acknowledge it's tilted too much for businesses like homebuilders and does too little to help borrowers at risk of losing their homes.

The plan merges large tax breaks for homebuilders and a $7,000 tax credit for people who purchase foreclosed properties, as well as $4 billion in grants for communities to buy and fix up abandoned homes.

Monday, April 7, 2008

Fannie Mae beefs up foreclosure guidelines

Fannie Mae announced new guidelines that will affect the loans it purchases from lenders all over the US, securitizes and then sells to investors on Wall Street. These new rules will affect potential homebuyers all across the nation, especially any homebuyer who has suffered a foreclosure in the recent past.

In an official release Monday Fannie said: “The dramatic shifts in market dynamics over the past several months have prompted us to continually review the full spectrum of our risk appetite, eligibility requirements, automated underwriting risk assessment, and pricing. It is important that we have underwriting and eligibility criteria that foster sustainable homeownership for the borrower”

Wednesday, April 2, 2008

Students and educators will also suffer the impact of the subprime

According to Forbes.com there is another group to add to those feeling the impact of the U.S. subprime mortgage meltdown: students and educators.

28% of financial support for America's public schools comes from local property tax. Property tax revenues, which in many areas of the country had grown along with property values, are on the brink of remaining flat or even getting smaller in the coming years. That’s the opinion of the National Center for Education Statistics,

"Homeowners that were in this crisis felt it first. It became a problem for the city when we saw our homes vacant," says Douglas Palmer, the mayor of Trenton, N.J. "When Wall Street started feeling it, it became a problem for the federal government. This cycle now is coming for the school budgets."

As city and school officials across the country put together budgets for the next school year, they're facing a reduced amount of money than desired and, in some cases, pressure to cut taxes.

More on Forbes.com

Friday, March 28, 2008

Democrats and Republicans Housing Crisis Plans

The housing crisis was a big thing in the presidential race this week. For good reason: Recent data illustrate that nearly a million American households are at risk of foreclosure, 71% more than a year ago. Nearly 6% of all owners are past due on their mortgages.

And the presidential candidates are trying hard to persuade voters that they have the best plan for fixing the problems. How do their plans compare?

The biggest divergence between Republican John McCain and his Democratic rivals Barack Obama and Hillary Clinton is over the government's role.

The Democratic candidates argue that if the Federal Reserve can help the purchase of Bear Stearns with $29 billion, then the federal government can also help the struggling homeowners.

But McCain contends that the Fed's intervention in the financial markets was planned to stabilize Wall Street - which in turn will help calm down the mortgage market and therefore help borrowers.

More at CNN.com

Tuesday, March 25, 2008

American confidence is now at its lowest since 1973

The confidence of American consumers has plunged in March to its lowest level for the last five years. The tightening of credit, inflation and deterioration of the job market is bringing many to believe that the economy is now in recession.

The Conference Board, a research group supported by business, said Tuesday that its consumer confidence index tumbled to 64.5 in March, down from 76.4 in February. This was significantly less than the index of 73.0 expected by economists surveyed by the firm Thomson/IFR.

The index is weakening since July and its evolution is scrutinized, since a decline in consumer confidence tends to lead to a slowdown in consumer spending, which then tends to slow the economy.

The director of the Research Center of the Conference Board, Lynn Franco, said that the index recorded in March was the lowest since the 64.1 noted in March 2003, just before the American invasion of Iraq. She said that a new decline is expected, since consumers are very pessimistic.

Two other related indices have also fallen. The first, which reflects current economic conditions, is now at 89.2, down from 104.0in February. The second one, which reflects the economic conditions to come, crashed at 47.9, its lowest level in 35 years, compared with a level of 58 in February. In December 1973, this index stood at 45.2, in the wake of the Arab embargo on oil and the Watergate crisis.

Wednesday, March 19, 2008

0.75 points to fight recession

The Federal Reserve Tuesday lowered its discount rate by 0.75 point, an intervention to contain the credit crunch that threatens to plunge the United States into recession.

This measure puts the federal funds rate from 3% to 2.25%, which is the lowest level since December 2004.

This decrease of 75 points, though agressive, may disappoint Wall Street, which wanted a reduction of one full percentage point.

The Monetary Policy Committee of the Fed, the Federal Open Market Committee, or FOMC, voted 8 to 2 against the reduction in the federal funds rate. The Fed also lowered its discount rate by 75 basis points to 2.5%.

"Recent information indicates that the outlook for economic activity have again deteriorated," the Fed noted in a statement. It mentioned in particular the weakness of household spending and labour markets. "The financial markets are still under pressure," said the Fed, noting that the worsening of the deterioration of the housing sector could weigh on the economy.

The Fed also stressed that the risks to the growth remain and that it will act "in due time" if necessary, thus leaving the door open for further rate cuts.

A few days ago, the economists called the central bank to cut interest rates by only 50 basis points. This was already seen as a drastic action, especially after the rate cuts of 125 basis points in total made by the Fed in the space of only eight days in January.

"The uncertainty about inflation prospects have intensified," the Fed said, adding that it would monitor these perspectives "closely".

Monday, March 17, 2008

Is the mortgage crisis going to get worst?

According economist Paul Krugman, we are in this until 2010: Bottom line for house owners: An average drop of 25%.

"I think home prices will fall enough for us to produce about 20 million people with negative equity. That's almost a quarter of U.S. homes."

More info on cnnmomey.com

Friday, March 14, 2008

Is the subprime ending?

According to Forbes.com, Standard & Poor's showed a ray of sunshine on a cloudy Thursday for the financial markets, indicating that price tag on the final bill for the subprime mortgage meltdown would be lower than some other prognosticators are showing.

Standard & Poor's said subprime write-downs "could reach" $285 billion and "are likely past the halfway mark." Sure that's a big number, but it's actually a lot lower than other estimates and only slightly higher than S&P's January estimate of $265 billion.

More on Forbes.com

Tuesday, March 11, 2008

Countrywide's Bad News - Another Enron

According to Forbes.com Countrywide Financial treads ever-closer to becoming the Enron of the housing crises.

Shares of Countrywide Financial flowed down 12.2%, or 62 cents, to $4.45, in afternoon trading Monday following news reports that the FBIis looking into whether it committed securities fraud. Specifically, the Federal Bureau of Investigation is reportedly investigating whether the company misrepresented its financial position and the quality of its mortgage loans in securities filings.

More on forbes.com

Thursday, February 28, 2008

Housing pricing grows worse

The home prices decline is showing no sign of letting up and the amount of foreclosures continues to rise.

A closely-watched national index released yesterday indicates home prices fell 8.9 percent in 2007 -- the biggest price drop in the index's 20-year history.

The S&P/Case-Shiller U.S. National Home Price index indicates that in the New York region, which includes counties in New York State, Connecticut, New Jersey and Pennsylvania, home prices tumbled 5.6 percent year-over-year in 2007.

The quantity of homes facing foreclosure jumped 57 percent in January compared with a year ago. Lenders are increasingly forced to take possession of homes they can’t unload at auctions, said RealtyTrac.

Wednesday, February 27, 2008

government could purchase up to 1 million mortgages over a period of five years

Investors could sell up to $15 billion of troubled mortgages to the government under a plan major House members are discussing to bolster the U.S. housing market.

The mortgage plan would allow the government to purchase up to 1 million mortgages over five years in an effort to help struggling owners avoid foreclosure, and financial markets avoid more mortgage-related losses. The mortgage loans would be bought by the Federal Housing Administration, a Depression-era agency that insures loans made to borrowers with lower or bad credit.

More information on CNNMoney.com

Tuesday, February 26, 2008

Home price dive accelerates

The 2007 year-end results are in and the info is bad: Major housing markets were plunging even more than anticipated.

The decline in residential real estate accelerated though the end of 2007, and property prices in 20 key markets went down 9.1% for the year, according to a survey released Tuesday.

The S&P Case/Shiller Home Price index showed its largest annual plunge in its 20-year history. By comparison, during the recession of 1990-1991, home prices only fell 2.8%.

Prices dropped faster throughout 2007 with the index recording a 9.1% year-over-year drop in December.

"Home prices across the nation and in most metro areas are significantly lower than where they were a year ago," said Robert Shiller, Chief Economist at MacroMarkets LLC.

All metro areas are now reporting at least four consecutive monthly drops.

More information on CNNMoney.com

Friday, February 22, 2008

Congress is considering a rescue for hundreds of thousands of homeowners

Inspired in part by some of the nation’s largest banks, the Bush administration and Congress are considering costly new proposals for the government to save hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Not since the Depression has a bigger share of Americans owed more on their homes than what they are worth. With the crumple of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are over their head with mortgage problems. That is more than double the percentage of just a year ago, according to a new estimate by Moody’s Economy.com.

More information in the New York Times.

Thursday, February 21, 2008

Mortgage rates: yoyo time again!

Fixed mortgage rates rise, adjustable rates fall: Long-term fixed mortgage rates are back to their January levels; average adjustable-rate mortgage rates are slightly lower than earlier this year, says Freddie Mac.

Adjustable-rate mortgages might become more popular as the difference between long-term fixed rates and adjustable rates raises, Freddie Mac reported Thursday.

"As the spread between long-term fixed-rates and adjustable-rates widens, it's possible we could see a slight increase in the popularity of adjustable-rate mortgages," said Freddie Mac (FRE, Fortune 500) vice president and chief economist Frank Nothaft in statement Thursday.

More information here…

Wednesday, February 20, 2008

Mortgage field-servicing firms are in for a treat

Never before seen action since the great depression

As the mortgage-lending crisis spreads, business is booming among small mortgage field-servicing firms which specialize among other things in "property preservation."

Pushing the trend: the national homeowner-vacancy rate, which measures how many vacant homes are for sale. That rate was at 2.8% in the fourth quarter of 2007, matching a record set in the first quarter of last year. It hasn't been this high since the famous Great Depression.

And it is far from finished: U.S. foreclosure filings, a prelude to vacancies, surged 75% last year to 2.2 million, according to RealtyTrac. Just for December, there were 215,749 foreclosure filings, almost double from December 2006.

All over the US, handymen, contractors and inspectors are on the front lines of a battle to keep the vacated homes free from burst pipes, vandals, rot and animals until they can be resold -- and to safeguard the integrity and living conditions of neighborhoods.

In some cases, these mortgage field men and women work for the lenders who are foreclosing on the house. In others, they act as vendors to big national middlemen who handle large volumes of foreclosures and then subcontract the fix-up work to these smaller regional shops.

While a big proportion of the companies, big and small, are private, some trade groups estimate mortgage servicing to be a $1 billion business with 8,000 to 10,000 active companies in operation.