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How To Move Your House In A Tough Market

If you’re planning to put your home on the market, it’s not your manners that need polishing. Try your silver, among other improvements. Now, more than ever, getting a signed contract in hand is all about price and quality.

Here's a few tips to selling your house in a tough market.

• Price Is A Science
• Condition, Not Conditions
• Less is More
• “Wow” House Priced to Sell

» CNBC - Slideshow [ Contribute: submit link / submit article ]

U.S. mortgage delinquencies set record

Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.

August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.

The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months.

» Reuters [ Contribute: submit link / submit article ]

U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month

Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.

A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier, and down 0.5 percent from July, the Irvine, California-based company said in a statement. One in 357 households received a filing.

» Bloomberg [ Contribute: submit link / submit article ]

Dow Soars Over 100 Points After July Home Sales Numbers

Existing-home sales surged 7.2 percent to a 5.24 million annual pace, the highest jump since August 2007. Economists had expected a rise of just 2.2 percent. Home sales were up 5 percent year over year. It was the fourth straight month sales have risen.

» CNBC [ Contribute: submit link / submit article ]

Mounting joblessness fuels US housing crisis

More than one in every eight homeowners with a mortgage was behind on home loan payments or in some stage of foreclosure at the end of the second quarter, as mounting unemployment aggravated the housing crisis, the Mortgage Bankers Association said on Thursday.

The percentage of loans that were in foreclosure or at least one payment past due rose to 13.16 per cent, the highest increase since the MBA began keeping records in 1972 and a jump of more than a percentage point since the first quarter.

» FT [ Contribute: submit link / submit article ]

Foreclosure Plague "Continued To Devastate" In July

There were more than 360,000 properties with foreclosure filings -- including default notices, scheduled auctions and bank repossessions -- an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July.

"July marks the third time in the last five months where we've seen a new record set for foreclosure activity."

» CNN [ Contribute: submit link / submit article ]

Why Homeowners Facing Foreclosure Should Be Allowed To Stay On As Renters

Less than 10% of homeowners facing foreclosure have benefited from the Obama administration's mortgage modification program, according to a Treasury Department report this month. This plan is the third federal mortgage modification plan in the last two years, but the foreclosure rate continues to skyrocket, with the country now on a path to 2 million foreclosures this year.

It's time to try a new route for helping homeowners. There is a simple alternative: Congress can pass legislation that gives homeowners facing foreclosure the right to stay in their home as renters. This "right to rent" policy would require no taxpayer money, no new bureaucracy and could immediately benefit homeowners facing foreclosure.

» LA Times [ Contribute: submit link / submit article ]

Las Vegas, Fort Myers, Florida Lead U.S. Cities in Foreclosures

Las Vegas and Cape Coral-Fort Myers, Florida led U.S. metropolitan areas in foreclosures in the first half of the year as unemployment and falling home prices forced home-loan defaults,

The Las Vegas area had the highest rate of foreclosure filings, with 7.5 percent of households receiving a default or auction notice or being seized by a lender. That rate was six times the national average. The Cape Coral-Fort Myers region, on Florida’s Gulf Coast, was second, with a rate of 7.2 percent.

“Foreclosure activity continued its upward trajectory nationwide and in the majority of metro areas in the first half of the year,” James Saccacio, chief executive officer of RealtyTrac, said in a statement. “While some of the markets that had the highest saturation of foreclosures over the past few years have seen declining rates, new markets like Provo, Utah, and Boise, Idaho, have seen large increases.”

Home prices in 20 major U.S. metropolitan areas dropped 17.1 percent in May from a year earlier, according to the S&P/Case-Shiller index. Nationwide, home prices have fallen 21 percent since peaking in July of 2006, according to the National Association of Realtors in Chicago. The U.S. unemployment rate rose to 9.5 percent in June, the highest in almost 26 years, the U.S. Labor Department said on July 2.

» RealtyTrac [ Contribute: submit link / submit article ]

Housing Market Shows Some Signs Of Recovery

"This is the first time in almost three years that we've seen price increases," says Yale University professor Robert Shiller, who helped design the home price index. "So when we see a break in the downward trend that's definitely encouraging news."

"Well, I think the worst is probably behind us — the worst pace of decline," he says. "We were going down at 2 percent a month for a number of months in a row nationally. That was really something. Now home prices relative to rents or construction costs are back at normal levels."

So have we finally hit bottom for the housing market?

"Well, I think it very much depends on what city you're in," says William Wheaton, a housing economist at MIT. "There are really two types of markets right now."

Wheaton says on the one hand, there are markets like Arizona, California and Florida, which have seen huge price corrections — down 30-50 percent — driven by a flood of foreclosure sales. Then there are other parts of the U.S. that haven't seen such big price drops.

In some places where prices have corrected sharply, a lot of people are able to get very good deals on houses.

"If you're in a market like California, where prices have fallen 50 percent and transactions have picked up and you ask your friendly professor 'Is this the bottom?' I would say pretty much so," Wheaton says." If you could buy a house [for] 50 percent of what you could a few years ago, I'd say go ahead and buy it."

Wheaton says there are many other markets where prices haven't fallen that much, and he thinks some could still drift lower. The local employment picture is also a significant factor.

[ PDF ] Standard & Poor's Case-Shiller Home Price Index, July 28, 2009

New US home sales up 11% in June

New house sales in the US jumped by 11 per cent in June, providing some of the strongest evidence yet that the market has bottomed out after being savaged for three years.

Greater demand is also chipping away at the housing glut. Last month the supply of new homes fell by 4.1 per cent to 281,000. That was the lowest level since 1998 and represented an 8.8 months supply of new homes, down from 10.2 in May.

» FT [ Contribute: submit link / submit article ]

Recessionomics: Tim Geithner Can't Sell House, Either

After a Price Drop ($1.635 million), the Treasury Secretary Decides to Rent His House ($7,500 a month) and He's Not Alone.

» ABC [ Contribute: submit link / submit article ]

Fleeting Builder Rally as Buyers Flee

The largest homebuilders are mothballing communities across the U.S., signaling they have little confidence that a market rebound is imminent. Builder shares have rallied 76 percent from the lows in November. They may fall more than 20 percent in the next four months unless home prices and property writedowns stabilize

“Until we see job losses abate and foreclosures begin to decline, rather than increase as we expect, there is unlikely to be a catalyst for the builders,” Torma said. “It’s going to continue to be a challenging environment.” The Standard & Poor’s index of home construction companies rose less than 1 percent today, after falling earlier as much 3.2 percent.

» Bloomberg [ Contribute: submit link / submit article ]

Mortgage rates down for 4th week

July 22, 2009 -- The benchmark 30-year fixed-rate mortgage fell 3 basis points, to 5.55 percent. One year ago, the mortgage index was 6.77 percent; four weeks ago, it was 5.8 percent. The Fed "believes that a highly accommodative stance of monetary policy will be appropriate for an extended period." (The Fed will keep short-term rates low for a long time)

» Markets [ Contribute: submit link / submit article ]

New York Seeks Data on Appraisals

As part of a New York state investigation into whether mortgage brokers pressure appraisers to inflate property values, First American Corp. (FAF)… A borrower who gets a home loan based on an inflated appraisal and falls behind on payments would have difficulty selling or refinancing for enough to pay off the mortgage… EAppraiseIT, which values up to 15,000 homes a year in NY… appraiser Mitchell, Maxwell & Jackson and broker Manhattan Mortgage Co… were subpoenaed for information about NY appraisals… In a study last year by October Research Corp. of Richfield, Ohio, 90% of appraisers said they felt influenced to write bogus appraisals. Four years ago, that number was 55%. Seventy-one percent said mortgage brokers asked them to do it.

» latimes.com [ Contribute: submit link / submit article / submit company ]

Manhattan Condos Tighten the Rules

Historically, condos have cost more, partly because they had looser rules, and partly because of their scarcity. Although both are changing, the price differential between condos and co-ops has remained roughly the same. Nor has the shift toward co-op-style behavior so far seemed to affect condo prices. The average sales price for Manhattan condos in the first quarter of this year was $1.45 million, 28% more than the average sales price for co-ops, which was $1.13m, according to sales data from Prudential Douglas Elliman.

» nytimes.com [ Contribute: submit link / submit article / submit company ]

Silver lining in the housing bubble

Bubbles have silver linings because the infrastructure built during bubbles — the physical infrastructure and the cultural infrastructure — doesn't get torn down after they pop… All that new construction and renovation (fueled by home equity lines of credit) has upgraded the nation's housing supply… Towers of unsold condos in Miami won't be torn down. They'll be turned into hotels or office buildings… New services… like mortgage websites where lenders compete for the business of individuals, or Zillow.com, the wildly popular service that uses public data and sophisticated algorithms to appraise home values… empower consumers and contribute to greater transparency in the housing market.

» latimes.com [ Contribute: submit link / submit article / submit company ]

Marin is 1st Calif. County With Million-Buck Median Homes

Marin County's median for resale houses reached $1,010,000 last month, the first time any California county passed the million-dollar mark… The median price paid for a Bay Area home increased last month to $659,000, a new peak. That was up 3.1% from $639,000 for March, and up 3.8% from $635,000 for April 2006… Prices have increased the last three months. DataQuick: "With sales this slow, prices would decline if there were a huge number of motivated sellers listing their homes. That doesn't appear to be the case. It's likely that potential buyers are biding their time, as are sellers.

» ocregister.com [ Contribute: submit link / submit article / submit company ]

The sophisticated and funky N-BLOX in Toronto

A groundbreaking modern residential building, the likes of which Toronto has never seen before, is set to take its place on the edge of one of North America's most colourful and coveted neighbourhoods. The sophisticated and funky N-BLOX at 799 College is a low-rise, high-quality, condominium project perfect for those who appreciate living an urban lifestyle in a vibrant and inviting neighborhood.

Set on a New York-style 50 x 110 deep lot, N-BLOX is surrounded by a city strip packed with popular restaurants, bars, cafés and specialty shops with parks and schools nearby. In what can be described as an architectural work of art, easily recognizable as a landmark, the façade will feature a stunning exterior that resembles avant-garde building blocks of glass clad with a mixture of stone, brick and metal. Eschewing volume for style and substance, only eight condominium apartments, ranging in size from 1,200 to 2,000 square feet, are being developed in this boutique six-storey structure, ensuring N-BLOX creates an eye-catching presence on the street and provides a modern compliment to this iconic neighbourhood. A cozy minimalist lobby, designed to optimize privacy and maximize security, leads to elevators that open directly into each suite’s private foyer. Each unit has its own exclusive elevator access, and penthouse residents have direct elevator access to their private rooftop terraces.

» quadrangle.ca [ Contribute: submit link / submit article / submit company ]

BusinessWeek: Housing's Roof Won't Cave In

Homeowners may well spend through the slump. With builders, lenders, and realtors slashing jobs, the housing bust is a serious drag on the economy. But there's a case to be made that despite the weakness in home prices, homeowners will keep spending enough to keep the economy on solid ground.

Here's the bullish case for the American consumer: First, people have new sources of spending money from rising wages and salaries and a booming stock market. Second, the drop in home prices so far has been small. And third, even if there is a big hit to housing wealth, research suggests that consumer spending may not drop. Builders have borne the brunt of the slump by cutting the supply of new homes. Their cutbacks are keeping the growing backlog of unsold houses from getting completely out of control.

» businessweek.com [ Contribute: submit link / submit article / submit company ]

The Real Estate Industry, though Volatile, Offers Riches to Those Who Know Where to Look

While many Americans are worried that real estate prices have flattened and may even turn downward, some of the country's top commercial developers say there always is opportunity for those who manage their projects efficiently in a global market, focus on areas with growing demand and have the staying power to wait out the downturns.

After record growth in 2006, how does the commercial market look today? "Let's just hang on and hope these times continue," said William L. Mack, referring to the current era of low-interest rates, rising rents and soaring real estate investment. Mack is managing partner of Apollo Real Estate Advisors, a New York-based real estate firm with office, retail, hotel and other projects in 20 countries.

[ mp3 ] listen or download / » wharton.upenn.edu

Forbes on Inflation, US housing

“Housing construction was crackling before 2004 because of Congress' virtual elimination of the capital gains tax on primary residences in 1997. But the Fed-fed inflation fired up the housing boom to white-hot levels. Flush with cash, lenders lowered loan standards, and new players entered the mortgage market. Fraud blossomed--why examine too closely a borrower's 1040 when rising prices will bail you out if the borrower gets in trouble? Speculators paid people to file mortgage applications to buy houses and apartments and quickly flip them. Now the sale price of houses is falling in many parts of the country. To add insult to injury, property taxes continue to climb as assessments catch up with housing values.”

» forbes.com

Home Prices Fall in Rich New York Suburbs Once Immune to Slump

MLS: The average price in Westport, Connecticut, fell 8.2% to $1.56 million in Jan.-April 2007, from Jan.-Apr. 2006.... In Chappaqua, New York… properties sit on the market an average of seven months before they sell, up from five months a year ago… The tightening of credit in response to rising subprime defaults has disrupted the real estate food chain… Prices fell as much as 18.8% this year in areas of… New Jersey, Connecticut and New York's Westchester County… Larchmont and Mamaroneck experienced a drop of 18.8% to $1.08m… In Bronxville, the slide was 12.4% to $1.34m. Home prices continue to climb in the wealthiest California suburbs, at a much slower pace.

» bloomberg

Housing Cheers Turn Gloomy

We're in a real estate recession, said David Lereah, chief economist, National Association of Realtors, who surprised many this week when he announced he would leave the Chicago-based trade group in May. "I'm projecting the first [nationwide] price drop since the Great Depression. We're going to have negative home prices in 2007. His comments seemed uncharacteristic for Lereah, whose mostly blue-sky forecasts have long been criticized for stoking the fire as home sales bubbled to stunning -- and unsustainable, even by his own account -- levels. He had been the public face for the Realtors since the housing boom began in 2001.

» chicagotribune.com

Consumers Boost Borrowing Despite Prices

Consumers boosted their borrowing in March… showing resilience in the face of rising energy prices and a painful housing slump. The Federal Reserve's report, released Monday, showed consumer credit increased at a brisk annual rate of 6.7% in March… Up from February's 2.8% growth rate and the biggest increase since November… The Fed's measure of consumer borrowing does not include mortgages or other loans secured by real estate. The March increase pushed total consumer debt up by… $13.46 billion to a record $2.43 trillion… Economists were expecting consumer borrowing to rise by $4.5b in March.

» kiplinger.com

Jean Nouvel's Residential Tower, New York

Jean Nouvel’s “Vision Machine” a 23-storey residential tower located in the Chelsea neighborhood of Manhattan along the Hudson River has begun construction. The stunning building which features a Mondrian-like curtain wall comprised of nearly 1,700 different size panes of glass that change character according to lighting conditions, is, according to its architect, a direct conceptual and material descendent of his Arab World Institute in Paris, which is celebrating its 20th anniversary this year. The building, which stands next to the recently completed, Gehry-designed Interactive Corporation headquarters, will contain 72 residences that will range in size from 890 square feet to 4,675 square feet. The buildings top floor will be a single grand residence with a full rooftop terrace. Each unit will have a sparely designed top of line kitchen and baths. At the base of the building is a dramatic lobby space with 20-foot high ceilings. It will a concierge, a ground floor restaurant and dining patio, a residents’ mail room, package and refrigerated storage room, access to a garden and a private elevator landing serving the residences above and the pool, gym and spa areas below. At 70 feet long, the building’s mirror-canopied pool will be one of the largest in Manhattan. Prices for the units will range from US $1.6 million to $22 million. The building will be LEED certified. Beyer Blinder Belle is serving as executive architect for the project.

» jeannouvel.com [ Contribute: submit link / submit article / submit company ]

Subprime psychology of market volatility

Volatility is not something usually associated with bricks and mortar, observes Lex. But since late February when investors woke up to the problems in the US subprime mortgage market, Vix (a measure of implied stock market volatility) has risen from its eerily low levels of late last year. Having remained largely below 12 for that period, it bounced briefly to about 20 and is still above recent lows.

Part of that is heightened concerns about the risk of contagion. These surged again on Monday following a stark profit warning from American Home Mortgage Investment Corp.

» alphaville

Housing Bubble and Real Estate Market Tracker

This Isn't Their Moment (New York Magazine, Nov. 8th) “The tough thing is, the market went down. A lot of people are offering 10 percent less.” Experts say it’s best to hold onto real estate for a couple of years to avoid paying capital-gains taxes and to weather changing markets like this one. (When the market was sizzling, homeowners could sell in a year and make at least 10 percent. If that year was 1999, it was more like 25 percent.) But if you bought recently and have to sell now, you may be in a position not heard of since the early nineties: You can actually lose money on a New York apartment... But selling prematurely isn't always a problem... One apartment, in Morton Square, went in one day for full asking. “If it’s great and priced right, it’ll sell".

Real Estate Bubble Bursts While Home Sales Fall Across Nation (New York Times, Nov. 7th) Pheonix: "Until last year, Fulton Homes’ developers were able to raise prices on its new homes by $1,000 to $10,000 almost every week.“People were standing in line for lotteries. Now they just don’t show up. Such cancellations often mean forfeiting as much as 5 percent of the price. The reason? The prospective buyers got cold feet or simply couldn’t sell their old home. Today, the number of unsold homes in the area has soared to almost 46,000 from just a few thousand in early 2005. Sales cancellations among big builders are running as high as 40 percent, double the rate a year ago. New home sales are down by more than 20 percent from their peak last year. And that reported drop does not take account of the extras builders are throwing in free or at steep discounts to lure buyers, which means that effective prices are even lower. The reversal in fortune is at its starkest here in the West. For-sale signs in some new subdivisions are so common that Janet L. Yellen, the president of the Federal Reserve Bank of San Francisco, recently described them as “the new ghost towns of the West.”

Home Sales, Prices Down In Denver (The Denver Business Journal, Nov. 7th) "Home sales and prices continued to slide in October, according to Denver-based Metrolist. The average price of all single family homes dropped from $283,131 in September to $280,551 in October.

U.S./International Mortgates and Real Estate Lending

Will Mortgage Power Reignite Housing Bubble? (Reuters UK, Nov. 2nd) London: "Mortgage lenders' willingness to let first-time buyers borrow ever-larger multiples of their income may ring alarm bells for those who remember the housing market boom, and subsequent crash, two decades ago. Consumer borrowing and personal insolvencies are already at record highs and interest rates are rising -- hardly an ideal time for people to be mortgaging themselves to the hilt. Lenders, however, are confident they are not exposing themselves or their customers to undue risk. They point out that interest rates globally are more stable and capital markets more developed than in past decades. Abbey, Britain's second largest mortgage lender, said this week it would offer homebuyers up to five times their single or joint salaries -- well above the three to four times advertised by most high street banks."

Macro Impact, and Will a Housing Crash Cause a Recession?

September Consumer Borrowing Falls (The Boston Globe, Nov. 8th) "Consumer borrowing fell in September by the largest amount since the recession of the early 1990s. The Federal Reserve said yesterday that borrowing declined at an annual rate of 0.6 percent in September, compared with a 4.6 percent rate of increase in August. Borrowing fell $1.2 billion in September -- the biggest drop since a $1.78 billion decrease in April 1992. The overall economy has lost momentum due to the housing slump."

» Search RealEstate-Specific Tags: Home Sales - Housing Bubble - Real Estate Market
» SeekingAlpha

Zillow's Look at Third Quarter Real Estate Performance

Zillow released our third quarter real estate market reports for five metro regions (Seattle, San Francisco, Los Angeles, Phoenix and Miami) and an additional report covering the top 36 metro areas studied this quarter.

San Francisco and Phoenix area real estate experienced a drop in values in the third quarter, relative to the prior quarter, while LA real estate values were essentially flat, quarter-over-quarter.  Seattle and South Florida, while slowing slightly, continue to show robust appreciation, significantly outpacing the majority of the nation. The U.S. report gives you insight into the top 36 metro areas, showing that median home values in the top markets are still on the rise, measuring average appreciation of 4.8 percent year-on-year. While this is still considered healthy appreciation by many standards, it's a dramatic slowdown from the double-digit appreciation many homeowners have come to expect in recent years.

[PDF] U.S. Home Value Report

[PDF] San Francisco
[PDF] Phoenix
[PDF] LA
[PDF] Seattle
[PDF] South Florida

» Zillow

Housing Bubble and Real Estate Market Tracker

UBS Sees Home Prices Down 10% in 2007 (Janet Morrissey in MarketWatch, Nov. 6th): "Home prices will fall 10% on average in 2007 and it will likely take three years to clear out the huge inventory of empty unsold homes currently in the market, according to a UBS report released Monday... UBS analyst Margaret Whelan estimated that the industry overbuilt to the tune of 900,000 homes between 2003 and the first half of 2006... "It will take about three years to shift all of that excess inventory," said Whelan. As a result, she expects housing starts to fall 15% in 2007 from 2006 levels. [UBS chief economist Maury] Harris is predicting median home prices will fall 10% over the next year, and housing starts will fall by 180,000 units to 1.55 million in 2007 from 2006."

How Well Will Homes Sell? Opinions Differ on Market for New Homes (Palm Beach Post, Nov. 5th): ""The current downturn should last two to five years," housing analyst Jack McCabe says. Bradley Hunter of Metrostudy says new-home sales will pick up in 18 months. The National Association of Home Builders says new-home prices will drop until at least 2008. David Berson of Fannie Mae says prices will perk up in 2009. And Mark Zandi of Moody's Economy.com says the worst of the downturn "is at hand.""

Real Estate Slump Tough on Midwest (CS Monitor, Nov. 3): "South Bend, Ind. – The housing market slowdown is nationwide, yet it has taken its earliest toll in Midwestern communities where the word "boom" never applied to home prices... This region, characterized by slow job growth and gathering problems in the automotive industry and in a business where outright price declines are rare, was the first in recent years to post a drop in prices - with median single-family homes down 2 percent in the second quarter from the same period in 2005. Cities such as Detroit, Cleveland, and South Bend are struggling even though they never had a big run-up. In the industrial heartland of the Midwest... land is relatively cheap. In South Bend, "It's a way different market, towards the bad side," from just a couple of years ago. Some communities are doing well, thanks to good schools or newer homes, but in many parts of town homes are listed at $50,000 or less - and aren't selling. One home is listed for such a low price - $17,500 - that the monthly mortgage payment would be about $87, about the same as the property tax."

Home Builders Try to Offset Sagging Sales (The Gazette, Nov. 2nd): "One Colorado Springs area home builder is offering landscaping, a sprinkler system and special financing to woo buyers... The number of single-family home-building permits issued in El Paso County plunged 45.5 percent to 188 in October compared with the same month last year, according to the Pikes Peak Regional Building Department."

Is This Really 'A Great Time to Buy or Sell a Home'? (Barry Ritholtz in Seeking Alpha, Nov. 6th): "In fact, its such a good time, that the National Association of Realtors decided they need to drop $40 million telling you so... [The NYT discusses the National Realtors Association's new ad campaign to coax buyers and sellers in to the market.] "The ad by the National Association of Realtors cites a 4.3 percent increase in the number of existing home sales contracts signed in August, from July, as evidence that “prices over all have stabilized.” But new data released last week by the association showed that contract signings fell 1.1 percent in September, from August, and 13.6 percent from September 2005. A spokesman said that the first ads were prepared before the latest figures were available and would be updated next week. Mr. Stevens dismissed the idea that the campaign, the first of its kind undertaken by the association, could be viewed as a sign of desperation..."

» SeekingAlpha

No Bottom Seen in Housing Market

Barry Ritholtz submits: Barron's Alan Abelson cites research by Merrill Lynch's David Rosenberg regarding the recent "stabilization" in Housing. It turns out that the only thing which is stabilizing is inventory -- but at extremely high levels.

To get inventory numbers down to a balance between supply and demand requires a 10% drop in home prices (and hence, more sales), and a 20-25% drop in new Home Starts.   

Here are the details:

"In truth, the big October Surprise that the conspiratorial crew anticipated so anxiously is that there was no October Surprise. Unless you count the really punk showing of the economy in the third quarter disclosed last week, with GDP limping to a 1.6% annual gain, the worst performance since the first quarter of 2003, when the recovery from recession was still trying to find its legs. Even with its demonstrated ineptitude, though, it's hard to see the administration conspiring to engineer 1.6% growth.

Merrill Lynch's David Rosenberg nailed the GDP figure when the consensus among the soothsayers on the Street ran to 2.3% and some of the more exuberant types were forecasting 3%.

The incredibly shrinking housing market is unmistakably beginning to exert a vicious drag on the economy as a whole. And that's despite the uptick in the housing stocks, buoyed by talk that the sharp decline in home sales is beginning to bottom out. The talk, it should be noted, comes from analysts desperate to see some signs of life in their group and realtors who are starting to worry about meeting their next mortgage payments. (They couldn't help themselves: They weren't able to resist the lure of adjustable-rate mortgages.)

We imagine neither bunch drew much comfort from the news that prices of existing homes in September suffered their biggest fall in 35 years. October, we're afraid, has been more of the sae.

For his part, David Rosenberg isn't buying the notion of a bottom in housing. He points out that existing house sales last month sank to their lowest level since January '04 and over the past six months have plunged at a 20% annual rate. Only seven times in the past four decades have prices absorbed that sort of pounding and, significantly, in five of those instance, the economy really took it on the chin.

At best, David says without enormous conviction, the inventory of unsold homes and condos up for resale may be stabilizing -- but at awesomely high levels. At last tally, backlogs of houses for sale weighed in at 7.1 months for single- family homes and 8.6 months for condos, a striking 60% higher than the level a year ago. And he points out that if "the inventory situation was truly a good- news story, then home prices wouldn't still be falling." Sounds eminently logical to us...

To judge by past housing cycles, to get to a reasonable balance between supply and demand, he believes, will require at least a 10% drop in home sales and prices and 20%-25% fewer housing starts. Declines of that magnitude, he reckons, would nick the consumer's balance sheet by something between $2.2 trillion and $4.5 trillion. That's "t" as in trillion.

Pretty gruesome prospect. And no small reason why we see a recession looming next year."  (emphasis added)

One last tidbit -- Rosenberg also makes the observation that the vast majority of the 10 million households that bought an existing home since June 2005 are now underwater on their purchases.

What are the repercussions of this? If you can afford to stay put, then none. Make your payments, and you will eventually be fine.

In the event of a sale, they take a small hit, perhaps losing some (or all) of what they put down to make the purchase. If they did a no money down, they may not be able to sell the house themselves, as they won't be able to transfer title with a post-sale balance on the existing mortgage. That only happens if a house sells for less than the mortgage price.

The real problem is with those 37% or so of buyers who used variable APRs and/or the Interest Only (I/O) mortgages. As the market value of the asset comes down, they may not have sufficient equity in the property to do a refinance or a conversion from I/O or APR to a traditional 30 year fixed.

Both of the above examples are why we are seeing an ongoing increase in foreclosures.

Pretty gruesome, indeed. via: Seeking Alpha