The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible. The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.
The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.
In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."
The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed's Dallas regional bank, dissented, preferring no change in rates.
The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.
Financial markets, which had been hoping for a bolder half-point move, rallied on the announcement. The Dow Jones industrial average, which had been in negative territory shortly before the Fed action, climbed back into the positive range in the minutes following the statement, with the Dow Jones industrial average up by more than 70 points in the first half-hour of trading.
Economists said the Fed decided to move a half-point rather than a quarter-point because it did not want an adverse reaction on Wall Street....more
Tuesday
Fed Cuts Interest Rate
WASHINGTON (AP) -- The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990.
Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world's largest economy was spreading worldwide.
Despite the Fed's bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that "appreciable downside risks to growth remain" and officials pledged to "act in a timely manner" to deal with the risks facing the economy. The action was approved on an 8-1 vote.
Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.
"The world's stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.
The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary....more
Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world's largest economy was spreading worldwide.
Despite the Fed's bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that "appreciable downside risks to growth remain" and officials pledged to "act in a timely manner" to deal with the risks facing the economy. The action was approved on an 8-1 vote.
Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.
"The world's stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.
The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary....more
Sunday
Bush to Revive Push For Housing Remedy
Shoring up public sentiment on the economy -- especially the battered housing sector -- could be vital to staving off a recession as Mr. Bush enters his last year in office. Pollsters say many people who aren't directly affected by rising defaults on subprime-mortgage loans are feeling the effects anyway, as they see the values of their homes drift downward. Even if Mr. Bush fails to get much more action out of lawmakers, White House pressure could help Republicans' political fortunes by reinforcing negative public perceptions of inaction in the Democratic-led Congress.
The administration and the Federal Reserve have taken several steps to attempt to address credit-market problems caused by rising mortgage defaults, including an administration-brokered industry effort to help people avoid foreclosure.
Mr. Gillespie and other aides didn't offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can't take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies' oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.
A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.
Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.
But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.
"Changing the tax code can also help state and local government do their part to help homeowners," Mr. Bush said in December. "This temporary measure would make it easier for state housing authorities to help troubled borrowers -- and Congress should approve it quickly."
"If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to," said Steve O'Connor, senior vice president of the Mortgage Bankers Association.
Mr. Gillespie suggested that Mr. Bush also will make a push for energy-policy changes, despite last month's signing of an energy bill. A possible focus this time is opening controversial new supply sources such as the Arctic National Wildlife Refuge and the outer continental shelf. Mr. Gillespie also mentioned pending trade agreements, renewal of Mr. Bush's intelligence-gathering authority, and renewal of the No Child Left Behind education initiative as top legislative priorities for 2008. The White House and Treasury also have been weighing various plans for boosting the overall economy, not just the housing sector, possibly through additional tax cuts...more
The administration and the Federal Reserve have taken several steps to attempt to address credit-market problems caused by rising mortgage defaults, including an administration-brokered industry effort to help people avoid foreclosure.
Mr. Gillespie and other aides didn't offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can't take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies' oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.
A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.
Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.
But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.
"Changing the tax code can also help state and local government do their part to help homeowners," Mr. Bush said in December. "This temporary measure would make it easier for state housing authorities to help troubled borrowers -- and Congress should approve it quickly."
"If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to," said Steve O'Connor, senior vice president of the Mortgage Bankers Association.
Mr. Gillespie suggested that Mr. Bush also will make a push for energy-policy changes, despite last month's signing of an energy bill. A possible focus this time is opening controversial new supply sources such as the Arctic National Wildlife Refuge and the outer continental shelf. Mr. Gillespie also mentioned pending trade agreements, renewal of Mr. Bush's intelligence-gathering authority, and renewal of the No Child Left Behind education initiative as top legislative priorities for 2008. The White House and Treasury also have been weighing various plans for boosting the overall economy, not just the housing sector, possibly through additional tax cuts...more
Real Estate: How Far Will It Fall in 2008?
There is one big question looming for homeowners and commercial real-estate investors this year: How much worse will it get?
The past year was the most painful in decades for residential real estate, as defaults on loans to less-creditworthy borrowers created a broader credit squeeze. House prices fell, home ownership dropped, foreclosures soared, and the housing market emerged as the soft underbelly of the economy.
Commercial real estate hit its peak early in 2007, when private-equity firm Blackstone Group LP paid $23 billion for office giant Equity Office Properties Trust, and then did an about-face. As credit tightened throughout the economy, commercial-property values tilted downward for the first time in several years.
Housing prices are likely to slide further this year, as credit remains tight and interest rates on many mortgages are set to rise, or "reset," and could trigger more defaults.
The commercial real-estate market, which includes properties such as offices, apartment buildings and shopping centers, could continue to soften as slower economic expansion causes rents to rise more slowly than in the past.
Residential Blues
Relief from the housing woes is unlikely anytime soon. "It will be another very bleak year with the worst of it occurring in the first half," predicts Mark Zandi, chief economist at economic-research site Moody's Economy.com. "Inventory is only growing and needs to be worked off before the market finds some stability," he said.
Through the third quarter of 2007, slightly more than 2.5% of all houses, or more than two million, were for sale and vacant, according to the U.S. Census Bureau. Since the first records were kept in 1965, that figure had never been higher than 2%, until the fourth quarter of 2005.
Demand is likely to stay depressed, keeping prices low, as high-risk borrowers who in the past would have qualified for subprime loans find themselves locked out of the market. Borrowers with little, if any, money for a down payment and those who don't want to document their finances also are likely to find the going tough.
House prices have fallen 6.5% as of October, since peaking in June 2006, according to the S&P/Case-Shiller Home Price index, which measures home values in 20 cities. Daniel Mudd, chief executive of government-sponsored mortgage investor Fannie Mae, expects prices to decline another 4% to 5% in 2008....more
The past year was the most painful in decades for residential real estate, as defaults on loans to less-creditworthy borrowers created a broader credit squeeze. House prices fell, home ownership dropped, foreclosures soared, and the housing market emerged as the soft underbelly of the economy.
Commercial real estate hit its peak early in 2007, when private-equity firm Blackstone Group LP paid $23 billion for office giant Equity Office Properties Trust, and then did an about-face. As credit tightened throughout the economy, commercial-property values tilted downward for the first time in several years.
Housing prices are likely to slide further this year, as credit remains tight and interest rates on many mortgages are set to rise, or "reset," and could trigger more defaults.
The commercial real-estate market, which includes properties such as offices, apartment buildings and shopping centers, could continue to soften as slower economic expansion causes rents to rise more slowly than in the past.
Residential Blues
Relief from the housing woes is unlikely anytime soon. "It will be another very bleak year with the worst of it occurring in the first half," predicts Mark Zandi, chief economist at economic-research site Moody's Economy.com. "Inventory is only growing and needs to be worked off before the market finds some stability," he said.
Through the third quarter of 2007, slightly more than 2.5% of all houses, or more than two million, were for sale and vacant, according to the U.S. Census Bureau. Since the first records were kept in 1965, that figure had never been higher than 2%, until the fourth quarter of 2005.
Demand is likely to stay depressed, keeping prices low, as high-risk borrowers who in the past would have qualified for subprime loans find themselves locked out of the market. Borrowers with little, if any, money for a down payment and those who don't want to document their finances also are likely to find the going tough.
House prices have fallen 6.5% as of October, since peaking in June 2006, according to the S&P/Case-Shiller Home Price index, which measures home values in 20 cities. Daniel Mudd, chief executive of government-sponsored mortgage investor Fannie Mae, expects prices to decline another 4% to 5% in 2008....more
Friday
Battle Lines Form Over Mortgage Plan...
In unveiling a plan to help more than one million struggling homeowners, the Bush administration and the mortgage industry have embarked on a controversial project: picking winners and losers from the rubble of the subprime-mortgage meltdown.
Under the deal, formally released yesterday, the industry would voluntarily help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages but aren't yet lost causes. For some homeowners, loan-servicing companies will agree to freeze mortgages at their low introductory rates. In other cases, credit counselors or loan servicers will walk mortgage holders through refinancing processes.
The deal won't provide relief to many subprime-mortgage holders: These include borrowers who are now in foreclosure, have already refinanced their homes or are more than 60 days delinquent on more than one payment over the past year. In some cases, people with good credit scores will be excluded. Also left out are those deemed able to afford the higher interest rates scheduled to replace their introductory rates over the next The initiative could help stabilize falling home prices and rising foreclosure rates, buoy the mortgage market and provide a modicum of comfort to investors watching the housing crisis bleed into the broader economy.
But it also sets what promises to become a battle line as the subprime crisis plays out over the coming election year. Some critics, especially Democrats, say the plan doesn't go far enough to protect vulnerable homeowners against foreclosure. Others, including some homeowners, as well as those who have watched from the sidelines as home prices have soared in recent years, charge that the plan amounts to a bailout for financially reckless borrowers.
The agreement covers homeowners who have taken out subprime mortgages, those offered typically to high-risk borrowers. About 1.8 million subprime loans are adjustable-rate mortgages, or ARMs, that carry low introductory rates that are set to expire in the next two years and adjust upward. These ballooning mortgage payments would threaten to produce a wave of foreclosures and a spiral of lower home prices and tightening credit.
The housing crisis is spreading beyond this relatively small subprime universe, causing turmoil on Wall Street and raising the specter of an economic slowdown. In the third quarter, home foreclosures hit their highest rate since at least 1972, according to the Mortgage Bankers Association. Prime adjustable-rate loans -- not covered in the industry's rescue plan -- accounted for 18.7% of mortgages starting foreclosure, the second-highest proportion behind subprime adjustable-rate loans. The overall delinquency rate is the highest since 1986, with some 2.64 million borrowers nationwide behind on payments for their first-lien mortgages for residences. more...
Under the deal, formally released yesterday, the industry would voluntarily help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages but aren't yet lost causes. For some homeowners, loan-servicing companies will agree to freeze mortgages at their low introductory rates. In other cases, credit counselors or loan servicers will walk mortgage holders through refinancing processes.
The deal won't provide relief to many subprime-mortgage holders: These include borrowers who are now in foreclosure, have already refinanced their homes or are more than 60 days delinquent on more than one payment over the past year. In some cases, people with good credit scores will be excluded. Also left out are those deemed able to afford the higher interest rates scheduled to replace their introductory rates over the next The initiative could help stabilize falling home prices and rising foreclosure rates, buoy the mortgage market and provide a modicum of comfort to investors watching the housing crisis bleed into the broader economy.
But it also sets what promises to become a battle line as the subprime crisis plays out over the coming election year. Some critics, especially Democrats, say the plan doesn't go far enough to protect vulnerable homeowners against foreclosure. Others, including some homeowners, as well as those who have watched from the sidelines as home prices have soared in recent years, charge that the plan amounts to a bailout for financially reckless borrowers.
The agreement covers homeowners who have taken out subprime mortgages, those offered typically to high-risk borrowers. About 1.8 million subprime loans are adjustable-rate mortgages, or ARMs, that carry low introductory rates that are set to expire in the next two years and adjust upward. These ballooning mortgage payments would threaten to produce a wave of foreclosures and a spiral of lower home prices and tightening credit.
The housing crisis is spreading beyond this relatively small subprime universe, causing turmoil on Wall Street and raising the specter of an economic slowdown. In the third quarter, home foreclosures hit their highest rate since at least 1972, according to the Mortgage Bankers Association. Prime adjustable-rate loans -- not covered in the industry's rescue plan -- accounted for 18.7% of mortgages starting foreclosure, the second-highest proportion behind subprime adjustable-rate loans. The overall delinquency rate is the highest since 1986, with some 2.64 million borrowers nationwide behind on payments for their first-lien mortgages for residences. more...
Greenspan Says Forcing Lenders To Alter Terms Would 'Tax' Economy
Former Federal Reserve Chairman Alan Greenspan said that compelling lenders to alter mortgage contracts would be a damaging tax on the economy and it would be less harmful to simply give the homeowners money.
Mr. Greenspan, clarifying remarks he made on television Sunday, said in an interview with The Wall Street Journal yesterday, "I'm saying instead of in effect 'taxing' financial institutions and giving the funds to the homeowners, we'd be far better off, as far as the future structure of our financial markets are concerned, to do it strictly with cash. Do it out in the open. Do it cleanly and with transparency, not by hidden processes."
Mr. Greenspan said on ABC News's "This Week" that "cash is available and we should use that in larger amounts, as is necessary, to solve the problems." But he wasn't specific about what form that cash would take, and some have interpreted his comments as advocating a massive fiscal bailout, a stance at odds with his longstanding reputation as a fiscal hawk.
Assuming the government is going to act to help out homeowners, Mr. Greenspan clarified that he would like it to do so in a way that minimizes the distortions to private behavior, which economists say can result in the misallocation of resources, less efficient markets and a lower standard of living.
He said, "Emergency aid is what I'm talking about, similar to what government does in natural disasters. I would make the criteria for who gets payments exactly the same for who would get rate relief. You still have the problem of drawing a line between those who were irresponsible and those who are innocent victims. That's a tough political value judgment to make." But once that judgment is made, "it is far less damaging to the economy and far simpler, without the ongoing consequences for the markets, if you give homeowners cash." more...
Mr. Greenspan, clarifying remarks he made on television Sunday, said in an interview with The Wall Street Journal yesterday, "I'm saying instead of in effect 'taxing' financial institutions and giving the funds to the homeowners, we'd be far better off, as far as the future structure of our financial markets are concerned, to do it strictly with cash. Do it out in the open. Do it cleanly and with transparency, not by hidden processes."
Mr. Greenspan said on ABC News's "This Week" that "cash is available and we should use that in larger amounts, as is necessary, to solve the problems." But he wasn't specific about what form that cash would take, and some have interpreted his comments as advocating a massive fiscal bailout, a stance at odds with his longstanding reputation as a fiscal hawk.
Assuming the government is going to act to help out homeowners, Mr. Greenspan clarified that he would like it to do so in a way that minimizes the distortions to private behavior, which economists say can result in the misallocation of resources, less efficient markets and a lower standard of living.
He said, "Emergency aid is what I'm talking about, similar to what government does in natural disasters. I would make the criteria for who gets payments exactly the same for who would get rate relief. You still have the problem of drawing a line between those who were irresponsible and those who are innocent victims. That's a tough political value judgment to make." But once that judgment is made, "it is far less damaging to the economy and far simpler, without the ongoing consequences for the markets, if you give homeowners cash." more...
Tuesday
U.S. Mortgage Crisis Rivals Savings and Loan Meltdown
To ease the pain, the Federal Reserve has cut short-term interest rates twice and is expected to cut them further tomorrow. The Bush administration has also pressed for private-sector curative measures. First, it urged big banks to create a new entity to buy some mortgage-linked securities that don't have a ready market now. And a plan finalized last week calls for freezing interest payments on perhaps hundreds of thousands of qualifying homeowners whose mortgage notes are set to rise. (See a primer: Will the Rate Freeze Help You?) Both ideas are controversial. They are hailed by some as well-conceived financial first aid and criticized by others as inadequate -- or an impediment to crisis resolution.
Buying Time
When the Fed began to raise interest rates in 2004, mortgage rates also began to climb. Initially, home prices kept rising as home buyers turned to mortgages with low initial payments, assuming they could sell or refinance before the mortgage rate adjusted higher. Borrowers who had trouble making payments could easily buy more time by refinancing into bigger loans, thanks to higher prices. That kept defaults low and encouraged rating agencies to continue blessing securities backed by such mortgages with high ratings.
Then, in places like Florida, buyers stopped coming. Mr. Delzio listed one home, on which he spent $203,000, at $210,000. He then cut the price repeatedly, finally to $175,000, barely more than the mortgage. He now rents it for $800 month, well short of the $1,400 monthly carrying cost.
Selling is made all the more difficult by the ample supply of homes and vacant land for sale in the area. Nationally, there were 2.1 million vacant homes for sale in the third quarter, equal to 1.6% of all the homes in the country -- a record.
At the end of 2006, the value of all homes in the U.S., excluding rentals, peaked at 153% of gross domestic product (or about $21 trillion) -- the highest level in at least six decades. By Sept. 30, that had edged down to 150% of GDP as home prices began to drop. With huge inventories of unsold homes soon to swell with foreclosed properties, that is likely to continue.
Falling home prices make consumers poorer and less ready to spend, and they make it harder to borrow against home values -- even if consumers are current on their payments....more
Buying Time
When the Fed began to raise interest rates in 2004, mortgage rates also began to climb. Initially, home prices kept rising as home buyers turned to mortgages with low initial payments, assuming they could sell or refinance before the mortgage rate adjusted higher. Borrowers who had trouble making payments could easily buy more time by refinancing into bigger loans, thanks to higher prices. That kept defaults low and encouraged rating agencies to continue blessing securities backed by such mortgages with high ratings.
Then, in places like Florida, buyers stopped coming. Mr. Delzio listed one home, on which he spent $203,000, at $210,000. He then cut the price repeatedly, finally to $175,000, barely more than the mortgage. He now rents it for $800 month, well short of the $1,400 monthly carrying cost.
Selling is made all the more difficult by the ample supply of homes and vacant land for sale in the area. Nationally, there were 2.1 million vacant homes for sale in the third quarter, equal to 1.6% of all the homes in the country -- a record.
At the end of 2006, the value of all homes in the U.S., excluding rentals, peaked at 153% of gross domestic product (or about $21 trillion) -- the highest level in at least six decades. By Sept. 30, that had edged down to 150% of GDP as home prices began to drop. With huge inventories of unsold homes soon to swell with foreclosed properties, that is likely to continue.
Falling home prices make consumers poorer and less ready to spend, and they make it harder to borrow against home values -- even if consumers are current on their payments....more
Monday
U.S., Banks Near a Plan to Freeze Subprime Rates for Borrowers
WASHINGTON -- The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.
An accord could reassure investors and strapped homeowners, both of whom are anxious as interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.
The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition, which is called the Hope Now Alliance.
Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.
Many subprime loans carry a low "teaser" interest rate for the first two or three years, then reset to a higher rate for the remainder of the term, which is typically 30 years in total. In a typical case, the rate would rise to around 9.5% to 11% from 7% or 8%. That would boost an average borrower's payment by several hundred dollars a month.
Exactly which borrowers will qualify for the freeze and how long the freeze would last are yet to be determined. Under one scenario, the freeze could run as long as seven years. The parties are developing standard criteria that would determine eligibility. The criteria should be finalized by the end of year. more...
An accord could reassure investors and strapped homeowners, both of whom are anxious as interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.
The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition, which is called the Hope Now Alliance.
Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.
Many subprime loans carry a low "teaser" interest rate for the first two or three years, then reset to a higher rate for the remainder of the term, which is typically 30 years in total. In a typical case, the rate would rise to around 9.5% to 11% from 7% or 8%. That would boost an average borrower's payment by several hundred dollars a month.
Exactly which borrowers will qualify for the freeze and how long the freeze would last are yet to be determined. Under one scenario, the freeze could run as long as seven years. The parties are developing standard criteria that would determine eligibility. The criteria should be finalized by the end of year. more...
Wednesday
The foreclosure market continues to boom as no relief appears in sight for stretched subprime mortgage holders.
As the economy shows more signs of a slowdown, this trend is likely to continue.
Although the real estate industry would prefer otherwise, foreclosures continue to make headlines. The latest data showed superficial relief, with September foreclosures down 8% from some 243,000 in August, but still more than double last year -- and still with more to come.
It may be a harsh analogy, but I often think of foreclosure buyers as the forest-floor ants consuming the dead wood to clean the forest. That means three things. First, as I see it, the sooner we get through this credit mess, the better. Second, the faster properties get through the foreclosure process and find buyers, the sooner we'll get through the mess. So third, foreclosure buyers clean out the dead wood (I like) and get great bargains in the process (I also like)....more
Although the real estate industry would prefer otherwise, foreclosures continue to make headlines. The latest data showed superficial relief, with September foreclosures down 8% from some 243,000 in August, but still more than double last year -- and still with more to come.
It may be a harsh analogy, but I often think of foreclosure buyers as the forest-floor ants consuming the dead wood to clean the forest. That means three things. First, as I see it, the sooner we get through this credit mess, the better. Second, the faster properties get through the foreclosure process and find buyers, the sooner we'll get through the mess. So third, foreclosure buyers clean out the dead wood (I like) and get great bargains in the process (I also like)....more
Thursday
Interest Rates Defy Fed's Recent Cuts...
Interest-rate cuts by the Federal Reserve are normally bad news for savers and good news for borrowers. But that scenario hasn't been playing out fully since the central bank began cutting rates in September.
The Fed has trimmed a total of three-quarters of a percentage point from short-term rates in recent weeks. However, rates on such popular savings products as money-market funds, savings accounts and certificates of deposit haven't fallen anywhere near that much, and some have even held steady. Meanwhile, rates on certain types of borrowings, including home-equity loans and auto loans, remain stubbornly high.
Behind the discrepancies is continuing tightness in credit markets, where many banks raise much of their capital. Instead, banks remain especially eager to attract consumers' deposits, and are willing to pay savers handsomely to keep the money coming in the door. At the same time, banks' higher cost of raising capital is keeping many of them from lowering rates on some kinds of loans
"Even though the Fed has eased three-quarters of a percentage point since September, the market has only gotten between 0.25% and 0.50% of that easing," says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago. "If you look at it from a saver's and borrower's side, it shows you that the market is still not functioning properly."
That's fine with savers. Average yields on money-market mutual funds, for example, whose yields typically move in line with changes in the Fed funds rate, are hovering at 4.76%, compared with 5.06% in mid-September -- roughly half the amount they'd be expected to drop, says Peter Crane of Crane Data LLC.
Declines in CD rates also are relatively modest. One-year CDs currently average 3.61%, down from 3.78% in mid-July, and five-year CDs are at 3.92%, down from 4%, according to Greg McBride, a senior financial analyst at Bankrate.com. By contrast, he says, comparable Treasurys have dropped a full percentage point over the same period. "Normally, CD yields would drop like a stone, and now, they've been dropping like a feather," he says.
To be sure, banks may still trim yields on deposits in the wake of this past Wednesday's Fed cut in the federal-funds rate, charged on overnight loans between banks. The move, aimed at bolstering the economy amid plunging home construction and eroding real-estate values, pushed the Fed rate down a quarter point to 4.5%. However, market experts expect consumers will continue to enjoy favorable yields on many savings products in the 4% to 5% range, with the highest yields on savings products still above 5%. "Yields are going to drop a little bit, but won't drop as much as we would expect in normal circumstances," Mr. McBride says. more...
The Fed has trimmed a total of three-quarters of a percentage point from short-term rates in recent weeks. However, rates on such popular savings products as money-market funds, savings accounts and certificates of deposit haven't fallen anywhere near that much, and some have even held steady. Meanwhile, rates on certain types of borrowings, including home-equity loans and auto loans, remain stubbornly high.
Behind the discrepancies is continuing tightness in credit markets, where many banks raise much of their capital. Instead, banks remain especially eager to attract consumers' deposits, and are willing to pay savers handsomely to keep the money coming in the door. At the same time, banks' higher cost of raising capital is keeping many of them from lowering rates on some kinds of loans
"Even though the Fed has eased three-quarters of a percentage point since September, the market has only gotten between 0.25% and 0.50% of that easing," says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago. "If you look at it from a saver's and borrower's side, it shows you that the market is still not functioning properly."
That's fine with savers. Average yields on money-market mutual funds, for example, whose yields typically move in line with changes in the Fed funds rate, are hovering at 4.76%, compared with 5.06% in mid-September -- roughly half the amount they'd be expected to drop, says Peter Crane of Crane Data LLC.
Declines in CD rates also are relatively modest. One-year CDs currently average 3.61%, down from 3.78% in mid-July, and five-year CDs are at 3.92%, down from 4%, according to Greg McBride, a senior financial analyst at Bankrate.com. By contrast, he says, comparable Treasurys have dropped a full percentage point over the same period. "Normally, CD yields would drop like a stone, and now, they've been dropping like a feather," he says.
To be sure, banks may still trim yields on deposits in the wake of this past Wednesday's Fed cut in the federal-funds rate, charged on overnight loans between banks. The move, aimed at bolstering the economy amid plunging home construction and eroding real-estate values, pushed the Fed rate down a quarter point to 4.5%. However, market experts expect consumers will continue to enjoy favorable yields on many savings products in the 4% to 5% range, with the highest yields on savings products still above 5%. "Yields are going to drop a little bit, but won't drop as much as we would expect in normal circumstances," Mr. McBride says. more...
Selling Your Property In A Slow Market
Look at the prices of homes getting sold, and the property market's decline seems no worse than a rough day in the stock market. Look at the number of unsold homes, and you realize there's a world of financial pain out there.
True, these unsold homes may eventually get bought at decent prices. But in the meantime, the owners are often bleeding money -- and many of them would be smart to slash their asking price and go for the quick sale.
• home prices are down just 4.5% from their July 2006 peak.
Yet even as prices appear pretty much unchanged, the number of unsold homes has soared. At the current pace of sales, it would take more than 10 months to clear this backlog, according to the National Association of Realtors.
Sure, it would be emotionally draining to have your home on the market for more than 10 months. But it probably wouldn't be a financial disaster -- as long as you're still in the house and you can comfortably cover the mortgage.
Maybe, however, you have an adjustable-rate loan that's now unaffordable. Maybe you're trying to unload a vacation home. Maybe you moved cross-country for a new job, but your old house still hasn't sold.
The monthly cost of carrying a vacant home could equal 1% of a home's value, figures Charles Farrell, an adviser with Denver's Northstar Investment Advisors. After all, you still have to pay utilities, insurance, property taxes, maintenance and, of course, the mortgage.
What if the mortgage is paid off? There's still an opportunity cost. The equity in your home could instead be invested in, say, bonds yielding 5%.
To make matters worse, "prices could be lower a year from now," Mr. Farrell warns. "There's also the risk of owning a physical asset. I'm thinking about things like fire, broken pipes, theft." more...
True, these unsold homes may eventually get bought at decent prices. But in the meantime, the owners are often bleeding money -- and many of them would be smart to slash their asking price and go for the quick sale.
• home prices are down just 4.5% from their July 2006 peak.
Yet even as prices appear pretty much unchanged, the number of unsold homes has soared. At the current pace of sales, it would take more than 10 months to clear this backlog, according to the National Association of Realtors.
Sure, it would be emotionally draining to have your home on the market for more than 10 months. But it probably wouldn't be a financial disaster -- as long as you're still in the house and you can comfortably cover the mortgage.
Maybe, however, you have an adjustable-rate loan that's now unaffordable. Maybe you're trying to unload a vacation home. Maybe you moved cross-country for a new job, but your old house still hasn't sold.
The monthly cost of carrying a vacant home could equal 1% of a home's value, figures Charles Farrell, an adviser with Denver's Northstar Investment Advisors. After all, you still have to pay utilities, insurance, property taxes, maintenance and, of course, the mortgage.
What if the mortgage is paid off? There's still an opportunity cost. The equity in your home could instead be invested in, say, bonds yielding 5%.
To make matters worse, "prices could be lower a year from now," Mr. Farrell warns. "There's also the risk of owning a physical asset. I'm thinking about things like fire, broken pipes, theft." more...
Saturday
The United States of Sub-Prime Loans
As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash
To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations...more
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash
To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations...more
Where Are All the Real Estate Deals?
During a housing downturn, buyers may start looking out for big bargains, but for reliable investments consider the whole economic picture...
You may have heard that now is the time to buy real estate—if you can afford to. As contrarians point out, demand is weak, sales are slow, and inventory is high. Homeowners and homebuilders are slashing prices desperately, and savvy investors are snatching up cheap foreclosure properties. The real estate market is teeming with bargain-priced homes, just waiting for that next lucky buyer to come along.
Or so it seems. Most experts agree the era of home flipping is over and believe homes should be looked at foremost as shelter and secondarily as a long-term investment. But, as always, there are some areas of the country where homes are affordable, price appreciation is imminent, and the underlying economy is strong. In these places, you might just have an easy time finding a great bargain.
Along with economists at Fiserv (FISV), Lending Solutions, and Moody's (MCO) Economy.com, BusinessWeek put together a list of the best metropolitan areas for bargain homes by looking at affordability, forecasts for price appreciation and job growth, and recent price fluctuations. These areas are not for high-risk investors; they are perfect hunting grounds for smart buyers looking for decent home price appreciation and a pleasant place to live at a discount. ..more
You may have heard that now is the time to buy real estate—if you can afford to. As contrarians point out, demand is weak, sales are slow, and inventory is high. Homeowners and homebuilders are slashing prices desperately, and savvy investors are snatching up cheap foreclosure properties. The real estate market is teeming with bargain-priced homes, just waiting for that next lucky buyer to come along.
Or so it seems. Most experts agree the era of home flipping is over and believe homes should be looked at foremost as shelter and secondarily as a long-term investment. But, as always, there are some areas of the country where homes are affordable, price appreciation is imminent, and the underlying economy is strong. In these places, you might just have an easy time finding a great bargain.
Along with economists at Fiserv (FISV), Lending Solutions, and Moody's (MCO) Economy.com, BusinessWeek put together a list of the best metropolitan areas for bargain homes by looking at affordability, forecasts for price appreciation and job growth, and recent price fluctuations. These areas are not for high-risk investors; they are perfect hunting grounds for smart buyers looking for decent home price appreciation and a pleasant place to live at a discount. ..more
U.S. Housing Chill Grows
Overall, sales of existing homes tumbled 4.3% in August to an annual pace of 5.5 million, the slowest in five years, the National Association of Realtors said yesterday. More worrisome: The number of homes for sale is enough to satisfy 10 months of demand at the current pace. Two years ago the figure was below five months. Analysts cite excess supply in forecasting that an upturn in sales and prices may not come until 2009.
Home prices in July fell 3.9% from a year earlier, according to the S&P/Case-Shiller home-price index. The index, which tracks prices in 20 U.S. metropolitan areas, hadn't measured that big of a decline since just after the 1990-91 recession.
The bottom is "not yet in sight" for housing, said Mr. Shapiro, the economist. He said the growing number of unsold homes "argues for accelerating declines of prices."
The worsening housing slump and turmoil in the credit markets is beginning to take a toll on retailers. Lowe's Chief Executive Robert Niblock, addressing analysts and investors at a conference in Charlotte, N.C., yesterday, refused to hazard a guess on when the housing slowdown will bottom. "The only thing that is consistent is the inaccuracies of the economic forecasts," he said. Late Monday, Lowe's reduced its earnings outlook for this year and 2008. Its shares fell 6.7% yesterday. more
Home prices in July fell 3.9% from a year earlier, according to the S&P/Case-Shiller home-price index. The index, which tracks prices in 20 U.S. metropolitan areas, hadn't measured that big of a decline since just after the 1990-91 recession.
The bottom is "not yet in sight" for housing, said Mr. Shapiro, the economist. He said the growing number of unsold homes "argues for accelerating declines of prices."
The worsening housing slump and turmoil in the credit markets is beginning to take a toll on retailers. Lowe's Chief Executive Robert Niblock, addressing analysts and investors at a conference in Charlotte, N.C., yesterday, refused to hazard a guess on when the housing slowdown will bottom. "The only thing that is consistent is the inaccuracies of the economic forecasts," he said. Late Monday, Lowe's reduced its earnings outlook for this year and 2008. Its shares fell 6.7% yesterday. more
Tuesday
Despite data, Fed leaves rates steady
Wall Street turbulence, Main Street credit problems and a nationwide housing slump pose increasing risks to the economy, the Federal Reserve said Tuesday, even as it left interest rates unchanged.
Although Federal Reserve Chairman Ben Bernanke and his central bank colleagues acknowledged challenges that have intensified since their last meeting in late June, they nonetheless expressed hope that the economy will safely make its way.
The policymakers also clung to their belief that the biggest potential danger to the economy is that inflation won't recede as they anticipate.
Against these economic crosscurrents, the Fed left an important interest rate at 5.25 percent on Tuesday. In turn, commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans -- would stay at 8.25 percent.
The central bank's key rate hasn't budged for more than a year. Before that, the Fed had raised rates for two years to fend off inflation.
On Wall Street, investors overcame their initial disappointment and bid stocks higher. The Dow Jones industrials gained 35.52 points to close at 13,504.30.
The Fed policymakers didn't signal that a rate cut -- as an insurance policy against undue economic weakness -- would be imminent. Analysts believe the Fed probably will leave rates alone at its next meeting on Sept. 18. But economists and investors think the odds are growing that the Fed might lower rates by the end of this year, if the economy shows signs of faltering and if inflation isn't worrisome.
"Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses and the housing correction is ongoing," the Fed said. "Downside risks to growth have increased somewhat," it added...more
Although Federal Reserve Chairman Ben Bernanke and his central bank colleagues acknowledged challenges that have intensified since their last meeting in late June, they nonetheless expressed hope that the economy will safely make its way.
The policymakers also clung to their belief that the biggest potential danger to the economy is that inflation won't recede as they anticipate.
Against these economic crosscurrents, the Fed left an important interest rate at 5.25 percent on Tuesday. In turn, commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans -- would stay at 8.25 percent.
The central bank's key rate hasn't budged for more than a year. Before that, the Fed had raised rates for two years to fend off inflation.
On Wall Street, investors overcame their initial disappointment and bid stocks higher. The Dow Jones industrials gained 35.52 points to close at 13,504.30.
The Fed policymakers didn't signal that a rate cut -- as an insurance policy against undue economic weakness -- would be imminent. Analysts believe the Fed probably will leave rates alone at its next meeting on Sept. 18. But economists and investors think the odds are growing that the Fed might lower rates by the end of this year, if the economy shows signs of faltering and if inflation isn't worrisome.
"Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses and the housing correction is ongoing," the Fed said. "Downside risks to growth have increased somewhat," it added...more
Monday
No Housing Turnaround for Two Years?
First, it was the second half of 2007. Then it was 2008. Now analysts are saying the national housing market may not rebound until 2009. On July 25, the National Association of Realtors reported that sales of existing homes fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million units, contributing to the bleak-and-getting-bleaker outlook.
Mixed Signals Confuse Buyers. The NAR believes consumer psychology is to blame. "Homebuyers have been getting mixed signals about the housing market, which is causing some of them to hesitate," said NAR Senior Economist Lawrence Yun in a statement. Rising mortgage rates and tighter lending standards aren't helping, either, Yun said. According to Freddie Mac (FRE), the national average commitment rate for a 30-year fixed-rate mortgage rose to 6.66% in June, from 6.26% in May.
Two "bright spots" in June, Yun said, are the decline in housing inventory and the "modest gain" in home prices. Total housing inventory fell 4.2% in the month, to 4.2 million existing homes for sale, representing a supply of 8.8 months. In the same period, the national median existing-home price edged up 0.3% year-over-year, to $230,100. For single-family homes, the median price rose only 0.1%.
"This increase is an aberration," says Patrick Newport, an economist with Global Insight in Waltham, Mass. "Current inventory levels make it almost a sure thing that prices will continue to slide." On July 11 the NAR said existing-home prices would recover in 2008, rising 1.8%, to a median of $222,700 after a 1.4% decline this year. But Newport thinks otherwise. "Our view is that the downturn [in sales] will continue into 2008," he says. "Given the level of unsold homes, however, nominal home prices will probably not rebound until 2009." ...more
Mixed Signals Confuse Buyers. The NAR believes consumer psychology is to blame. "Homebuyers have been getting mixed signals about the housing market, which is causing some of them to hesitate," said NAR Senior Economist Lawrence Yun in a statement. Rising mortgage rates and tighter lending standards aren't helping, either, Yun said. According to Freddie Mac (FRE), the national average commitment rate for a 30-year fixed-rate mortgage rose to 6.66% in June, from 6.26% in May.
Two "bright spots" in June, Yun said, are the decline in housing inventory and the "modest gain" in home prices. Total housing inventory fell 4.2% in the month, to 4.2 million existing homes for sale, representing a supply of 8.8 months. In the same period, the national median existing-home price edged up 0.3% year-over-year, to $230,100. For single-family homes, the median price rose only 0.1%.
"This increase is an aberration," says Patrick Newport, an economist with Global Insight in Waltham, Mass. "Current inventory levels make it almost a sure thing that prices will continue to slide." On July 11 the NAR said existing-home prices would recover in 2008, rising 1.8%, to a median of $222,700 after a 1.4% decline this year. But Newport thinks otherwise. "Our view is that the downturn [in sales] will continue into 2008," he says. "Given the level of unsold homes, however, nominal home prices will probably not rebound until 2009." ...more
The new exit strategy: A short sale
For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that's resetting higher), up to now the only option was, well, letting the bank foreclose. That's not a good option since a foreclosure sticks on your credit record for at least 10 years. But some experts are now advocating a "short sale." This is a case of a distinction with a difference: If your bank agrees to a short sale, you then hire an agent to find a buyer for the house, you sell the house for a loss, and with the bank's blessing, they agree to eat the loss (although they could still demand the homeowner make some kind of payment or share the loss).
That's the really short version of how it works. ..more
That's the really short version of how it works. ..more
Thursday
Home prices fall at fastest rate in 16 years
WASHINGTON (MarketWatch) -- Home prices in 10 major U.S. cities dropped at the fastest pace in 16 years during the 12 months ending in April, according to Standard & Poor's Case-Shiller home price index released Tuesday.
Home prices in the 10 cities fell 2.7% on a year-over-year basis, the largest decline since September 1991. Meanwhile, prices in 20 cities dropped a record 2.1% year over year...more
Home prices in the 10 cities fell 2.7% on a year-over-year basis, the largest decline since September 1991. Meanwhile, prices in 20 cities dropped a record 2.1% year over year...more
Monday
Mortgage Brokers: Are They Friends or Foes for Borrowers?
The political debate over how to deal with a surge in defaults on home loans is raising a question that consumers ought to consider: Is my mortgage broker really working for me?
Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price. But many brokers are making it clear they don't see things that way. They are fighting efforts by federal and state politicians to impose a fiduciary duty on them to put their customers' interests first, as lawyers, real-estate agents and financial planners generally are required to do with their clients.
To protect yourself, one strategy is to shop for a home loan directly at a few lenders and then see whether a broker can find a better deal. When choosing a broker, borrowers should ask tough questions first. Among them: In searching for loans, do you feel obliged to put my interests ahead of yours? Exactly how much will you earn on this loan? And how many lenders do you check regularly for rates and terms?lanners generally are required to do with their clients....more...
Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price. But many brokers are making it clear they don't see things that way. They are fighting efforts by federal and state politicians to impose a fiduciary duty on them to put their customers' interests first, as lawyers, real-estate agents and financial planners generally are required to do with their clients.
To protect yourself, one strategy is to shop for a home loan directly at a few lenders and then see whether a broker can find a better deal. When choosing a broker, borrowers should ask tough questions first. Among them: In searching for loans, do you feel obliged to put my interests ahead of yours? Exactly how much will you earn on this loan? And how many lenders do you check regularly for rates and terms?lanners generally are required to do with their clients....more...
Saturday
U.S. Home Prices Fall For First Time Since 1991
U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday. A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters. The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month.
The national decline "is reaffirmation of the pullback in the U.S. residential real estate market," said Robert Shiller, chief economist for MacroMarkets LLC, and co-inventor of the index.
"This fall is consistent with the ongoing trend that has developed over the past year," wrote Goldman Sachs economists, who said they believe the Case-Shiller index is the best gauge of home values. "We remain comfortable with our forecast of house prices falling by 5% over 2007." more...
The national decline "is reaffirmation of the pullback in the U.S. residential real estate market," said Robert Shiller, chief economist for MacroMarkets LLC, and co-inventor of the index.
"This fall is consistent with the ongoing trend that has developed over the past year," wrote Goldman Sachs economists, who said they believe the Case-Shiller index is the best gauge of home values. "We remain comfortable with our forecast of house prices falling by 5% over 2007." more...
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