Business news stories and oped columns are filled with comments about the economy picking up steam. The case is less obvious to those of us who look at the data. Febuary's reported job growth of 236,000 wasn't bad, but it was not quite as good as the 271,000 job gain reported last February or the 311,000 new jobs reported for January of 2012. It pays to step back and look at the big picture. Most forecasts show growth under 2.0 percent in 2012. We have little reason at this point to assume that these forecasts are overly pessimistic.
2---A Look Behind the Curtain at Wall Street's 24/7 Effort to Gut Finance Reform, Mother Jones
3---Detroit Emergency Manager: Gov. Rick Snyder Announces State Financial Takeover, Huffington Post
4---DeMarco Calls for New Push on Reform as Fannie Profits Return, Bloomberg
I have been observing a developing ‘consensus’ among private-market participants that the conforming conventional mortgage market cannot operate without the American taxpayer providing the ultimate credit guarantee for most of the market,” DeMarco said in written testimony prepared for delivery at the House hearing. “That clearly is one outcome, but I do not believe it is the only outcome that can give our country a strong housing finance system. I believe that our country, and its financial system, are stronger than that.”
Washington-based Fannie Mae (FNMA) and McLean, Virginia-based Freddie Mac have been under U.S. conservatorship since 2008 and have drawn nearly $190 billion in taxpayer aid to stay afloat during that time. Lawmakers who don’t want the companies to return to their previous government-sponsored status are becoming concerned that political momentum for winding down and replacing them could erode as the housing market rebounds and profits soar
5---Wall Street Institutions Behind Home Price Surges In Markets Like Phoenix, Forbes
In Q4 2012, Phoenix REO prices were 37% higher than a year ago, followed by Las Vegas (30%) and several California markets. All six markets with rising shares of institutional investors experienced double-digit increases and were among the top nine for REO price appreciation.
“More importantly, the ripple effects are greatly impacting the broader market. Lower-end home prices in markets with rising shares of institutional investors are up 15% from a year ago, compared to only 6% for the remaining markets.”
Institutions are most active in five states: Florida, Georgia, Arizona, Nevada and California. Interestingly the metro area that welcomed the most institutional activity in 2012 was Miami, Fla., with firms funding 30% of all sales. Single-family home prices for the Miami metro area rose about 11% in 2012 (including distressed homes), according to CoreLogic. Institutional investors accounted for 21% of all sales in Charlotte, N.C., 19% in Las Vegas, and 18% in Orlando.
It’s no secret that Wall Street has been bullish on real estate. Housing stocks have surged over the past year, many teetering on the edge of overbought, and billionaire investors like Warren Buffett have been exceedingly vocal about the investment opportunities brick and mortar properties have represented. Private equity and hedge fund firms have been sinking billions into single family rentals, buying distressed homes off of banks’ balance sheets in discounted bulk.
6---Investors Flock To Housing, Looking To Buy Thousands Of Homes In Bulk, archive Forbes
7---"Housing Recovery" Is More Complicated Than You Think, Forbes
When you stand back and look at the U.S. housing marketplace at the start of 2013, what do you see?
A moderate to strong rebound underway in home prices in many areas, fast turnaround times from listing to sale, and multiple-offer competitions increasing as local home inventories plunge?
A surprising and sobering stagnation in prices in large swaths of the country, with some areas experiencing lengthy times from listing to sale, despite inventory declines. The softening in these local markets could be significant enough to slow down the overall pace of national price gains this year.
Which do you choose?
How about both?
8---Housing Markets Will Probably Never Return To Pre-Crisis Levels: Case-Shiller Chair Blitzer, Forbes
The hazard now is that people think normal is 2006, but we aren’t going back there for a long time, maybe never,” Blitzer said. Despite impressive growth, prices remain stuck at autumn 2003 levels, while the shadow inventory stood at about 3.1 million units last summer, according to Barclays, compared to an average of about 500,000 before the crisis. These have weighed down on big banks’ balance sheets, including Bank of America and Citigroup, certainly affecting credit availability.
Housing starts provide another example: before the crisis they had topped 2 million during some months, something that had only happened twice before (after the Korean War as veterans from two wars came back, and in the mid-80s when the Fed lowered rates, Blitzer explained). Currently, housing starts stand just above 900,000, and are expected to average 1.1 million in 2013, Barclays’ research team indicates.
9---In like a lion, greater fool
Sales are now falling in every major housing market. February year/year numbers sucked. The ones coming out of March will be worse. It must have killed CREA on Friday to announce a 15.8% gutting of real estate transactions nationally, while anyone who bought a house in the last two years had coffee coming out of their nose as they read the MSM headlines...
Realtors are now cutting their estimates (the third time) for 2013, while momentum turns negative. As this blog has chronicled since last summer, sales have tumbled since F dropped the mortgage bomb on July 9th, and coming off a market one year ago that was frothier than a beagle in heat. Leading the fall were Vancouver (of course), Winnipeg, Toronto and Vancouver. Some areas of the country (BC’s Fraser Valley or parts of the Okanagan) are experiencing sales crashes of 40% and price drops of 20%. This is the leading edge of our correction.
Of course the housing cartel’s working overtime at its usual disinformation. CREA says prices will decline this year by only 0.2%, while its Frankenumber actually rose 2.7% in February. Media everywhere have been told that while sales are down, prices are up more than 1% year/year – if you eliminate Vancouver. As dumbass a statement as that is, it’s useless info for those debating a home purchase, since values peaked last April and have been eroding since. It’s only a matter to weeks or months before they go negative. Include Vancouver, and they implode....
On a more worrisome note, the real estate fantasy we’ve built for each other sits on a foundation of debt. Forget the untrue meme that borrowing is down, saving is up and mortgages are being repaid. It’s the opposite. Stats Can has just revealed household debt has hit a new record, despite F’s efforts to curtail bank lending. The debt-to-disposable-income ratio has crested at 165%,. In the last 90 days of 2012 alone we added $11,000,000,000 in new mortgage debt.
Canadians owe $1.1 trillion in home loans, and indebtedness is rising at five times the inflation rate. At the same time among our largest population group (the Boomers), 78% have houses, 70% have no pensions and 60% don’t have a hundred grand saved. God help us.
Finally, this week brought big news in BC, and a shameless public act.
House sales across the province have now cratered by 24% and prices already tumbled more than 8%. An irreplaceable mansion in Victoria just re-listed for 28% less. A leading Van realtor in the best of hoods is telling clients, “Declining market trends will almost certainly continue. The bottom line continues to be that prices are falling. The Real Estate Board of Greater Vancouver’s Westside detached home HPI index is down over 10% from its high point last Spring. By end of summer I expect this to have fallen another 10%
10---Clouds gather over Canadian housing market, Globe and Mail
11---Grand theft auto loans, washinton free beacon
Delinquent contracts at GM now represent 8.5 percent of all auto loans—higher than delinquencies at Ford, Toyota, and Honda combined.
All four companies have in-house financing arms that lend money to purchasers. GM’s structure differs from its competitors because it focuses primarily on subprime borrowers, while customers with higher credit scores opt for financing from Ally Bank.
“When you talk about our delinquency rate, GM Financial’s is higher than the industry average of captive lenders because 85 percent of our portfolio is subprime, whereas the portfolios of other captive lenders are predominantly prime,” GM Financial spokeswoman Chrissy Heinke said. “So, it’s not an apples to apples comparison.”
GM’s prime borrowers fall into delinquency at the industry average. Ally reported 1.6 percent in delinquencies in the quarter ending Sept. 30, 2012, its most recently available SEC filing.
General Motors is doubling down on the subprime strategy. Only 4 percent of GMF borrowers had credit scores above 660 in 2012, compared to nearly 8 percent in 2011.
12---Fannie Motors, washinton free beacon
GM’s securitization of subprime auto loans could create auto bubble...
General Motors has flooded financial markets with auto-backed securities in an effort to offload its risky subprime loans onto banks, a strategy industry insiders say could produce a bubble.
High production costs and falling profit-per-car have led auto manufacturers to turn to financing to earn higher profits. Automakers have capitalized on lending by not only loaning money to customers but also packaging and selling those loans to investors in a manner similar to the sale of mortgage-backed securities that created the housing bubble.
The dramatic increase in securitization has coincided with GM’s acquisition of AmeriCredit, one of the nation’s largest subprime auto lenders, which it renamed GM Financial (GMF).
“It’s becoming Fannie Motors,” said Competitive Enterprise Institute finance scholar John Berlau, referring to the government-backed housing lender Fannie Mae. “They’re still using our tax dollars to break into exotic and money-losing propositions from Chevy Volts to subprime loans, both of which could literally and figuratively blow up in their faces.”
85 percent of GMF loans are subprime.
GM has redoubled its efforts to capture revenue from the banks. The company issued nearly $60 billion in asset-backed securities (ABS) between 1994 and 2010. The bailed out automaker issued $5.6 billion in securities in 2012, a 50 percent jump from the average ABS issuance between 1994 and 2010 and $1 billion more than 2011, according to GM Financial spokeswoman Chrissy Heinke.
13---The stock market and economy are two very different animals, abnormal returns
We want to believe the stock market and economy are inextricably linked. That is what the financial news industry is built upon. The economic indicator announcement is a staple of business TV. Maybe that is yet another good reason to go on a “news diet.”
14---China Bank Securitizing U.S. Loans , WSJ
In November, Bank of China became the first Chinese lender to participate in the sale of U.S. commercial-mortgage-backed securities, known as CMBS. Bank of China joined a group of banks in a $950 million loan to finance a 43-story building at 1290 Avenue of the Americas in midtown Manhattan that was then packaged into bonds.
The Chinese bank is planning loans that would end up in to two or three more CMBS deals, a person with knowledge of the bank said. State-controlled Bank of China earns a profit from selling loans via CMBS. It also frees up its balance sheet to make more loans.
The bank uses its capital to lend at lower rates than many of its competitors.
Bank of China had $3.7 billion in commercial-property loans outstanding in its U.S. branches as of the fourth quarter, according to data provider Trepp LLC, almost four times the level in the same period of 2009.
"They are like the 1,000-pound gorilla in the room, where they have the capital to [lend at] very competitive terms," said Christopher Haynes, founder of loan adviser Broadacre Financial Corp. and a 20-year veteran of Merrill Lynch's real-estate team. "Securitization may be encouraging them to do even more."
The CMBS market is off to a record start this year. Investors are moving into riskier investments that offer higher yields, as the Federal Reserve's near-zero interest rates hold down returns on the safest debt, including Treasurys.
CMBS issuance is on track to reach $26 billion for the first quarter, more than four times the level from a year ago and the highest three-month total since the fourth quarter of 2007, according to Commercial Mortgage Alert, a trade publication. The $8.8 billion sold in January marked the biggest ever for that month.
Bank of China has focused on high-profile properties in New York with its forays into CMBS. The bank has tentatively agreed to provide about $600 million to help fund Chetrit Group's $1.1 billion purchase of the Sony Building in Manhattan, real-estate executives with direct knowledge of the deal said. That loan isn't likely to be packaged into a CMBS, however.
The latest securitization foray by Bank of China involved teaming up with Goldman Sachs Group Inc. GS -0.56% and Deutsche BankDBK.XE -3.20% on a $900 million loan on a 1.7 million-square-foot office and retail property in Manhattan's Times Square.
15--Is The "Buy to Rent" Party Over?, zero hedge
, all you need is for prices to rise to the point the entire business model is dead and then people stop buying. You don’t even need to see rampant selling. If the buying dries up, the housing market will totally crash once again.Rents for single-family homes are rising slower than property prices as firms such asBlackstone Group LP (BX) flood the market with homes for lease, posing risks to investors betting billions on the burgeoning market.
Monthly payments for properties in Phoenix rose 1.3 percent in February from a year earlier, compared with a 25 percent jump in for-sale asking prices, according to Trulia Inc. (TRLA), which operates an online listing service. In Atlanta, asking prices climbed 14 percent as single family rents gained 0.5 percent, and in Las Vegas rents dropped 1.7 percent even as asking prices soared 18 percent.
Monthly leases in Phoenix’s west side, where investors bought the most rentals, fell by about $100 a month, or 10 percent, in 2012, said James Breitenstein, CEO of Landsmith, a San Francisco-based single-family rental firm that sold most of its 250 Phoenix rental houses last year.
“There are a lot of properties out there, so the competition to get your property rented is fierce,” Svoboda said. “Tenants are very savvy. If you’re overpriced by $25, they’ll let you know and go to another one around the corner.”