Mortgage rates rise to highest level in 7 weeks; Rates on 30-year mortgages continue to remain above 6 percent, making it the highest level in seven weeks. Freddie Mac reported that the 30-year fixed mortgages averaged 6.06 percent for this week, up slightly from 6.03 percent last week. It is interesting to note that while mortgage rates are remaining at above 6 percent, the Federal Reserve cut the federal funds rate down by a quarter point to around 2 percent. This is the lowest level the federal funds rate has been since late 2004. So the Fed is trying to cut the interest rate down to stimulate the economy with more business and consumer investment in order stave off a recession, potentially caused by the housing slump and credit crisis. But the banks have been stung by the credit crisis due to their own excessive lending of subprime and adjustable-rate mortgages to Americans, during the housing boom. These Americans can no longer pay the higher interest rate fees on the subprime mortgages and are forcing the banks to foreclose on these homes. The banks are sitting on a glut of homes that have fallen in value during the bust, and can no longer recoup their own losses. Hence, the banks are keeping home mortgage rates high at above six percent, perhaps as a means of recouping their losses due to the speculation in the housing market.
Home foreclosure rate continues ugly climb; The number of U.S. homes heading toward foreclosure more than doubled in the first quarter of this year. California-based RealityTrack reported that 649,917 homes reported at least one foreclosure-related filing in the first three months of 2008--up 112 percent from 306,722 during the same period last year. Among the hardest hit states were Nevada, Florida, and California. The latest tally also represents an increase of 23 percent from the fourth quarter of 2007. Bottom line here is that the U.S. housing market has not shaken out the excess caused by the subprime mortgage meltdown. There are still too many Americans with subprime mortgages or ARMs that will be going under over the course of this year.
Sales of new U.S. homes plunged in March; The Commerce Department reported that sales of new homes dropped by 8.5 percent in March to a seasonally adjusted annual rate of 526,000 units, the lowest sales pace since October 1991. The median price of a home sold in March dropped 13.3 percent, compared to March 2007.
Existing home sales fell 2 percent in March; The National Association of Realtors reported that sales of existing single-family homes and condos dropped by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units. The median price of a home sold in March was $200,000, a decline of 7.7 percent from a year ago.
A couple of interesting points here about both of these MSNBC stories on the falling sales of both new and existing homes. Both median prices of new and existing homes dropped by a significant percentage--new home prices dropped 13.3 percent while existing home prices dropped 7.7 percent, when both compared to a year ago. Sales of new homes dropped by a significant percentage of 8.5 percent. These are probably newly constructed homes that home builders have probably not been able to find buyers for, and are slashing prices just to get these unsold homes off their books. Existing home sales are those homes that Americans currently own. I would say that these Americans realize that home prices are dropping, and are either pulling their homes off the market, or perhaps converting possible second homes into rental properties until home prices stabilize, or start to increase. Either way, both of these stories show that the housing market is still in the dumps.
Vacant homes for sale hit new record high; The Census Bureau reports that 2.9 percent of U.S. homes--excluding rental properties--were vacant and up for sale, compared with 2.8 percent of homes during the fourth quarter of 2007. This works out to around 2.28 million homes, up from 2.18 million homes during the same quarter of last year. More than likely, these numbers represent the foreclosed homes that the banks are sitting on, of which they can't unload to cover their losses in the subprime mortgage meltdown and credit crisis. And you can bet that the current value of these empty homes have dropped significantly, when compared to the price of the mortgages the banks gave out in selling these homes to Americans during the housing boom. It all goes back to the high 6 percent mortgage rates that banks are refusing to lower in order to cover their losses of these empty, foreclosed homes.
And finally, we have this MSNBC story;
Shiller: Housing slump may exceed Depression;
NEW HAVEN, Conn. - An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression and bailouts will be needed so millions don’t lose their homes.
Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor’s/Case-Shiller home price index, said there’s a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.
“I think there is a scenario that they could be down substantially more,” Shiller said during a speech at the New Haven Lawn Club.
Shiller’s Standard & Poor’s/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.
[....]
“Basically we’re in uncharted territory,” Shiller said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.”
Uncharted territory....Wow!
No comments:
Post a Comment