Jeff Miller submits:
OK, here I go with another educational concept that has no immediate and actionable investment advice. I heard a couple of uninformed comments about housing. One was that the market needed to push prices down so that it would clear. This reflects ignorance. Markets clear at the current price.
The other was about shadow supply. Let’s take a closer look.
Prieur du Plessis submits:
The chart below, the Affordability Index of US Residential Property, comes courtesy of the New Observations on Real Estate, Mortgages & Life blog. The Index is computed by factoring in home prices, mortgage rates and income.
Let’s have an open thread and discuss in the comments section whether this represents a buying opportunity, or is it a question of fools rush in where wise men fear to buy? Click on the "comments” section below and share with me your views on whether I should part with my South African rand for a residential property in some part of America.
John Lounsbury submits:
Once again here are some valuable data summaries from Calculated Risk. First we have this graph that shows the approximately 50% rise in occupied rental units over the past 40 years and the approximately 150% rise in unoccupied units.
Over the past 30 years the numbers are an approximately 40% increase in occupied rental units and an approximately 300% rise in unoccupied units.
Michael Panzner submits:
Yale Professor Robert Shiller, author of the called-the-top classic, Irrational Exhuberance, is one of the very small group of economists who "gets it." Although I don’t necessarily agree with everything he has to say, he is that rare academic who is guided by facts and an appreciation for how the world really works, unlike the so-called experts who believe in theories that have little or no basis in reality. For that reason alone, I usually pay attention to his insights on the world.
Here’s what he had to say about the housing market in a recent interview with Yahoo! Finance Tech Ticker:
John Lounsbury submits:
David Streitfeld has an interesting article this morning in The New York Times discussing the outlook for an increase in the number of housing short sales and government efforts to facilitate these. A short sale is one in which the lender agrees to accept a sale price less than the outstanding mortgage balance.
Short sales can be advantageous to both mortgagor (borrower) and mortgagee (lender). The credit impairment for the borrower is less than for a foreclosure. The lender can often recover more of the outstanding debt than by going through foreclosure. Even if the sales prices are comparable, the short sale occurs much more quickly and with significantly less attendant expense than do foreclosures and subsequent resale.
Ockham Research submits:
Orleans Homebuilders (OHB), which has home and condo building operations in eight states, filed for Chapter 11 on Tuesday after defaulting on a $350 million credit facility in February. At the time of filing, the company had $311 million in cash borrowing outstanding on the credit facility and had failed to get all 17 bank lenders to agree to extend the maturity. As of the end of 2009, the company had $440 million in assets compared to nearly $500 million in liabilities.
Obviously, the company has struggled along with the rest of the industry due to a slumping housing market as revenues have fallen by nearly two-thirds from their peak in 2006. Furthermore, land and other assets bought during the boom days in homebuilding are worth far less now following the bubble’s burst. These two events have caused assets to fall at a much faster pace than the company could lower
its debt, and the heavily leveraged balance sheet deteriorated rapidly. Orleans is seeking court approval of a $40 million financing package that would enable the company to continue to operate during bankruptcy, as it seeks to find a buyer through negotiated sale, reorganization plan, or court-supervised auction.
Paco Ahlgren submits:
Sales of new homes declined 11 percent in January from December to the lowest level since the U.S. began keeping records in 1963, according to a report from the U.S. Commerce Department released Wednesday.
Sales dropped to an annual pace of 309,000 with the median price falling to $203,500 in January, the lowest since December 2003. At the current sales rate, there is a 9.1 months’ inventory of new homes.
Kehong Wen submits:
What’s the matter with this market? Just one day after we learned that the January new home sales has hit a half-century record low, the stocks for homebuilders have mostly recovered?
In fact, some showed a gain Thursday. HOV was up 1%. KBH was up a fraction. Most outrageous of all: SPF was up by 5%. How can that be?
John Mauldin submits:
Last week I mentioned the (what seemed to me and much of the world) odd incident of Greek politicians talking about the need for Germany to pay its debts to Greece. I got this response from a Greek reader. Comments afterward.
Dear Mr. Mauldin,
Richard Suttmeier submits:
-The Housing Slump renews, hurt by higher building costs due to commodity speculation.
-Fannie Mae taps its unlimited line with the U.S. Treasury for another $15.3 billion.
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