Sunday, May 15, 2011

notes on housing, mississippi flooding, et al…

it isnt news to those of you who are using google's blogger that it started having problems on thursday and went offline that afternoon to stay unavailable until friday afternoon...all 3 1/2 million blogs were affected...apparently they had installed some kind of redesign package on wednesday which had a bug, & it took a while for them to catch it; as a result, all posts & comments from the time of the install, 7:37am PDT on Weds 5/11, were temporarily removed while they worked on it; so some economic posts which were linked elsewhere disappeared in the interim; it made for a hectic couple days, as posts & comments were restored piecemeal, but i believe by my final GGO update yesterday afternoon i had picked up the economic posts which had gone missing...

we had several home price indexes out this week which, taken together, corroborate that the second leg of the housing downturn is now underway; first, zillow reported its home price index fell 3% in the first quarter vs the 4th quarter, and was now down 8.2 percent year-over-year; then corelogic, the home price index used by the Fed, reported a 1.5% decline in march, which put their index 4.6% below the 2009 lows; then the NAR (natl assoc realtors) reported prices have fallen 7% YTD...these follow on the heels of the clear capital index, which had declared an official double dip the week before last, after their index fell 4.9% from the previous quarter and 5.0% YoY...the zillow database further showed that 28.4% of mortgages were underwater, ie, that the mortgagee owed more on the house than zillow figured to house to be worth; in some large MSAs, the negative equity figure topped 50%...the average house declined $15,000 in price since last year, which means that the typical home buyer who took advantage of the $8000 tax credits which were being offered to temporarily support prices early last year has now lost more than twice in home value than what they saved on taxes from the credit...participants in the earlier interest free federal home loans fared even worse; by zillow’s calculations, a typical home has lost $48,000 in value since march 2008...a survey of over 3000 brokers showed that over 1/3 of houses are now being bought by speculators with cash, and anecdotally many are reported to be foreign buyers...apparently, these price declines are not affecting florida real estate as much as thought; their legislature rolled back land use regulations to give home builders freedom to develop more tract housing as willy nilly as they deem necessary...

it seems the banks no longer want to take possession of much more home inventory, either, as foreclosures of homes which are delinquent have now slowed to the slowest pace since 2007; although part of the slowdown in the process could be attributed to the fact that the banks are being a bit more careful in handling the procedure than they were last year when robosigners were signing several hundred affidavits a day...the average time nationally between delinquency and foreclosure has now widened to over 400 days; but in some backlogged states (ie new york & new jersey) a homeowner can count on living in his home an average over 900 days after he or she quits paying on the mortgage; further complicating the procedures for the GSEs is that half of the mortgages they own or guarantee are registered in MERS (Mortgage Electronic Registration Systems) name; Fannie, Freddie & other lenders have prohibited their servicers from initiating foreclosures in MERS name; Fannie reported it lost $8.7 billion dollars in the quarter just ended, and requested an additional taxpayer bailout of $8.5 billion to cover that loss...

on the matter of foreclosure fraud, the 50 state attorneys seem to have given up the ghost of their investigation, leaving the banks to offer a measly $5 billion to settle the robosigning and forgery issues, instead of the $20 billion mentioned earlier (which some critics thought should be more than 10 times that much), with not much in the way of recourse for the homeowners who were wrongly foreclosed on; it was also reported that only 100 foreclosure files were were reviewed in the combined investigation by the Fed, the treasury and the OCC before the consent decree was issued; as part of that, the banks will hire firms of their own choosing to review their foreclosure procedures and give them a clean bill of health...nothing to see here, move on...

based on the amount of the treasury auctions of tuesday & wednesday this week, we’ll be going over the federal debt ceiling when the notes settle tomorrow; the treasury expects it will be able to cook the books at least until july or early august to avoid a US default...as of the most recent comments i’ve seen, the parties are still intransigent, with boehner insisting on $2 trillion in spending cuts, and some of the more radical in his party asking for as much as $6 trillion; all seem to insist on a medicare overhaul of one sort or another; meanwhile, everyone from bernanke to wall street is warning of the danger of using the debt ceiling as a bargaining chip; even the conservative chamber of commerce insists that congress should raise the debt ceiling “as expeditiously as possible.” ...the obama administration has asked congress to "fast track" the sale of government real estate, proceeds of which will be earmarked 60/40 to pay down the debt and to cover expenses, a proposal which seems to have bipartisan support...

the flooding on the mississippi will likely go into the record books as the worst since 1927, if not the worst in history, as the final volume of water is yet to be determined; however, we now do have the official stats for our record breaking april rainfalls which contributed to it (map to the right)...6 states (OH, IN, IL, KY, WV, & PA) had their wettest april in the 117 year record; additionally, michigan had its second wettest april ever, and NY & TN had their 3rd wettest; three other states (AK, MO, & VT) had rainfall totals among their 5 wettest aprils in history; moreover, 9 states had the wettest february to april ever...a combination of several climate factors, including a weakening la nina and a positive arctic oscillation left the storm stuck in the mississippi/ohio valley area, where it repeatedly tapped moisture from the gulf; as a result some areas received over 20 inches, or half their normal annual precipitation, in april alone...and that same weather pattern blocked moisture from reaching the southwest, so areas of texas, oklahoma, & NM now are experiencing extreme drought conditions, with the entire state of texas now having the driest 7 months in its history...

the river floodcrest is now expected to hit greenville, MS, early this week, and vicksburg by thursday; when it reaches the morganza floodgates, the spillway will be opened for the 2nd time in history to save the populated areas of louisiana around baton rouge and new orleans, but flooding instead morgan city and several LA gulf coast refineries with as much as 20 ft of water; as much as 14% of US refining capacity could be affected by flooding...the crop losses from flooding, including midwest corn wheat, & soybeans, and southern rice & cotton, could total $2 billion...and there's also a major impact to transportation in the country's midsection as well, since barge traffic even on rivers such as the tennessee that are not at flood stage has remained bottled up...

the japanese government finally admitted this week that unit one at fukashima had experience a full meltdown, something most experts had been saying all along; they're still pouring water on the remains of the unit, but it's leaking out as fast as it's added, so no further progress in containment has been made...similarly, no further progress has been made in containment of the meltdown of the eurozone, and i mustve collected more than four dozen links to the ongoing troubles in greek and ireland for this weeks blog post...

the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me...

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