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Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
Fed Official Sees Home-price Dips ‘well Into 2009'
Janet Yellen, president of the Federal Reserve Bank of San Francisco, has this to say this AM in a speech to the University of California San Diego Economics Roundtable …
Changes in housing prices are inextricably linked to household wealth, which in turn affects consumer spending, as well as prospects for housing construction. Unfortunately, it appears to me that there are at least three reasons for thinking that housing prices have further to fall. First, the ratio of house prices to rents—a kind of price-dividend ratio for housing—still remains quite high by historical standards, despite having fallen from its historical peak reached in early 2006. That suggests that further price declines may be needed to bring housing markets into balance. Second, inventories of unsold homes remain at elevated levels. This “excess supply” of available homes will put downward pressure on housing prices. Indeed, these inventories are likely to directly depress construction activity, since there is little point in building new homes when there is already a large backlog of unsold homes. Third, the futures market for house prices predicts further declines in a number of metropolitan areas this year. In particular, the Case-Shiller composite index for home prices shows a 15 to 20 percent year-over-year decline in the second half of this year. The bottom line is that construction spending and house prices seem likely to continue to fall well into 2009.
I would note that the housing market slowdown hit earlier and harder in San Diego than in most other parts of the state and the nation. Using the Case-Shiller index for San Diego, the cumulative decline from the 2006 peak is approaching 30 percent. San Diego illustrates that the housing problems are not simply a consequence of too much subprime lending, since the growth in subprime mortgages during the housing boom was much more limited in the San Diego area than it was in the most highly exposed parts of California, Arizona, and Nevada. Nonetheless, mortgage delinquencies and home foreclosures in San Diego have grown noticeably over the past two years as prices have dropped. As with the rest of the country, it seems likely that further unpleasant adjustments in ownership and equity will be necessary before the housing market stabilizes.
To read more of the speech, CLICK HERE!
Foreclosure fighter hits Phoenix
from The Arizona Republic, reports that a Boston-based non-profit mortgage lender with $10 billion in lending capital, Neighborhood Assistance Corporation of America, opened its first Phoenix office in May. According to Darren Duarte, spokesman for the non-profit, its mission is to originate low-interest, fixed-rate loans, teach responsible home ownership, lobby against predatory lending practices and provide intervention services for borrowers at risk of foreclosure. Duarte said, "We have been able to get legally binding agreements with some of these lenders." He added that Neighborhood Assistance Corporation does not use credit checks to determine borrower eligibility, and yet its default rate has never crept above 1%.
Bargain Hunters Have Field Day With REOs from Realtor Magazine Online, reports that banks with high numbers of foreclosures are dumping them onto the market and bargain hunters are taking advantage of these opportunities. "In this market, there are so many REOs that the banks are getting their clocks cleaned. This might not be bottom, but waiting six months might be too late," says Mark Partipilo, a Las Vegas real estate investor.
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