The 10 shareholder Realtor groups that own Chicago-area Multiple Listing Service of Northern Illinois have worked out their differences in a settlement agreement that would allow a merger between MLSNI and another Chicago-area MLS (see Inman News).

The settlement proposal, which seeks to resolve a lawsuit that is now under appeal, will be considered by the MLSNI board next month, and will also be considered by shareholders and the board for MAP MLS, the MLS that is pursuing a merger with MLSNI.

Half of the shareholder Realtor groups had filed a lawsuit last year against MLSNI and the other shareholder groups to block the merger. The planned merger has been a lengthy and messy process to date, and it's not a done deal until all parties have signed off.

Problems in the U.S. mortgage market are meddling with the metals market, another example of the far-reaching impacts of the housing downturn, subprime mortgage meltdown and credit crunch.

Bloomberg reports: "A slowdown in North America and the trouble in the broader financial markets have really hung over metals in the last few months and had a big impact," according to Kevin Tuohy, a trader at MF Global U.K. Ltd. in London, as investors worry about the subprime fallout on metals such as copper, which is used in residential pipes and wiring.

"Copper fell for a second consecutive session in London on speculation that a slump in the U.S. housing market will extend into next year and further damp demand for industrial metals," Bloomberg reports, and nickel and aluminum also fell. Tuohy said in the article, "We expect more fallout in the first quarter before things start to improve."

The Sydney Morning Herald also reports that nickel "will lead a decline in industrial metals this year as stockpiles expand and demand slows with the U.S. housing market," according to a survey of analysts, and industrial metals are falling for the first time since 2001 as the U.S. housing market downturn has cut demand for other metals such as zinc and tin.

How is the housing market faring? The U.S. Census Bureau and Department of Housing and Urban Development reported last week that the rate of new-home sales hit a 12-year low in November, while the National Association of Realtors reported today that the sales rate for resale homes was down 20 percent in November compared to the November 2006 rate.

And a Standard & Poor's/Case-Shiller price index for 20 major U.S. metro areas fell 6.1 percent year-over-year in October, while the Realtor group reported a 3.3 drop in the median price of resale homes in November compared to November 2006.

Inman News writer and Coldwell Banker top producer Dian Hymer is a friend of the industry who needs our help. Suffering from cancer, she needs a bone marrow transplant. An initial run of the National Marrow Donor Program registry showed no matches. You may be a match. Registering for the program is simple. Click here.
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Median home-price change for new and resale homes in the six-county Southern California area in November 2007 compared to November 2006: -10.3% (DataQuick)

Median home-price change for single-family, detached resale homes statewide in November 2007 compared to November 2006: -11.9% (California Association of Realtors)

Year-over-year median price change in Riverside County in November 2007: -16.5% (DataQuick)

Year-over-year median price change in San Benito County in November 2007: -27.5% (DataQuick, CAR)

Year-over-year median price change in Benicia in November 2007: -43.8% (DataQuick, CAR)

Number of months of consecutive year-over-year declines in San Francisco Bay Area new and resale home sales: 34 (DataQuick)

New-home building permits issued statewide in November 2007 compared to November 2006: -44.6% (California Building Industry Association)

Rate of foreclosure filings per household in California in November 2007: 1-in-325, 5th in nation (RealtyTrac)

State's share of total U.S. foreclosure filings in November 2007: 19.8% (RealtyTrac)

It's that time of year -- the news media is unleashing a horde of year end/year ahead stories on the public in an attempt to digest recent history and put it into a context that sheds some light on the road ahead. These stories can provide an opportunity to step back and look at the big picture, but they're also a newsroom staple because there's usually a dearth of news over the holdidays.

That's not the case this year, where the forces tearing apart credit markets aren't taking time off for the holidays. Bear Stearns Companies Inc. this week reported its first quarterly loss ever, thanks to $1.9 billion in writedowns on securities tied to subprime loans.

But stocks were up sharply today, in part because consumers weren't afraid to go Christmas shopping in November. While Americans were getting out their credit cards to buy gas and cheap imported goods, countries that have been making a good living exporting oil and manufactured goods to the U.S. have been busy buying stakes in Bear Stearns and other investment banks that are in dire need of capital because of their exposure to bad mortgage loans.

Back in October, Bear Stearns announced that an investment bank controlled by the Chinese government, Citic Securities, was buying a 6 percent stake in the company, with rights to increase its ownership to nearly 10 percent. 

Another government-controlled investment fund, China Investment Corp. is putting up $5 billion fro a 10 percent stake in Morgan Stanley, which just reported $9.4 billion in writedowns on investments linked to bad mortgages. Citigroup said in November it would sell the Abu Dhabi Investment Authority a 4.9 percent stake in the company for $7.5 billion.

The Wall Street Journal reports Merrill Lynch is looking to sell a $5 billion stake in the company to Singapore's state-run investment fund, Temasek Holdings Ltd. Singapore has already taken a $10 billion stake in Swiss bank UBS through Singapore Investment Corporation.

All this foreign investment in Western banks is not necessarily a bad thing, by the way, at least if you believe the Financial Times, whose editors say it wouldn't be happening if these banks didn't look like profitable investments. They may also be looking after their own interests and trying to assist the Fed and European Central Bank in preventing a total collapse of credit markets (see previous post).

Credit markets could be the canary in the coal mine indicator of a U.S. recession in 2008, according to one of the more insightful year-end/year-ahead stories out so far, "Seven economic warning signs" by MarketWatch's Rex Nutting.

"The biggest unknown in the economy right now is the condition of short-term credit markets that big businesses rely on for their immediate funding needs. Some of those markets are functioning well, but others are clogged up," Nutting writes. "Some firms, especially those in the mortgage business, can't sell commercial paper at any price. Other companies can't get funding from banks because banks are hoarding their reserves."

Nutting says to watch what happens to the spread between the London Interbank Overnight Rate (LIBOR) and the 3-month Treasury bill, which used to be comfortable right around 10 basis points but has been more like 75 lately (indicating just how tight credit has become).

"The Federal Reserve and other central banks have been trying to Roto-Rooter the system, flushing it with cash too cheap to pass up," Nutting says. "The Libor rate should show how successful they are."

Ara K. Hovnanian, president and CEO for homebuilder Hovnanian Enterprises, said this week that new homes have traditionally been priced higher than equivalent resale homes, though builders in slow-moving markets have ramped up incentives and dropped home prices to jump-start sales during this downturn.

"Now, things are backwards," he said, "with new homes selling at a discount to existing-home levels. Homebuilders have lowered prices on their new homes much more dramatically than existing-home owners have been willing to lower prices on their homes." He cited examples in which the company lowered the net average selling price in a couple of California communities by 28 percent to 35 percent from December 2006 to October 2007 through a combination of incentives and price drops.

In some markets that may be the case, though national median price data doesn't reflect the flip that Hovnanian describes.

The National Association of Realtors forecasts that the divide between the median resale-home price and the median new-home prices will grow next year, and the median price of resale homes is expected to be $218,200 this year compared to the median new-home price of $242,500 this year.

The U.S. median price of new homes actually increased at a slower rate (up 9 percent) than the median price of resale homes (up 12.4 percent) in the boom year of 2005 compared to 2004, according to NAR stats, while the median resale price rose at a slower rate in 2006 (up 1 percent compared to 2005) than the median new-home price (up 2.3 percent compared to 2005).

What are you seeing in your market areas? Are new homes a better bargain than resale homes? Are new-home incentives and price reductions driving down the price of resale homes or is there a disconnect?

Six percent of subprime loans were originated directly over the internet in the first half of 2007, according to a new survey of subprime lenders by the Mortgage Bankers Association.

If that doesn't sound terribly impressive, consider that's a 50 percent increase from the latter half of 2006, when only 4 percent of subprime loans (by total dollar volume) were originated directly over the Internet.

It's even more impressive when you consider that the average loan amount originated over the Internet ($135,640) was much smaller than those originated by mortgage brokers ($195,200) or retail lenders like banks ($180,732). In terms of raw number of loans, the Internet accounted for 8 percent of subprime loan originations in the first half of 2007, up from 5 percent the previous six months.

So who's losing market share at the expense of the Internet? Would you be surprised to learn mortgage brokers? Mortgage brokers, who have been taking heat for supposedly steering gullible borrowers into costly loans in order to pocket yield spread premiums, saw their market share of subprime dollar volume drop from 72 percent in the latter half of 2006 to 58 percent in the first six months of 2007.

But retail lenders look to have been the greatest beneficiaries of the credit crunch, growing their market share from 23 percent to 36 percent during the same period. While it's perhaps understandable that retail lenders like banks are picking up market share-- they still have money to lend, and a certain amount of street cred -- it's interesting to see Internet direct lenders benefitting as well, considering that many don't enjoy a squeaky clean image. Could it be they're just easier for people who would rather surf the Internet then pick up the telephone to find?

The survey was taken before the secondary markets for subprime and alt-A loans fell apart in August, so it will be interesting to see what's happened since then.

Some other trends from first half of 2007 are pretty much as expected:

--a growing percentage of subprime loans in the first half of 2007 (64 percent) were refis, not purchase loans. That compares to refis making up 55 percent of subprime loans in latter half of 2006.

--the average subprime loan amount is shrinking -- $185,109 in first half of '07, down 8.4 percent from previous six months. The difference for the average second loans was even more pronounced -- $15,809, compared to $35,506.

--75 percent of subprime loans were ARMs in second half of 2006. Only 69 percent in following six months.

Some of the numbers I've thrown out here are in the press release. The actual survey has more details, including breakdowns by FICO score and LTV.

Bloggers Connect is all about helping real estate professionals take advantage of much of the new media available to them online these days. This time around we're taking another step forward and diving into the emerging world of video and videoblogging in a session we're calling Beyond  the Written Word - which will be moderated by Jeff Turner of Turner's Perspective and TechnoSanity.

Panelists include:

• Douglas Heddings, Senior Vice President, Prudential Douglas Elliman and blogger at TrueGotham.com
• Rachel Natalie Klein,  Founder of the daily real estate Internet show, IntoTheBox.tv
• Daniel Rothamel, Realtor, Strong Team REALTORS and blogger at RealEstateZebra.com and AgentGenius.com
• Mike Price, President of ML Broadcast who blogs at Mike's Corner

Jeff wanted to get the conversation around videoblogging going a little early so he reached out to the videoblogging community  to get their advice for real estate pros interested in video. The resulting video Jeff edited together is posted below.

You can jump in to the conversation right now at the Real Estate Shows Blog - where you can see the rest of the replies. Otherwise, we'll see you in New York in January!

China -- through government-controlled China Investment Corp. -- will soon own a nearly 10 percent stake in the U.S.'s second-biggest investment bank, Morgan Stanley, thanks to $9.4 billion in writedowns on investments linked to bad mortgages.

China Investment Corp -- which has only existed for about three months -- is providing a $5 billion cash infusion, the Associated Press reports. With $200 billion to play with, the Chinese fund is one of the biggest in the world, also owning a stake in Blackstone Group. 

No shame for Morgan Stanley, perhaps, since Citigroup -- the nation's first-biggest investment bank -- had to lean on the Abu Dhabi Investment Authority last month for $7.5 billion.

China and others major exporters of goods to the U.S. (name any member of OPEC) became big behind-the-scenes players in mortgage financing during the housing boom, through their purchase of U.S. Treasurys and mortgage-backed securities.

A recent UC Berkeley study found Chinese investors hold about 9 percent of U.S. Treasuries, 5 percent of agency bonds and 3 percent of agency MBS -- investments that helped push down mortgage rates by 0.5 percent to 1 percent. Middle East oil exporters have also been big bond and MBS investors.

Now, it may be that these foreign investment funds -- backed by countries that desperately need U.S. consumers to continue spending like there's no tomorrow -- just see a great investment opportunity. But they might also be acting to protect other investments by propping up credit markets.

Either way, the Financial Times opines, foreign investment funds are "more like friends in need" than "shady puppet-masters," and their investment in western corporations shouldn't be cause for worry.

"Sovereign wealth funds should usually be welcomed when they seek stakes in western companies, troubled or otherwise," the Times commented Monday, after Dow Chemical entered into a joint venture with Kuwait's state-run oil company.

With the turmoil in financial markets, "we should fear too little sovereign investment, rather than too much," the Times editorialized. The owners of these funds "are not fools. Do not expect too many injections of capital into western banks until they look more deserving of the money."

In that context, maybe China Investment Corp.'s investment in Morgan Stanley suggests that the worst is behind it (the bank says its $1.8 billion worth of remaining subprime mortgage exposure as of Nov. 30 is down from $10.4 billion at the end of August).

Then again, China has more $100 billion invested in mortgage-backed securities issued by Fannie and Freddie, and something on the order of $400 billion in U.S. Treasuries. Maybe the decision makers at China Investment Corp. also think the Federal Reserve and European Central Bank need a little help providing liquidity to banks.

David Seiders, chief economist for the National Association of Home Builders, forecasts a 40 percent chance that the U.S. will slump into an economic recession -- Seiders estimates Gross Domestic Product growth of 0.5 percent in the current quarter and 1.5 percent growth in first-quarter 2008. The group's summary of his latest forecast is titled, "The Economy Enters a Serious Danger Zone."

Several other economists have also tossed out percentages to measure the likelihood that the nation will face a near-term economic recession.

A sampling:

• Dean Baker, co-director, Center for Economic and Policy Research    100 percent
• John Tucillo, former chief economist, National Assocaition of Realtors    80 percent
• Robert Shiller, economist, Yale University: Over 50 percent
• Ken Rosen, chairman, Fisher Center for Real Estate and Urban Economics, UC Berkeley    45 percent
• David Seiders, chief economist, National Association of Home Builders    40 percent
• Lawrence Yun, chief economist, National Association of Realtors    10 percent

Any thoughts on the "R" word?