Market: 'not bottom, not bottoming'
Commentary: Overborrowing could counteract stimulus
By Lou Barnes, Friday, May 29, 2009.
Flickr photo by greckor.The explosion in long-term interest rates is abating today, but the warning from markets remains stark and bleak.
In one week the 10-year T-note blew from the 3.2s to the 3.7s, now 3.5 percent but far from the 2.5 percent to 3 percent range of Thanksgiving through April. An origination fee bought a four-something-percent mortgage until Wednesday, then 5.25 percent at the top, back toward 5 percent now.
Optimists and worrywarts found what they wished in economic data. Conference Board Consumer Confidence Index rose from the 25.3 pit in February to 54.9 in May. However, a normal-growth economy has a 100-125 confidence reading. Orders for durable goods jumped 1.9 percent in April, but only offset the downward revision for March. New unemployment claims held 623,000 -- off from the 663,000 peak in early April, but no good.
Sales of previously owned and new homes stayed flat in April, at record lows. "A"-quality loan delinquencies rose to 8.9 percent; all indicators for foreclosures are rising; modification programs are still small-number, and of those, re-defaults run 25 percent to 60 percent. Low-priced homes in every market get auction-style attention.
However, foreclosures at 50 percent of resales tells you everything you need to know about the nonforeclosure fraction. Unstable, not bottom, not bottoming. Higher rates make bottom impossible. Even before this week's rate-wreck there was still no uptick in purchase loan applications.
There are four reasons for the bust in long-term Treasurys:
1. In this ultimate Keynesian spasm, too many Treasurys are coming to market. Not so much the $2 trillion this year, or even the $1.5 trillion next year, but the flat refusal by the Obama administration to adopt fiscal discipline in the out-years. On current "plan" our debt will soar from 45 percent of gross domestic product to 75 percent in 2013, still ramping open-ended.
2. Everyone knows that inflation is a sure thing. The odds are 10-to-1 against, but there's nothing like last-war certainty. Breaking that fear will take time. The Fed could get us to Weimar or Zimbabwe by printing currency and dropping it in stacks on street corners, but in utterly broken credit conditions invented money is struggling slowly from the Fed to the corner, evaporating on the way. ...CONTINUED
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Submitted by Joe Loomer on May 29, 2009 - 11:03am.
Better be quick about freeing up the credit. Anyone who bought a home via VA or FHA from mid-2006-on cannot move if they want to.
Lost in this whole inventory argument is the fact that even those buyers who WANT to upsize cannot do so unless they purchased in a market that did not lose value. Even our modest .5% to 1% appreciation since 2006 prevents anyone from selling (and therefore buying again) because they do not have the equity.
So much for the adage that most Americans move every 3-5 years. They no longer have anywhere to go, or a job to move for.
Augusta GA Homes
Navy Chief, Navy Pride
Joe Loomer (USN Ret.)
Associate Leadership Council, Growth Chair
Keller Williams Realty Augusta Partners
www.augustalistingexpert.com
jloomer@kw.com
direct: 706-627-2650
Submitted by Kathy Judy on May 29, 2009 - 12:38pm.
I don't know. In my micro market (rural) we are doing well right now, business is good just like pre boom. We don't have many repos or short sales and the pent up demand has released. In the words of a late county commissioner "the economy is always bad here". Consequently the buyers finally understand the $8000 is real and are flocking to take advantage of it. I know you have to look at the larger picture but I'm on the side of the optimists on this one. Consumer emotions govern the economy and I think people are feeling a little bit better.
Submitted by Doug Francis on May 29, 2009 - 12:44pm.
Your mention of the "financial system still loaded with bad assets" sends a chill down my spine. The numbers were tossed around often in the press a few months ago, but credit-default-swaps seem to be yesterday's news... but aren't they still on the balance sheets and a day of reckoning will come.
CDS's remind me of WWII mines adrift in the sea.
Doug Francis
RE/MAX Presidential in Fairfax, Virginia
http://dougfrancishomes.com
Submitted by Robert A. Hulme on May 29, 2009 - 1:07pm.
Getting Credit flowing will be one of the keys to our recovery. First-Time home buyer incentives are certainly helping as well.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
Loan Officer
Mortgage Xpress
www.UtahHomes.ws
www.UtahHomesforSale.ws
Submitted by William Metzker on May 29, 2009 - 3:11pm.
Rumsfeld's quirky but now-famous "known unknowns" and "unknown unknowns" has become more truth than Leno laugh line. The toxic assets are the former. Everything else is the latter.
The uptick in home sales so many are atwitter over has more to do with the IRS handing out money to first-timers who can afford the short sale and REO-depressed houses with artifically low mortgages. It's a version of the boom years compressed into a miniature globe, and agents and brokers all give it a little shake and say it's pretty.
The big lenders with huge toxic assets on their balance sheets are sitting on their bailout money in order to meet new capital requirements. Even those who say they're paying back their TARP money will leave cash in the ol' capital account. Who can blame them? Sure, they're lending a little, but in a depressed economy, who wants to borrow any money? And the Treasury? Did they lose another loan to Ditech?
And if someone does buy a house right now, what will it be worth in a year? In two years? In some ways, buying a house is like driving a new Chrysler off the showroom floor.
If we're lucky, prices will get low enough in all sectors to grease the skids enough to make a little something happen. Home Depot will sell more stuff to those people who bought the short-sold houses needing work, have to re-supply its inventory, and eventually, maybe one sawmill will fire back up. Maybe everyone will decide Twitter is the Emperor's New Clothes and depress its price enough for Rupert Murdoch to buy it, and the Twitter founders will go on to found solar-fired cigarette lighters to sell in Asia. or whatever.
But little things happening add up, and if we're lucky, really, really lucky, the unknown unknowns will turn out to be the shadows in the dark forest.
Submitted by John Rakoci on May 29, 2009 - 3:39pm.
The 1st time buyrer tacx credit along the coast is an unfair joke. Those that qualify can not afford it. We had a nice spring time pop, but certainly not a trend. Until obama finds an economist with sense he listens to things will not get better. Maybe if the printing presses at Treasury break down from over work????????
Submitted by Tim Ryan on May 29, 2009 - 9:02pm.
Foreclosures and REOs are definitely in play in today's Naples real estate market. High end property sells very slow if at all, except some very popular destinations like Pelican Bay and Pelican Marsh.
Tim Ryan-Amerivest Realty
http://www.naplesguru.com
http://www.enaplesrealestate.com
Submitted by Sal Antsipenka on May 29, 2009 - 9:07pm.
This is just the beginning of rate spikes which are inevitable as soon as there are definitive signs of recovery. By the way, did you notice that gas has gone up substancially in the last weeks, but people got used to that as usual and after last summer gas cost looks reasonable. The same will happen to mortgage rates - more good economic news more rate increases.
Sal Antsipenka
Century 21 Mike Miller Realty
Naples, Florida
http://www.naplesrealestateseller.com
International RealEstate Buyer Leads
http://www.realestatefair.net