S&P / Case-Shiller Confirms the Obvious (again)

Housing prices are indexed and tracked in many many ways. Please note the massive lag in S&P/CS price data as presented below in this post. But first, let's just look at their data for this release via Bloomberg:

Next, let's look at a few graphs from Reggie Middleton via his BoomBustBlog as well as via ZeroHedge (his post there today a must read/see). Here's a short interpretation on my part:

1.) S&P/Case-Shiller uses a methodology that clearly lags the actual market when it comes to declining sales prices.



2.) Whomever is actually responsible for foreclosing on the many delinquent mortgages out there has obviously been kicking the can down the road, and trying to buy themselves some time. Delinquencies are still running just shy of double the rate of actual foreclosures (when the house is returned to the free market and sold at public auction).



3.) Those who've just stopped paying their mortgage and stayed put in the house have made out like bankers when it comes to bailouts. Who wouldn't like to live rent/payment/tax free for one and a half or two years?



So that's fine. Folks who borrowed way over their heads are living for free. That game will be temporary. What's really egregious is that those responsible for the fraud settle out of court for a fine, and still walk away with their millions! Mortgage fraud as well as securities fraud used to be prosecuted dutifully in this country. Where in the hell is the US Attorney General? The SEC? FASB? FBI? County clerk? Basic math?

However, there are many entities with deep pockets that were hurt by the mortgage fraud and are now pressing the issue legally. They have plenty of money to get the attention of our elected officials as well as our court system.

If it weren't for Allstate's lawsuit, many of us would never see this little slice of truth about RMBS fraud. Read the last two stories linked below, and note the obvious mortgage securities fraud. The macro lesson is simple: many if not most mortgage backed securities were never properly underwritten, nor were they packaged legally into the trusts.

Do you notice how large for profit corporations are the only folks getting justice these days? Defendants settle out of court. It's just the cost of doing business. No meaningful investigations or charges or prosecutions have occurred at all. This fact alone is the single biggest failure of the Obama administration as well as our congress.

THOUSANDS went to jail after the S&L crisis in the 1990s.

How many prosecutions have occurred so far in the wake of this "little" housing crisis? Why do our elected officials continue to ignore the obvious fraud and bail out the bankers on the backs of the middle class?

Where is the rule of law? Gone forever? Private property rights?

http://www.zerohedge.com/article/how-allstate-used-sampling-confirm-bofacountrywide-lied-about-virtually-everything-selling-m

http://noir.bloomberg.com/apps/news?pid=20601010&sid=atWASFW4avGk




People get ready . . . . . . . . . . . there's a train a comin'


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Core Logic October Home Price Index: Oregon Real Estate Price Depreciation Accelerates Rapidly

The October 2010 Core Logic HPI Report released on December 16th shows that Oregon housing prices will not experience a double dip!

Ironically, this is because home prices here never stopped declining after 2007. In fact, Core Logic's data clearly shows that not only are home prices in Portland and Oregon continuing to decline since the peak of the housing bubble, the rate of decline is again steadily accelerating in a manner similar to what we saw in 2008 and the first quarter of 2009.




Portland was obviously lagging the rest of the nation in price declines until mid 2009, and we are now rapidly making up that ground and continue to do so at an alarming rate. In fact, as of this Fall we are now declining faster than Florida and Arizona.

"Including distressed sales, the five states with the greatest depreciation were: Idaho (-15.06 percent), Alabama (-9.30 percent), Oregon (-8.50 percent), Arizona (-8.25 percent) and Florida (-8.00 percent)."

“We are continuing to see the weakness in home prices without artificial government support in the form of tax credits. The stubborn unemployment levels and seasonality are also coming into play,” said Mark Fleming, chief economist for CoreLogic. “When you combine these factors with high shadow and visible inventories, the prospect for a housing recovery in early 2011 is fading.”


Core Logic's National Heat Map Including Distressed Sales:



Core Logic's National Heat Map Excluding Distressed Sales:


Source: Core Logic


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Portland Makes Forbes List of Top 8 Cities "Where Home Prices Are Falling Dangerously"

Last week Forbes released it's list of top metro areas where "home prices are falling dangerously". Portland ranks at #4 on the list:

"In Portland, Ore., where the economy has performed poorly and private-sector job growth has been tepid, housing prices fell by 1.9% in September and are down 3.6% in the last year. In September home prices fell in 18 of the 20 metro areas tracked by Standard & Poor's Case-Shiller composite home price index.

That was worse than August, when 15 of the top 20 cities were down month-over-month. "There is a large supply of houses on the market," says David Blitzer, chair of the index committee at Standard & Poor's. "And further, hidden supply due to delinquent mortgages, pending foreclosures or vacant homes." "

(hat tip to YetAnotherGuest for the Forbes article)

Although the Federal Reserve is monetizing US treasury debt at breakneck speeds, bond yields and mortgage rates are climbing. Keep in mind that a good rule of thumb is that for every 1% increase in mortgage interest rates, housing prices decline by roughly 10%.




Prices are nowhere near the bottom in Portland, and the supply of greater fools is shrinking rapidly in my opinion. If you are a buyer, keep your powder dry and continue to save cash to buy ~ 2012-2014. If you're a seller, hanging on to bubble era prices is a recipe for disaster.

Interest Rates vs Prices (must read from Patrick.net)

The Truth About Real Estate Pros

RE Pro Typical Responses to the Truth and Basic Math

"They aren't making any more land. TRUE, but sales volume has fallen 40% in the last year alone. It seems they aren't making any more buyers, either. Japan has a severe land shortage, but that hasn't stopped prices from falling for 15 years straight. Prices in Japan are now at the same level they were 23 years ago."

"Because it's a terrible time to buy when interest rates are low, like now. House prices rose as interest rates fell, and house prices will fall if interest rates rise without a strong increase in jobs, because a fixed monthly payment covers a smaller mortgage at a higher interest rate. Since interest rates have nowhere to go but up, prices have nowhere to go but down.

The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.

It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way."

Neither buyer nor seller will find meaningful home price appreciation returning anytime soon. Keep that prediction in mind if you are pursuing either end of a home sale transaction. It's obvious that interest rates are being kept low by the Fed's purchase of treasuries to support asset prices. When mathematical reality takes hold and bond/mortgage rates are set by the free market -hang on to your hat.



If the Fed is successful, expect a slow steady grind downward in home prices ala Japan since the late 90s. I'm not convinced that interest rates have found a bottom yet, and fully expect to see 30 yr taxpayer/gov. backed mortgages with a 3.xx% handle on a 30 yr home loan before it's all over and the Fed prints money to buy/bailout everything in sight.




If rates do continue to march upward from here, prices will plummet even faster and farther than most can even begin to imagine today. Keep in mind that the Fed is limited in its ability to print money and prevent the inevitable as the purchasing power of the US dollar erodes. Higher food and energy prices due to excessive printing/monetization by the Fed will choke off anything resembling a sustainable recovery.

There is no such thing as a free lunch, and bubble era debts which cannot be repaid - quite simply won't be. Leveraged asset values/prices will have no option but to fall further as a result.
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Search Foreclusures Using Google Maps

Google Maps has an interesting and (somewhat) new feature that allows users to show foreclosures for free in a given area by toggling various options in a rather indirect manner:

1.) Go to http://maps.google.com

2.) In the upper right corner of the map click the "more" button and select "real estate"


3.) A menu appears in the upper left pane of the web page with "for sale" houses pre-selected by default

4.) Un-check "for sale" and check only "foreclosure"


5.) Zoom in and out and click/drag on the map as desired to see foreclosures in a specific area



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An Irishman Abroad Comments on The Financial Crisis

There's more truth in this two minute interview than you'll see on any main stream news show or hear from any of our politician's lips when it comes to the financial crisis, the housing bubble, the bailouts, and the bonus grifting bankers behind it all.




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It Really IS Different Here: Job Creation and Wages Have Not Kept Pace With Our Peers or Housing Prices

A recent report by ECONorthwest paints a rather dark picture for Portland's economic performance, as well as it's affordability when compared to its peers. The data clearly shows that Portland's ability to generate economic wealth for its citizens has failed miserably to keep pace with its peers or its still lofty bubble era housing prices.

"Portland-metro residents have lower wages and incomes than residents of peer regions. Forty years ago Portland-metro wages and incomes looked more like our peer regions, but since then our peers have steadily outperformed the region's economy. Today, our average incomes are 16 to 21 percent lower than those of our peers."



"The Portland-metro area does not notably out-perform our peers on compensating characteristics such as cost of living or quality of life. Our peers are achieving high quality of life AND higher wages and incomes."



"Multnomah County has lost 26,463 private-sector jobs since 1997. It ranks second to the bottom in job creation among 199 counties in the west over the last decade. In the 1990s, the growing gap between Portland-metro's economic fortunes and its peers widened significantly. Private-sector job growth stalled after 1997 and has declined since 2000. Meanwhile, our peer regions have been more resilient, replacing jobs and wages lost"



And despite throwing healthy sums of tax money at our public schools and public teacher's unions, Oregon's academic performance at the high school level is dismal when compared to our peers. Lastly, Oregon's college affordability ranked a lackluster 44th out of 50 states.


There is much more data and analysis in the report, none of which bodes well for the future of housing prices in the Portland metro area. Lofty real estate values require plentiful jobs with healthy incomes and monthly cash flow to service mortgages. The Portland metro area has clearly failed to keep pace on the jobs/wages side, and its housing/real estate prices will inevitably suffer going forward as a result.

Sources:

ECONorthwest

The Oregonian

10 Reasons NOT to Buy Now

Michael David White does an outstanding job of summarizing exactly where we are with respect to the current housing bubble bust. If you're thinking of dipping your toes into the housing market water, think twice and keep your powder dry after viewing these 10 charts:

http://thenewmortgagecompany.files.wordpress.com/2010/12/print-10-key-charts.pdf

The short version?

Sell NOW or be priced in forever.

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