Here is your open thread for Monday June 29th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
The Tim » Jun 29, 2009 at 10:43 am
Anybody care to venture a guess as to where April’s Case-Shiller data will come in for Seattle when it’s released tomorrow? March was down 16.4% YOY and 22.5% from the peak.
Last year saw a slight (0.72%) MOM increase from March to April, so if this year is just flat, the YOY drop will bump up to 17.0%.
Kary L. Krismer » Jun 29, 2009 at 10:57 am
Since it’s a 3 month average, I’ll go with down .223%.
(That’s how much the 3 month moving average of the NWMLS numbers were down for April.)
The Tim » Jun 29, 2009 at 12:34 pm
BTW, I am aware that the site is having some serious issues today (frequent downtime, “error establishing database connection,” etc.). I’ve had it up to here with MediaTemple and will be seeking a new host. These guys were supposed to be reliable. So much for that idea. Anybody got any recommendations?
patient » Jun 29, 2009 at 2:59 pm
RE: The Tim @ 1 – A bit more difficult than usual due to all the unsustainable government meddling during those months resulting in foreclosure moraturiums and the ultra low interest rates, my guess is still a 2% MoM decline March to April in tomorrows c/s number.
Ray Pepper » Jun 29, 2009 at 4:53 pm
RE: The Tim @ 3 –
never had a problem with dreamhost.
The Tim » Jun 29, 2009 at 5:09 pm
RE: Ray Pepper @ 5 – Oi. Nope. Dreamhost was the first host I tried for Seattle Bubble after moving from Google’s free Blogspot service. Not going back there. As many or more troubles than MediaTemple. The most reliable one I’ve used so far has been HostGator.
Greg Perry » Jun 29, 2009 at 5:29 pm
The cap (crap?) and trade (tax?) passed by the House on Friday has huge implications for real estate.
http://www.johnboehner.house.gov/blog/?postid=134502
Homebuyers Beware. Trying to save up for a new home? You may have to save up a little longer for your purchase. The Democrats’ bill would dramatically increase new home costs by mandating California’s expensive new building codes for the entire nation. Immediately upon enactment, the Democrats’ bill would demand a 30 percent increase in energy efficiency for new construction. A couple of years later, the Democrats’ bill would require an additional 50 percent improvement. These numbers were chosen with no concern for cost to consumers or feasibility in implementation.
Homebuilders Beware. The Democrats’ bill imposes new mandatory regulations and civil penalties for homebuilders. If your state refuses to accept the stringent and costly California building codes, the federal government may assess penalties. And don’t get too comfortable with the new mandatory regulations because the Democrats’ bill allows for “consensus-based” codes to supplant those outlined in the bill. So, as soon as you’ve invested your hard-earned money to comply with the bill’s mandates, the rug could get pulled from underneath you. Translation? You’ll pony up more and more money.
Home Sellers Beware. Having a hard time selling your home? Here’s one more hurdle to jump: all homes sales are conditioned upon an energy audit and a new energy rating assessment and energy labeling program for your home that’s outlined in the Democrats’ bill. And if you thought you could improve your property with a fresh coat of paint and some granite counters? Think again! Now your home will be subjected to a new energy rating assessment and energy labeling program that will penalize you for older windows, original fixtures, and dated appliances. So the Democrats’ bill would bring down the value of your home!
Sniglet » Jun 29, 2009 at 5:29 pm
With all the opprobrium being dumped on the hapless Federal Reserve chairman, a little balance is in order. Ben Bernanke is not some evil spirited monster, salivating at ways to nationalize the economy, or enable world domination. I fully believe he is honestly trying to prevent economic catastrophe by the best means he knows of.
http://surkanstance.blogspot.com/2009/06/i-come-to-praise-ben-bernanke.html
jon » Jun 29, 2009 at 6:55 pm
By Kary L. Krismer @ 2:
There are a couple of important differences between CSI and average sales. CSI weights shorter sales pairs more heavily, so that means there will be greater weight to distress sales bought near the peak. That would put CSI lower. But the NWMLS number is susceptible to a shift in the mix, which CSI is not, and the pickup in the market at the low end brings the median sales price down. That would put the CSI higher. The latter effect is the greater, so if NWMLS is .223% then I will bump that to 0%.
B&W NIkes » Jun 29, 2009 at 7:00 pm
RE: Greg Perry @ 7 – Greg, I heard that too. Initially it sounds kind of spooky. I thought about it though, and the climate and environmental differences across the country will make that initial draft nearly impossible to execute in the draconian form Boehner’s red herring talking points imply. Anyway, wouldn’t some new standards ultimately result in improving many properties that could and should benefit from more thoughtful effort than many were given during the flip it boom? Efficiencies do have higher up front costs, way too high I think, but I haven’t heard of many prospective buyers not wanting energy efficient products and houses. It would be way cooler if an entity like ANSI was more involved than DC though. At any rate, these aren’t going to be mandatory for quite a while it seems.
patient » Jun 29, 2009 at 7:15 pm
RE: Greg Perry @ 7 – What’s not to like about an energy efficient home? Sounds great to me, especially since there is a lot of room for more value within today’s redicolous prices. More bang for the buck, I like it.
jon » Jun 29, 2009 at 7:24 pm
RE: B&W NIkes @ 10 – Sounds to me like the same process that brought us the use of ethanol fuels from corn, even though it takes more energy to produce the fuel than the fuel provides. In this case a building consultant won’t let you sell you house unless you hire a building contractor to do various improvements, whether they make economic sense or not. The houses that would most benefit from fixing up are the ones that are going to be torn down or renovated by the new owner. Even if the house is 5 years from renovation, only improvements that would payback before 5 years make sense.
Besides, the value of reducing energy consumption by 30% in a place like Arizona or Montana is going to be a lot higher than Washington state, but the cost will be about the same. So a 30% improvement in Arizona will pay back quickly, whereas it will never pay back after interest costs in Washington.
Kary L. Krismer » Jun 29, 2009 at 9:01 pm
RE: jon @ 9 – First, C-S probably is throwing out distress sales. If the price changes too much, then they assume the condition of the property changed (either direction).
Second, I don’t really see how it’s possible for something to not be affected by the mix. The types of properties selling now are a lot different than 2 years ago. How could C-S not be affected by that.
It’s a gauge of market health and just as imperfect as any other gauge of market health–just in different ways.
jon » Jun 29, 2009 at 9:57 pm
RE: Kary L. Krismer @ 13 – CSI will be affected by the mix only in a second order way when the lower and upper ends of the market have different price movements. So far we have seen that the upper and lower CSI tiers differ only by a small amount.
When the low end of the market picked up, in NWMLS raw sales data like NWMLS the median gets pulled down directly. For CSI, it just means that there are more sales pairs from the low end of the market. The sales pairs are still going to show the price change on individual houses.
I recall Shiller explaining that the reason the CSI was lower than the OFHEO was that CSI was including more foreclosures. But yes, where they put their cutoff will affect their results.
My earlier prediction of 0% left out the other difference of CSI from NWMLS, which is people buying a larger house or better neighborhood for that same price. Even with the NWMLS nearly flat, that could be happening because of the slow sales at the upper end. So maybe down 0.223% is the right number.
Kary L. Krismer » Jun 29, 2009 at 11:13 pm
Last week we were discussing reasons not to fly a yet to be developed Chinese commercial airliner. Here’s another reason: http://blogs.wsj.com/chinajournal/2009/06/29/shanghai-building-collapses-nearly-intact/
deejayoh » Jun 29, 2009 at 11:50 pm
By Kary L. Krismer @ 2:
I think you might be off by .002%, just eyeballing it.
Kary L. Krismer » Jun 30, 2009 at 6:44 am
By Kary L. Krismer @ 2:
Hey, I was really close—-if you ignore the fact I got the direction wrong! :-)
Edit: Which deejayoh apparently missed. ;-)
April was .235% over March.
B&W NIkes » Jun 30, 2009 at 11:33 am
RE: jon @ 12 – That’s interesting stuff but one must assume a good deal of unknowns across the board to arrive at the null value conclusion required to justify a lack of action.
“The future ain’t what it used to be”
Kary L. Krismer » Jun 30, 2009 at 11:44 am
RE: jon @ 12 – Imagine if you had to reduce energy costs by 30% in northern California, or some other very mild climate. You’d probably have to spend $30,000 on solar panels.
jon » Jun 30, 2009 at 11:55 am
Someone posted this on a CR comment thread:
U-Haul 26′ one-way Los Angeles to Austin $2151 Aug 1st pick-up
U-Haul 26′ one-way Austin to Los Angeles $678 Aug 1st pick-up
So I checked a couple more:
Pickup austin, tx, Drop off Seattle, WA: $1052
Pickup Seattle, WA, Drop off Austin, TX $2136
Pickup San Diego, CA Drop off Seattle, WA $1086
Pickup Seattle, WA, Drop off San Diego, CA $826
B&W NIkes » Jun 30, 2009 at 12:51 pm
RE: Kary L. Krismer @ 19 – True, some scenarios paint a few painfully absurd possibilities, but not probabilities. Reducing energy costs in more extreme climates like New Mexico or Ohio (where more than 80% of power comes from combustion) makes much more sense for the individuals and for the larger picture.
Sniglet » Jun 30, 2009 at 3:25 pm
Does anyone know of any data showing the default rates of mortgages depending on vintage? I am wondering if there might be a trend of higher (and swifter) default rates the more recent the loan. I’ve seen articles talking about how we are seeing an increasing number of 0 day defaults on FHA loans. I wonder if we are seeing similar phenomena (i.e. with defaults occuring at earlier times) on non FHA loans as well?
If this theory holds water (i.e. that recent mortgages are defaulting faster than ever), then perhaps we need to see far tighter lending requirements.
Scotsman » Jun 30, 2009 at 5:49 pm
I posted on another thread a few days ago about how trust was gone from the system on all levels. Here’s a great example of “why”:
Tuesday, June 30, 2009
May San Diego Home Sales Increase Revised From 89% to 6.5%
Posted by Tyler Durden at 4:57 PM
More and more economic data manipulation is coming to the fore, none of which as blatantly obvious as the California housing market. Some of it is palatable, but when home sales in San Diego get revised from 89% to 6.5% due to a “data glitch”, it is no wonder that increasingly more Americans realize every single day they are being blatantly lied to by an Administration whose sole purpose in life is to give out 10 pair of rose-colored glasses to every possible voter in the next election. For the most recent take on this the WSJ chimes in:
The California Association of Realtors expects to make sharp downward revisions in its recent monthly reports of soaring home sales in the San Diego area, Robert Kleinhenz, deputy chief economist of the trade group, said in an interview. Those revisions will mean modest downward revisions in statewide sales, he added.
The revisions are likely to be announced in late July, when the Realtor group reports home sales for June. The problem resulted from a glitch in data from a multiple-listing service in San Diego, Mr. Kleinhenz said. He said a change in computer systems used there resulted in incorrect data being sent to the Realtor association over the past year or so.
Sniglet » Jun 30, 2009 at 6:19 pm
RE: Scotsman @ 23 – I also remember seeing an article about how realtors in Florida were deliberately listing incorrect sales prices into the MLS system. The realtors interviewed said that their clients (usually banks who were selling REOs) didn’t want the actual sale prices entered in the system. And this isn’t even accounting for the myriad cases where lenders refuse to foreclose because they just don’t want to increase their inventory of unsold homes (i.e. because they are unwilling to sell the properties for market prices).
You can’t trust the inventory stats, you can’t trust the pending sales stats (for reasons we’ve discussed previously), and you can’t even trust the actual sale price stats.
Clearly there are lots of games being played with data these days.
Nick Sincere » Jun 30, 2009 at 6:57 pm
RE: Scotsman @ 23 –
I don’t see how the Administration has anything to do with a glitch in the San Diego multiple listing service.
Jillayne » Jun 30, 2009 at 7:52 pm
Sniglet re: comment 22, yes there is some historical data now on FHA 2008 vintage that shows a huge increase in early payment defaults (this is when the loan closes and not ONE payment is made. The loan immediately defaults.) I believe this was attributed to the last gasp of the Nehemiah program during mid 2008 with lots of builders putting together transactions with straw buyers just to get the builder inventory off the books.
14months ago I pondered what the 2008 vintage RMBS pools would look like:
http://www.raincityguide.com/2008/02/02/pondering-the-2008-rmbs-vintage/
Here’s what you’re looking for from CR:
http://www.calculatedriskblog.com/2009/03/rising-epd-on-fha-loans.html
Yes, UW guidelines will continue to tighten until defaults start to level off. The other thing that’s happening is for people who are high risk, banks are adding on to the interest rate, which is a GOOD idea and will continue to have a downward effect on home values.
Remember, FHA is still only 3.5% down. With home values continuing their downward trend, a certain percentage of FHA WILL default every month.
Expect a bailout of the FHA mortage insurance fund. It can’t handle this level of defaults.
Scotsman » Jun 30, 2009 at 9:54 pm
RE: Nick Sincere @ 25 –
If you’re not familiar with Durden’s take on things I can see how you might see that as a bit of a stretch. But there is a growing cynicism toward all reporting entities and the usefulness of any data reported. After all, of what use is bad or intentionally distorted data when the goal is to improve the decision making process? What’s the saying- “garbage in, garbage out?”
The case he cites involving the CAR is particularly egregious. By their own admission the erroneous process had been in play for “a year or more.” And a revision from 89% growth down to 6.5% is beyond laughable. How would you feel if, as a potential home buyer, you’d been using that data to make the largest purchase decision of your life?
What I don’t see is how anyone, (except maybe a Realtor?), could even begin to defend or minimize such action.
Alan » Jun 30, 2009 at 10:42 pm
RE: Kary L. Krismer @ 17 –
Correlated but independent.