Jim "Mad Money" Cramer on April 19, 2009 called the bottom of the housing slump had been hit when he said:
The bottom, well, is now. We are seeing a huge wave of buying of foreclosed homes in Northern and Southern California and in Florida. The numbers are too positive to think that these, the hardest-hit areas, aren't putting in long-term bottoms.
But, Cramer seems to have forgotten the schooling he took at the hands of Jon Stewart who seemed to think that Cramer has called more bottoms than a proctologist. The reasons you should consider waiting to buy your American Dream/Nightmare after the fold.
Sure, home sales have risen slightly. BUT ONLY ON A NASTY PRICE DECLINE. There was another 18.7 per cent drop in US house prices in March, according to the Case-Shiller Home Price Index of 20 cities and the RATE of decline is not improved. So you will still be buying on the down slope and under water immediately. Hey, why not just buy Cramer's four books instead?
12 per cent of all US mortgages are behind or in foreclosure. Half of all Alt-A ARMS (adjustable-rate loans to folk with blemished credit) were past due or in foreclosure. California, Nevada, Arizona and Florida accounted for 46 percent of new foreclosures in the country.
Check out a good graph at: http://3.bp.blogspot.com/...
Another bout of US foreclosures are expected to take house prices lower again this summer.
But how about the supposed experts, what are the builders doing? The Census Bureau's Housing construction data suggest that seasonally adjusted housing construction has continued to hit new lows in January, February, and March, even when measured relative to construction costs. Even the rate of decline of housing construction spending does not seem to have declined.
Check a good image at: http://1.bp.blogspot.com/...
But at least the builders aren't going to make the 10month supply of houses on the market worse, right? Except that continuing job losses are expected. The New York Timesis not optimistic:
As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures. In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from sub-prime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.
"We’re right in the middle of this third wave, and it’s intensifying," said Mark Zandi, chief economist at Moody’s, "That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast."
From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.
During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000. Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.
Each foreclosure costs lenders $50,000, according to data cited in a 2006 study by the Federal Reserve Bank of Chicago, so an additional two million foreclosures could mean $100 billion in lender losses.
Don't let Geitner or Summers convince you that their buddies at the banks passed all their stress tests except for about $50 Billion. They're not even close to the ball field yet. Don't expect any help from the government. Remember the banks own the Senate (Schumer) and refused to allow bankruptcy judges the power to modify home loans. Obama was left with a program to entice mortgage holders to modify voluntarily that isn't likely to work:
But as Fitch and others have found, finding the right way to modify a loan remains a challenge. Servicing firms increased the use of modifications a year ago and quickened the pace in the fall. A key finding from the Fitch report was that subprime, pooled loans that have been modified are souring at high rates despite a change in the loan terms. Fitch said a conservative projection was that between 65% and 75% of modified subprime loans will fall 60-days or more delinquent within 12 months of the loan change. That finding echoes prior U.S.-bank-regulatory agency reports of high redefault rates for modified loans.
The public is not any better at predicting the future:
The perception of American homeowners is finally catching up to reality, which is that 80 percent of all homes in the country lost value during this past year," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in a statement accompanying the survey. "While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months. Unfortunately, there are few markets we expect to perform this well," he said.