Estelar Properties
Private equity firms are jumping into distressed housing as the
US government plans to market 200,000 foreclosed homes as rentals
to speed up the economic recovery. GTIS Partners will spend $1
billion by 2016 acquiring single-family homes to manage as
rentals, Thomas Shapiro, the fund’s founder said. That followed
announcements this month that GI Partners, a Menlo Park private
equity fund, expects to invest $1 billion, and Los Angeles-based
Oaktree Capital Management LP will spend $450 million on similar
housing. “It’s a massive market,” Shapiro said in a
telephone interview from New York. “We’re starting to see
this as a billion dollar opportunity to buy rental housing.”
Increasing rentals may reduce lenders’ losses on foreclosed and
surrendered properties and curb declines in home prices,
according to a Federal Reserve study Chairman Ben S. Bernanke
sent to Congress on Jan. 4. Private equity funds began focusing
on these investments in September, after the administration asked
for proposals to sell the government’s inventory of foreclosed
homes -- about half of all houses seized from delinquent
borrowers.
Private sector gains 170,000 jobs
The private sector created 170,000 jobs in January, boosted again
by a surge in service-sector employment, according a report from
ADP and Macroeconomic Advisors. With economists looking for
signs of life in the jobs market, the ADP number was close to
consensus estimates and likely sets the stage for solid though
not overwhelming overall growth when the government releases its
monthly report Friday. The private payrolls report showed
service jobs growing by 152,000 in January, after rising a
revised 241,000 in December. Goods-producing jobs rose 18,000
while manufacturing added 10,000 and construction gained 2,000
for the month. The total number of private sector jobs created
is a substantial dropoff from December's report that showed a
revised 292,000, revised down from 325,000. The Labor Department
on Friday is expected to report nonfarm payrolls growth of
159,000 and an unchanged unemployment rate of 8.5%, according to
StreetAccount estimates. Economists sometimes use the ADP numbers
to adjust their projected unemployment estimates. ADP's numbers
have been running on average 10,000 more than the government,
though that number swelled to 92,000 in December, raising caution
that seasonal distortions could be influencing the payroll firm's
figures.
November home prices down 3.7% from previous year
The average price of a single-family home fell again in November,
with decreases in 19 of the 20 largest metropolitan areas during
the month, according to the Standard & Poor's/Case-Shiller index.
The ratings agency's 20-city composite index and 10-city index
both declined 1.3% from a month earlier. The larger, benchmark
index drop 3.7% from November 2010 and the 10-city index for
November was 3.6% lower than the year earlier. S&P said both
indices are one-third lower than the peak in the summer of 2006
and home prices are now at levels last seen in the middle of
2003. Atlanta home prices for November were nearly 12% lower
than the prior year, while Detroit at 3.8% and Washington with a
0.5% gain are the only metropolitan areas to post annual
increases. Home prices in Atlanta, Las Vegas, Seattle and Tampa,
Fla., all reached new lows in November, according to
S&P/Case-Shiller. "Despite continued low interest rates and
better real GDP growth in the fourth quarter, home prices
continue to fall," said David Blitzer, chairman of the S&P index
committee. He said Phoenix, one of the hardest-hit areas in
recent years, was the only MSA to post an increase in prices from
October with a 0.6% gain. "Annual rates were little better as 18
cities and both composites were negative," Blitzer said. "The
trend is down and there are few, if any, signs in the numbers
that a turning point is close at hand." Analysts with
Toronto-based Capital Economics agreed and said "there are still
no signs that house prices are on the verge of turning around,"
as the Case-Shiller indices fell for the seventh month in a row.
"But things should be different in six months' time, when the
recent rises in home sales will have helped to put a floor under
prices," the analysts said.
California is broke
California needs to come up with more than $3 billion to avoid
burning through its cash by March, according to the state
controller, who urged borrowing and delaying some payments.
"Assuming no additional revenue loss, erosion of borrowable
internal funds, or significant spikes in spending, $3.3 billion
of cash solutions are needed to address California's liquidity
needs during this period," State Controller John Chiang said in a
letter to the chairman and vice chairman of the Joint Legislative
Budget Committee released on Tuesday. Chiang said California
does not need to issue IOUs again as it did during a cash crunch
in 2009 or delay tax refunds, noting he has developed a plan with
the state treasurer's office and the state's finance department
that would postpone some payments and borrow from external
sources and from state accounts to bolster the state's cash. "It
is not an ideal solution, but it is the best way to manage the
challenge without relying on IOUs or delaying tax refunds —
actions that can disrupt the delivery of essential public
services and slow California's economic recovery," Chiang said.
Senator Mark Leno, chairman of the Joint Legislative Budget
Committee, said he expects the Senate and Assembly by the end the
week will approve borrowing from state funds. Leno said he
expects the internal borrowing will raise approximately $850
million. Chiang noted California's dwindling cash reflects
revenue coming in below forecast in the state's budget and
spending exceeding expectations.
MBA - mortgage applications down
Mortgage applications decreased 2.9% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending January
27, 2012. The Market Composite Index, a measure of mortgage loan
application volume, decreased 2.9% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
increased 9.0% compared with the previous week. The Refinance
Index decreased 3.6% from the previous week. The seasonally
adjusted Purchase Index decreased 1.7% from one week earlier. The
unadjusted Purchase Index increased 17.1% compared with the
previous week and was 4.3% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market
Index is up 4.11%. The four week moving average is up 2.48% for
the seasonally adjusted Purchase Index, while this average is up
4.22% for the Refinance Index.
The refinance share of mortgage activity decreased to 80.0% of
total applications from 81.3% the previous week. The
adjustable-rate mortgage (ARM) share of activity increased to
5.6% from 5.3% of total applications from the previous week.
“The Federal Reserve surprised the market last week by
indicating that short-term rates were likely to stay at their
current low-levels until the end of 2014. Longer-term treasury
rates dropped in response, and mortgage rates for the week were
down slightly as a result,” said Michael Fratantoni, MBA’s
Vice President of Research and Economics. Fratantoni continued,
“Although total application volume dropped on an adjusted basis
relative to last week, refinance volume remains high, with survey
participants reporting that the expanded Home Affordable
Refinance Program (HARP) contributed to roughly 10% of their
refinance activity.” In December 2011, Connecticut had the
largest increase in refinance applications, increasing by 80.1%
from November. Maine saw a 30.8% increase in applications for
home purchase, which was the largest state-increase in
applications for home purchase. Only 12 states had a decrease in
home purchase activity in December, while every state in the US
saw an increase in refinance volume.
Europe on life support
The European Central Bank (ECB) has saved the euro zone from a
heart attack, but its members face a long convalescence, made
worse by the insistence that fiscal starvation is the right
remedy for feeble patients. Last week’s downgrading of its
forecasts by the International Monetary Fund (IMF) shows the
dangers. The IMF now forecasts a recession in the euro zone this
year, with a decline of 0.5 per cent in overall gross domestic
product (GDP). GDP is forecast to fall sharply in Italy and
Spain, and stagnate in France and Germany. This is a terrible
environment for countries seeking to cut fiscal deficits.
Forecasts are far from satisfactory for other high-income
countries. But the euro zone is the most dangerous part of the
world economy: only there do we see important governments —
Italy and Spain — menaced by a loss of creditworthiness.
Elsewhere, governments of high-income countries can continue to
support their economies, largely because they possess a central
bank and an adjustable exchange rate. This combination has given
them the ability to run large fiscal deficits. In post-crisis
conditions, such deficits are both the natural counterpart and
the principal facilitator of necessary private sector
deleveraging. The euro zone has no such internal mechanisms.
When private external financing dried up, as happened to a number
of countries, affected members needed both financing — in the
short run — and a mechanism for adjusting their external
accounts — in the longer run — other than via deep slumps.
The euro zone lacks both capacities. It has turned out, as a
result, to have limited ability to cope with the global financial
disease. As Donald Tsang, chief executive of Hong Kong, remarked
in Davos: “I have never been as scared as I am now.” Astute
observers have a sense that little stands between them and a wave
of sovereign and banking defaults inside the euro zone, with
ghastly global repercussions.
Olick - refinancing to go through FHA
"After announcing during his State of the Union address a new
government refinance program for, 'responsible' but 'underwater'
borrowers with privately held mortgages, President Obama is
expected to detail the plan today. It will go through the
government mortgage insurer, the Federal Housing Administration
(FHA) and could cost between 5 and 10 billion dollars, according
to senior administration officials. The cost of the program,
officials say, would be covered by a tax on major lenders, which
is likely to make it a no-go in Congress. It would cover closing
fees for borrowers and additional risk to the FHA, which doesn't
insure new loans where the borrower owes more than the home is
worth. Critics will also argue that the FHA, which now has an
inordinately, historically large share of the mortgage market, is
in no position to take on any more risk. The FHA could be
considered 'underwater' itself, guaranteeing about $1 trillion in
mortgages but sitting on just a $1.2 billion dollar cushion to
cover losses. To that end, officials say they could create a
separate fund for these loans, not the regular mutual mortgage
insurance fund (MMI). This would be a special risk fund, designed
to handle high losses. 'In this program we're talking about
extraordinary circumstances,' says Brian Chappelle of Potomac
Partners. 'People have played by the rules, they made payments in
addition to the fact that their house is underwater, they're
paying excessively high rates. It's a unique homeowner, not
somebody looking for a handout.'
To be eligible, borrowers would have to be current on their
mortgages, not having missed a payment in at least six months.
They need a credit score (FICO) above 580, must be employed, and
must have a conforming loan (between $271,050 and $729,750
depending on their location). No appraisal would be necessary,
according to officials. Estimates are that the plan could help
3.5 million borrowers in addition to the 11 million expected to
qualify for the existing refinance program for those with Fannie
Mae and Freddie Mac loans (HARP). The one sticking point could be
the mortgage insurance premiums charged by the FHA. If rolled
into the loan, they would put a borrower further underwater. 'To
use taxpayer dollars to bail out the few who are current and
don’t need payment assistance but are underwater is ludicrous
and worsens their equity position,' says JT Smith of Aristar
Funding. The plan would also require lenders to write down the
value of the loan if it exceeded 140% of the value of the home.
Administration officials say the trade-off for lenders is they
get rid of a risky loan.
On the flip side, the government would then be backing that same
risky loan, but officials argue they would offset some of that
risk because in order to get closing fees paid, the borrower has
to agree to use the lower interest rate savings on the refinance
to pay off principal balance. The plan faces many headwinds,
first and foremost being Congressional approval; borrowers and
lenders would also have to agree to all the requirements, as this
is not an automatic plan but a voluntary, borrower-initiated
deal. It would also rile Wall Street, as hundreds of thousands of
loans could 'pre-pay,' which means the bondholders lose. 'Some
say it undermines the value of existing [mortgage] securities, so
they would build a premium in,' notes Chappelle. That could make
future loans for other Americans more expensive."
US to charge European traders
US authorities are preparing to charge four former Credit Suisse
employees with criminal and civil fraud related to write-downs on
subprime mortgage derivatives at the height of the financial
crisis, sources familiar with the matter said. Credit Suisse
will not be charged in the matter, which is being investigated by
federal prosecutors and the US Securities and Exchange Commission
(SEC), the sources said. The four people to be charged were
former Credit Suisse traders who were fired, another source said,
but it was unclear when and for what reason. The suspected
illegal conduct took place roughly four years ago, the source
said, adding that the bank had been cooperating with officials.
The investigation stems from $2.85 billion in write-downs that
Credit Suisse took on collateralized debt obligations in 2008,
said the sources, who spoke on the condition of anonymity.
Credit Suisse revealed those CDO losses in early 2008, and blamed
them on a group of rogue traders - who the bank said had
deliberately mispriced securities - and on a failure of internal
controls. Credit Suisse, the Federal Bureau of Investigation,
the SEC and Manhattan US attorney Preet Bharara declined to
comment on the matter.
WSJ - housing's firmer foundation
The Case-Shiller index is closely watched for a reason. It was
quicker than a US government price index to show just how bad
things were as housing came off the rails in 2007. But right
now, the connection between what the S&P/Case-Shiller index says
and what is actually going on with housing may be lukewarm at
best. The difference: The Federal Housing Finance Agency index
includes only homes with mortgages guaranteed by Fannie Mae and
Freddie Mac, while the Case-Shiller index includes those backed
by jumbo and subprime mortgages. Many homes that were backed by
subprime mortgages are now being sold in foreclosure. They aren't
in nearly as good condition as when they were last bought, and
are selling for less than if they had been properly maintained.
Because the Case-Shiller index is based on repeat sales, such
homes may be biasing it downward. Moreover, the Case-Shiller
index is based on a three-month average of sales, so its November
level includes transactions that were completed in October and
September. Consider that it takes about two months between a sale
and a closing (often longer with mortgage hassles these days),
and you are talking about deals agreed on in the summer, when
recession fears filled the air. Things now look better. Home
prices probably do, too.
US government plans to market 200,000 foreclosed homes as rentals
to speed up the economic recovery. GTIS Partners will spend $1
billion by 2016 acquiring single-family homes to manage as
rentals, Thomas Shapiro, the fund’s founder said. That followed
announcements this month that GI Partners, a Menlo Park private
equity fund, expects to invest $1 billion, and Los Angeles-based
Oaktree Capital Management LP will spend $450 million on similar
housing. “It’s a massive market,” Shapiro said in a
telephone interview from New York. “We’re starting to see
this as a billion dollar opportunity to buy rental housing.”
Increasing rentals may reduce lenders’ losses on foreclosed and
surrendered properties and curb declines in home prices,
according to a Federal Reserve study Chairman Ben S. Bernanke
sent to Congress on Jan. 4. Private equity funds began focusing
on these investments in September, after the administration asked
for proposals to sell the government’s inventory of foreclosed
homes -- about half of all houses seized from delinquent
borrowers.
Private sector gains 170,000 jobs
The private sector created 170,000 jobs in January, boosted again
by a surge in service-sector employment, according a report from
ADP and Macroeconomic Advisors. With economists looking for
signs of life in the jobs market, the ADP number was close to
consensus estimates and likely sets the stage for solid though
not overwhelming overall growth when the government releases its
monthly report Friday. The private payrolls report showed
service jobs growing by 152,000 in January, after rising a
revised 241,000 in December. Goods-producing jobs rose 18,000
while manufacturing added 10,000 and construction gained 2,000
for the month. The total number of private sector jobs created
is a substantial dropoff from December's report that showed a
revised 292,000, revised down from 325,000. The Labor Department
on Friday is expected to report nonfarm payrolls growth of
159,000 and an unchanged unemployment rate of 8.5%, according to
StreetAccount estimates. Economists sometimes use the ADP numbers
to adjust their projected unemployment estimates. ADP's numbers
have been running on average 10,000 more than the government,
though that number swelled to 92,000 in December, raising caution
that seasonal distortions could be influencing the payroll firm's
figures.
November home prices down 3.7% from previous year
The average price of a single-family home fell again in November,
with decreases in 19 of the 20 largest metropolitan areas during
the month, according to the Standard & Poor's/Case-Shiller index.
The ratings agency's 20-city composite index and 10-city index
both declined 1.3% from a month earlier. The larger, benchmark
index drop 3.7% from November 2010 and the 10-city index for
November was 3.6% lower than the year earlier. S&P said both
indices are one-third lower than the peak in the summer of 2006
and home prices are now at levels last seen in the middle of
2003. Atlanta home prices for November were nearly 12% lower
than the prior year, while Detroit at 3.8% and Washington with a
0.5% gain are the only metropolitan areas to post annual
increases. Home prices in Atlanta, Las Vegas, Seattle and Tampa,
Fla., all reached new lows in November, according to
S&P/Case-Shiller. "Despite continued low interest rates and
better real GDP growth in the fourth quarter, home prices
continue to fall," said David Blitzer, chairman of the S&P index
committee. He said Phoenix, one of the hardest-hit areas in
recent years, was the only MSA to post an increase in prices from
October with a 0.6% gain. "Annual rates were little better as 18
cities and both composites were negative," Blitzer said. "The
trend is down and there are few, if any, signs in the numbers
that a turning point is close at hand." Analysts with
Toronto-based Capital Economics agreed and said "there are still
no signs that house prices are on the verge of turning around,"
as the Case-Shiller indices fell for the seventh month in a row.
"But things should be different in six months' time, when the
recent rises in home sales will have helped to put a floor under
prices," the analysts said.
California is broke
California needs to come up with more than $3 billion to avoid
burning through its cash by March, according to the state
controller, who urged borrowing and delaying some payments.
"Assuming no additional revenue loss, erosion of borrowable
internal funds, or significant spikes in spending, $3.3 billion
of cash solutions are needed to address California's liquidity
needs during this period," State Controller John Chiang said in a
letter to the chairman and vice chairman of the Joint Legislative
Budget Committee released on Tuesday. Chiang said California
does not need to issue IOUs again as it did during a cash crunch
in 2009 or delay tax refunds, noting he has developed a plan with
the state treasurer's office and the state's finance department
that would postpone some payments and borrow from external
sources and from state accounts to bolster the state's cash. "It
is not an ideal solution, but it is the best way to manage the
challenge without relying on IOUs or delaying tax refunds —
actions that can disrupt the delivery of essential public
services and slow California's economic recovery," Chiang said.
Senator Mark Leno, chairman of the Joint Legislative Budget
Committee, said he expects the Senate and Assembly by the end the
week will approve borrowing from state funds. Leno said he
expects the internal borrowing will raise approximately $850
million. Chiang noted California's dwindling cash reflects
revenue coming in below forecast in the state's budget and
spending exceeding expectations.
MBA - mortgage applications down
Mortgage applications decreased 2.9% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending January
27, 2012. The Market Composite Index, a measure of mortgage loan
application volume, decreased 2.9% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
increased 9.0% compared with the previous week. The Refinance
Index decreased 3.6% from the previous week. The seasonally
adjusted Purchase Index decreased 1.7% from one week earlier. The
unadjusted Purchase Index increased 17.1% compared with the
previous week and was 4.3% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market
Index is up 4.11%. The four week moving average is up 2.48% for
the seasonally adjusted Purchase Index, while this average is up
4.22% for the Refinance Index.
The refinance share of mortgage activity decreased to 80.0% of
total applications from 81.3% the previous week. The
adjustable-rate mortgage (ARM) share of activity increased to
5.6% from 5.3% of total applications from the previous week.
“The Federal Reserve surprised the market last week by
indicating that short-term rates were likely to stay at their
current low-levels until the end of 2014. Longer-term treasury
rates dropped in response, and mortgage rates for the week were
down slightly as a result,” said Michael Fratantoni, MBA’s
Vice President of Research and Economics. Fratantoni continued,
“Although total application volume dropped on an adjusted basis
relative to last week, refinance volume remains high, with survey
participants reporting that the expanded Home Affordable
Refinance Program (HARP) contributed to roughly 10% of their
refinance activity.” In December 2011, Connecticut had the
largest increase in refinance applications, increasing by 80.1%
from November. Maine saw a 30.8% increase in applications for
home purchase, which was the largest state-increase in
applications for home purchase. Only 12 states had a decrease in
home purchase activity in December, while every state in the US
saw an increase in refinance volume.
Europe on life support
The European Central Bank (ECB) has saved the euro zone from a
heart attack, but its members face a long convalescence, made
worse by the insistence that fiscal starvation is the right
remedy for feeble patients. Last week’s downgrading of its
forecasts by the International Monetary Fund (IMF) shows the
dangers. The IMF now forecasts a recession in the euro zone this
year, with a decline of 0.5 per cent in overall gross domestic
product (GDP). GDP is forecast to fall sharply in Italy and
Spain, and stagnate in France and Germany. This is a terrible
environment for countries seeking to cut fiscal deficits.
Forecasts are far from satisfactory for other high-income
countries. But the euro zone is the most dangerous part of the
world economy: only there do we see important governments —
Italy and Spain — menaced by a loss of creditworthiness.
Elsewhere, governments of high-income countries can continue to
support their economies, largely because they possess a central
bank and an adjustable exchange rate. This combination has given
them the ability to run large fiscal deficits. In post-crisis
conditions, such deficits are both the natural counterpart and
the principal facilitator of necessary private sector
deleveraging. The euro zone has no such internal mechanisms.
When private external financing dried up, as happened to a number
of countries, affected members needed both financing — in the
short run — and a mechanism for adjusting their external
accounts — in the longer run — other than via deep slumps.
The euro zone lacks both capacities. It has turned out, as a
result, to have limited ability to cope with the global financial
disease. As Donald Tsang, chief executive of Hong Kong, remarked
in Davos: “I have never been as scared as I am now.” Astute
observers have a sense that little stands between them and a wave
of sovereign and banking defaults inside the euro zone, with
ghastly global repercussions.
Olick - refinancing to go through FHA
"After announcing during his State of the Union address a new
government refinance program for, 'responsible' but 'underwater'
borrowers with privately held mortgages, President Obama is
expected to detail the plan today. It will go through the
government mortgage insurer, the Federal Housing Administration
(FHA) and could cost between 5 and 10 billion dollars, according
to senior administration officials. The cost of the program,
officials say, would be covered by a tax on major lenders, which
is likely to make it a no-go in Congress. It would cover closing
fees for borrowers and additional risk to the FHA, which doesn't
insure new loans where the borrower owes more than the home is
worth. Critics will also argue that the FHA, which now has an
inordinately, historically large share of the mortgage market, is
in no position to take on any more risk. The FHA could be
considered 'underwater' itself, guaranteeing about $1 trillion in
mortgages but sitting on just a $1.2 billion dollar cushion to
cover losses. To that end, officials say they could create a
separate fund for these loans, not the regular mutual mortgage
insurance fund (MMI). This would be a special risk fund, designed
to handle high losses. 'In this program we're talking about
extraordinary circumstances,' says Brian Chappelle of Potomac
Partners. 'People have played by the rules, they made payments in
addition to the fact that their house is underwater, they're
paying excessively high rates. It's a unique homeowner, not
somebody looking for a handout.'
To be eligible, borrowers would have to be current on their
mortgages, not having missed a payment in at least six months.
They need a credit score (FICO) above 580, must be employed, and
must have a conforming loan (between $271,050 and $729,750
depending on their location). No appraisal would be necessary,
according to officials. Estimates are that the plan could help
3.5 million borrowers in addition to the 11 million expected to
qualify for the existing refinance program for those with Fannie
Mae and Freddie Mac loans (HARP). The one sticking point could be
the mortgage insurance premiums charged by the FHA. If rolled
into the loan, they would put a borrower further underwater. 'To
use taxpayer dollars to bail out the few who are current and
don’t need payment assistance but are underwater is ludicrous
and worsens their equity position,' says JT Smith of Aristar
Funding. The plan would also require lenders to write down the
value of the loan if it exceeded 140% of the value of the home.
Administration officials say the trade-off for lenders is they
get rid of a risky loan.
On the flip side, the government would then be backing that same
risky loan, but officials argue they would offset some of that
risk because in order to get closing fees paid, the borrower has
to agree to use the lower interest rate savings on the refinance
to pay off principal balance. The plan faces many headwinds,
first and foremost being Congressional approval; borrowers and
lenders would also have to agree to all the requirements, as this
is not an automatic plan but a voluntary, borrower-initiated
deal. It would also rile Wall Street, as hundreds of thousands of
loans could 'pre-pay,' which means the bondholders lose. 'Some
say it undermines the value of existing [mortgage] securities, so
they would build a premium in,' notes Chappelle. That could make
future loans for other Americans more expensive."
US to charge European traders
US authorities are preparing to charge four former Credit Suisse
employees with criminal and civil fraud related to write-downs on
subprime mortgage derivatives at the height of the financial
crisis, sources familiar with the matter said. Credit Suisse
will not be charged in the matter, which is being investigated by
federal prosecutors and the US Securities and Exchange Commission
(SEC), the sources said. The four people to be charged were
former Credit Suisse traders who were fired, another source said,
but it was unclear when and for what reason. The suspected
illegal conduct took place roughly four years ago, the source
said, adding that the bank had been cooperating with officials.
The investigation stems from $2.85 billion in write-downs that
Credit Suisse took on collateralized debt obligations in 2008,
said the sources, who spoke on the condition of anonymity.
Credit Suisse revealed those CDO losses in early 2008, and blamed
them on a group of rogue traders - who the bank said had
deliberately mispriced securities - and on a failure of internal
controls. Credit Suisse, the Federal Bureau of Investigation,
the SEC and Manhattan US attorney Preet Bharara declined to
comment on the matter.
WSJ - housing's firmer foundation
The Case-Shiller index is closely watched for a reason. It was
quicker than a US government price index to show just how bad
things were as housing came off the rails in 2007. But right
now, the connection between what the S&P/Case-Shiller index says
and what is actually going on with housing may be lukewarm at
best. The difference: The Federal Housing Finance Agency index
includes only homes with mortgages guaranteed by Fannie Mae and
Freddie Mac, while the Case-Shiller index includes those backed
by jumbo and subprime mortgages. Many homes that were backed by
subprime mortgages are now being sold in foreclosure. They aren't
in nearly as good condition as when they were last bought, and
are selling for less than if they had been properly maintained.
Because the Case-Shiller index is based on repeat sales, such
homes may be biasing it downward. Moreover, the Case-Shiller
index is based on a three-month average of sales, so its November
level includes transactions that were completed in October and
September. Consider that it takes about two months between a sale
and a closing (often longer with mortgage hassles these days),
and you are talking about deals agreed on in the summer, when
recession fears filled the air. Things now look better. Home
prices probably do, too.
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