News About the Housing Market
And it’s not good:
When counting this year’s first half, one in every 84 homes was slapped with at least one filing, ranging from default notices to bank repossessions.
It’s just more bad news as the limping real-estate market struggles for stability. Foreclosures can command discounts as high as 60%, a drag on surrounding home prices and appraisal values. The data also show that the government’s frantic efforts to keep Americans in their homes haven’t been completely effective, and moratoria crafted to slow foreclosures seem to simply delay the pain. Even worse, with unemployment at a rate not seen in a quarter century, there’s no relief in sight.
“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” said James J. Saccacio, RealtyTrac’s chief executive. “Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes are now worth represent a potentially significant future risk.”
Moody’s Economy.com estimates 15 million homeowners owe more on their mortgages than their houses are worth. Barclays Capital, meanwhile, estimates new foreclosures started this year at 3.0 million, with 2.6 million expected in 2010.
While not every filing ends with repossession, RealtyTrac’s closely watched and frequently cited report, which uses data collected from more than 2,200 counties nationwide, highlights the nation’s most troubled regions.
The boom-to-bust markets continue their domination. In the year’s first half, Nevada claimed the top spot, with one in every 16 units receiving at least one filing, a 61% jolt from a year earlier. Arizona followed with one in 30, while Florida came in with one in 33. For June, the top trio were Nevada, depressed by Las Vegas – California, hurt by the Inland Empire region – and Arizona, dragged down by Phoenix.
Meanwhile, what’s going on with all those toxic assets? They’re still sitting there:
A month after the PPIP program was announced, under pressure from banks and Congress, the U.S. Financial Accounting Standards Board watered down accounting rules and made it easier for banks not to mark down the value of toxic assets. For many toxic assets whose fundamental value fell below face value, banks may avoid recognizing the loss as long as they don’t sell the assets.
Even if banks can avoid recognizing economic losses on many toxic assets, it remained possible that bank regulators will take such losses into account (as they should) in assessing whether banks are adequately capitalized. In another blow to banks’ potential willingness to sell toxic assets, however, bank supervisors conducting stress tests decided to avoid assessing banks’ economic losses on toxic assets that mature after 2010.
The stress tests focused on whether, by the end of 2010, the accounting losses that a bank will have to recognize will leave it with sufficient capital on its financial statements. The bank supervisors explicitly didn’t take into account the decline in the economic value of toxic loans and securities that mature after 2010 and that the banks won’t have to recognize in financial statements until then.
Together, the policies adopted by accounting and banking authorities strongly discourage banks from selling any toxic assets maturing after 2010 at prices that fairly reflect their lowered value. As long as banks don’t sell, the policies enable them to pretend, and operate as if, their toxic assets maturing after 2010 haven’t fallen in value at all.
How did that Trillion in bailout money help?
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