Update - U.S. Home Prices Fall At Record Rate

The reverse Midas touch of the Republican/Chimperator "who needs regulation" mentality continues to unfold. Those being harmed are millions of homeowners, most of whom did not engage in hair brained loan transactions. MSNBC is reporting the the monthly decline in home prices for April, 2008, is the largest in more than 20 years. Yet the GOP and McCain can only think of less regulation, intermixing religion and the civil laws, and more tax breaks for the most affluent. Even in this area where prices are usually somewhat insulated due to the annual relocation of military personnel, prices have begun to slide. Meanwhile, everyone who makes their living off of the residential real estate industry - like 129 employees of a plywood plant in Chesapeake who will lose their jobs when the company closes its plant in August- and me included is undergoing extreme financial strains. Thanks a lot Chimpy! Here are some highlights:

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The Standard & Poor’s/Case-Shiller home price index of 20 cities fell by 15.3 percent in April versus a year ago, according to Tuesday’s report. . . . Meanwhile, a report from the Office of Federal Housing Enterprise Oversight said U.S. home prices fell 4.6 percent in April from the same month last year, when the index peaked. That marked the biggest decline ever in the agency’s monthly index which dates back to January 1991.

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No surveyed city stayed above water, according to the Case-Shiller index. The last holdout, Charlotte, N.C., finally succumbed to the national housing downturn, with prices there slipping 0.1 percent from a year ago. Las Vegas and Miami both continue to post the largest declines, falling 26.8 percent and 26.7 percent, respectively.

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The housing slump, along with higher food and fuel prices and disruptions in the credit markets, has taken its toll on consumer sentiment. An industry group Tuesday said U.S. consumer confidence fell unexpectedly sharply in June to the fifth-lowest level ever. The Conference Board’s reading of consumers’ expectations also hit an all-time low.

Record Housing Market Drop

The GOP-Chimperator deregulation economic plan continues to wreak havoc on the U.S. housing prices as reported by MSN Money. Most hard hit are Florida and California where the percentage drops in values are in double digits for some cities. I truly believe that until housing begins to recover, the larger economy will continue to tank. Sadly, ther appears to be no turn around in sight. Thankfully, in the greater Norfolk area market, prices have yet to decline overall, although certain neighborhoods and larger condo projects have been hard hit. Here are story highlights ( http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/HomePriceReport.aspx):

A 291-city report finds broad declines, but the biggest pain is limited to California and Florida. Small towns in the South and West are holding up well, number crunchers say. The 291-city report finds widespread declines, but the worst pain is found in California, where homes on average lost 6.7% of their value over the year; Florida, where homes prices declined 4.7%; and the desert Southwest, where overbuilt Arizona and Nevada continue to writhe.

"It's a perfect storm: Housing is heading down, and the economy is heading down with it," says economist James W. Hughes of Rutgers University. "2008 is certainly destined to be a lost housing year." The worst trouble is concentrated in California and Florida, where overbuilding and speculation drove prices beyond the reach of most buyers, and Ohio and Michigan, where failing local economies, job losses and shrinking populations mean there are more houses for sale than buyers.

In a handful of metropolitan areas -- Charlotte, N.C.; Milwaukee; Seattle; and New York -- the per-square-foot price of real estate still is growing (though far more slowly than at the market's peak), according to Radar Logic.

The Chimperator's Idea of a Sound Economy - New Home Sales: Biggest Drop Ever

Watching the early morning news, I listened to some of the preview of the State of the Union Speech being spun by the Chimperator's press secretary. Among the remarks she was gushing - and make me want to gag - were comments that the underlying economy is strong. Obviously, that bubble world view is somewhat hard to reconcile with the CNN headline concerning the plunge in new home sales. It just proves further that the Chimperator is utterly out of touch with reality. Here are some highlights:

NEW YORK (CNNMoney.com) -- New home sales posted the biggest drop on record in 2007, according to the government's latest look at the battered housing market, as a year that saw a meltdown in the mortgage market and a drop in home values ended with yet more signs of weakness.

December sales came in at an annual rate of 604,000, the report showed, down from 634,000 in November, which was also revised lower. The reading was well below the consensus forecast of 645,000, according to economists surveyed by Briefing.com. The weak December sales left full-year new home sales at 774,000, down 26 percent from the 1.05 million sales in 2006. That was the biggest drop since the government started tracking new home sales in 1963, surpassing the 23 percent decline posted in 1980.

Homes financed by conventional mortgages fell 27 percent, the biggest drop since the government started tracking financing in 1988. But the weakness in prices made buyers reluctant to jump into the market, even if the availability of financing was not an issue. The number of new homes bought with cash fell nearly 24 percent, while mortgages guaranteed by federal agencies such as the Federal Housing Administration or the Veterans Administration fell 16 percent.

Some Fear Economic Stimulus Is Already Too Late

I have been talking about the US economy for months while the Chimperator and others in his regime have stupidly tried to claim that the economy was fine and strong. Anyone believing that line no doubt still thinks Saddam had WMD's. As this New York Times story (http://www.nytimes.com/2008/01/13/business/13econ.html?hp) indicates, now that folks have finally awakened to the problem, the attempted cures may well be too late to stop the gathering economic downturn. I continue to believe that things are going to get very ugly. I hope I am proved wrong, but I do not think I will be. Here are some highlights:

With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008. The answer could be a defining factor in the outcome of the fiercely contested presidential election. Not long ago, the race centered on the war in Iraq.

But now, as candidates fan out across the country, visiting places as varied as the factory towns of Michigan and streets lined with unsold condominiums in Las Vegas, voters are increasingly demanding that they focus on the best way to keep the economy from slipping off the tracks. The measures now being debated in Washington and on the campaign trail — tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates — could certainly moderate the severity of a downturn.

But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largess or cheaper credit, some economists say. “The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”

In the view of many analysts, the economy is now in a downward spiral, with each piece of negative news setting off the next. Falling housing prices have eroded the ability of homeowners to borrow against their property, threatening their ability to spend freely. Concerns about tightening consumer spending have prompted businesses to slow hiring, limiting wage increases and in turn applying the brakes anew to consumer spending.

A widely watched index showed manufacturing slowing, despite a weak American dollar that has encouraged growth in exports. The construction of new homes has already fallen by some 40 percent since the peak in 2006. The sales of new homes have fallen even faster, suggesting that a large oversupply of places to live will continue to drag down prices. Home prices have dropped by about 7 percent since the peak in 2006, but some experts suggest they could fall by another 15 to 20 percent before hitting bottom.

“There is still a long way to go,” said Nouriel Roubini, an economist at the Stern School of Business at New York University and chairman of the research firm RGE Monitor. Mr. Roubini has long predicted the real estate downturn would cause a severe recession. He envisions foreclosures accelerating this year, and banks counting fresh losses. That could make them less able to lend and further slow economic activity, not just in the United States but around the world.

“We’re facing the risk of a systemic financial crisis,” Mr. Roubini said. “It’s not just subprime mortgages. The same kind of reckless lending has been occurring throughout the financial system. And it’s not only mortgages: Now it’s credit cards and auto loans, where we see problems increasing. The toxic junk is popping up everywhere.”

A recession could pack enormous political consequences. Over the last century, the economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research. In each of those years — 1920, 1932, 1960 and 1980 — the party of the incumbent president lost the election.

Stocks Tumble on Credit Concerns

Not to be a Cassandra, but things continue to look bleak in the housing market - some sellers are getting desperate (see photo) and Wall Street is taking note:

NEW YORK (AP) -- Wall Street fell sharply Thursday, extending its weeks-long streak of volatility after disappointing home sales figures added to investors' increasing uneasiness about the mortgage and corporate lending markets. The Dow Jones industrials fell more than 240 points, while Treasury yields plunged as investors moved money from stocks to bonds. Investors who had been able to shrug off concerns about subprime mortgage lending problems and a more difficult environment for corporate borrowing were clearly worried once again. Anxiety increased after the Commerce Department reported that sales of new homes fell 6.6 percent last month to a seasonally adjusted annual rate of 834,000 units, more than triple what had been expected and the largest percentage drop since sales fell by 12.7 percent in January.

I guess the only silver lining is that the public will be even more angry at Bush and the GOP, a trend I hope continues. See:http://www.nytimes.com/aponline/business/AP-Wall-Street.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1185466954-Q7YMMbwBDelInK+dtx78nA