March 21, 2007

Banc of America Securities forecasting 5% price drop in 2007

But on the other hand, we have another economist. Problems in mortgage lending go “well beyond subprime,” and the tightening of loan underwriting standards now underway is likely to push demand for homes down 15 percent and depress prices by 5 percent this year. According to a report issued Tuesday by Banc of America Securities LLC, “Dissecting the Mortgage Distress,” there’s already an excess supply of 800,000 existing homes on the market, and another 300,000 will soon be added to inventories through foreclosure. But the biggest problem facing housing markets may be the tightening of credit that’s taking place as lenders put the brakes on risky loans including low-documentation and…

March 21, 2007

Real estate stock buys caused by sub-prime scare

A Citigroup housing sector analyst had this to say. Yet the group has lost about 23% the past several weeks, according to Kim, due to the subprime woes and is once again trading at about price-to-book value — a rough estimate of a company’s tangible assets if it were liquidated. He reiterated his view that a price-to-book valuation of 1 is a traditional “buy signal” and that the “recent pullback represents an attractive entry point.” Here are a couple of pieces on good real estate stock buys caused by the falling price due to the sub-price mortgage default scare. Here’s a similar take from Street.com. Thanks to the panic over…

March 21, 2007

Enough with all the sub-prime drama!

This guy in this SeekingAlpha piece is annoyed by all the sub-prime hoopla. For two years all we have heard is “housing must slow down” and “there are too many risky loans out there.” Now that the housing market has slowed down and the home buyers with those risky (subprime) loans did exactly what we knew they would do, default, this is suddenly a big deal? Very entertaining. But there’s numbers too! This is not really the big deal it is being made out to be. Some numbers: • Approximately 80% of the mortgage market as “A” credit. • For “A” paper, the delinquency rate is in a comfortable 2.5%…

March 21, 2007

U.S. new home groundbreaking down, permits down 2.5%

All of which is good news for new home builders and resale home sellers. Year-over-year, groundbreaking on new homes is down 28.5% compared with February 2006, according to the Dept. of Commerce. Building permits fell 2.5% – economists expected the number to be roughly unchanged. U.S. futures, which had been down prior to the housing data, recovered on the news, entering positive territory. Source: SeekingAlpha

March 20, 2007

Trump on real estate markets

The Donald’s outlook on real estate investing. For the moment, he said, conditions vary widely from city to city. New York and Los Angeles are very strong, he said, while Chicago is “okay,” and San Francisco joins Toronto in the weaker category. He said that two years ago, when the market was at an all-time high, he was telling people not to buy real estate. “Now I’m telling them to do it.”

March 20, 2007

Homes cheaper than cars in Detroit

Boy, there is a lot of pain in Detroit real estate.

March 20, 2007

U.S. economy can handle increased foreclosures

Finally, an economist quantifies the effect of the sub-prime loans on foreclosures. Dr. Cagan analyzed 8.4 million adjustable-rate loans made during those three years and estimated that 13% of them, totaling $326 billion, will end in foreclosures. After lenders resell those properties, the total losses for lenders or investors holding the loans will be $113 billion, he estimated. That is about 1% of total U.S. home-mortgage loans outstanding. “The vast majority of borrowers will be fine,” Dr. Cagan said. The estimates are based on an assumption that average home prices will remain about level with the December 2006 level over the next five years. If prices drop 10%, the number…