The Ups And Downs Of The Mortgage Industry
While there are some bright spots in the housing market, I still don’t think it’s hit the bottom of this dip yet.
The pace of existing home sales edged up in November from a record low, according to a report on Monday that offered some tentative signs of stabilization in the still-ailing housing market.
Sales of previously owned homes rose 0.4 percent to a 5 million-unit annual rate, the first increase in nine months, the National Association of Realtors said.
Not only has the residential mortgage industry self-imploded, but now the commercial sector might be showing signs of strain as well.
As more banks report write-downs tied to the global credit crunch, analysts say Wachovia Corp (WB.N) may have losses lurking in an area that has garnered less investor attention.
The fourth-largest U.S. bank has in recent years aggressively tried to add market share by underwriting commercial mortgage-backed securities.
Demand for such securities has slid amid credit concerns, leaving dealers struggling to unload loans whose quality might be perceived as less sound than investors now demand.
It’s going to make for an interesting 2008, that’s for sure.
Sphere: Related ContentJobless Claims At Three Month Low
So… Today is an up day yes? The number of jobless claims have dropped by the largest amount in three months.
The number of laid off workers filing claims for unemployment benefits fell last week by the largest amount in three months.
The Labor Department reported that applications for jobless benefits dipped by 15,000 last week to a total of 338,000. The decline was the largest since the level of claims had dipped by 22,000 in the first week of September.
Of course, someone else will release something by the end of the day that negates this good news.
Squandering Their Equity
I really don’t think this is news...
Homeowners started losing hold of their homes years before spiking foreclosures and the housing slump slammed the economy.
Piece by piece, some gave away their homes by tapping equity to take cash out to pay for cars, weddings and vacations. Others never owned one brick. During the country’s most recent housing boom, the term “homeowner” became a misnomer as lenders offered 100 percent or more home financing to some buyers.
Now, slipping home prices threaten to further erode the value of many Americans’ single largest asset, curbing consumer spending and jeopardizing retirement assets.
It was clear a couple years ago that people didn’t have any actual equity in their homes.
Four years ago, our neighbor moved in, paying about $165,000 for his house. Two years later he got a home equity loan for $50,000 so he could finish off the basement. I knew there was something wrong at the time, because there is no way to build $50,000 in equity in two years on a 100% loan at 7% interest. My suspicions were correct when he moved out this past year.
Oh, it sure would have been nice to take a home quity loan to do some things around here, but I am glad now that I didn’t, that’s for sure. The only problem I face now is being the only house on my street that isn;t in danger of being foreclosed. So much for the appreciation of my most valuable asset.
Sphere: Related ContentH&R Stuck With Option One, For Now
It seems everyone had their fingers in the subprime lending debacle. It amazes me that so many other non-mortgage related companies had mortgage units that were helping to push those ridiculous loans at people.
H&R Block Inc (HRB.N) said on Tuesday the sale of its struggling subprime home lender unit, Option One Mortgage Corp, to Cerberus Capital Management LP was terminated, a move that will trigger $75 million of charges and 620 job cuts.
Block shares were down 7.5 percent to $18 in pre-market trade.
The end of the deal “is not a good thing,” said Alexander Paris, an analyst at Barrington Research in Chicago. “There’s charges and losses, but it might be making the best out of a bad situation.”
The best out of a bad situation would find mortgage companies freezing rates and even rolling some of them back to a point where people wouldn’t actually lose their homes. It sounds better than having millions of empty homes all around the country.
I wonder how many other companies, like H&R Block, will be recording mortgage related losses before the year ends.
So Which Is It?
Headline #1:
Manufacturing sector growth slipped in Nov: ISM
Growth in factory activity slipped in November to the lowest since January as tight credit conditions and the housing downturn restrained production, according to an industry report released on Monday.
Headline #2:
New orders boost manufacturing in Nov.
U.S. manufacturing expanded in November as new orders and production improved, but weakness in employment suggested that industrial jobs may not be as plentiful in coming months.
So… Which is it? Growing or slipping? Shrinking or expanding? Is it sunny or cloudy? I just can’t restrain myself.