Interest Rate Roundup

Thursday, October 25, 2007

Lots of housing news, coverage

Housing and mortgage stories are all over the place this morning, so let me see if I can touch on a few of them:

* The New York Times, in a piece titled "Reports Suggest Broader Losses From Mortgages," leads off with this zinger: "Every time economists and Wall Street executives think they have acknowledged the full extent of the losses from the meltdown in real estate mortgages, more bad news turns up." It then goes on to note some statistics about the extent and cost of the housing crisis:

- The cost to financial firms and investors could run up to $400 billion, well above the $240 cost (adjusted for inflation) of the Savings and Loan bailout/crisis fueled by souring commercial loans and interest rate gyrations in the late 1980s and early 1990s.

- Real estate wealth could fall anywhere from $2 trillion to $4 trillion, less than the $7 trillion lost in the tech stock implosion. But since changes in real estate wealth tend to impact spending more than changes in stock market wealth, the economic impact of the housing bust could be broader than the dot-com bust.

* Meanwhile, the Wall Street Journal didn't bother to mince words. Its piece called "With Buyers Sidelined, Home Prices Slide" says it all ...

"So many houses. So few buyers.

"Home builders are slashing prices, often by more than 10%. Some people who list their homes on admit they are "desperate" to sell. Inventories of unsold homes are at the highest level in nearly two decades, providing plenty of choices.

"Yet a severe tightening of credit by mortgage lenders is keeping many buyers out of the market, while the huge supplies of homes for sale have persuaded others that they can wait for further price cuts."

* The news isn't getting any better on the profit front for the nation's home builders. Another pair of 'em -- Pulte Homes and Ryland Group -- reported their latest quarterly results since yesterday.

Pulte lost $788 million in the September quarter, a big swing from profit of $190 million in the year-earlier period. The third-largest builder took $1.18 billion in charges to write down the value of land and goodwill. Third-quarter net new orders tanked 37.2% (measured in units) and 47.1% (measured in dollars).

Ryland lost $54.7 million, vs. year-ago profit of $87.9 million. Writedowns and writeoffs came to $128 million. Net orders dropped 20.9% in units and 27% in dollars. These reports indicate that builders are cutting prices to entice buyers, something the national statistics point to as well.

* Here in Florida, things were particularly brutal in September. Statewide, single-family home sales plunged 38% from a year ago, with every single market registering a decline. Median prices fell 9%, with 18 out of 20 registering a drop. Things weren’t much better in the condo market – with sales declines in 16 out of 20 metros and price declines in 11 out of 20. You can read more coverage on the Florida market in the Orlando Sentinel and Tampa Tribune, among others.

Next up is the Census Bureau's report on new home sales, due out in about an hour.


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