the visible hand

it is the theory which decides what can be observed – einstein

positive signs driven by short term factors

Posted by ecoshift on August 22, 2009

America’s housing market: Where it all began | The Economist
Aug 20th 2009 | NEW YORK

…Moreover, the positive signs in housing are partly driven by short-term factors. One is the tax credit for first-time buyers that was included in Mr Obama’s stimulus package: some are rushing to buy now because deals must close by November 30th to qualify. Annual tax refunds, handed out in recent months, may also have given the market a temporary lift. Attractive mortgage rates helped, too. But these have climbed off their historic lows, despite efforts to keep them down through the Fed’s purchases of mortgage-backed securities. Many expect them to rise further as ballooning government borrowing puts upward pressure on Treasury yields.

A glut of supply will also weigh on prices, thanks to a wave of repossessions. Foreclosures are running at record levels, with one in 355 of the nation’s homes receiving a filing in July alone. Seized properties now account for almost one in four sales (see chart 2). Increasingly, those losing their homes are supposedly safer borrowers with “prime” mortgages. They now account for more foreclosures than subprime borrowers, says the Mortgage Bankers Association (MBA).

With 1.8m homes already in foreclosure, a “similar amount” may be heading that way, reckons Torsten Slok, an economist at Deutsche Bank. Even those states that were the first to feel pain are still seeing a sharp increase in pre-foreclosure notices. In California one type of notice, for “trustee sales”, leapt by 32% from June to July, according to ForeclosureRadar, a website. Even more worryingly, delinquencies, the raw material for foreclosures, are still on the rise across much of the once-golden state. In Orange County nearly 7% of mortgages are at least three months overdue but not yet foreclosed, up from around 5% at the start of the year.

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2 Responses to “positive signs driven by short term factors”

  1. Excellent information. Unfortunately, this blog is speaking directly to millions of Americans. I can see the light at the end of the tunnel (2011 and beyond).

    -Heath

  2. ecoshift said

    I can see the light, but… is the tunnel getting longer?

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