Home prices hit 2004 levels

House prices inched higher in July, but are down 3.3% for the year ended July 31 and 18.4% lower than the April 2007 peak, according to the Federal Housing Finance Agency.

The regulator, which holds Fannie Mae and Freddie Mac in conservatorship, said July home prices increased 0.8% and are at levels last seen in March 2004. The agency lowered June's gain to 0.7% from a previously reported 0.9% increase.

The FHFA index includes the price of properties backing mortgages sold to or guaranteed by the government-sponsored enterprises.

Prices rose 3.6% in July in the West North Central Census region, according to the FHFA, while prices in the South Atlantic region fell 0.4% in July.

The agency said the West North Central region, which includes the Plains States west of the Mississippi River, was the only area of the country to see home prices rise in the 12 months through the end of July.

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Homeownership no longer an aspirational goal: PIMCO

This new trend in demographics will impact years to come.

The idea of homeownership as an aspirational goal may no longer carry much weight as college graduates enter the work force saddled with high student loan debt and older Americans focus on retirement.

Rod Dubitsky, an analyst with PIMCO, said the overall question that looms large over the mortgage industry is: Who is going to buy housing in the next 10 years?

 The a key reason besides jobs...student debt.

And student debts are expected to go even higher, as salaries are dropping, according to Dubitsky. The average median salary for recent graduates fell to $27,000 in 2010, compared to $30,000 in 2007.

Dubitsky said the ability of these borrowers to make their way into the housing market is contingent on whether they have the opportunity to save money. But the statistics on this point remain grim with the average student debt now equal to a 15% down payment on a median-priced home

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Servicers write down principal on nearly 5,000 HAMP modifications

Banks have been very hesitant to reduce principal on mortgages when the borrower is behind on their payments. 1) Sometimes the bank is only the serivicer and doesn't have legal authority to do so.  2) Once one borrower gets a write down, then every one is going to want a mortgage reduction. 

Mortgage servicers included a principal writedown on 4,911 active workouts through the Home Affordable Modification Program since the fall of last year, the Treasury Department said Friday.

The Treasury launched HAMP in March 2009 to provide an incentive to servicers for the modification of loans on the verge of foreclosure. Through May, participating servicers started more than 731,000 permanent modifications and began 1.6 million trials. Servicers completed 32,000 permanent modifications in May, up 11% from the previous month.

In October, the Treasury launched the Principal Reduction Alternative, requiring servicers participating in HAMP to evaluate borrowers with a loan-to-value ratio of more than 115% for a principal writedown

It seems the only reason it part of the ever growing HAMP program.

Major servicers have been reluctant to write down principal without taxpayer dollars. Ally Financial (GJM: 23.78 -0.17%) and Bank of America (BAC: 11.06 +0.91%) agreed to principal reduction programs through state Hardest Hit Fund programs. Wells Fargo (WFC: 28.71 +2.32%) is in talks with the Arizona Department of Housing to do the same.

But representatives at these banks maintain the writedowns will only come on the mortgages they own and at the discretion of their investor.

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House fails to extend unemployment benefits

If this the extension doesn't pass, then I would expect to see some downward pressure on rents and consumption data.  

Federal jobless payments, which last up to 73 weeks, kick in after the state-funded 26 weeks of coverage expire. These federal benefits are divided into tiers, and the jobless must apply each time they move into a new tier.

Congress has extended the deadline to file those applications four times in the past year. The last jobless benefits extension -- which lasted six months and cost $34 billion -- faced a lot of opposition on deficit conscious Capitol Hill before it finally passed in mid-July.

The $12.5 billion bill that was on the floor Thursday needed two-thirds approval, or 275 votes, a tough hurdle. The vote was 258 to 154.

Still, the bill was the opening salvo in what's likely to be a highly charged debate on extending the safety net for the nation's millions of unemployed. While the next step is unclear, it's possible the extension will resurface in a larger bill, such as one that would extend the Bush tax cuts.

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Foreclosure Crisis: Stealth Stimulus for Defaulters

I've said before all this free housing expenses add to the personal consumption bubble.  This adds to the economy possibly misleading actual and sustainable consumer spending

While delays in the foreclosure process are costing bond holders and mortgage servicers, defaulting homeowners living in–or even renting out–their homes are getting a pretty tidy subsidy, writes the WSJ’s Mark Whitehouse in today’s paper. That subsidy is worth about $2.6 billion a month, according to a WSJ analysis. That’s .25% of U.S. personal income, roughly equivalent to the benefit top earners receive from Bush-era tax breaks.

Will any of that money find its way back into the economy, as a stealth stimulus? It’s hard to say, writes Mr. Whitehouse. Some defaulters save their mortgage payments in the hopes that a mortgage modification will finally come through, others who have lost their jobs just need the money to keep on going–for food, car payments and the like.

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Is there a Personal Consumption Bubble?

The BEA report that personal consumption in August was $41.3 billion dollars.  However, you have ask yourself what about the households  that are in default and delinquency which are not paying their mortgages.  Are they spending or saving their mortgage payments?  The foreclosure issue is also heating up again with paper mills and states and OCC wanting to suspend foreclosures.

There are currently about 7 million mortgages in delinquency, default, or foreclosure.  I know some of these might be cured, but I'm just going to keep this number.  The average new mortgage is $1,100, but I don't know what the average payment  is for the 7 million mortgages that are in the process, but again I'll just use $1,100.

Number of Households:       7,000,000

Average Mortgage Payment     $1,100

Total payments            $7,700,000,000 

So, every month there could be $7.7 billion dollars that either spent or saved that normally were paid on mortgages.  Also, some of these mortgages are in default due to unemployment, so this $7.7 billion might be a smaller number. 

Now, according to Calculated Risk the personal saving rate is now 5.8%, so these funds normally spent on mortgages could now be savings.  However, I think these payments divided between savings and consumption, but in what ratio?

If anybody has any data on average payment in the delinquency, default, or foreclosure process please let me know.

Retail data: Americans still cautious in August

From the AP Here

The figures confirm a flurry of anecdotal evidence that retailers will be disappointed by this year's back-to-school season -- a time they see as second only to the winter holidays.
"We are still not seeing a rebound," said Michael McNamara, vice president of research and analysis for SpendingPulse, which includes transactions in all forms including cash.

My question, is this recession spending or this the new baseline.  As income as dropped and unemployment remains high, this might be the new normal.