Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Tuesday, February 15, 2011


"Housing Market Looks Sickest in Cities That Once Seemed Immune made it to the front page of the NYT. It is amazing as to how many pundits are still calling for a housing recovery. We were reminded from a faithful reader that there is one important headwind against the housing recovery (even more important than FICO scores). Appraisals are coming in so far under the selling price that deals are not closing. Appraisals are being compared to sales on the same street or on the same subdivisions. New homes cannot compete with foreclosures as a result of the low appraisals. Buyers are asked to come up with larger down payments. This usually kills the deal.

The result: The housing downturn will very likely continue. Now that for sure isn’t priced in."
---Rosenberg, ibid

Bill: Headwinds to Housing recap:
  • The major headwind is financing. Freddie/Fannie are doing most of the financing - that is, they buy the loans from the so-called banks, who are basically mortgage brokers:  Originate and sell.  Fannie/Freddie keep some, sell some.  This is a big problem.  A post will follow in a couple of days about this clogged and fragile conduit.
  • Also, there's the huge inventory
  • Also there's forclosuregate
  • And, per above, appraisals
  • Anything else? How about sort-of rising rates these days.
  • Update:  Extra-tight lending standards
  • Oh!  Unemployment:  Long-term and becoming structural

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