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Real Estate News - January 2008

The following news stories are those which are most important for understanding the house price crash and the impact on house prices going forward...

January 31

Wall Street Journal: The concept of trading homes temporarily for vacations has long existed, but now it's being adapted to the slumping real-estate market.

Marketwatch: Consumers shouldn't count on consumer interest rates falling in response to Fed rate cuts. Fixed-interest mortgage rates are set by markets based on long-term money rates, not short-term rates. If bond investors fear that the Fed is letting inflation get out of control, then long-term rates could rise instead of fall. This is what we are seeing now.

Real Estate Journal: Countrywide Financial Corp. reported a loss of $421.9 million for the fourth quarter as growing defaults and declining home prices battered the America's largest mortgage lender.

January 30

Marketwatch: Fed cuts rates 0.5%. Fearing that financial-market turmoil and a weak housing market could cause the economy to spiral downward, the Federal Reserve moved aggressively Wednesday for the second time in eight days to lower interest rates and signaled it was ready to do more as needed. This will put more pressure on the value of the dollar and increase the price of commodities like oil and gold.

Marketwatch: Home prices in 10 major U.S. cities have fallen a record 8.4% in the 12 months ending in November, according to the Case-Shiller home price index released Tuesday.

FT: UK banks face having to put billions of pounds into a revamped scheme to compensate savers in a banking collapse, as part of a wide shake-up of the sector after the Northern Rock debacle.

January 29

Reuters: The FBI has opened criminal investigations into 14 corporations as part of a crackdown on improper subprime lending, agency officials said on Tuesday.

Marketwatch: Foreclosure filings soared 75% in 2007 from a year earlier as credit trouble and falling home values fell on homeowners. There were 2.2 million foreclosure filings last year. More than 1% of all U.S. households were in some stage of foreclosure during the year, up from 0.58% in 2006, RealtyTrac said. In December, foreclosure filings zoomed 97% from a year earlier, giving the fourth quarter the highest quarterly total since RealtyTrac, Irvine, Calif., began issuing its report in January 2005.

FT: ‘Credit orgy’ is over and recession looms, says Jabre. The Geneva-based hedge fund manager, who predicts only a short-lived bounce in stock markets, said that anyone with debt faced problems. “We’re at the end of a 10-year credit orgy.

We are going into a very slow cash period so those who have debt have to liquidate at any price,” he said. “The system is reaching self-cleaning.”


FT: Private investors withdrew the highest-ever amounts from investment funds last month and switched into cash and low-risk savings. As the value of the dollar, the pound and paper instruments fall, the next step will be a move into a more secure store of value - gold and silver.

January 26-27-28

Marketwatch: U.S. builders slashed prices by more than 10% in December in a failed bid to boost sales, which dropped about 5% to the lowest level in nearly 13 years, the Commerce Department reported Monday. For the year, sales declined at a record 26.4% pace.

FT: A boom in the use of derivatives is giving creditors strong incentives to push troubled companies into bankruptcy rather than help rescue them, according to new research and industry experts. A study by academics Henry Hu and Bernard Black concludes that, thanks to explosive growth in credit derivatives, debt-holders such as banks and hedge funds have often more to gain if companies fail than if they survive. The study suggests this development could endanger the stability of the financial system.

FT: Fortis faces €1bn subprime hit.

Nineteen U.S. metropolitan areas are likely to notice a direct impact from an increase in conforming loan limits included in the proposed economic stimulus plan, according to a Washington-based policy research firm.

January 25

New York Times: A French bank announced Thursday that it had lost $7.2 billion, not because of complex subprime loans, but the old-fashioned way — because a 31-year-old rogue trader made bad bets on stocks and then, in trying to cover up those losses, dug himself deeper into a hole.

January 24

Marketwatch: Capping the worst year for the housing market in 25 years, resales of U.S. homes and condos fell 2.2% in December to a seasonally adjusted annual rate of 4.89 million, the National Association of Realtors reported Thursday. For all of 2007, sales of single-family homes fell 13%, the biggest decline since 1982. The median sales price of an existing single-family home fell for the first time in the 40-year history of the survey, dropping 1.8%. Although no hard data are available, most economists believe median home prices hadn't fallen since the Great Depression of the 1930s.

January 23

Real Estate Journal: U.K. Property Crunch Grows Deeper - Investors are looking to cash out of some high-profile commercial-property funds in what appears to be the latest sign of U.K. investor caution tied to the global credit crisis.

Real Estate Journal: U.K. Banks Are Facing Housing Storm at Home - After tripling in the past decade, house prices in the U.K. are slipping, adding to rising consumer gloom and sparking fears the U.K. could be on the precipice of a crisis that would rival that of the U.S. With payments on some 1.4 million mortgages resetting to higher levels this year -- up 52% from 2007 -- banks and mortgage lenders are likely to face rising defaults as heavily indebted U.K. homeowners run into trouble.

FT: Beijing creates subprime taskforce - China’s banking regulator has

convened a task force to monitor US subprime exposure at Chinese banks as they prepare for larger-than-expected losses on those holdings.


FT: Ambac Financial, the second-largest bond insurer in the world, on Tuesday reported a record $3.26bn loss and said it was seeing strong interest from a number of potential parties about capital infusions that would help the company secure its crucial triple-A credit rating.

FT: Tuesday saw the biggest cut by the Federal Reserve to its target Fed Funds rate in 26 years, and the biggest emergency cut it had ever made between scheduled meetings. That followed the biggest falls in European and Asian markets since the terrorist attacks of September 11, 2001, which occurred amid the highest levels of equity market volatility since the invasion of Iraq in 2003.

January 22

Marketwatch: The parallels between today's market and those preceding the 1987 Crash are several – and disturbing.

Marketwatch: Fed cuts interest rates by 75 basis points.

Marketwatch: Bank of America said Tuesday its fourth-quarter profit tumbled 95% after the company said write-offs for subprime credit problems, big trading losses and a weakening consumer hit the firm.

January 19-20-21

Marketwatch: British shares in worst fall since Sept. 11 attacks. FTSE 100 index drops 323 points as miners and banks weigh.

Marketwatch: Three times as many subprime mortgages were modified for struggling borrowers in the fourth quarter of last year than in the third quarter.

FT: Derbyshire at risk of credit downgrade. The small UK building society has been placed on review for possible downgrade by Moody’s, the credit rating agency, because of its exposure to specialist mortgage lending such as buy-to-let.

January 18

Real Estate Journal: The credit crunch that roared through the residential real-estate market is starting to bite commercial projects, too.

Property Week: Shares in fund manager New Star Asset Management, which runs the UK’s most high profile private investor property fund, plummeted this morning, after it slashed its dividend by almost half because of tough market conditions.

Property Week: UK property funds suffered their worst quarter on record it was announced today. The IPD UK Pooled Property Fund Indices (PPFI) delivered a total return of -9.1% for the three months to December 2007, the most negative performance since it began in 1990.

Property Week: National Grid has cancelled the £700m sale of its property portfolio because it did not receive high enough bids.

January 17

Reuters: Lehman to cut 1,300 mortgage jobs.

Reuters: Merrill posts worst quarter in its history.

Marketwatch: Housing starts plunge 14% to 16-year low. New home construction falls 25% in 2007 to lowest in 15 years.

FT: JPMorgan and Wells Fargo hit by loan losses.

FT: UBS, one of the biggest casualties of the US subprime crisis, faces an additional blow to its profitability after a decision to wind down its traditional Switzerland-based private banking business for rich US clients. The move by the world’s biggest wealth manager follows a reassessment of the risks and rewards from an activity that has drawn increasing attention from US regulators concerned about marketing efforts in the US by offshore bankers.

FT: Shares in Japan’s largest banks fell sharply on concerns about their subprime exposure. Analysts warned of further writedowns across the Asian banking sector, but on a much more limited scale than in the US and Europe. The fears were triggered by reports that Mitsubishi UFJ would suffer more substantial subprime-related losses than the Y23bn ($214m) in unrealised losses it has already posted.

FT: California and Florida – the biggest and fourth biggest state economies in the US – are either in recession or on the brink, many economists now believe.

January 16

Real Estate Journal: What It Takes to Sell Your House Quickly.

Real Estate Journal: On Wall Street, the losers in the collapse of the housing market are legion. The biggest winner looks to be John Paulson, a little-known hedge fund manager who smelled trouble two years ago. Funds he runs were up $15 billion in 2007 on a spectacularly successful bet against the housing market. Mr. Paulson has reaped an estimated $3 billion to $4 billion for himself -- believed to be the largest one-year payday in Wall Street history.

FT: East Europe warned on subprime fallout.

January 15

Marketwatch: Adjustable-rate mortgages are declining in popularity these days, and for good reason: There's less of a financial advantage to borrowers, according to Freddie Mac's annual ARM survey, released Tuesday.

Marketwatch: Citigroup said Tuesday that it needs to raise $12.5 billion in new capital from a private placement and public offering of preferred shares, as well as cutting its dividend.

Marketwatch: Merrill Lynch & Co. on Tuesday said it has reached agreements with several investors, notably three foreign ones, to raise $6.6 billion.

FT: Sovereign Bancorp, the Philadelphia-based bank in which Grupo Santander of Spain has a 25 per cent stake, said it expected to take a $1.6bn writedown in the fourth quarter based on higher customer loan defaults and the decline in value of its investment in a New York savings and loan institution.

January 11

Marketwatch: Gold futures broke over $900 an ounce on Friday for the first time ever after Thursday's comments by Chairman Ben Bernanke were widely interpreted as signaling further rate cuts.

Marketwatch: A record increase in imported oil prices in November sent the U.S. trade deficit to its highest level in more than a year, the Commerce Department reported Friday.

Real Estate Journal: Housing Decline Saps Retail Real Estate.

Marketwatch: Bank of America to buy Countrywide Financial for $4 billion.

Marketwatch: Citigroup, Merrill seek fresh capital injections to keep afloat.

FT: Capital One, the largest

independent credit card company in the US, cut its profit outlook by more than 20 per cent on Thursday amid rising losses on loans in the fourth quarter and a slowing US economy.


FT: Investors in collateralised debt obligations face further downgrades and the possibility that the value of their investments will plummet or be wiped out. About $58bn worth of CDOs, which repackage slices of other structured deals such as mortgage-backed bonds, are understood to have hit “events of default”.

FT: Buy to let mortgage lender Paragon moved to avert receivership by unveiling a £287m rescue rights issue but the mortgage provider warned that it might have to shut to new business in spite of the capital raising.

January 10

Marketwatch: Federal Reserve Chairman Ben Bernanke said Thursday that more interest rate cuts are on the way, as the U.S. central bank wrestles with a deteriorating economy brought on by a struggling housing market, high energy prices and a weaker stock market.

Reuters: Bank of America in talks to buy troubled Countrywide.

Mortgage Strategy: The Monetary Policy Committee has voted to freeze the Bank of England base rate at 5.5%.

Marketwatch: MBIA slashes dividend to preserve capital.

FT: Mortgage lender John Charcol put on market for £50m

FT: Bear and Fortress held tie-up talks.

January 9

FT: Credit market fears open the way for Buffett

Reuters: Countrywide says foreclosures highest on record.

January 8

Property Week: Sales in commercial property nose-dived in the fourth quarter of 2007, hit by tumbling prices and turmoil in credit markets.

Reuters: Countrywide denies bankruptcy rumors.

Marketwatch: Pending home sales sink 2.6% in November, down 19.2% in the last year.

FT: Bad news on homes hits top builders.

FT: Global markets for complex credit products look likely to see issuance volumes collapse this year as the effects of the turmoil in debt markets continue to cripple much of the securitisation industry, according to analysts’ forecasts.

January 5-6-7

Wall Street Journal: Gold's place in the financial system dates back centuries, but it is enjoying a modern-day renaissance, thanks in part to new vehicles that allow investors to buy and sell the precious metal as easily as a share of Google stock.

January 4

Reuters: U.S. jobs growth skidded to a near-halt in December and the unemployment rate hit a two-year high, according to a government report on Friday that raised recession fears and chances of more interest-rate cuts.

Firstrung: New mortgage approvals crash by 36% year on year - Bank of England.

January 3

New York Times: The collapse of the fabled Levitt & Sons, the first big home builder to fail in the current slump, illustrates how the real estate turmoil is spreading far beyond subprime borrowers.

Wall Street Journal: U.S. house prices "likely would have to fall considerably" to return to a normal relationship with rents, says a study by one former and two current Federal Reserve economists.

January 2

New York Times: PHH, one of the largest originators of residential home loans, announced Tuesday that it is scrapping a proposed $1.8 billion sale to General Electric and Blackstone Group, because banks had failed to agree to finance the transaction. The busted deal offers another sign that troubles within the mortgage industry will continue into 2008.

Reuters: GOLD SOARS TO RECORD HIGH ABOVE KEY $850/OZ LEVEL.

Reuters: FED MINUTES: CREDIT WOES MAY FORCE MORE RATE CUTS.

Reuters: Oil prices vaulted to a record $100 a barrel on Wednesday as violence in Nigeria, tight energy stockpiles and a weaker dollar triggered a surge of speculative buying, dealers said.

January 1

Real Estate Journal: The credit crunch is creating problems in commercial real estate, driving down prices of office buildings, shopping malls and apartment complexes, and leaving some owners scrambling for cash.

Real Estate Journal: A collateralized debt obligation called Norma illustrates how investors and Wall Street, in their efforts to keep a lucrative market going, took a good idea too far.

Reuters: Mortgage and vehicle fleet company PHH Corp said on Tuesday it terminated its nearly $2 billion sale to General Electric Co and Blackstone, after the private equity firm failed to obtain required financing for the deal.

Reuters: EXISTING HOME SALES EDGE UP FROM RECORD LOW.

Telegraph: The pound suffered its weakest annual performance for 15 years in 2007, as markets bet that 2008 will be a miserable one for the British economy.

 

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