by Calculated Risk on 8/25/2009 04:05:00 PM

Imagine a headline in June 1991 (if Case-Shiller was around):

"House Prices increase at 11.6% annualized rate in June!"

The horrible price declines were over ... right? Nope. Real house prices declined for almost another 5 years. Just something to remember.

From Bloomberg: NYC Apartment Rents Fall as Tenants Gain Leverage

In buildings attended by doormen, rents on one-bedroom apartments dropped 10 percent from a year earlier to an average of $3,274 a month, according to a report by the Real Estate Group of New York. Studio prices fell 7 percent at those properties to $2,329 and two-bedrooms declined almost 6.9 percent to $5,161.

Falling rents means a further decline in house prices to lower the price-to-rent ratio.


And a market graph from Doug Short. This matches up the market bottoms for four crashes (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 8/25/2009 02:25:00 PM

This following graph compares the Case-Shiller Composite 10 SA index with the Stress Test scenarios from the Treasury (stress test data is estimated from quarterly forecasts).

The Stress Test scenarios use the Composite 10 index and start in December. Here are the numbers:

Case-Shiller Composite 10 Index, June: 152.55

Stress Test Baseline Scenario, June: 148.82

Stress Test More Adverse Scenario, June: 140.71

Unlike with the unemployment rate (worse than both scenarios), house prices are performing better (from the perspective of the banks) than the the stress test scenarios. I believe there will be further price declines later this year, because I think the Case-Shiller seasonal adjustment is insufficient, and because I expect the first-time home buyer frenzy to slow just as more distressed supply comes on the market - even if an extension to the tax credit is passed.

by Calculated Risk on 8/25/2009 11:30:00 AM

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Forty six states are showing declining three month activity.

This is what a widespread recession looks like based on the Philly Fed states indexes.

On a one month basis, activity decreased in 35 states in June, and was unchanged in 8 states. Here is the Philadelphia Fed state coincident index release for July.

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for July 2009. In the past month, the indexes increased in seven states (Louisiana, Mississippi, North Dakota, South Carolina, South Dakota, Vermont, and Wisconsin), decreased in 35, and remained unchanged in eight (Hawaii, Indiana, Nebraska, New Jersey, Oklahoma, Rhode Island, Tennessee, and Virginia) for a one-month diffusion index of -56. Over the past three months, the indexes increased in three states (Mississippi, North Dakota, and Vermont), decreased in 46, and remained unchanged in one (South Carolina) for a three-month diffusion index of -86.

The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. Most of the U.S. was has been in recession since December 2007 based on this indicator.

Note: this graph includes states with minor increases (the Philly Fed lists as unchanged).

A large percentage of states showed declining activity in July. Still a widespread recession in July by this indicator ...

by Calculated Risk on 8/25/2009 10:01:00 AM

Here are three key measures of house prices: Price-to-Rent, Price-to-Income and real prices based on the Case-Shiller quarterly national home price index.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph through Q2 2009 using the Case-Shiller National Home Price Index (SA):

Click on image for larger graph in new window.

This graph shows the price to rent ratio (Q1 1997 = 1.0) for the Case-Shiller national Home Price Index. For rents, the national Owners' Equivalent Rent from the BLS is used.

Looking at the price-to-rent ratio based on the Case-Shiller index, the adjustment in the price-to-rent ratio is mostly behind us as of Q2 2009 on a national basis. However this ratio could easily decline another 10% or so.

It is important to note that rents are now falling and this has not shown up in the OER measure yet. The OER lags REIT rents, and I expect OER to declines later this year. And declining rents will impact the price-to-rent ratio.

Price-to-Income:

The second graph shows the price-to-income ratio:

This graph is based off the Case-Shiller national index, and the Census Bureau's median income Historical Income Tables - Households (and an estimate of 2% increase in household median income for 2008 and flat for 2009).

Using national median income and house prices provides a gross overview of price-to-income (it would be better to do this analysis on a local area). However this does shows that the price-to-income is still too high, and that this ratio needs to fall another 10% or so. A further decline in this ratio could be a combination of falling house prices and/or rising nominal incomes.

Real Prices

This graph shows the real and nominal house prices based on the Case-Shiller national index. (Q1 2000 = 100 for nominal index)

Nominal prices are adjusted using CPI less Shelter.

The Case-Shiller real prices are still significantly above prices in the '90s and perhaps real prices will decline another 10% to 20%.

Summary

These measures are useful, but somewhat flawed. These measures give a general idea about house prices, but there are other important factors like inventory levels and credit issues. All of this data is on a national basis and it would be better to use local area price-to-rent, price-to-income and real prices.

It appears that house prices - in general - are still too high. However prices depend on the local supply and demand factors. In many lower priced bubble areas supply has declined sharply (as banks are currently slow to foreclose), and demand is very strong (first-time home buyer frenzy, and cash flow investors). This is pushing up low end prices.

However in the mid-to-high end of the bubble areas - with significant supply and little demand - prices are probably still too high.

by Calculated Risk on 8/25/2009 09:00:00 AM

S&P/Case-Shiller released their monthly Home Price Indices for June this morning.

This monthly data includes prices for 20 individual cities, and two composite indices (10 cities and 20 cities). This is the Seasonally Adjusted data - others report the NSA data. Note: I have more on the quarterly national index soon.

Click on graph for larger image in new window.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 32.6% from the peak, and up about 9% (annualized) in June.

The Composite 20 index is off 31.4% from the peak, and up in June.


The second graph shows the Year over year change in both indices.

The Composite 10 is off 15.1% over the last year.

The Composite 20 is off 15.4% over the last year.

This is still a very strong YoY decline.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

NOTE: updated 3rd graph. Two cities have price increases for 2009, and hopefully this graph shows the change better.

Prices increased (SA NSA) in 15 of the 20 Case-Shiller cities in June. In Las Vegas, house prices have declined 54.6% from the peak. At the other end of the spectrum, prices in Dallas are only off about 5.6% from the peak - and up in 2009. Prices have declined by double digits almost everywhere.

Let the debate begin - seasonal issues of mix (distressed sales vs. non-distressed sales), the impact of the first-time home buyer frenzy on prices, etc. - but this does show a price increase in June.

I'll compare house prices to the stress test scenarios soon.

by Calculated Risk on 8/25/2009 08:33:00 AM

From Bloomberg: Court Orders Federal Reserve to Disclose Emergency Loan Details

The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.
...
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders.
...
The judge said the central bank “improperly withheld agency records” ... She gave the Fed five days to turn over documents it told the reporters it located ...

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

There is going to be some interesting information available soon.

by Calculated Risk on 8/25/2009 12:43:00 AM

Some people knew this was coming ...

From Reuters: Deutsche Bank plans Tier 1 issue, reopens market

Deutsche Bank AG plans to raise new Tier 1 debt ... as banks seek to rebuild balance sheets in the wake of the financial crisis.

The German bank confirmed it planned to issue euro fixed-rate perpetual notes, with annual call dates beginning from March 2015, and said it was managing the issue. ... the first of an expected series of new Tier 1 notes to hit the market in coming months from banks ... The deal would be smaller than 1 billion euros as the bank was seeking to test the market's appetite ...

And SunTrust hints at raising new capital, from Bloomberg: U.S. Banks Face More Loan Losses, SunTrust Chief Says

“The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Chief Executive Officer James Wells III said today in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.”
...
“The industry has moved from a potentially cataclysmic scenario to one that is merely very difficult,” Wells said. “The industry is back from the brink of a potential global financial-system meltdown.” ... “Even if the economy begins to improve modestly, commercial real estate conditions will probably deteriorate until 2010.”
...
Wells said SunTrust may repurchase $4.9 billion in preferred shares sold through the U.S. Troubled Asset Relief Program “as soon as possible,” without being more specific.

Ahhh ... just prudent balance sheet management!

by Calculated Risk on 8/24/2009 10:13:00 PM

From CNBC: Obama to Reappoint Bernanke as Fed Chief

U.S. President Barack Obama will reappoint Ben Bernanke for a second term as chairman of the Federal Reserve on Tuesday, a senior administration official said on Monday.
...
"The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation and this world have ever faced," Obama will say in a statement to the media at 9 am New York time.

As Fed Governor Bernanke supported the flawed policies of Alan Greenspan - he never recognized the housing bubble or the lack of oversight - and there is no question, as Fed Chairman, Bernanke was slow to understand the credit and housing problems. And I'd prefer someone with better forecasting skills.

However once Bernanke started to understand the problem, he was very effective at providing liquidity for the markets. The financial system faced both a liquidity and a solvency crisis, and it is the Fed's role to provide appropriate liquidity. Bernanke met that challenge, and I think he is a solid choice for a 2nd term (not my first choice, but solid).

by Calculated Risk on 8/24/2009 08:06:00 PM

From the SF Gate: Hotel losses mount, hurting city's coffers (ht Michael)

In June, the average room rate in San Francisco was $134, the lowest it has been since 2005 and well below the $162 peak in June 2008 ... For a while, managers filled rooms by offering lower rates, but the number of visitors also has begun to slide, and in June, occupancy tumbled to 73 percent, down from 85 percent the same time last year.

A 17% decline in room rates, and a 14% decline in occupancy rates, suggests about a 30% decline in RevPAR (Revenue Per Available Room).

Add to the troubled mix the fact that many hotel owners, in San Francisco and across the state, financed purchases or refinanced loans between 2005 and 2007 - when the hotel values were at their peak. Since then, hotels statewide have lost 50 to 80 percent of their value, meaning that many owners owe far more than their asset is worth.

Hospitality industry analyst Alan Reay calls the situation a "perfect storm" that won't improve any time soon ...

Actually this is a perfect storm everywhere for hotels. Too much supply - and more coming online every day. Too much debt. And too few guests.

by Calculated Risk on 8/24/2009 05:49:00 PM

Check out the updates to the NY Fed Credit Conditions map.

A very cool tool from the NY Fed: New York Fed Launches Expanded U.S. Credit Conditions Section of Website (ht Bob, Justin)

The Federal Reserve Bank of New York today launched an expanded section of its website, adding new regional information on consumer credit conditions intended to assist policymakers address mortgage delinquency and foreclosure issues.

The U.S. Credit Conditions section offers new interactive maps and data on auto and student loan delinquencies, and mortgage “roll” rates. These features complement existing maps and spreadsheets on mortgage foreclosures and delinquencies, measures of subprime and alt-A mortgages and bank credit card delinquencies. The data are available at the state and county level.

by Calculated Risk on 8/24/2009 04:00:00 PM

Here is an email sent out by George Mason University today (thanks to KurtyBoy):

Beginning August 30, after hours parking in the FDIC parking garage, from 5:30 pm to 11:00 pm with a valid Mason Arlington permit, is no longer available.

Click on email for larger image in new window.

KurtyBoy adds: "Notice how the bullet about the parking has been added in a different font? Like a change that just got made.... "

Looks like long hours for Sheila Bair and crew.

And from Jim the Realtor:




Here is the market graph from Doug Short, Doug Short is matching up the market bottoms for four crashes (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 8/24/2009 01:52:00 PM

A few comments on the first-time homebuyer tax credit:

A couple of details:

The tax credit is up to 10% of the purchase price, or $8 thousand maximum.

"First-time" homebuyers are defined as anyone who hasn't owned a primarily residence for the last 3 years (not really "first-time").

The tax credit can be used as the downpayment, see Kenneth Harney's: How buyers can use tax credit for down payment

This has led to a frenzy of first-time home buying. Even though the program ends on November 30th, the buyer must close escrow before then - so the program will boost traffic through September and maybe into October.

Existing home sales are reported in the month following the close of escrow. So the program should have a positive impact on reported numbers throughout most of the year.

The odds are very high that the tax credit will be extended. My understanding is the NAR and NAHB are pulling out all the stops and the extension of this credit is their #1 priority. Also, since housing is the top economic priority for the Obama Administration, I think we will see an extension at the same size ($8K), maybe for another 6 months. This extension will probably not be a high priority until October. However, just like with the cash-for-clunkers program, I think the impact will wane over time.

Anecdote: I've spoken with two younger guys (30 ish) who told me they had no down payment, but edit: were looking to buy a house NOW. They are using the tax credit and FHA to buy. I think that conversation is happening in many places.

This suggests existing home sales will decline - perhaps significantly - after the frenzy subsides.

by Calculated Risk on 8/24/2009 12:04:00 PM

These are very important numbers ...

Press Release from Fitch: Fitch: Delinquency Cure Rates Worsening for U.S. Prime RMBS (ht BURN, Ron Wallstreetpit)

While the number of U.S. prime RMBS loans rolling into a delinquency status has recently slowed, this improvement is being overwhelmed by the dramatic decrease in delinquency cure rates that has occurred since 2006, according to Fitch Ratings. An increasing number of borrowers who are 'underwater' on their mortgages appear to be driving this trend, as Fitch has also observed.

Delinquency cure rates refer to the percentage of delinquent loans returning to a current payment status each month. Cure rates have declined from an average of 45% during 2000-2006 to the currently level of 6.6%. ...

'Recent stability of loans becoming delinquent do not take into account the drastic decrease in delinquency cure rates experienced in the prime sector since the peak of the housing market,' said [Managing Director Roelof Slump]. 'While prime has shown the most precipitous decline, rates have dropped in other sectors as well.'

In addition to prime cure rates dropping to 6.6%, Alt-A cure rates have dropped to 4.3%, from an average of 30.2%, and subprime is down to 5.3% from an average of 19.4%. 'Whereas prime had previously been distinct for its relatively high level of delinquency recoveries, by this measure prime is no longer significantly outperforming other sectors,' said Slump.

... Furthermore, up to 25% of loans counted as cures are modified loans, which have been shown to have an increased propensity to re-default.

... 'As income and employment stress has spread, weaker prime borrowers become more likely to become delinquent in their loan payments and are less likely to become current again,' said Slump.

Regardless of aggregate roll-to-delinquent behavior, it will be difficult to argue that the market has stabilized or that performance has improved, until there is a concurrent increase in cure rates. This is especially true in the prime sector, which remains performing many times worse than historic averages. Prime 60+ delinquencies have more than tripled in the past year, from $9.5 billion to $28 billion total, or roughly $1.6 billion a month.
emphasis added

This really puts the recent rise in delinquencies in perspective. Look at this graph from MBA Forecasts Foreclosures to Peak at End of 2010

Click on graph for larger image in new window.

This graph shows the delinquency and in foreclosure rates for all prime loans.

Prime loans account for all 78% of all loans.

Back in the 2000 to 2006 period, 45% of those delinquencies cured. Now, according to Fitch, only 6.6% cure - and a large percentage of those "cures" are modifications - and there is a large redefault rate on those loans.

by Calculated Risk on 8/24/2009 10:33:00 AM

From the Chicago Fed: Index shows economic activity improved in April

The Chicago Fed National Activity Index was –0.74 in July, up from –1.82 in June. All four broad categories of indicators improved in July, while three of the four continued to make negative contributions to the index. Production-related indicators made a positive contribution to the index for the first time since October 2008 and for only the second time since December 2007.

Click on table for larger image in new window.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. According to the Chicago Fed:

"[T]he Chicago Fed National Activity Index (CFNAI), is a weighted average of 85 existing, monthly indicators of national economic activity. The CFNAI provides a single, summary measure of a common factor in these national economic data ...

[T]he CFNAI-MA3 appears to be a useful guide for identifying whether the economy has slipped into and out of a recession. This is useful because the definitive recognition of business cycle turning points usually occurs many months after the event. For example, even though the 1990-91 recession ended in March 1991, the NBER business cycle dating committee did not officially announce the recession’s end until 21 months later in December 1992. ...

When the economy is coming out of a recession, the CFNAI-MA3 moves significantly into positive territory a few months after the official NBER date of the trough. Specifically, after the onset of a recession, when the index first crosses +0.20, the recession has ended according to the NBER business cycle measures."

Note: this is based on only a few recessions, but this is one of the indicators to watch to determine when the recession ends. This suggests the economy was still in recession in July.

Of course this says nothing about economic purgatory ...

by Calculated Risk on 8/24/2009 08:52:00 AM

From Bloomberg: Roubini Sees Increasing Risk of Double-Dip Recession

Nouriel Roubini ... said the chance of a double-dip recession is increasing ... The global economy will bottom out in the second half of 2009, Roubini wrote ...

“There are risks associated with exit strategies from the massive monetary and fiscal easing,” Roubini wrote. “Policy makers are damned if they do and damned if they don’t.”

Government and central bank officials may undermine the recovery and tip their economies back into “stagdeflation” if they raise taxes, cut spending and mop up excess liquidity in their systems to reduce fiscal deficits, Roubini says. He defines “stagdeflation” as recession and deflation.
...
Roubini currently expects a U-shaped recovery, where growth will be “anemic and below trend for at least a couple of years,” he said.

There are still many problems in the economy, including the housing market, commercial real estate, household balance sheets (still too much debt), consumer spending, and more. As Roubini notes, there are significant risks "associated with exit strategies from the massive monetary and fiscal easing".

From the WSJ: Policy Makers Seek to Learn From 1937's Stalled Comeback

The Great Depression was W-shaped. The stock-market collapse led to a steep economic decline. But by 1933, the economy had rebounded. Then a series of monetary and fiscal blunders drove the country back into a deep recession at the end of 1937.

That episode is at the heart of the debate over how quickly the government and the U.S. Federal Reserve should unwind the emergency measures they have taken to fend off a Depression-like contraction.

For the administration, the answer is clear: Err on the side of continued expansionary policies. "What you learned from that episode in 1937 is that it's not enough to be recovering," says Christina Romer, chairman of the president's Council of Economic Advisers and an expert on the Great Depression. "You don't want to do anything when you start recovering that nips it off too soon."

by Calculated Risk on 8/23/2009 07:31:00 PM

From Reuters: Analyst Bove sees 150-200 more U.S. bank failures (ht Ron at WallStreetPit)

[Dick] Bove said "perhaps another 150 to 200 banks will fail," on top of 81 so far in 2009, adding stress to the FDIC's deposit insurance fund.
...
Bove said the FDIC will likely levy special assessments against banks in the fourth quarter of this year and second quarter of 2010.

He said these assessments could total $11 billion in 2010, on top of the same amount of regular assessments. "FDIC premiums could be 25 percent of the industry's pretax income," he wrote.

Meredith Whitney said Friday that she expects around 300 banks to fail this cycle. With 109 failures so far (81 this year), 300 seems low. I'll take the over ...

by Calculated Risk on 8/23/2009 06:09:00 PM

(ht The Economic Populist)

"We've got a problem with terminology because we usually say either the economy is in recession or the economy is recovering. Either you're in hell, or you're in heaven. And the trouble is we're actually in purgatory. We're actually in a situation almost for sure GDP is growing; almost for sure the business cycle leading committee will eventually decide that the recession ended this summer. But almost surely also we're still losing jobs. The unemployment rate is going to continue to rise. So we're in that infamous jobless recovery state."
...
"What we have now is a whole lot better than seeing the end of the world six months down the pike, but it is not good enough - or even remotely good enough."
emphasis added

by Calculated Risk on 8/23/2009 11:34:00 AM

For something a little different ...

For the first time since the automatic cost of living adjustments (COLA) were adopted in 1975, Social Security benefits will not increase in December 2009. This also means the contribution base (currently $106,800) will not increase in 2010.

There is also a reasonable chance that there will be little or no increase in benefits in 2011 (starting in December 2010).

Click on graph for larger image in new window.

This graph shows the cost of living adjustments for social security benefits since 1975 (increases start in December, but are mostly for the following year).

The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W¹ for the three months in Q3 (July, August, September) and compares to the average for the proceeding year Q3 months. Note: this is not the headline CPI-U.

In 2007, the average of CPI-W was 203.596. In 2008, the average was 215.495. That gives an increase of 5.8%.

Since Q3 2008 CPI-W has fallen - to 210.526 in July - and CPI-W will certainly be below 215.295 in August and September.

Instead of cutting benefits by the change in CPI-W, the benefits will stay the same for 2010.

However, for 2011, the calculation is not based on Q3 2010 over Q3 2009, but Q3 2010 over the highest preceding Q3 average - the 215.495 in Q3 2008. This means CPI-W could increase 2.3% over the next year, and there would be no increase in Social Security benefits in 2011.

Contribution and Benefit Base

In addition, this means the contribution base will not increase in 2010. Although the base is calculated using the National Average Wage Index, the law - as currently written - prohibits an increase in the contribution and benefit base if COLA is not greater than zero.

From Social Security: Cost-of-Living Adjustment Must Be Greater Than Zero

... ... any amount that is directly dependent for its value on the COLA would not increase. For example, the maximum Supplemental Security Income (SSI) payment amounts would not increase if there were no COLA.

... if there were no COLA, section 230(a) of the Social Security Act prohibits an increase in the contribution and benefit base (Social Security's maximum taxable earnings), which normally increases with increases in the national average wage index. Similarly, the retirement test exempt amounts would not increase ...

In 2011, for benefits, the increase will be zero or small because the calculation is based on CPI-W in Q3 2008.

However, for the contribution base in 2011, if the COLA is even slightly positive, the increase will be based on changes in the national average wage index (not COLA).

Note: It seems very likely that the base in 2011 will be increased by new legislation, so this probably will not matter - but it does matter for 2010.

⁽¹⁾ CPI-W usually tracks CPI-U (headline number) pretty well. From the BLS:

The Bureau of Labor Statistics publishes CPIs for two population groups: (1)the CPI for Urban Wage Earners and Clerical Workers (CPI-W), which covers households of wage earners and clerical workers that comprise approximately 32 percent of the total population and (2) the CPI for All Urban Consumers (CPI-U) ... which cover approximately 87 percent of the total population and include in addition to wage earners and clerical worker households, groups such as professional, managerial, and technical workers, the self- employed, short-term workers, the unemployed, and retirees and others not in the labor force.

by Calculated Risk on 8/23/2009 09:16:00 AM

We've discussed this all year, and this is happening in many low priced areas ...

From Carolyn Said at the San Francisco Chronicle: 'Cash is king' in market for foreclosed homes

"Since January, I've put in 10 bids (on foreclosed homes); some were up to $80,000 over asking price and were still turned down," said [first-time home buyer, Jay] Nielsen, 41, a medical assistant. Each time, the banks selected offers from investors with all-cash offers - even when those offers were lower than his, Nielsen said.

"Cash is king right now," said Glen Bell of Keller Williams Realty in Berkeley. For foreclosed homes, "a cash offer that hits the target price will many times trump a higher-priced offer with a loan. The ability to close has become just as important to banks as price. The prospect of a property being tied up longer, still on their books and then falling out is costly."

The result is that average consumers say they are being shut out because they can't compete against deep-pocketed investors snapping up homes to rent out or flip. ...

All-cash sales are most common where prices are low and bank-owned properties account for the lion's share of listings. In foreclosure-ridden Pittsburg, for instance, 42.7 percent of home sales in the first three weeks of July had no record of a purchase loan, according to county data analyzed by MDA DataQuick. The median price for those transactions was $105,000.

There is a buying frenzy right now for first-time homebuyers trying to take advantage of the $8,000 tax credit (see 6 things to know for details) before the program expires at the end of November (must close escrow by then).

Meanwhile cash-flow investors are buying properties in the same price range (the numbers don't work on higher priced homes). In some of these areas, the only buyers are first-time homebuyers frequently using the tax credit as their downpayment and investors. The sellers are banks or short sales.

Not exactly signs of a healthy market.

by Calculated Risk on 8/23/2009 12:36:00 AM

Here: Good News/Bad News - America's Recession