by Calculated Risk on 6/16/2009 04:54:00 PM

Jim takes us on a tour of a few REOs not yet on the market in the north San Diego County Coastal region. Jim says he couldn't find many foreclosed properties that aren't listed.

Some of these homeowners really dipped into the home ATM. Amazing. The home on 3 acres in Rancho Santa Fe isn't much, but that is a very nice area (and that is why the price is so high).

by Calculated Risk on 6/16/2009 04:00:00 PM

By popular demand ...

Click on graph for larger image in new window.

The first graph shows the S&P 500 since 1990.

The dashed line is the closing price today.

The S&P 500 is up almost 35% from the bottom (235 points), and still off almost 42% from the peak (653 points below the max).

The second graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

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

by Calculated Risk on 6/16/2009 03:18:00 PM

In the previous post, I disagreed a little with the JPMorgan analysts - I noted:

Prices increased more in percentage terms in the low priced areas of California (like the Inland Empire and Sacramento) than in the high priced coastal areas. So prices will probably fall further in percentage terms from the peak in the low priced areas.

Case-Shiller has some tiered house price indices for a number of cities, and most of the bubble cities show this pattern (more appreciation in the low priced areas).

Click on graph for larger image in new window. Here are a few select cities. The first is Washington, D.C. Note the price range of the tiers changes by city.

The second graph is for Miami.

The third graph is for San Francisco. Most other bubble areas show a similar pattern of larger percentage price increases for the lower tier.

by Calculated Risk on 6/16/2009 01:30:00 PM

From Bloomberg: ‘Millionaire Homes’ May Lose Value Until 2012 (ht James)

... “Tighter lending standards and the lack of cheap financing for these borrowers continue to be key issues,” the New York- based [JPMorgan Chase & Co. analysts] wrote [in a June 12 report], referring to “jumbo” mortgages. That’s after so-called interest-only and option adjustable-rate loans were a “major driver” of soaring values, they said.
...
“Currently, we have national home prices bottoming in 2011,” they said. “However, prices for more expensive homes may not bottom out until 2012, and ultimately result in peak-to- trough declines in excess of 60 percent (compared to 40 percent nationally).”

“California is probably worse than other states, but higher-priced homes in general are going to be a problem,” Sim said in a telephone interview today.

Most of the low end sales are "one and done" (the seller is a bank), and this will lead to a dearth of move up buyers. This lack of move up buyers, and tight financing will impact demand for the mid-to-high end. Although the percentage of foreclosures will be less in the high end areas than the low priced areas, the foreclosures are still coming (see Alt-A Foreclosures in Sonoma and Foreclosure Resales: Slow in High Priced Areas )

However I disagree with the JPMorgan analysts on the relative price declines. Prices increased more in percentage terms in the low priced areas of California (like the Inland Empire and Sacramento) than in the high priced coastal areas. So prices will probably fall further in percentage terms from the peak in the low priced areas.

Also, I think the price declines will occur over a longer period in the high priced areas (like the JPMorgan analysts), so the nominal price declines will be less (assuming a little inflation). But those are minor details - I agree there are further substantial price declines ahead.

by Calculated Risk on 6/16/2009 12:14:00 PM

The FDIC released the Summer 2009 Supervisory Insights today. The report includes the following table showing all the government support announced in 2008 and soon thereafter. The maximum capacity is $13.9 trillion.

I thought people would like to see the details (not all will be used).

Government Support for Financial Assets and Liabilities Announced in 2008 and Soon Thereafter ($ in billions)
Important note: Amounts are gross loans, asset and liability guarantees and asset purchases, do not represent net cost to taxpayers, do not reflect contributions of private capital expected to accompany some programs, and are announced maximum program limits so that actual support may fall well short of these levels
	Year-end 2007	Year-end 2008	Subsequent or Announced Capacity If Different
Treasury Programs
TARP investments1	$0	$300	$700
Funding GSE conservatorships2	$0	$200	$400
Guarantee money funds3	$0	$3,200
Federal Reserve Programs
Term Auction Facility (TAF)4	$40	$450	$900
Primary Credit5	$6	$94
Commercial Paper Funding Facility (CPFF)6	$0	$334	$1,800
Primary Dealer Credit Facility (PDCF)5	$0	$37
Single Tranche Repurchase Agreements7	$0	$80
Agency direct obligation purchase program8	$0	$15	$200
Agency MBS program8	$0	$0	$1,250
Asset-backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)9	$0	$24
Maiden Lane LLC (Bear Stearns)9	$0	$27
AIG (direct credit)10	$0	$39	$60
Maiden Lane II (AIG)5	$0	$20
Maiden Lane III (AIG)5	$0	$27
Reciprocal currency swaps11	$14	$554
Term securities lending facility (TSLF) and TSLF options program(TOP)12	$0	$173	$250
Term Asset-Backed Securities Loan Facility (TALF)13	$0	$0	$1,000
Money Market Investor Funding Facility (MMIFF)14	$0	$0	$600
Treasury Purchase Program (TPP)15	$0	$0	$300
FDIC Programs
Insured non-interest bearing transactions accounts16	$0	$684
Temporary Liquidity Guarantee Program (TLGP)17	$0	$224	$940
Joint Programs
Citi asset guarantee18	$0	$306
Bank of America asset guarantee19	$0	$0	$118
Public-Private Investment Program (PPIP)20	$0	$0	$500
Estimated Reductions to Correct for Double Counting
TARP allocation to Citi and Bank of America asset guarantee21			– $13
TARP allocation to TALF21			– $80
TARP allocation to PPIP21			– $75
Total Gross Support Extended During 2008		$6,788
Maximum capacity of support programs announced through first quarter 200922			$13,903

Table notes:
1 $300 is as of 1-23-2009 as reported in SIGTARP report of February 6 2009; EESA authorized $700.
2 Year-end reflects Treasury announcement of September 7, 2009, capacity reflects Treasury announcement of February 18, 2009; funding authorized under Housing and Economic Recovery Act.
3 Informal estimate of amount guaranteed at year-end 2008, provided by Treasury staff.
4 Year-end balances from Federal Reserve Statistical Release H.R. 1, “Factors Affecting Reserve Balances” (henceforth, H.R. 1); capacity from “Domestic Open Market Operations During 2008” (Report to the Federal Open Market Committee, January 2009), page 24.
5 Year-end balances from H.R. 1.
6 Year-end balances from H.R. 1; capacity from “Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Commercial Paper Funding Facility,” accessed May 26, 2009, from http://www.newyorkfed.org/aboutthefed/annual/annual08/CPFFfinstmt2009.pdf.
7 Year-end balances from H.R. 1; see also “Domestic Open Market Operations During 2008” (henceforth “DOMO report”) report to the Federal Open Market Committee, January 2009, page 11, summary of activity in program announced March 7 by the Federal Reserve.
8 Year-end balances from H.R. 1, capacity from Federal Reserve announcements of November 25, 2008 and March 18, 2009.
9 H.R. 1.
10 Year-end balances from H.R. 1; capacity from periodic report pursuant to EESA, “Update on Outstanding Lending Facilities Authorized by the Board Under Section 13(3) of the Federal Reserve Act,” February 25, 2009, page 8, henceforth referred to as “Update;” Federal Reserve AIG support is separate from Treasury support that is included in the TARP line item.
11 Year-end balances reported in DOMO report, page 25.
12 Year-end balances from H.R. 1; capacity from Federal Reserve announcement of March 11, 2008, Federal Reserve Bank of New York press release of August 8, 2008, and discussion at page 22 of DOMO report.
13 From “Update,” page 2.
14 From “Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Money Market Investor Funding Facility,” accessed May 26, 2009, from http://www.federalreserve.gov/monetarypolicy/files/129mmiff.pdf; Federal Reserve to fund 90 percent of financing or $540 billion.
15 Program and capacity announced by the Federal Reserve, March 18, 2009.
16 FDIC Quarterly Banking Profile, Fourth Quarter 2008, (henceforth, “QBP”) Table III-C.
17 Year-end outstanding from QBP, Table IV-C; total estimated cap for all entities opting in the program from QBP, Table II-C.
18 Announcement by FDIC, Treasury, and Federal Reserve November 23, 2008.
19 Announcement by FDIC, Treasury, and Federal Reserve of January 16, 2009.
20 To purchase legacy assets, as described in Treasury, FDIC, and Federal Reserve announcement of March 23, 2009. $500 refers to maximum capacity of Legacy Loans Program; funding for the Legacy Securities Program is believed to be subsumed under the TALF.
21 SIGTARP quarterly report of April, 2009, page 38.
22 Year-end 2008 amounts plus the amount by which announced capacity exceeds the year-end 2008 amount, minus the amount of known double counting.