by Calculated Risk on 6/17/2009 08:34:00 AM

From Rex Nutting at MarketWatch: Consumer prices inch 0.1% higher in May

U.S. consumer prices increased a seasonally adjusted 0.1% in May as higher gasoline prices were largely offset by falling food prices, the Labor Department reported Wednesday.

It was the first increase in the consumer price index in three months.

The core CPI ... also rose a seasonally adjusted 0.1% in May.

The CPI has fallen 1.3% in the past year, the sharpest decline in prices since April 1950.

by Calculated Risk on 6/17/2009 07:47:00 AM

The MBA reports:

The Market Composite Index, a measure of mortgage loan application volume, was 514.4, a decrease of 15.8 percent on a seasonally adjusted basis from 611.0 one week earlier.
...
The Refinance Index decreased 23.3 percent to 1998.1 from 2605.7 the previous week and the seasonally adjusted Purchase Index decreased 3.5 percent to 261.2 from 270.7 one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.50 percent from 5.57 percent ...

The Purchase Index is now at the level of the late '90s.

With the 10 year yield moving down (3.67% yesterday from 3.99% a week ago), 30-year fixed mortgage rates decreased slightly this week. But mortgage rates are still significantly higher than three weeks ago (4.81%), and that increase in mortgage rates has led to significantly fewer refinance applications.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Although we can't compare directly to earlier periods because of the changes in the index, this shows no pick up in overall sales activity.

by Calculated Risk on 6/16/2009 09:52:00 PM

The WaPo has the document: Near-Final Draft of Document on Regulatory Overhaul (pdf)

From the WaPo: Financial Regulatory Overhaul Is Detailed

The plan is an attempt to overhaul an outdated system of financial regulations, according to senior administration officials.

It would vastly increase the powers of the Federal Reserve ... It also would create a new agency to protect consumers of mortgages, credit cards and other financial products.

President Obama is expected to formally unveil the proposal [Wednesday]. The administration also plans to release an 85-page white paper detailing the plans and justifying each element as a direct response to the causes of the financial crisis.
...
The proposed Consumer Financial Protection Agency would have broad authority to regulate the relationship between financial companies and consumers of mortgage loans, credit cards, checking accounts and other financial products. It would define standards, police compliance and penalize delinquent firms. Other agencies, particularly the Federal Reserve, would surrender some powers.

From MarketWatch: Fed may become systemic regulator, hike capital requirements

The proposal will also call for the elimination of the Office of Thrift Supervision and the Federal Thrift Charter, subsuming the agency into a new "National Bank Supervisor," agency based on the Office of Comptroller of the Currency that will supervise all federally chartered depository institutions.

by Calculated Risk on 6/16/2009 09:25:00 PM

I've been joking about "accidental landlords" for a couple of years, and how these properties are just more shadow housing inventory.

Daniel McGinn takes it a step further, and describes his own misadventures in Newsweek How I became an Accidental Slumlord (ht Tim waiting for 2012)

... As America copes with a painful hangover from a decade-long real-estate orgy, I'm dealing with a headache of my own. Four years ago, at the height of the boom, I visited Pocatello to write a story for NEWSWEEK about how out-of-state investors had begun buying cheap rental properties there, drawn by ultralow sales prices and a solid rental market. ... A year later, while writing a book about the housing boom, I decided to dive in myself. In late 2006, after seeing only e-mailed photos, an appraisal and an inspection report, I paid $62,750 for a two-unit rental property in Pocatello, which is 2,450 miles from my Massachusetts home. I didn't expect to get rich; my main motivation was to have a good story for the book. By that measure, the deal was a success; when House Lust came out in 2008, the chapter in which I described my early misadventures as a property magnate (an early tenant went to jail; my first property manager made off with $1,300) helped fuel reviews and interviews. But now, long after the buzz over the book has died down, I'm stuck with a house in Idaho—and friends who call me a long-distance slumlord.
...
Thanks to an energetic local property manager, my two apartments have never been vacant. Many months the combined rent of $690 covers the $503 mortgage payment and other expenses. Still, I'm frequently hit with repair bills (a broken stove, a leaking underground water line) that send me into the red. And even after the tax write-offs, my costs have exceeded the rental income by more than $2,500 since I purchased it.
...
My reaction to seeing my property and my tenants for the first time is common among out-of-state landlords who've visited their property. "When somebody is paying $300 a month in rent, in general they aren't the Rothschilds," says a 47-year-old Los Angeles schoolteacher who visited his own Pocatello duplex for the first time in December. "You're getting somebody who that's all they can afford." Although he'd seen photos of his property before he purchased it, this investor—who declined to be named because he's embarrassed to have made such a "boneheaded" investment—was surprised by its poor condition, citing holes in the walls, an awkward layout and general dinginess.

This is more nightmare than investment. But it could have been worse. I'll never understand why people invest in properties sight unseen.

by Calculated Risk on 6/16/2009 07:04:00 PM

NOTE: I'm not just picking on Cramer. I'm trying to emphasize two key points: 1) there will be two bottoms for housing, and 2) the median price is useless with a changing mix.

I've cautioned that people would make the following analysis errors ...

From CNBC: Cramer: Housing Has Officially Bottomed

Residential real estate has finally found a floor, Cramer told viewers on Tuesday.
...
How can Cramer be so sure? New housing data reported today showed a dramatic change for the better, especially in some of the hardest-hit areas in the US. That news, along with much lower prices and the working off of inventory, validate his prediction, made last August, that housing would stabilize this month, ending its multiyear declines.
...
What does a bottom look like? It’s the combination of ramping sales, and sales in certain areas are up ten times those of last year, and an end to falling prices. That’s exactly what we’ve seen for the past three months, Cramer said.

First, for almost every housing bust there have been two distinct bottoms: the first for activity (like housing starts) and the second for prices. Maybe this time is different, but I think Cramer is confusing activity for price.

For more on the two bottoms, see: More on Housing Bottoms

On price, Cramer is probably looking at the median sales price from the National Association of Realtors. This shows that the median price has flattened over the last four months. But the median price has been heavily distorted by foreclosure sales in low end areas. A much better measure of price is the Case-Shiller index, and that shows prices fell at a 25% annual rate in Q1 nationally on a seasonally adjusted basis.

It was predictable that some people would confuse activity with price (remember there will probably be two bottoms). And it was predictable that some people would get confused when the median price started to flatten out (as the mix slowly changed) even though prices are still falling.