CHESSNOID

The housing market still hasn’t bottomed even though many analysts and economists keep saying every month since January of this year it will bottom out. I don’t understand why they keep saying that when most of the data seems to point we are still trending down. The recent report from CNN.Money says:

NEW YORK (CNNMoney.com) — The foreclosure juggernaut lurched forward in July as banks took back 77,295 homes – up 8% in a month and 183% in a year, a report issued Thursday shows.

Total foreclosure filings – delinquency notices, auction sale notices and bank repossessions – were up 8% from June and 55% year-over-year, according to RealtyTrac, an online marketer of foreclosed homes.

One of every 464 U.S. households received at least one filing during July. And more than 680,000 homes have been repossessed by lenders since the beginning of August 2007, when the credit crunch hit.

“Bank repossessions, or REOs, continued to be the fastest growing segment of foreclosure activity,” said RealtyTrac’s chief executive officer, James Saccacio, in a statement. “The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale.”

The company says it has more than 750,000 active listings of repossessed homes for sale on its database. That represents about 17% of all the existing homes for sale in the United States as reported by the National Association of Realtors.

I think maybe the numbers are so gigantic or seem impossibly high, they just must figure it can’t go higher. This is one of those vicious cycles that will continue until the cycle is balanced. The easy credit for the past 5-6 years sent the housing boom to levels previously unseen. Now that it has peaked, the free fall in prices will continue to plummet because there is nothing to support it.

The latest shoe

Prime loans are just the latest class of mortgages to suffer a spike in failure rates. The first lot to go bad was, of course, subprime mortgages, whose problems set the housing meltdown in motion. Next were the Alt-A loans, a class between prime and subprime loans that doesn’t require strict documentation of a borrower’s assets or income.

Now, as prime loans are added to the mix, the resulting foreclosures could haunt the housing market for a long time, according to Global Insight’s Patrick Newport.

“Home prices will drop for quite a while – maybe several years,” he said.

Prices are already off nearly 20% from their 2006 highs, according to the S&P/Case-Shiller Home Price index.

And there’s a strong inverse correlation between home prices and defaults, according to Lawrence Yun, chief economist for the National Association of Realtors.

“It’s a feedback loop,” he said. “Price declines lead to more defaults, which leads to more price declines.”

More foreclosures will add to an already massive oversupply of homes on the market. Inventories are up to about 11 month’s worth of sales at the current rate.

Indeed, about 2.8% of all homes for sale were vacant as of June 30, according to Census Bureau statistics. That’s up about 50% from three years ago, and near historic highs.

The bank stocks rallied again at the end of last week on the hopes that the higher Fannie Mae and Freddie Mac loan limits from $417,000 to $625,000 will help spark a long term housing rally. I don’t understand why the investors would think this would change anything under the current market and conditions and throw money in the stock market. Again, that’s just me. From my understanding, these 2 big giant institutions are putting out their biggest losses ever.

Large losses, and more ahead

Fannie reported a net loss of $2.3 billion, or $2.54 a share. Analysts surveyed by Thomson Reuters forecast a loss of 68 cents a share, compared to earnings of $1.86 a share a year earlier. Shares of Fannie (FNM, Fortune 500) were down 9% on Friday.

The much bigger-than-expected loss stemmed from the company’s forecast for bigger future losses, which caused it to set aside an additional $3.7 billion and write down the value of its securities.

The company said that the rate of credit market losses for the second half of the year is likely to be more than twice the rate of losses in the first six months. And it sees significant losses on loans continuing into 2009.

Fannie has suffered significant losses from bad loans this year. Its credit losses soared to $1.3 billion in the second quarter, up more than 400% from year-ago levels and up 42% compared to the first quarter.

Much of Fannie’s large losses before this quarter came from writedowns in the value of its portfolio of mortgage-backed securities it owns. But clearly the climbing losses on the loans themselves will become an increasing problem in the periods ahead.

I know this is just a repetition of previous blog posts, but it is important to gauge where we are at in the housing business cycle. We are still increasing in the delinquencies and I don’t believe the banks are being forthcoming with their numbers and may even be cooking the books. On top of the first mortgage defaults and foreclosures , they are coping with rising delinquencies in 2nd mortgages (helocs), auto loans, personal loans, and credit cards. All delinquencies are rising across the board which means banks are collecting less and not more money to their bottom line.

NEW YORK (Reuters) - As the U.S. economy teeters on the brink of recession the credit-card asset-backed market is showing signs of stress as rising unemployment squeezes consumers further, forcing defaults on credit card payments.

Delinquencies on credit cards are rising, investors are demanding higher yield spreads for credit card-backed securities, and issuance is down as the sector’s largest buyers retreat.