Jamble Magazine Green Economy – Green News

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After holding steady for several months, home prices have started falling again.

Prices around the country fell by 0.2 percent between July and August, according to the latest  Case-Shiller numbers, which were released this morning.

That’s a small decline. But there’s probably more to come.

The market is glutted with houses. As of September, it would have taken 10 months to sell all of the homes on the market. (It takes about six months in a healthy market.)

On top of that, there are several million homes in or near foreclosure that are likely to come on the market in the next few years. The foreclosure mess may slow that process, but almost all of those houses will eventually come to market.

“Further declines are inevitable, and they will likely be bigger than in August,” Ian Shepherdson of High Frequency Economics wrote in a note this morning.

Declines in August were widespread. Here’s a look at 20 metro areas tracked by Case-Shiller:

Standard & Poor’s

A rejection letter from the Essanay Film Manufacturing Company (1907-1925), best known for making Charlie Chaplin movies:

Silent Movies

Hat tip: Boing Boing, via Old Hollywood, via Silent Movies

Calclulated Risk

The housing glut got a bit less glutty last month.

As of September, it would have taken just over 10 months to sell all of the existing homes on the market, according to figures out this morning.

That’s definitely still a glut — a healthy market has about six months of supply. But it’s down from more than 12 months of supply this summer.

The persistence of the glut suggests that, all else equal, home prices may fall further.

The foreclosure mess didn’t get going until almost the end of September, so it probably didn’t have much of an effect on the figures out this morning. It may show up next month, though it’s hard to know which way it will cut.

If the mess scares off a lot of potential buyers of foreclosed homes, we could see the glut creep back up. But if it prevents lenders from putting foreclosed homes up for sale, it could ease up on the glut (at least for now).

Note that the numbers out this morning don’t include newly built homes; data on sales of newly built homes will be out Friday.

As part of the bailout of Citigroup, the U.S. government agreed to guarantee over $300 billion in securities held by the bank.

More than a year and a half ago, Bloomberg News asked the government to disclose which securities it guaranteed. Here’s the result, according to Bloomberg:

… after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails … so heavily redacted that most of what’s left are everyday messages such as “Did you just try to call me?” and “Monday will be a busy day!”

In other words, the government hasn’t answered Bloomberg’s basic question.

The government’s reasons for not disclosing the information includes trade secrets, personnel rules and practices, memos subject to attorney-client privilege and violations of personal privacy. The response “adhered to the rules, regulations, U.S. attorney general guidance and relevant case law,” a spokesman told Bloomberg.

Meanwhile, Citigroup has paid off its bailout money with interest, and the taxpayer guarantees have been terminated.

For more: Bloomberg also sued to force the Federal Reserve to disclose what it bought as part of the bailout. That disclosure led to our podcast on the Fed owning a mall in Oklahoma City.

Jose Luis Magana/AP

The Fed is joining a bunch of other regulators looking into the foreclosure mess, Ben Bernanke said in a speech this morning.

He didn’t add much to what we already know about the mess, but he did give a useful quick history of the idea of homeownership in America (and how it’s taken a beating in the past few years):

Home ownership is great!

For many of us, owning a home signaled a passage into adulthood that coincided with the start of a career and family. High levels of homeownership have been shown to foster greater involvement in school and civic organizations, higher graduation rates, and greater neighborhood stability.

So the government should reward people for buying houses.

Recognizing these benefits, our society has taken steps to encourage homeownership. Tax incentives, mortgage insurance from the Federal Housing Administration, and other government policies all contributed to a long rise in the U.S. homeownership rate—from 45 percent in 1940 to a peak of 69 percent in 2004.

Oh, wait. There’s also a downside.

Home purchases that are very highly leveraged or unaffordable subject the borrower and lender to a great deal of risk. Moreover, even in a strong economy, unforeseen life events and risks in local real estate markets make highly leveraged borrowers vulnerable.

Especially when lenders start giving out crazy mortgages and people buy houses they can’t afford.

It was ultimately very destructive when, in the early part of this decade, dubious underwriting practices and mortgage products inappropriate for many borrowers became more common. In time, these practices and products contributed to problems in the broader financial services industry and helped spark a foreclosure crisis marked by a tremendous upheaval in housing markets.

Now millions of people are either underwater or almost underwater on their homes — an ugly picture that may last for a while.

Now, more than 20 percent of borrowers owe more than their home is worth and an additional 33 percent have equity cushions of 10 percent or less, putting them at risk should house prices decline much further. With housing markets still weak, high levels of mortgage distress may well persist for some time to come.