Home prices fell in March

posted at 12:15 pm on May 25, 2010 by Ed Morrissey

Yesterday’s momentary bright news in the housing market turned out to be even more transitory than first thought.  Sales jumped by 7.6% in April, but home prices fell by 0.5% in March despite the efforts of the Obama administration to incentivize home purchases.  The new Standard & Poor’s survey shows a “renewed weakening” in home prices — which may have consumers once again on the defensive:

Home prices fell in March from the previous month, a sign of a weakening housing market despite historically low mortgage rates and now-expired tax credits. …

The numbers are especially disturbing because they show that improved sales due to the tax credits didn’t translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.

“When you loot at recent trends, there are signs of renewed weakening in home prices,” he said in a statement.

In a healthier economy, extraordinarily low mortgage rates would pump up demand for homes. But economists say the job market is too weak and credit is too tight.

Sales of previously occupied homes rose 7.6 percent in April, theNational Association of Realtors said Monday. But the sales were boosted by government incentives that have now expired and economist don’t expect the improvements to last.

A separate report by Bl0omberg yesterday shows how fragile the housing market has become.  FHA has moved ahead of the combined efforts of Fannie Mae and Freddie Mac in guaranteeing mortgages in the first quarter of this year, giving direct government support to most of the home lending occurring in the US.  It’s a market on life support, analysts conclude (via the Daily Caller):

Loans guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac.

FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a “government-financed market,” David Stevens, the agency’s head, said today at a conference in New York, citing research by consultant Potomac Partners.

“This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.”

The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.

What could go wrong?  Seven months ago, Edward Pinto — who ran Fannie Mae in the late 1980s — warned that FHA would be the next bailout:

A former Fannie Mae executive warned a House panel Thursday that the Federal Housing Administration is destined for a multibillion-dollar taxpayer bailout in 24 to 36 months, an analysis that the agency’s top official immediately dismissed as “completely unfounded.”

At a hearing before a House Financial Services panel, Edward J. Pinto predicted that the FHA will suffer $40 billion in losses, leaving it unable to cover its bad loans without taxpayer help. Pinto, a real estate finance consultant who served as Fannie Mae’s chief credit officer from 1987 to 1989, said he testified so lawmakers would “not be able to say that no one told them of the magnitude of the impending losses.” …

In his testimony, Pinto called the audit’s underlying assumptions “overly optimistic.” The FHA’s escalating default rate, its rapidly eroding reserves, and a recent dramatic increase in the amount of money people can borrow on FHA loans will have disastrous consequences, he warned the panel. FHA loans are especially vulnerable because they require only a 3.5 percent down payment — well below the 10 to 20 percent private lenders demand.

Pinto compared the FHA loans with Fannie Mae’s book of loans in 2006, which he said have similar characteristics, and he applied the default rate on the Fannie loans to the FHA mortgages. By that measure, the FHA was short $40 billion on its main financing account as of Sept. 30, in effect stripping the reserve account of its required funding and leaving it $14 billion in the hole, he said. The FHA, based on its history, will not be able to modify enough loans to thwart the losses.

The Obama administration is using FHA in the same manner Democrats used Fannie and Freddie from the late 1990s to the crash of 2008.  Obama needs cheap lending to continue and especially wants to encourage lower-income entry into the housing markets.  In order to do that, the White House has pushed FHA to broaden lending in exactly the same manner as Fannie and Freddie, right down to the mortgage-backed securities that triggered the 2008 panic in financial markets that threatened to destroy the Western banking system.

History is repeating itself at FHA, all to postpone a rational revaluation of the housing market.  We’re extending the pain rather than eliminating it, and we’re positioning ourselves for a completely unnecessary second collapse in the process.


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“When you loot at recent trends, there are signs of renewed weakening in home prices,” he said in a statement.

Well that’s what Obama does….loot.

Patrick S on May 25, 2010 at 12:18 PM

Sounds like full steam ahead with that “jobless recovery”…

PatriotRider on May 25, 2010 at 12:18 PM

The FHA’s escalating default rate, its rapidly eroding reserves, and a recent dramatic increase in the amount of money people can borrow on FHA loans will have disastrous consequences

One would think a lesson was learned. I guess not.

Round 2. Fight.

lorien1973 on May 25, 2010 at 12:20 PM

So how’s that government takeover workin out for ya, Hugo Obama?

stenwin77 on May 25, 2010 at 12:21 PM

It looks like all of Obama’s bubbles may pop at the same time.

AUINSC on May 25, 2010 at 12:22 PM

The Obama administration is using FHA in the same manner Democrats used Fannie and Freddie from the late 1990s to the crash of 2008.

Now I am totally convinced that the destruction of the United States of America is “Job #1″ for Barack Hussein Obowma…

Seven Percent Solution on May 25, 2010 at 12:23 PM

…and we’re positioning ourselves for a completely unnecessary second collapse in the process.

Obama: ” ‘Unnecessary’ is a matter of opinion, perspective, and goals, eh?”

Midas on May 25, 2010 at 12:23 PM

Green shoots! Oh wait…it’s just a bunch of thistle weeds.

Bishop on May 25, 2010 at 12:30 PM

We own a condo that was purchased for my mother. We bought it for $120K six years ago and can’t get a nibble at $84K. The housing market has more like collapsed.

Hening on May 25, 2010 at 12:30 PM

“This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.”

Wow, I can’t believe Dave Stevens actually said that. I’ll bet he gets fired for it.

rockmom on May 25, 2010 at 12:33 PM

Hey, I have an idea…!

Let’s elect Barack Hussein Obowma as President of the United States!!!

Who’s with me?

Seven Percent Solution on May 25, 2010 at 12:34 PM

This man is a scourge. “Criminal” isn’t an adequate word. Mere electoral defeat is not an adequate response. He has caused deep and lasting damage to the greatest and most humanistic society on earth. It is important that he be exposed in a mercilessly detailed and humiliating manner. His poisonous bad faith and his perversions to our economy and society need to be revealed as a public education and public service. He needs to be shamed beyond recovery.

rrpjr on May 25, 2010 at 12:34 PM

And if things go according to plan, there will anarchy in the major urban areas by October necessitating ‘marshal law’.

belad on May 25, 2010 at 12:34 PM

What’s that definition of being crazy? Doing the same thing over and over expecting a different result.

OR

Just maybe this is all on purpose to bankrupt the country.

jukin on May 25, 2010 at 12:37 PM

So do we still have to pay our mortgages or what?

Akzed on May 25, 2010 at 12:38 PM

Seven Percent Solution on May 25, 2010 at 12:34 PM

I was against you until I Bing’ed “Barack Hussein Obama”. His bio said that his life experience as an adult consists mainly of being a community organizer.

So now I’m with you, he looks like the perfect person to lead the most powerful nation on Earth.

Bishop on May 25, 2010 at 12:38 PM

The housing problem has not yet been dealt with. The Toxic assets are a huge factor, and the Banks have been sitting on those problems.

There’s no question that we’re going to hit a huge depression.

Obama really did try to prevent this. I don’t think the government had the ability.

It’s about like stopping the oil problem in the gulf.

This is, indeed, the perfect storm.

AnninCA on May 25, 2010 at 12:46 PM

Here in south East CT , housing prices are nearly 20% lower than last April according to the most recent data. Nice big article in yesterdays paper about it. This is after a previous 20%+ loss from the year before. So our average house here in CT lost about $60-70K in two short years. And we have not seen the end yet. Glad I am not planning on moving for at least 5-7 years from now.

Johnnyreb on May 25, 2010 at 12:48 PM

Here in south East CT , housing prices are nearly 20% lower than last April according to the most recent data. Nice big article in yesterdays paper about it. This is after a previous 20%+ loss from the year before. So our average house here in CT lost about $60-70K in two short years. And we have not seen the end yet. Glad I am not planning on moving for at least 5-7 years from now.

Johnnyreb on May 25, 2010 at 12:48 PM

The problem is that housing prices were 10 times what they should have been. Anyone who honestly believed that the average home price could go from $25,000.00 in 1970 to $400,000.00 in 2007 were falling for the worlds biggest ponzi scheme.

doriangrey on May 25, 2010 at 12:55 PM

Frankly, prices should fall.

They should fall dramatically, even.

AnninCA on May 25, 2010 at 12:58 PM

We own a condo that was purchased for my mother. We bought it for $120K six years ago and can’t get a nibble at $84K. The housing market has more like collapsed.

Hening on May 25, 2010 at 12:30 PM

What the mortgage lenders are doing to the condo market is criminal. When they foreclose on a condo unit, they withhold payment of Association fees until the unit is sold. Associations are bleeding cash from their reserve funds because they are forced to operate with non-paying units.

These same lenders then refuse mortgages for the condo project, stating that it does not meet the FHA minimum reserve requirements. A lot of condominiums are going to fail entirely because of this practice.

RedWinged Blackbird on May 25, 2010 at 12:59 PM

Appropriately, PBS is running a piece this week on the Great Depression and the life of hobo’s…ahh, the good old days.

d1carter on May 25, 2010 at 1:01 PM

doriangrey on May 25, 2010 at 12:55 PM

I don’t disagree. Housing prices should have never climbed to the levels seen in the last 10 years. That being said, I am just glad I am not in a position where I have to attempt to sell my house. 18-24 months is the typical selling time here and that usually comes after a couple of serious price reductions by the seller.

Johnnyreb on May 25, 2010 at 1:06 PM

We own a condo that was purchased for my mother. We bought it for $120K six years ago and can’t get a nibble at $84K. The housing market has more like collapsed.

Hening on May 25, 2010 at 12:30 PM

We bought our old townhouse for $179k in 2005. When my husband got orders away, and we put the house on the market in 2007, is was assessed at $188k. The housing market crashed, we ended up underwater, and the bank accepted a short sale in April for $130k. It was actually on the market for $115k, but the buyer offered more. We got out lucky – some of the other townhomes in our area are going for around $100k, and might be dropping under that threshhold soon – when just 5 years ago, they were assessed in the mid to high $100k’s, and selling for close to $200k.

Glad we learned our lesson, though. No more homebuying anytime soon, and never trust the word “homesteading” when uttered by the Navy.

Anna on May 25, 2010 at 1:14 PM

Green shoots!

NTWR on May 25, 2010 at 1:20 PM

I sure wish we hadn’t fallen for Barney Frank, Chris Dodd, Franklin Raines, Jamie Gorelick, and the rest of the criminals’ game. We just saw everyone buying homes, people around us who made way less money, and prices just going up and up. If it kept going like that we would have been priced out of the market in 3 months. When even the laborers of questionable citizenship status were buying we were dumb enough to jump in.
I hope we see the aforementioned individuals in prison at some point in the future.

NTWR on May 25, 2010 at 1:26 PM

I can’t wait till the Hussein regime starts starving its opposition!

Inanemergencydial on May 25, 2010 at 1:32 PM

I hope we see the aforementioned individuals in prison at some point in the future.

NTWR on May 25, 2010 at 1:26 PM

They are democrat/Marxists/socialists/communists, Statues will be erected to them as the great warriors to the peoples workers Utopia…

doriangrey on May 25, 2010 at 1:33 PM

Well now Chris Dodd is on the committee investigating himself. Maybe it’s time to just leave the effin’ country.

Sorry I’m extra fired up today- someone stole the lfag from our front yard the other night and burned it under a nearby bridge.

NTWR on May 25, 2010 at 1:36 PM

*flag*

NTWR on May 25, 2010 at 1:37 PM

Obama really did try to prevent this

Really? I’m curious. What, exactly, did he do that hasn’t made the problem worse?

WitchDoctor on May 25, 2010 at 1:37 PM

Yeah, but was it unexpected?

echosyst on May 25, 2010 at 2:12 PM

Housing has been in a bubble that federal policy has cultivated for decades. Only after the collapse is complete, and the bad loans dealt with, can the market truly begin to recover.

The Democrats, in their ignorance and folly, are still trying to keep the bubble inflated.

LarryD on May 25, 2010 at 2:14 PM

Obama really did try to prevent this.

AnninCA on May 25, 2010 at 12:46 PM

This coming from someone who still believes Bill Clinton was a good President.

Del Dolemonte on May 25, 2010 at 2:45 PM

Hey, I have an idea…!

Let’s elect Barack Hussein Obowma as President of the United States!!!

Who’s with me?

Seven Percent Solution on May 25, 2010 at 12:34 PM

I believe that Barak Obama will return this country to what it once was…a frozen wasteland populated by roving bands of natives living in animal skin tents.

Lily on May 25, 2010 at 2:48 PM

AnninCA on May 25, 2010 at 12:46 PM

You are partially correct. The government cannot fix this…it’s impossible.

What they have done since TARP began is postpone the economic pain (but not diminish it) at the cost of billions of wasted tax payer dollars.

This is like Joe Six-Pack trying to stay afloat by taking out payday loans every month instead of cutting back on expenses.

Asher on May 25, 2010 at 2:53 PM

the Federal Housing Administration is destined for a multibillion-dollar taxpayer bailout in 24 to 36 months, an analysis that the agency’s top official immediately dismissed as “completely unfounded.”

Was that analyst a Senator, or on a House budget committee? Cuz his view sounds a lot like the view from Frank&Dodd on the previous housing bubble.

hawksruleva on May 25, 2010 at 2:57 PM

Well maybe it has “paid off” to move to a state that was its own recession for the past decade (Michigan). I bought my condo at $228K in 2006, had it appraised in 2009 because I was getting ready to dump my higher 2006 interest rate and it appraised at $233,500. Then I finally did the new loan this month, it appraised at $235K. I have put in about $5K since I originally bought it new in 2006. So while I am not making a wild profit here, at least it is holding its own. I actually bought high and sold low TWICE in CA in my lifetime. The only reason I missed this bubble bursting this time is that I moved back to Michigan, instead of moving to California back in 2006.

This time I tried to carefully choose the house/condo. I picked one in a growing area, where the economy didn’t totally suck and found a community catering to baby boomers who want to downsize their houses. For one I picked it right. I do like that fact that my new loan is 4.375% fixed.

karenhasfreedom on May 25, 2010 at 4:52 PM

Let’s see. When prices FALL, sales go up! Why, that’s MAGICAL!

GarandFan on May 25, 2010 at 4:56 PM

Even Ed falls into this trap.

HOME PRICES ARE SUPPOSED TO FALL. THEY WERE AT ARTIFICIAL LEVELS! THAT’S WHAT A BUBBLE IS. You treat as if this is bad news! The Federal Reserve and Federal intervention of the housing market is what created the bubble in the first place. This caused a misallocation of resources, especially in the housing market. The new supply of housing was not sustainable. Once the market popped the bubble, government is doing all it can to re-inflate the bubble by propping up housing values. Housing prices are supposed to crash. A house is not your ATM. It is a durable GOOD. With the great strides in technology, housing prices should be gradually falling over the last 20 years. Get the hell out of the marketplace you moronic statists!

Falling housing prices is not BAD NEWS for the economy! The misallocation of resources MUST BE corrected.

iamse7en on May 25, 2010 at 5:08 PM

Alan Colmes is on BOR’s show saying everything’s getting better with the economy. Sorry I don’t trust him…as soon as I hear the same from Bob Beckel, Kirsten Powers, Dr. Marc Lamont Hill and Juan Williams then I’ll be convinced!

Falling housing prices is not BAD NEWS for the economy! The misallocation of resources MUST BE corrected.

iamse7en on May 25, 2010 at 5:08 PM

Kind of pointless when they’re valued on a system based upon fiat money in the first place-there is no real measure as to what even a Dollar is really worth.

Dr. ZhivBlago on May 25, 2010 at 8:13 PM

Sales jumped by 7.6% in April, but home prices fell by 0.5% in March despite the efforts of the Obama administration to incentivize home purchases.

I’m pleased that home prices are moving in the right direction again.

Kralizec on May 25, 2010 at 9:27 PM