S&P raises default forecast

Standard & Poor's Monday boosted its expectations for losses on risky loans backing U.S. mortgage securities to as much as 40 percent, suggesting a darkened outlook for the troubled housing market.

The more dire assessment will likely "significantly impact" bonds originally carrying AAA ratings, S&P said in a report.

Increased assumptions for total losses on subprime and Alt-A residential mortgage-backed securities come amid declines in market value of the debt and a surge in the inventory of bank-owned properties, S&P said.

S&P boosted loss projections for subprime loans made at the peak of the market in 2006 and 2007 to 32 percent and 40 percent from 25 percent and 31 percent, respectively.

For 2005 loans, loss projections rose to 14 percent from 10.5 percent.

SOURCE: REUTERS VIA CNBC

Happy 4th of July

If you're in town and interested in seeing some properties this
weekend, check out SF Open Homes

See you next week.
HighRiseSF

Unemployment up more than expected in June

Those green shoots just can't catch a break:

Employers cut a larger-than-expected 467,000 jobs in June and the unemployment rate climbed to a 26-year high of 9.5 percent. Workers also saw weekly wages fall, suggesting Americans will have little appetite to spend and the economy's road to recovery will be bumpy.

The Labor Department report, released Thursday, showed that even as the recession flashes signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on solid ground.

June's payroll reductions were deeper than the 363,000 that economists expected and average weekly earnings dropped to the lowest level in nearly a year.

What does this have to do with real estate? Well, bad economic news should have the effect of pressuring bond rates, and by default mortgage rates, lower. HighRiseSF will, of course, have details on rates in the coming days and whether this will, in fact, impact rates. If so, it might help to bring mortgage applications back up, and with it, sales.

SOURCE: CNBC

Mortgage applications drop 18.9% in one week

Mortgage applications, a true leading indicator of real estate activity (as opposed to sales, which lags behind by 30-60 days) dropped 18.9% from week to week:

The volume of mortgage applications filed last week dropped a seasonally adjusted 18.9% from the week before, as refinancing activity plunged, the Mortgage Bankers Association reported Wednesday.

Applications for mortgages to refinance existing home loans fell 30% for the week ended June 26 -- putting the MBA survey's refinance index at its lowest level since November.

Meanwhile, the week-to-week pace of applications filed for mortgages to purchase homes was down a seasonally adjusted 4.5%.

In the week ended June 19, overall applications activity rose a seasonally adjusted 6.6% from the prior week, the MBA's data showed. The survey done by the Washington-based MBA covers about half of all U.S. retail residential mortgage applications.

Again, not news for loyal followers of HighRiseSF - this is a conversation we've been having for the past month.

Keep following for the latest in up-to-date information and its impact on real estate prices and mortgage rates.

SOURCE: MARKETWATCH

25% underwater? No problem!

HUD Secretary Shaun Donovan announced today that:

the Fannie and Freddie refi plan ... would now be expanded to negative 25 percent equity... [Y]our loan can be a full 25 percent more than the current value of your home, and Fannie and Freddie will gladly buy and/or back your new refi.

SOURCE: CNBC

No new highrises on the horizon for 5 years?

San Francisco's latest Catch-22: falling land prices may lead to some great deals, but little availability of capital markets means there's no money to invest:

Plummeting land values and the deep recession have taken a toll on one of San Francisco’s central business models for urban redevelopment: public-private development deals.

With many developers predicting that highrise development of any sort won’t work economically for another five years, public agencies are struggling with a development model in which private builders pay for the right to develop valuable land and, in the process, bankroll public benefits like parks, roads and affordable housing.

Until the capital markets are willing to invest in the next generation of highrise condos, hotels or office buildings, public entities like the Port of San Francisco and the city Redevelopment Agency are stuck with prime land that has little or no current value.

The plus side, if you can call it one, is that supply will be limited in the next few years, eventually leading to higher prices if demand picks up.

SOURCE: BIZ JOURNAL

Fun with affordability charts

Via CNBC comes two charts which show the level of affordability nationwide and in various markets (San Francisco is not represented but Oakland, San Diego, Los Angeles, and Sacramento are, which you can extrapolate out to cover SF):

The first chart shows the difference in renting versus owning in these markets (how much more or less you'd pay on a mortgage versus rent):



The second chart shows housing cost to income ratio. This is the ratio banks typically use when qualifying buyers. The max was supposed to be around 45%-49% but was much higher in the boom years due to programs like stated-income loans. Now, the raios are much more reasonable, and in many cases (like Sacramento) very reasonable:



The interesting part is how areas which were heavily bubble-induced (Las Vegas, Phoenix, Riverside, Oakland, etc) are under 30%. That's a major change and shows the level of affordability in these areas.

Now if only buyers didn't have to put 20% down payments, the excess inventory in the market would be absorbed faster. Just not back to 0-5% down payments. Can we agree on 10%?

SOURCE: CNBC