Shadow Inventory in New York City

Shadow Inventory in New York City
The Wall Street Journal

Is shadow inventory casting a pall over the already weak housing market in Manhattan and Brooklyn?

We’ve written about shadow inventory in post-bubble markets, which appear to be on the mend, posting more home sales and shrinking home supply. However, some speculate that banks are holding foreclosed properties off the market to prevent a flood of low-priced homes from depressing prices. In post-bubble areas, shadow inventory also includes would-be home sellers who rent out their properties.

Home Values Flatten in Short Term; Yearly Declines Shrink, but High Rates of Foreclosure, Negative Equity Expected to Delay True Recovery
PRNewswire

Home values in the United States posted their 10th consecutive quarterly decline, falling 12.1 percent year-over-year to a Zillow Home Value Index(1) of $186,500, according to the second quarter Zillow Real Estate Market Reports(2). But for the first time since home values started to fall in 2007, the rate of year-over-year decline has shrunk slightly compared to the previous quarter, with home values falling 12.1 percent as opposed to 12.4 percent year-over-year in the first quarter. The Zillow Home Value Index measures the value of all homes in an area, and the Q2 Real Estate Market Reports encompass 161 metropolitan statistical areas (MSAs).

Home values have flattened significantly in the short term, with the Zillow Home Value Index falling 2.7 percent from the first quarter to the second quarter, and falling only 0.9 percent from May to June.

First-time home buyers get new state incentive
timesunion.com

New York sweetened the pot for first-time homebuyers Monday, announcing a new tax credit expected to save some mortgage holders at least $30,000 over the life of their loans.

The state program allows buyers to claim a tax credit equal to 20 percent of their annual mortgage interest for the life of the loan -- money applied against federal income taxes.

Bad assets may need more support
Reuters

WASHINGTON - The U.S. Treasury Department should consider expanding programs to cleanse troubled assets from bank balance sheets if current efforts fail to restart markets or if economic conditions worsen, a U.S. bailout watchdog panel said on Tuesday.

The Congressional Oversight Panel said in its latest monthly report that toxic loans and securities continue to pose a threat to the financial system, particularly for smaller banks that face mounting losses on commercial real estate loans.

The Next Fannie Mae
The Wall Street Journal

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?

Maguire Properties Warns of Loan Defaults
The Wall Street Journal

Maguire Properties Inc., one of the largest office-building owners in Southern California, is planning to hand over control of seven buildings with some $1.06 billion in debt to creditors, the latest sign that rising vacancies and falling rents are causing stress in the commercial real-estate sector.

Maguire, which borrowed heavily during the go-go years to make disastrous top-of-the-market investments, mostly in Orange County, notified the buildings' mortgage holders Friday that it expected "imminent default" on the loans. The buildings are all worth less then their mortgages and aren't generating enough cash to pay debt service and finance leasing expenses.