Volatility Plus Uncertainty Equals Fools Abounding
The Mortgage Bankers Association says, like Gilda Radner used to, “Nevermind.”
They don’t say, we were wrong, we’re sorry. They say, we’re re-forecasting the year.
On The Big Picture blog, analyst Peter Boockvar offers this commentary. (We believe he’s inserted an unnecessary pair of quotation marks with his closing assertion.)
After the note I just sent on the Fed, the MBA said that after raising its forecast for mortgage originations by over $800b in March after the Fed’s QE plan and the subsequent decline in interest rates, they are cutting its ‘09 est by $700b. 88% of the cut is due to refi’s as the Fed “has not been successful in maintaining lower treasury yields.” In March when they raised their estimate they had this caveat, “with the billions in Treasury securities that would be issued to finance record budget deficits and with the Fed expected to purchase only a portion of those, how long rates stayed low would depend on whether other investors stayed in the market. If other investors shied away from Treasuries due to expectations of future inflation and the declining value of the $, the effect on rates would be more short-lived and our mortgage originations forecast would prove too optimistic.” “That has proven to be the case.”
Here’s CNBC’s Diana Olick reporting on the MBA reversal:
Here’s the question. If the threat of inflation is the cause for upward pressure on interest rates, why–with no reason to believe that at least wage inflation is in the offing–is there so much panic about imminent, momentum-crushing inflation?
We think the bigger concern to focus on is the weakness of the recovery itself, as Big Builder online editor Bill Gloede notes in his blog post today.
You know what? The MBA can reforecast again in three months and change it all back.
The New Warren Commission
Witness the collision of yet another certifiably brilliant mind with the thick, dull wall of bureaucracy.
As TARP Watch Dog running the Congressional Oversight Panel, Harvard University Law professor Elizabeth Warren has been a perfect pick. She chooses her battles and is ferocious as a non-partisan taxpayers’ advocate.
Now, it looks as if she’s destined for a new role. The New York Times reports.
Elizabeth Warren pitches a Consumer Commission as part of financial rules overhaul.
Most notably, she laid out the argument for a new agency in the journal Democracy in summer 2007. Presumably taking a cue from Ralph Nader, the essay was titled, “Unsafe at Any Rate.”
Some excerpts:
Consumers can enter the market to buy physical products confident that they won’t be tricked into buying exploding toasters and other unreasonably dangerous products.
They can concentrate their shopping efforts in other directions, helping to drive a competitive market that keeps costs low and encourages innovation in convenience, durability, and style. Consumers entering the market to buy financial products should enjoy the same protection. Just as the Consumer Product Safety Commission (CPSC) protects buyers of goods and supports a competitive market, we need the same for consumers of financial products — a new regulatory regime, and even a new regulatory body, to protect consumers who use credit cards, home mortgages, car loans, and a host of other products. The time has come to put scaremongering to rest and to recognize that regulation can often support and advance efficient and more dynamic markets.
The story continues.
So, we must assume that Warren believes her commission would work as a safeguard for consumers against the reckless and chicanerous come-ons of financial services companies.
What it won’t safeguard against is consumers’ reckless and chicanerous behavior when it comes to financial market bubbles–real estate or otherwise.
The Corvair of 2002-2006 was not the NINJA no-downpayment option-ARM. It was, more often than not, the person who took the loan to get rich quick.
Rates Relax–On With the Rescue and Recovery Plan
The inflation scare that blew up last week has calmed down–if only temporarily–and, as that threat recedes, home mortgage interest rates are easing again.
Will applications for refinancing and purchasing new and used homes reverse a four-week downward trend? We only have to wait less than a week to learn how sensitive the number of applications is to a dramatic change in direction of mortgage interest rates.
In any event, at an average 30-year fixed rate of 5.38%, rumors of the rising interest rate-driven demise of housing’s newfound flutter of a pulse are premature. Good news headlines of a housing bottom–in sales unit volume, anyway–can resume. The wrenching job of digging out from a three-year hole can go on.
It is only guess work, but we think that in the first half of 2010, we’ll look back to a couple of months early in 2009 and see where housing’s most anemic days of this cycle describe the literal lowpoint in the cycle for the movement of new homes.
Builders of new homes finally have just a smattering of something they really need: Good ink. Now, positive press can do only so much. Word of an uptick in some long leading indicators, or the possibility that GDP will nudge back into the black somewhere around the turn of the year, or that global demand is rising from the ashes can all soothe the psyche somewhat.
So, massively lower prices, historically low interest rates, a love-pat from the U.S. government in the form of a tax credit, and a brightening economic horizon that will eventually produce greater demand for goods and services that should increase the value of hours worked… these things are the pluses.
But one would be hard-pressed to guess that these positives can nobly offset three crushing negatives–the effects of continued high job losses, foreclosure-driven home price declines, and really daunting home mortgage lending conditions.
Perhaps the most intimidating negative force of all? It’s that credit-worthy and income secure people don’t–and won’t–think it would be really stupid not to buy a home right now.
There are two things a home isn’t any more. One is this, it’s not an investment in the money-making sense of the word. For the better part of five years, the economy designed itself around the notion that demand for houses could be strong enough to put the equivalent of an extra wage earner into every homeowner’s household. And that’s the way households bought things, as if they were earning half again as much as they were earning.
The other thing a home isn’t is practically blasphemous to point out, but it’s true among more than 75% of households: it’s not a married-with-children sanctum. Home–especially a new one–is more and less than a cul-de-sac lot in a good school district.
People who are obstinate enough to deal with today’s credit conditions and lenders, and job market volatility, and financial gyrations, and actually get into the new-home market are there for different reasons today than they might have been 36 months ago, or five years ago.
The toughest code anyone in the residential real estate game has to crack is not the credit crunch. It’s the de-levering of the household balance sheet and what that means to you, me, Joe the Plumber, and his Ph D. sister. Nothing in the demographic pipeline right now says buying a home is going to make people rich, so if you’re in the game, it’s got to be another appeal.
Still, the motivation that you’re going to find is one of the more effective ones getting people back off the sidelines–and we know you’re going to do that–is that classic twist on the fear-vs.-greed principle.
In this case, fear is not the enemy, but rather a profound, unconscious force that can work entirely in your favor. It is the fear of “have not” that will stir prospective home buyers toward being a “have.” And it is the fear of being a dummy for not acting at the moment one should have that will turn 1.6 absorptions per month per community into four or five within the next 12 months.
With all due respect to both John Zogby and J. Walker Smith, I think they’re out of their league when they wax on about what homes of tomorrow should be. Smaller and walkable is the opposite of larger and more drivable. Time will tell what home buyers prefer when it comes to dimension and proximity.
What they want now is one thing: To be Smart. Smart is the new Easy Money. Smart precludes disasterous financial decisions and bears an uncanny correlation to fiscal soundness.
There’s no time like now to pull out the stops and work like the dickens to understand how dramatically prospective home buyers’ needs have changed recently.
Consumers May Fake it to Make it
You gotta hand it to us consumers. Per Flow of Funds data, we’re about $14 trillion in the hole on household net worth from where we were before this whole thing came undone, starting in 2007.
Caculated Risk also observes, homeowner net equity is “Cliff Diving,” far below 41% when you account for the fact that 31% of homeowners have no mortgage to pay.
Still, consumer sentiment, according to the University of Michigan’s monthly survey, is inching up.
Not to where anyone should get excited, but up vs. the other direction.
Here’s a video clip from CNBC, with experts on the latest consumer sentiment data.
Calculated Risk says take it with a grain of salt.
Consumer sentiment is a coincident indicator – it tells you what you pretty much already know.
Good Fed Hunting — Mish’s Rate Rant Burns Bernanke
Blame Ben. It is Fed Chairman Bernanke who threw up a “Wall of Capital Shame” in the face of Wall Street’s weakest moments last Fall.
Here’s what Mike Shedlock — a k a Mish — takes away from the galloping interest rates phenomenon that could imperil housing’s mini-relief rally.
Fed Is Out Of Control
What now Big Ben? You’ve already blown over a third of your $1.25 trillion commitment and all you have to show for it is more garbage on your balance sheet and a locked up refi market.
One thing is clear, Ben Bernanke and the Fed have lost control of the mortgage market (not that the Fed was ever in control in the first place). They weren’t. It was all an illusion.
If nothing else, Mish offers the healing powers of the verbally avenged. He’s far from being a lone voice in the desert. Author and investment advisor Arthur Laffer does some Fed hunting of his own in an op-ed piece in today’s Wall Street Journal.
About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base — which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash — by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.
Interestingly, the interest rate bump puts buyers and sellers into even more of a squeeze getting to the finish line thanks to another fresh consequence of greed taking a backseat to fear in the home lending marketplace: the Home Valuation Code of Conduct. (See Big Builder editor Sarah Yaussi’s news and blog coverage of same).
Here’s more Mish dish on the issue from one of his trusted correspondents:
One problem is lenders are requiring applicants to put up $500 for appraisals and if the amounts do not come in, even if they miss by a tiny bit, the deal is denied and the applicant is out $500. Jeff had a $1.2 million sale fall through because an appraisal was $20K short.
A couple years back lenders were letting anything slide, now they appear to be looking for excuses to kill any deal, especially with the recent spike in rates. If the appraisal and paperwork is not perfect, goodbye loan and goodbye $500 appraisal fee. Customers are not too happy to say the least.
Apparently, Ben is not guilty when it comes to HVCC, which should not be confused with HVAC. Nonetheless, it’s fun and illuminating to hear Mish heat up and ventilate on just about anything he turns his attention to.
The Mortage Interest Rate Wild Card
Three stars aligned–home prices, interest rates, and first-time buyer/new-home tax credits. Toss “seasonality” into the mix of positive catalysts, and you can start discounting the nascent March, April, May run in housing as a marketplace behaving the way an injured athlete does after a big cortisone treatment. He might look okay for a while, but you can only wonder whether and how long the painkilling effect will last.
Now, just when data starts rolling in that supports this alignment, interest rates have begun shaking loose from their virtuous bond with more affordable house prices and a kick-back from Uncle Sam or a state for a home purchase.
The Wall Street Journal leads this a.m. with its take on the quantum leap percentage point-plus increase in mortgage rates since the end of May.
“Mortgage rates at these levels will hobble the [housing] recovery, and it was just the beginning of the recovery,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.
Investors have been anxiously watching bond yields climb over the past few weeks, pushing up mortgage rates, which normally track 10-year Treasury notes. The yield on the those briefly hit 4% on Wednesday afternoon for the first time since mid-October before ending the day at 3.937%.
Many policy makers see the rise in Treasury yields as a sign that investors are optimistic that the economy is on the mend. But many market participants say higher long-term bond yields indicate investors are increasingly worried about inflation.
What unfortunate timing! Look at a key “take-away” from Wachovia senior analyst Carl Reichardt’s latest “Neighborhood Watch Survey” of new-home community sales managers.
With three straight surveys and a broader base of SMs reporting better-than-expected sales and traffic, we now believe that field conditions saw their low ebb in early 2009. While seasonality plays some role in our data, SMs expect strength this time of year, yet still see activity above these expectations.
This verbiage is rosy, given where it’s coming from. Reichardt notes that upward pressure on interest rates may stall the new-found momentum. Other analysts point also to the fact that tax credit programs for first-time home buyers expire on a Federal level by the end of calendar 2009, and state-funded programs will only last until the coffers run dry.
Hanley Wood Market Intelligence has done an extensive market-by-market analysis that ties the effecitve date of California’s $10K tax credit to new-home purchase activity. The Orange County Register’s Jonathan Lansner quoted the HWMI study at length in his blog post about how the O.C. was SOL when it came to an upside of the combined California and U.S. government tax credits for home purchases.
Click to Enlarge graph of Hanley Wood Market Intelligence Data.
Costa Mesa-based Hanley Wood Market Intelligence reports that Orange County buyers signed 35% fewer sales contracts for new homes in March and April, the first months of a homebuyer tax credit designed to spur the purchase of newly built residences.
The California program gives homebuyers a tax credit of up to $10,000 for new single-family homes selling after March 1. (Uncle Sam will chip in another $8,000 if you’re a first-time buyer!) But while demand has been high statewide for the California tax credit, that has yet to impact the pace of sales and construction here:
What Lansner neglects to report on is whether the 35% decline year-on-year for the two-month March/April period is more or less than the decline year-on-year from, say January-February of 2009 from a year earlier.
He does acknowledge that statewide, the $10,000 tax-credit appeared to have jumpstarted sales in many communities.
In Reichardt’s Neighborhood Watch survey, he notes:
Trends in the West — especially No Cal — made a surprising turn as SMs cited the strongest sales trends compared to expectations.
The big question post the “Spring Selling Season” uptick must be how to keep whatever momentum there is in the market going through the balance of the year… especially without the critical tailwind of low, low interest rates.
California, as of June, is said to be 85% through its $100-million allocation for home buyer tax credits, and nobody expects below 5% home loan rates to come back to roost anytime soon.
Here’s Calculated Risk’s take on mortgage rate trends, and how to stay ahead of the curve on them:
Here is a new tool from Political Calculations: Predicting Mortgage Rates and Treasury Yields
This is based off the chart I posted last Friday and is very timely with the Ten Year Yield pushing 4%.
Using their tool, with the Ten Year yield at 3.99%, this suggests that 30 year mortgage rates will rise to 5.8% based on the historical relationship between the Ten Year yield and mortgage rates.
The question is, does the demand resubmerge when the three stars are not in alignment? Will those who move off the sidelines because of the sense that “there will never be a better time to buy” now begin to feel they’ll do better if they wait out further house price declines?
As most new-home builders have discovered, the monthly payments riddle is the one they need most critically to solve. If interest rates go up, prices have to go down to solve that riddle.
It strongly suggests that in the current policy environment, a strong likelihood is that Fix Housing First’s original plan for both a compelling tax credit and a mortgage buy-down may do the trick of sparking demand, clearing more inventory, restoring scarcity, and putting a new floor of value under residential real estate.
We see a Stimulus 2.0 package emerging during the Fall session of Congress, designed to capture any green shoots still out there, and accelerate the economy’s ability to begin paying down the “Wall of Capital” with which the Fed and Co. met the economic crisis starting last Fall. A mortgage buy-down might likely be in that program, to test new residential construction’s capacity to serve an accustomed role as an engine driving the broader economy.
Saddest Quote du Jour
Only those who are compelled by an old-fashioned sense of obligation might continue making payments.
This is the opinion of the Milken Institute’s director of regional economics Ross DeVol and president and chief executive Michael Klowden, which appeared this past Friday in the Financial Times.
They’ve mapped out a plan that the HUD Secretary Shaun Donovan, FDIC’s Sheila Bair, Treasury Secretary Tim Geithner, and the Fed’s Ben Bernanke should consider in light of the feeblest signs that home buying demand does exist if just a few of the foreclosure headwinds can be muted.
DeVol and Klowden note that the big flaw in Obama’s program to stem foreclosures is not in its mission nor even its structure, but in its math. A 105% LTV ceiling just doesn’t cover enough troubled homeowners, nor does the current program forcefully enough incentivize wavering borrowers to weather the storm and keep repaying.
To fix this conundrum, the Obama administration should add the homeowner principal forgiveness vesting plan to its program. Here’s how it works: After a valuation of the property and proper income and credit verification, two separate loans are made. The first loan, from Fannie Mae, would be for the current value. A second, interest-only loan, from the Treasury Department, would make up the difference between the current home value and the original mortgage.
We wonder how widely shared the two authors’ view is on the following assumptions:
- 6 out of 10 purchases since 2004 are underwater
- Every 100,000 foreclosures prevented translates into .5% on home price stabilization
The big time conclusion:
So, if 1.5m foreclosures were to be avoided, home prices would be 7.5 per cent higher than without the plan.
That’s a lot of wealth destruction avoided, a lot of consumption capacity preserved, a lot of jobs saved.
Still, it’s sad that the sense of obligation to pay back what one borrows is “old-fashioned.” Passe.
Statistics, More Statistics, and Damned Lies
“They’re lying.” This is what Yale economics icon Robert Shiller told Builder 100 Conference executives about experts who claim they know how the housing economy will behave in the months ahead. “It’s impossible to know.”
This would suggest that a positive outlook and a negative one are equally viable. So why not believe the more optimistic take?
Shiller is one of the smartest people today commenting on what makes the housing economy tick, and he’s the first to say he doesn’t know when it comes to predicting where it’s going to go. Mind his phrasing in an op-ed piece from the New York Times this past Saturday. He carefully uses the word “may” to say, “hey, it could go the other way, too.”
Even if there is a quick end to the recession, the housing market’s poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997.
We’re ever concerned about predictions. We heard a lot of anecdotal good numbers for April, and have gotten word from a number of builders that May was just as good or even better. We heard of one home builder in the D.C. metro market who closed on 55 homes in May, a good 20% ahead of plan. In Phoenix, monthly sales in some communities are better than they’ve been dating back almost two years.
At the same time, the gathering financial storms of nonperforming commercial mortgage back securities and unrepayable credit card debt coupled with an expanding black hole of unemployment remain abstractions whose risks to forward planning may be too hard to calculate.
Have investors who’ve restored more than 40% of value to stocks from their low-point and gotten the Dow Jones in positive territory for the year factored in these forces already? Have government and Fed policies actually begun to find traction in the financial system that have started to slow the bleeding?
Here’s what we think. For most privately held home builders, especially the ones on life support who are one letter from the bank short of doom, there’s no gain whatsoever from a negative scenario. These companies are beyond scenarios altogether, and just pumping to get another sale done to keep working their way through their bank obligations for another month.
Housing prices–especially national ones–bear little relationship to the realities of these companies. They’re focused on the small ball. Build quick. Beat existing, distressed, and foreclosed properties to the punch somehow, and make it so that the monthly payments make sense to a home buyer exactly the way these companies’ own monthly payments to their lenders stay on course.
More macro financial shocks are coming. More job loss will put a drag on local economies. More household deleveraging will take money out of circulation as consumers curb their spending.
Even so, Shiller says, what happens time and time again in the history of economics is that people’s behavior frequently defies logical supply and demand behavior.
All of these people could be made to change their plans if a sharp improvement in the economy got their attention. The young couple could change their minds and decide to buy next year, and the elderly couple could decide to further postpone their selling. That would leave us with a buyer and no seller, providing an upward kick to the market price.
Can the 87% or more of people who may stay employed offset the negative feedback of those who’ll continue to swell the ranks of those involuntarily out of work during the next 12 months as the economy grapples for recovery?
Will those who are able to hang onto their jobs be confident enough in their income stability to strike while the pricing, interest rate, and Federal tax credit incentive irons are hot?
The expression one real estate/housing player uses to offer an answer to these questions is this: “You’ve got to fake it to make it.” There’s no upside to believing the downside outlook.
For the moment, getting to ”the other side” of this mess means staying in business through tomorrow.
M and A for Another Day
A piece in yesterday’s Wall Street Journal reports we’re not going to see merger and acquisition fever hit the home building sector “anytime soon.”
The story is misleading in a couple of ways.
It springs of a theory that a “bottoming out” in the new home market will itself precipitate a flurry of M&A deals, which may be correct. Few if any players in home building think that the dozen or so bigger public companies will remain a constant even in the next 12 months.
Still, the theory’s broad strokes don’t take one very far toward understanding what will trigger another big M&A deal, because one guy’s “bottoming out” is still another guy’s rapidly “falling knife.” One of the article’s misleading notes is that there’s concurrence about the new-home market having hit bottom. There isnt’t.
Just as many capable home buyer prospects still won’t pull the trigger to buy a home right now for fear that prices are still falling and that they’ll wind up like so many recent home buyers who are currently underwater on their mortgages because of the erosion, the same fear still rules commercial real estate acquisition and development. Buying lots at any price could and will still put some purchasers in the position of overpaying vis a vis their costs to build, market, and sell a home on the lot. There will still be losers in this game of risk.
However, the second misleading perspective in the WSJ piece is comes with its analyst quote.
“What does public-to-public M&A get you except more land and more write downs,” says Robert Stevenson, a housing analyst at Fox-Pitt Kelton. “It doesn’t make much sense.”
Analysts can talk all they want about how home builders should not be looking to add land to their portfolio right now, but that is precisely what many of them have got to do to kick-start sales. They need cash. They have land. But the land they have is not necessarily the land they need to jumpstart the market. The land they need to catalyze sales sooner than later is land that they can build for an entry-level, first-time buyer, … a non-contingency buyer.
Like Hovnanian reported yesterday, it and other companies are under lots of pressure to buy lots that were formerly selling for $220K for as little as $25K a lot. Look closer at Hovnanian’s latest absorption data. They’re averaging 7-and-a-half sales per store (community) per quarter, which is a 26% improvement quarter-on-quarter. What’s likely to be the case is that in the current home mortgage finance environment, there’s probably more first-time buyers in the mix of its current absorptions than historically.
So while the analysts note that Hovnanian is off from historical absorption rates of 40 to 50 sales per community per quarter, it’s fair to say that the company’s had to focus a disproportionate amount of effort on first-time buyer sales just to keep the volume and cash spigot flowing. In a sense, it’s probably selling better against the first-time buyer segment then it had historically, and it will continue to have to to survive its leverage and cash crisis.
Why are other home builders reporting encouraging results in the past five months compared with the fourth quarter of 2008? Most of the more sanguine reports come from home builders with a strong “monthly payment” based product for first-time buyers.
Trolling for lots at bargain basement prices enables public home builders to set up new stores–open communities–and sell homes at the “new reality” price level and still make some margin.
We’d agree that there might not be a raft of me-too M&A deals in the wake of Pulte’s acquisition of Centex. But not for the reasons and theories underlying the WSJ article.
Any company that plans to count on a cash pipeline for the next 12 to 18 months needs lots — different lots in many cases than the ones they already have. So, it’s not ludicrous to imagine another land-motivated M&A deal. Further, another huge factor in the Pulte-Centex acquisition is the elimination of a competitor. The industry could stand for one or two more take-outs to get to a more suitable capacity level.
We do know that many or all of the public home building company CEOs have been in conversations with one another about buying each other. It happens frequently, and all of them expect that the time will come when the dozen of the biggest will wind up as a handful of firms. So, while we wouldn’t call for a chain reaction of deals, we would not count out one or more in the next six months.
Fix Housing Later
Unemployment is the chicken. Foreclosures are the egg. Swap their positions all you like. They’re each a self-fulfilling prophecy of the other, a negative feedback loop.
Housing leaders and housing-centric economists want to believe housing always leads the economy. Fix housing, they say, and you’re on your way to fixing the broader economy, because housing is an engine with a multiplier effect. Residential investment dollars–including construction costs for all kinds of housing–redouble and stream into many other markets and cause good things to happen in local, regional, and national economies.
This time though, a consensus is building that housing will not lead the way out of the downturn. Housing is not broken. Creation of demand is. Look at the latest unemployment data. Now, look at how foreclosures are working, i.e. 54% of new foreclosures are prime fixed and adjustable rate mortgages from among the lowest risk borrowers, per this analysis by Calculated Risk.
How about this for an argument? Housing, not only will not lead an economic recovery, it should not. Business Week economist Mike Mandel makes a case that a housing snapback would drain needed investment from other industry and service sectors that would put a more solid structure–including healthcare, education, and manufacturing–under the economy.
Here’s a few-minute video from Mandel on his Fix Housing Later theory.
Clearly, a more normalized level of demand for housing–existing, new, for-sale, and for-rent–would shape itself around less cyclical job growth in non-housing industry arenas. Businesses that got burnt badly as they met hyperbolic, investor-driven demand. In a real sense, housing’s 15 year run before 2006 used up a couple of the wild cards that would have jump started the economy, and pulled forward buyers into homeownership that it would be nice to have in the demand pool right now.
So, even as new residential construction business executives begin to populate their sound bites these days with flashes of wishful thinking, practically the only silver lining in today’s new one-family home sales data is that builders knocked 12 days of inventory off the books, reducing the ready supply of new homes nationally by 13,000 to 297,000.
In some markets, like Phoenix, home builder and developer sentiment has shifted from “you-have-to-fake-it-to-make-it” to that of genuine excitement. “They’ve turned the lights back on” in the land acquisition conference rooms, according to an executive with ties to investor and home builder land transactions.
What’s selling will have to continue to compete with foreclosures, super affordable to migrate renters across into homeownership. No contingencies. No funny business on the mortgage–it’s either FHA qualified, or at least 20% down. Delinquencies and defaults will pile up among prime and Alt-A borrowers for months and months to come, thanks to an unemployment rate expected to grow into the double digits before it starts to ease back by the end of 2010.
Get stocks to start parking in a promise of future growth, and a real economy GDP to inch back from its deep 6 to something around 0 this year, and by golly, consumer sentiment will start a real recovery.
Meanwhile, another year of trying to figure out how to do things with less people than you really need. What we all need though is an economy that can sustainably grow again, not one heated back up by housing. Fix Demand First, housing later.