Halfway Through the House-Price Bust?

America may well be only halfway through the house-price bust; so says this week’s Economist:

Mr Bernanke’s maps use figures from the Office of Federal Housing Enterprise Oversight (OFHEO). Its statistics have broad geographic reach and track repeat sales of the same house. The monthly national index suggests average prices have fallen only 3% from a peak in April 2007, and the quarterly figures are still positive (see left-hand chart).

But OFHEO’s figures include only houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. By excluding subprime and jumbo loans, they leave out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe.

Thus OFHEO’s figures probably understate the scale of the housing mess, particularly in states such as California and Florida. Another set of indices, developed by Robert Shiller and Karl Case and produced by Standard & Poor’s (S&P), a rating agency, includes all types of houses and, not surprisingly, show house prices rising faster during the boom and falling faster now. As of the fourth quarter of 2007, the S&P/Case-Shiller national index was down 10% from its peak, and an index of ten large cities had fallen by almost 16% by February. Although the Case-Shiller figures are not perfect—they miss many rural areas—they are a better gauge of price declines in big cities.

Note: As mentioned earlier this week, Fannie Mae data is ex-foreclosure, also.

The graphs say it all:

Changes in House Price by County

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Source:

Map of misery
The Economist, May 8th 2008
http://www.economist.com/finance/displaystory.cfm?story_id=11333030

Category: Real Estate

Fooling_someEvery now and again, CNBC puts on a superlative show.  Friday morning’s Squawk Box was one of those times when they hit the ball out of the park.

As I was heading out the door to work, I heard David Einhorn of Greenlight Capital begin chatting about shorting stock, soft SEC enforcement, and Allied Capital (ALD). CNBC also announced that William Ackman of Pershing Square Capital was coming on in a while.

Einhorn discussed his presentation at Jim Grant’s conference Private Profits, Socialized Risk as well as his book, Fooling Some of the People All of the Time: A Long Short Story.
   

So before leaving the house, I TiVo’d Squawk, and then headed off to work. I watched the show Friday evening, and it was fantastic.  Watch the videos below and see if you agree.

• The Short & Short of It
Short selling can be good for the markets, with Owen Lamont, DKR
Fusion, David Einhorn, Greenlight Capital and CNBC’s Steve Liesman

click for video

Short_and_short

• Whistle-Blowing pt. 1

Activist investors face challenges convinsing regulators to face the facts, with William Ackman, Pershing Square Capital Management and David Einhorn, Greenlight Capital Management

click for video

Whistle_blower_1


• Whistle-Blowing, 2

click for video

Whistle_blower_2


• Hedging Your Bets

Discussing fraud on Wall St., with David Einhorn, Greenlight Capital Management president

click for video

Hedging_your_bets

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Related

Fooling Some People site
http://foolingsomepeople.com/main/

The Speech
http://foolingsomepeople.com/main/speeches.html

Book:  Fooling Some of the People All of the Time: A Long Short Story

Jim Grant’s conference presentation Private Profits, Socialized Risk

Category: Credit, Derivatives, Financial Press, Video

Quote of the Day: On a Great Danger Approaching

Category: Psychology

Oil Bubble?

Category: Commodities, Earnings, Energy, Psychology, Technical Analysis, Valuation

Signs of a Housing Bottom?

Category: Contrary Indicators, Real Estate

What’s Next for Crude Oil ?

Category: Commodities, Contrary Indicators, Energy, Psychology, Technical Analysis

Trichet Warns of `Protracted’ High Inflation

Unlike the Federal Reserve, Trichet and the EC are very concerned with high Inflation:

Click for Video


Remember, the EC has a single charge — maintaining price stability — and is not concerned with maximizing growth . . .

Source:
Trichet Sees `Rather Protracted’ High Inflation
Gabi Thesing and Christian Vits
Bloomberg, May 8 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZrZpAw8DbmI&

Read More

Category: Federal Reserve, Inflation, Video

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Category: Books, Real Estate

Oil = $124

Category: Commodities, Energy

Advice for Billionaires on Getting Things Done

Category: Wages & Income