From the NY Post:

HEDGE HORROR
SUBPRIME MELTDOWN COULD WIPE OUT BILLION$

As home foreclosures ricochet through Main Street in rising junk mortgage meltdowns, Wall Street is facing a separate barrage that could swamp its first rich victims - hedge funds for the wealthy.

The financial industry yesterday got more unhinged following a shake-up a day earlier when two credit-rating agencies stripped away the fragile masks of shaky mortgage securities, exposing their worthless sides.

The stunning formal disclosures, which eventually could affect as much as $2 trillion in various mortgage securities, is expected to trigger widespread revaluation of the paper, which some analysts believe could wipe out 40 to 50 percent of their values.

For hedge funds, it would mean having to cover losses by giving back money to clients, even if it means selling off other good assets at a discount to raise money.

“The hedge funds are so over-leveraged, they’ll be the first to crack,” said Peter Schiff, CEO of Euro Pacific Capital.

Even Wall Street banks such as Merrill Lynch are vulnerable, with analysts saying the crisis could wipe out $132 million, 1.6 percent, of its profits this year.
…
Alarms also were sounded yesterday for the nation’s banks when the Federal Deposit Insurance Corp. chief said it is looking “very carefully” at how many banks are holding junk mortgage paper, particularly a tainted and repackaged version of the risky junk bonds, known as collateralized debt obligations (CDOs.)
…
“Its going to get worse before it gets better. How much worse, I don’t know,” Bair said.

The following table contains closed residential real estate transactions in Branchburg for May-June, 2007. However, unlike the inaccurate information promulgated by most agents and media sources, the “DOM” (Days on Market) column indicates the sum of days-on-market accrued through serial listings of the same home (it is a common agent “trick” to withdraw and re-list a home, in order to create the public impression of a “fresh” home that has seen fewer days on market). In addition, the “OLP” (Original List Price) column reflects the list price of each home at the time it was first offered for sale.

Sales statistics posted at Branchblog will always be cross-checked to provide the most accurate and unbiased housing market snapshot possible.

Please direct specific inquiries to Chip Hughes at (908) 334-2329 or chip.hughes@att.net. Better yet, leave a comment!

All information is deemed accurate, but not guaranteed, and is provided courtesy of Garden State Multiple Listing System:

AVERAGES: 145 Days-on-Market; SALE PRICE 92% of original list price.

First, my apologies for the lack of content the past couple of weeks. The reason is, in a nutshell: I’ve been very busy. Not only have I been working intently with current clients to achieve sales during this time, but a new wave of clients has approached- almost all at once- looking to sell. The end of June/beginning of July is not normally an active listing period in the Realtor’s year, but this market has brought us new buying and selling patterns…along with a whole host of new challenges and needs for both our buyers and sellers.

In the next few days, I’ll be posting the final numbers for May closed sales in Branchburg. Expect to see a continuation of the trend toward more days-on-market and closing prices averaging about 87-90% of the original asking price. To go a step further, be aware that our local inventory of homes offered for sale has now exceeded last year’s high (reached in September, 2006), and this year’s Spring market did little to sell through much of our standing inventory; the local supply has crawled up to nine months’ worth…up from September ’06’s previous high of eight months.

Many past and present clients have also asked me about the implications of the “subprime meltdown”, the latest example of which has been the collapse of two Bear Stearns internal hedge funds that borrowed heavily against large holdings of CDOs (collateralized debt obligations) that were securitizations (a fancy word for “bundles”) of subprime mortgages. To that, my answer is simple: this is just the tip of the iceberg. Any securities that are based upon thousands of delinquent and defaulting loans is a security that is in deep trouble. If enough mortgages within the security go belly-up, that security’s rating will be downgraded. If the company holding that security has borrowed heavily against it, that company’s lenders will issue margin calls (which is exactly what happened to Bear Stearns). It’s whistling past the graveyard to believe that this problem is isolated only to Bear Stearns; many other investment banks, hedge funds and insurance companies either directly or indirectly own these CDOs. Many of these other holders may have also borrowed against the CDOs and will be subject to margin calls when the quality of the collateral deteriorates.

What does all this mean to you and me? In the long run, it means tightening credit. As many of the “toxic” loans made to poorly-qualified buyers go belly-up and roil the end markets for the holders of this debt, institutions who are issuing credit today and tomorrow will naturally tighten their lending guidelines. Already, lenders who in the past were eager to allow 100% financing, easy credit to questionable borrowers and loans without full documentation are suddenly demanding 5-10% minimum downpayments and full documentation of income…plus proof of the ability to make regular loan payments (what a concept!). As the subprime crisis deepens, lenders will continue to raise their qualification requirements for new borrowers.

May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is “going public with our concerns” that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. “The housing market has softened much more than is being reported” by the Fed, and the National Association of Realtors (NAR), says JBREC.

The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation’s biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.

Taking the states with the worst housing sales/foreclosures crises, JBREC found Florida home sales down 34%, not 28% as NAR reported; Arizona sales down 38%, not 28%; and California’s down 37%, not 24% as NAR reports. This strong underreporting of the collapse by NAR, the firm says, only dates from the middle of 2006; it doesn’t claim any intentional misrepresentation by NAR.

As for new-home sales, JBREC reports the Census Bureau is continuing not to subtract cancellations from reported sales, giving sales figures which are much rosier than the grim reality, and are reported publicly by the Federal Reserve.

“In summary, we believe that the Fed should know that the housing market correction has been quite steep, and is also not showing signs of bottoming out,” concludes JBREC.

Separately, a Wall Street firm reported May 18 that the foreclosure “shock cone” is widening: While total foreclosures, at all stages, are up 60-70% over last year so far, foreclosure notices—the front end of the process, when a mortgage is typically 90 days delinquent—are 127% higher so far than in 2006. It said that foreclosed homes being resold by banks or lenders, are hitting the housing market with an average price drop of 30% nationally.

Friday May 25, 10:29 AM EDT

WASHINGTON (AP) — Sales of existing homes fell by a larger-than-expected amount in April while the median price of a home sold during the month fell for a ninth straight month as the troubles in the subprime mortgage market acted as a further drag on housing.

The National Association of Realtors reported Friday that sales of existing homes fell by 2.6 percent last month to a seasonally adjusted annual rate of 5.99 million units. That was the slowest sales pace since June 2003.

The median price of a home fell to $220,900, an 0.8 percent fall from the midpoint selling price a year ago. It marked the ninth straight decline in the median price.

Sales were weak in all parts of the country. The Northeast experienced the biggest decline, a fall of 8.8 percent in April from the March sales pace. Sales were down 1.7 percent in the West, 1.2 percent in the Midwest and 0.7 percent in the South.

The following table contains closed residential real estate transactions in Branchburg for April, 2007. However, unlike the inaccurate information promulgated by most agents and media sources, the “DOM” (Days on Market) column indicates the sum of days-on-market accrued through serial listings of the same home (it is a common agent “trick” to withdraw and re-list a home, in order to create the public impression of a “fresh” home that has seen fewer days on market). In addition, the “OLP” (Original List Price) column reflects the list price of each home at the time it was first offered for sale.

Sales statistics posted at Branchblog will always be cross-checked to provide the most accurate and unbiased housing market snapshot possible.

Please direct specific inquiries to Chip Hughes at (908) 334-2329 or chip.hughes@att.net. Better yet, leave a comment!

All information is deemed accurate, but not guaranteed, and is provided courtesy of Garden State Multiple Listing System:

 AVERAGES: 198 Days-on-Market; SALE PRICE 90% of original list price.