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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: nextrade! who wrote (7037)	11/22/2002 7:59:59 PM
From: nextrade!	Read Replies (1) \| Respond to of 306849

An excerpt from Contraryinvestor contraryinvestor.com It just so happens that about 20% of the survey respondents expected a decline in average home prices in their area over the next twelve months. Of course these lending officers are merely guessing as to which direction home prices will take ahead. No one really knows. But it just may influence their decision making to some extent ahead. As you know, bankers are really only a part of the mortgage lending story in this country. It's the big hitter mortgage funding entities like Fannie and Freddie that really make the rules for most folks wishing to borrow against currently sacred residential property. It is worthwhile noting that once prices do start to soften, commercial banks actually involved in real residential mortgage lending tend to scare off fast, as directly witnessed by the spike in tightened standards during the early 1990's. Will Fannie and Freddie scare as easily? Or more to the point, will their bondholders and shareholders scare as easily when the period of softening residential prices ultimately comes down the pike? Yesterday witnessed an 11.4% month over month drop in new housing starts in this country. But don't be fooled by the headlines. September was a huge spike up in monthly starts so we are only witnessing the correcting of the September anomaly. Year over year new housing starts remain up 4.7%. Moreover, single family permits in October climbed to a near record high. We recently heard the management of a large publicly traded home builder speak to a group of analysts. We were simply stunned at the complacency on the part of management regarding any type of "cycle" for the business. They essentially saw no end in sight to current growth. Refi app's spiked up again for the week ended November 15, but mortgage apps for new purchases remains in a clear downtrend. Maybe the bank survey reflects the reason for this change in purchase activity. Let's put it this way, we think it's pretty fair to say that we have witnessed the rate of change peak in new purchase activity for this cycle. For now, the refi application peak is still open to question. Housing is not about to fall off a cliff, yet the trajectory is clearly downward at this point. Maybe that's why long term investors in FNM have essentially made nothing over the last two years - two of the greatest years for absolute dollar mortgage financing activity ever witnessed in the history of this country. In addition to what the bank mortgage lenders have to say about life, keep an eye on this canary in a coal mine for where the housing market may be heading in 2003