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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (46103)	2/8/2006 1:05:22 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Rumours of US housing bubble are hot air By John Weicher Published: February 7 2006 20:54 \| Last updated: February 7 2006 20:54 Some economists are watching the transition from Alan Greenspan to Ben Bernanke at the US Federal Reserve with concern about the impending end of the housing bubble and its impact on the US economy. This is rather odd, because two months ago the consensus seemed to be that the housing bubble had already been pricked. For that matter, since the turn of the millennium, analysts have been debating whether there is or is not a US “housing bubble”. The worriers should take heart: reports of the death of the housing bubble are premature. Indeed, reports that there was a bubble at all were premature. Certainly there is evidence that the housing market is at a peak. The best source of information on US house prices is a quarterly index prepared by the Office of Federal Housing Enterprise Oversight, the regulator of Fannie Mae and Freddie Mac, the US mortgage finance groups. The office calculates that, as of September, US house prices rose at an annual 12 per cent over the past year. This is very rapid by any past experience, but still below the 13.2 per cent of the previous year. Moreover, mortgage rates have been rising. Last week Freddie Mac reported a market average of 6.23 per cent for a 30-year fixed-rate mortgage, up about 75 basis points in seven months. At the same time, new home construction dropped in December and housing starts were down about 8 per cent since June. The OFHEO index may be the harbinger of a bursting bubble. If the market is peaking, there could be problems. The past few years have seen a proliferation of new mortgage instruments that shift risk to the homebuyer, such as interest-only loans where the only increase in the homeowner’s equity comes from appreciation. In a declining market, many of those borrowers are likely to default on their mortgage and lose their homes. Not all the evidence points to a peak, however. The OFHEO price index, which is based on mortgage originations, has shown much sharper price increases over the past year for homes that are being refinanced than for homes being bought and sold. The home purchase price index has been rising more slowly and much more smoothly, by 10.9 per cent over the past year, more than the 10.4 per cent rate increase for the year before. The steadier growth suggests that the prices people are actually paying, and receiving, have not peaked. The current mortgage rate increase is the third time in three years that rates have started to rise, accompanied by consensus among analysts that the housing boom was over. Both times previously, rates rose for a while and then dropped to a new low, while the boom continued. That of course may not happen this time. Yet even if rates continue to rise, house prices may also climb. Homebuyers have shown a remarkable willingness to move between mortgage instruments in response to interest rate changes. In 2004, they moved into adjustable-rate mortgages to take advantage of favourable initial rates. Last year, they switched back into fixed-rate mortgages to protect themselves as rates rose. In both years, they kept buying homes. Despite the December decline, new home starts set a record in 2005 – for the third consecutive year. A longer view suggests that the US is seeing a blip in a long-term bull housing market, not a bubble about to be pricked. The OFHEO price index covers the past 30 years, periods of high inflation, low inflation, disinflation, boom and recession. In those 120 quarters, house prices have dropped only eight times, and never for more than one quarter. What seems to be happening is that home sellers are overshooting the market, incorporating a further expected increase in their asking price. Buyers are a little more cautious, quite reasonably. At the current rate, typical American homeowners will see the value of their homes double in six years. That would be nice for them, but the US is not likely to see continuing double-digit house price increases while the inflation rate remains low. Nonetheless, home prices are likely to keep rising. The current demand for homeownership in the US is very different from the housing boom of the 1970s, when erratically accelerating inflation depressed stock prices and drove everyone into tangible assets in self-protection. This time, it is real. The writer, director of the Centre for Housing and Financial Markets at the Hudson Institute in Washington, DC was assistant secretary for housing and federal housing commissioner at the US Department of Housing and Urban Development (2001-05) news.ft.com

To: patron_anejo_por_favor who wrote (46103)	2/8/2006 1:19:02 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Some sap put a tree in Bronx house! It's the most bizarre treehouse in New York. [I really do not understand this. If the builder is wrong about the property line he will never get title insurance. Furthermore are there restrictions on buildi g right up to a propertly line. There should be setbacks. Finally, how the hell can you tear down a fence and build a wall right into a tree, whether it is yours or not. Mish] A property-line dispute between a builder and a lifelong Bronx resident is in an architectural stalemate - with a live tree right in the middle of a cinder-block wall of a new house. "I've never seen anything like this, ever," said John Schwing, 51, whose tree is embedded in the wall next door. "We keep having all these people walking by and staring at it. It's the talk of the neighborhood." The roots of the 1-foot-diameter tree are sliced in half, a layer of cement is slathered up to the bark and the wooden joists on the new building's second floor are built around a spreading branch. Another tree farther back on the lot is also partially encased in the wall. "This can't be. It's got to be a bad dream," said Philip Tortoriello, 42, who owns the house on the other side of the new property and has his own boundary problems with the developer. "This is a joke. I've never seen this. This is like ... like ... wow! I can't believe that." The saga started last month when a Queens developer who had torn down the old house next door on St.Raymond Ave. in Westchester Square began putting up a three-story apartment building, filling the entire lot - and reaching the tree, which sits on the property line. Schwing said he came home one day to find workers had ripped down his fence and dug a hole into his yard, sparking an angry dispute with Flushing builder ABA Management Corp. ABA vice president Ryan Pedram said Schwing demanded $20,000 to let him take down the tree. But Pedram decided to keep building around it, figuring they could settle the matter and fill in the hole later. "I went to his house and he threw me out. I tried to talk to him and he wouldn't. This is not a reasonable guy," Pedram said. Schwing said he wasn't serious about the $20,000 demand, but is now so mad that he won't settle for any amount - and he wants the building torn down and his tree restored. "The tree's got to grow. I don't understand it," Schwing said. "You'll never see anything like this again." Strangers took pictures of the spectacle yesterday. A delivery truck stopped in the middle of the street and three movers hopped out to gawk. Chris Mercado, who works at Westchester Square Medical Center across the street, said he and his co-workers can't believe what they see out the window. "We just stand there and watch them working, and we laugh," Mercado said. "It's crazy." The city building code doesn't actually prohibit anyone from building a wall with a tree in the middle of it, but live trees inside buildings require special construction, said Buildings Department spokeswoman Ilyse Fink. "The plans do not call for a tree in the wall," Fink said. "We're going to send somebody out to look at this." nydailynews.com