The Bubble's Popping; Don't Take It Personally

With many new readers, this blogger should explain that at the end of a busy Friday, it's time to clear the desk. "Lots of news on the home loan front. "Investors in the $5.6 trillion U.S. mortgage-backed securities market are growing wary of the inverted yield curve's impact on their investments since it is a harbinger of price losses. 'Historically, mortgages do not perform well in an inverted yield curve environment,' said Scott Kirby, who oversees roughly $25 billion in an array of different mortgage-type securities." From a mortgage site. "Mortgage companies trimmed 1,400 full-time employees from their payrolls in December, following 2,000 job cuts in November. MortgageWire has reported on layoffs at prime and subprime lenders alike, including Ameriquest Mortgage, Argent Mortgage, Aurora Loan Services, BNC Mortgage, ECC Capital Corp., and Countrywide Home Loans." "Warm weather helped builders in January, and the economy added 46,000 construction jobs after a 5,000 gain in December. Manufacturers added 7,000 jobs last month, after cutting 1,000 positions in December." "The hot job Market in metro Phoenix has a dark cloud on the horizon, however, McPheters warned. 'There's an issue lurking that is new to us, and that is the rapid escalation of home prices,' Lee McPheters said. 'Last year, we moved above the national average (in home prices). It won't stop people moving here, but they're going to live further and further out. We'll suffer growing pains as a result of housing prices.'" "Last month, there were 1,578 single-family homes and 2,125 condominiums being actively marketed for sale, said Mary Flood, president of the Honolulu Board of Realtors. This compares to just 961 and 1,378 dwellings, respectively. While prices are up year-over-year, performance in some markets is off. The median condominium price actually fell 3.3 percent to $295,000 from the prior month's $305,000." "Hurricane season is over, but for John Beach there's one more financial cloud on the horizon. He recently got a notice that insuring the house he owns near the Atlantic Ocean against wind damage will cost $7,606 in premiums this year. 'Bluntly, the coast can't afford itself,' says Jim Oliver." But the biggest surprise of the week for Californians was, foreclosures where? "More Bay Area homeowners had serious trouble paying their mortgages and went into default as 2005 drew to a close, evidence that a cooler housing market can hurt the financially strapped. Lenders sent 2,292 'notices of default' to owners in the nine-county area in the last quarter of 2005. 'From here on out the number will probably increase steadily,' said DataQuick's John Karevoll." "There were 3,163 default notices issued in the 14 counties that DataQuick counts as 'Central Valley.' The largest number, 849, was in Sacramento County, up 31.4 percent from a year earlier. Lending institutions sent 14,999 default notices to California homeowners during the October-to-December period..up 19 percent from the third quarter, and up 15.6 percent from 2004's fourth quarter. All regions of the state saw an increase in foreclosure activity." "Q: Lenders like to tell us to 'cash out the equity in your home.' What they really offer is a loan that must be paid back in full, with interest. The only true way to access the equity in a home is to sell it. People might be more careful with debt if they looked at it this way." "'It's a seller's market transitioning to a buyer's market,' says David Lereah, chief economist for the NAR. Sellers are reluctant to drop their asking prices, but a lot of them might have to." "Prepare yourself mentally. Don't take it personally if you don't get the price you expected. 'The big thing is you've got to accept what the market is, and make the most of it,' says (realtor) Jeff Lyons. 'It doesn't have anything to do with you personally; it has to do with the market.'"