Rip the Band-Aid?

For the market in homes to get going,
One should think of arresting the slowing
Of foreclosure delays
On homes that appraise
For less than the owners are owing.

Dr. Goose, who is no expert on America's housing malaise or real estate generally, recently checked into this topic to see what progress we are making at the halfway point in what appears to be a "lost decade". First the good news: according to MarketWatch, the level of foreclosure activity declined 3% in July (10% year-over-year), making the 22nd straight month that the numbers declined on an annual basis. However, the number of properties entering foreclosure rose 6% in July, the third such monthly increase in a row. 27 states registered y-o-y increases.

To a degree, it appears that the fall in overall foreclosure activity and the more recent rise in foreclosure starts relate to the same phenomenon: in states such as Florida, Illinois and my adopted state of New Jersey, foreclosure processing and procedural issues (or "levels of dysfunction," in the words of a RealtyTrac analyst) had slowed the pace of filings last year. The resulting bottleneck is evidently only now beginning to clear, resulting in the latest uptick in starts. By the same token, well-intentioned laws to aid distressed homeowners, such as that recently enacted in Oregon, may only delay the inevitable in many cases, thereby delaying as well the hoped-for clearing of the market.

China's Slowing Growth

As the world isn't sure of withstanding
A slowdown in China's expanding,
The brightest and best
Are correctly obsessed
With predicting a hard or soft landing.

The Hard guys are finding it troubling
That the property market is bubbling,
And China's growth race,
To equal the pace
Of construction, would have to be doubling.

Say the Softies: there isn't just one way
Of averting a slump the yuan way;
While liquidity's free,
One can easily see
There's a gentle descent to the runway.

Economists and analysts around the world are weighing in on the question of how quickly China's sky-high growth rate will fall, and with good reason: while the developed world limps along at 1-3% growth, China's National Bureau of Statistics announced that their nation's economy grew 9.2% in 2011. The problem is illustrated by the Wall Street Journal graphic; though China is the jet engine propelling the world economy, it is on a downward glide path. Will there be a hard landing, in which property markets collapse and, directly or indirectly, throw millions out of work?
Yes, says Professor Patrick Chovanec of Tsinghua University's School of Economics and Management in Beijing. Dr. Chovanec points out that an outsized portion of Chinese GDP growth belongs to real estate, which is growing unsustainably fast. "Frankly, you don’t need a real estate collapse in order to trigger a serious slowdown in these sectors. All you need is a pause in the hitherto frantic pace of construction," says the professor.
No, say Zhou Xin and Nick Edwards of Reuters; China's vast fiscal resources give it powerful tools to moderate a slowdown, which the Fed and the European Central Bank can only look upon in envy.
Both sides make good points, but the most important perspective is that the future of China is many times more important to the world economy than that of, say, Greece.

Washington Doesn't Get the Housing Bust

The index of US home prices
Shows no end to the real estate crisis
Ev'rywhere but DC;
Counter-cyclically,
There the job market more than suffices.  

The S&P Case-Shiller Index of existing home prices showed continuing weakness in the residential market in January. Year over year, prices fell by an average of 3.1%, in every metropolitan area except Washington DC. There, a combination of a crowded housing market and a resilient job picture for politicians, bureaucrats, military and lobbyists contributed to a 3.6% annual increase.  San Diego was essentially unchanged at +0.1%, no doubt demonstrating the calming effects of warm Pacific breezes.

Time to Buy a Home?

A house on the market, priced rightly,
Will sell at a pace that is sprightly,
So a backlog that grows
Leads one to suppose
That homes are expensive, if slightly.  

The Commerce Department announced that new home sales fell to 250,000 in February, the lowest number on record.  Moreover, the supply of homes on the market has increased from 7.4 to 8.9 months of sales.  These among other factors prompted investment strategist Barry Ritholtz to ask: "Should You Buy a Home?"  Based on a comparison of home prices and home-owning costs to 1) personal income, 2) renting and 3) US GDP, Mr. Ritholtz concludes that the residential real estate market, though fallen from great heights, is still a bit pricey.