In last week’s “2010 Housing Market Leading Indictors” webinar, we discussed the need for the private banking sector to pick up the slack in mortgage origination when the federal government bows out this Spring.  A requirement for a successful transition is the recovery of mortgage securitization (RMBS issuance) that will enable private banks to offload the risk accompanying mortgage lending in an uncertain housing market environment.

Jacob Gaffney’s report from the ASF 2010 – “Mortgage Modifications Drive Lack of Private Investor Demand” – is an excellent review of a session hosted yesterday where managers from Citigroup, Deutsche Bank, and General Electric Investment Corporation discussed RMBS issuance and other securitization options to spur private sector lending in 2010.

This session is on the heels of a previous article - ”New Private-Label RMBS May Thaw Jumbo Market: Report” – published last month.  From the article:

The mortgage finance industry is abuzz with word of new residential mortgage-backed securities (RMBS) issued by private investment firms — the first such planned issuance in more than a year, and some say a sign that the credit freeze may be thawing out for private-label RMBS.

On StructuredFinanceNews.com, there’s additional coverage about ABS from the ASF today – Govt. Programs Have Had Positive Impact on ABS, ASF Panelists Say.

These structured products served as the foundation for many of the derivative products scorned during the 2008 banking meltdown (CDO, CLOs, etc.) but ironically, might be the elixir that enables the government’s exit from the mortgage market.

Thanks to those that joined us for Wednesday’s live webinar – “2010 Housing Market Leading Indicators, presented by Altos Research.”  We’ve had TONS of requests for the presentation slides and a recording of the event.  Ask and ye shall receive…

The presentation is now hosted on our YouTube Channel and available in parts to enable you to jump through the key parts of the presentation that most interest you.

Part I: Seller Confidence Indicators emerging in January 2010; Seller Price Discovery trends since 2007.

Part II: Seller Price Reduction trends; Housing Supply; Lagging Luxury Segment.

Part III: Mortgage Market and effects on the housing market; S&P/Case-Shiller HPI for October & November 2009; Discussion of the San Francisco, Los Angeles, and Phoenix housing markets.

Part IV: Discussion of the Phoenix, Atlanta, Seattle, Chicago, and Portland housing markets.

Part V: Key takeaways from the 2009 Housing Market, including Price Floor Evidence and Stimulus Response including government support of the mortgage market and the homebuyer tax credit.

Part VI: 2010-2011 housing market expectations; Forecast of 2011 housing prices; Discussion of the economy’s affect on the housing market; Shadow Inventory

We’ll be hosting more of these presentations throughout 2010, so comments and topical suggestions are welcome.

If you’d like the presentation slides from the webinar, you can download them in PDF file format here.

Big event starting on Sunday. We’ll be there. Why is the American Securitization Forum 2010 Conference so important?  The topics covered at the ASF meetings set the tone for the next year and show the financial market’s response to government and private sector initiatives for the securitization market.  Many of our clients trade RMBS, whole loan asset portfolios, service mortgages, and purchase distressed assets – this is a key event for us to see what’s happening out there.

With the upcoming changes to the residential mortgage market -  the US government’s pull back from housing market lending and the re-expiration of the homebuyer’s tax credit in April 2010 – it’s a pivotal year in the housing market to see if the recovery is real, if we’ve simply troughed, or if we’re headed lower (gasp!).

Here’s a look at a few agenda items at the ASF 2010:

• Securitization and Its Role in the Financial Markets
• RMBS Deal Performance Analysis
• Consumer Credit Metrics and Evaluation
• 2010 Securitization Market Outlook
• Securitization Policy Reforms
• Restoring the Private Securitization Market and Unwinding Government Support Programs
• Mortgage Underwriting Trends

Personally, my favorite event is the Working Lunch – A Discussion Between Newt Gingrich and Howard Dean, Moderated by Larry Kudlow. Need I say more?

Drop me a line (scott@altosresearch.com) if you’re attending to talk about the housing market and what we’re seeing out there.  Starbucks or Budweiser – your choice.  I’m buying.

See you there.

A DSNews article from yesterday (”GAO Releases Report on Loan Performance and Negative Equity“) covers the release of a US Government Accountability Office report – Loan Performance and Negative Home Equity in the Nonprime Mortgage Market. The report is a look at loan performance and negative equity across the 16 US markets, taking a faulty “balance sheet” approach – examining metro level data and estimating the percentage of homeowners with negative equity based on June 30, 2009 data.  The report doesn’t account for recent market trends in these metros and thus incorrectly assesses the overall negative equity situation.

From the DSNews article about the report:

“Using the S&P/Case-Shiller index, the report estimated the percentage of borrowers with negative equity for 16 metropolitan areas. These percentages ranged from about 9 percent in Denver to more than 90 percent in Los Vegas. In the 16 metropolitan areas reviewed…”

Source: Loan Performance and Negative Home Equity in the Nonprime Mortgage Market published by US Government Accountability Office (December 16, 2009)

This assessment fails to account for recent gains several metros, under-emphasizes a troubling trend for markets that appear to be do doing better than others and under-values markets that have highly negative estimates.   Looking at the market data for the latter half of 2009 for two of the three top and bottom markets listed in the report – Las Vegas, Miami, Denver and Boston starts to show trends not captured in the report:

Year-on-Year Housing Price Changes: Denver, Boston, Miami & Las Vegas

The “good” market – Denver – is just now starting to feel the housing market pressure.  Denver bucked the national trends all throughout 2007 and 2008.  It wasn’t until July 2009 – one month after the data used in the GAO report that Denver prices had year-on-year losses:

Look at year-over-year prices in Boston – it’s reached positive territory and has been steadily rising since April 2008.  The housing market began its decline way back in September 2005 according to Karl Case and John Quigley’s paper – “How Housing Busts End: House Prices, User Costs and Rigidities During Down Cycles” – presented 12 months ago at the January 2009 American Economics Association (AEA) annual meeting.  Boston was among the first markets hit in the current housing downturn and appears to be among the first work its way out of the doldrums. Isolating and magnifying the Boston metro year-on-year price trends, it’s clear that Boston’s trough occurred in June 2008:

Boston Housing Market: Year-on-year price trends since July 2008

Back in June 2008, the Case-Shiller HPI for Boston (BOXR) rose a few points before falling off later in the year. In 2009, the BOXR values again moved into positive ground before leveling off again in the Fall.  However, early indications for 2010 indicate that price levels the Spring will start at a higher baseline level than in 2008 and 2009:

Boston Metro Housing Market: Median Ask Prices since 01/07

Why is this important?  In the GAO report, Boston is estimated to have only 23.1% of homeowners with negative equity, one of the lowest rates of the 16 metros analyzed. If you measured negative equity positions for Boston metro homeowners in 2006 or 2007, the percentage would have assuredly been higher than the 23.1% reported in the GAO report.  This could have major implications for markets like Miami and Las Vegas with it comes to loan modifications and negative equity positions. A Public Policy Discussion Paper presented at the aforementiond AEA by Christopher Foote, Kristopher Gerardi and Paul Willen at the FRB Boston – “Negative Equity and Foreclosure: Theory and Evidence”- provides some empirical proof that negative equity positions do not automatically lead to foreclosures.  While some percentage of homeowners will inevitably walk away from their mortgages or face undesired foreclosures, improving market conditions on their own could eradicate much of the negative equity situations and pressure to force loan modifications in worse-off markets like Las Vegas and Miami.

Las Vegas hit its trough value in June 2009 for year-on-year prices and has been improving since – something we wrote in a post from earlier this month (see “Can’t Make a Comeback Unless You’ve Been Down…“). Miami’s year-on-year price trough hit in early 2009. Now look at median ask prices, a leading housing market indicator, for the Miami metro since January 2007.  Prices in Miami troughed in Fall 2008 and are starting the year at approximately the same level as January 2008, with a clear upward trend over the past 14-16 months.

Miami Housing Market: Median Ask Prices since 01/07

It’s quite possible that a case of “do nothing” in terms of load modification in these markets and allowing them to run their course may very well be the right solution after all.

We’ve just returned from New York City, attending last week’s Real Estate Connect New York City 2010 hosted by InmanNews.  Outstanding event to hear what’s happening right now in the real estate industry, and we’re all about real-time… Thought this would be a good time to close out our “2009 Year End Trends” blog post series, focusing on the Northeast markets. (And besides, it’s time to start looking ahead to 2010 since we’re three weeks into the year now..)

Unlike the rest of the country in this series, I’m taking a broader view of the major Northeast housing markets by looking at metro-level data instead of city-level data for New York, Boston, Philadelphia and Washington DC.  Here’s a quick look at the market data followed by analysis of what we’re seeing in this region:

Median Ask Price Trends by MSA: New York, Boston, Philadelphia & Washington DC

Active Housing Supply by MSA: New York, Boston, Philadelphia & Washington DC

• Nothing too surprising in any of these metros.  Each saw a positive price bump in Spring 2009, but gave back the gains as the year progressed.  We’ve saw this consistently throughout country.
• Inventory continues to decline steadily in Boston, Philadelphia & Washington DC, with a slight rise in New York that was unusual compared to the national trends.
• We’ll be watching the Price of New Listings in each area in early 2010 to see if there will be another Spring-time bounce in 2010.  (This stat serves as a leading indicator for any real estate market, capturing the most recent market activity before sold transactions even occur…) The downward trend in this stat has leveled off in recent weeks which is a good sign:

Median Price of New Listings by MSA: New York, Boston, Philadelphia & Washington DC

If you’ve enjoyed this look at the major cities and metros across the US over the past couple of weeks, register now to receive our Real-time Housing Market Report. It’s free and distributed around the 10th of each month.

The Altos Research January 2010 Real-Time National Housing Report is now available for download.   Some highlights from this month’s report:

• The Altos Research 10-City Composite Price was down by 1.0% in December and 1.4% during the fourth quarter of 2009. For the full year 2009, the Composite Price Index showed an increase of 5.2%.
• The Composite effectively bottomed out in January 2009 at $470,017, climbed throughout the first half of the year to $509,030 in July before returning to a gradual downward trend and ended at $494,426 in December. Prices are likely to continue showing modest declines throughout the seasonally weak winter months of 2010.
• Listed property inventory declined in 24 of 26 markets tracked. The inventory declines were largest in Boston and the California markets of Los Angeles, San Francisco and San Jose.

If you’re a new reader to “How’s the Market?”, our monthly real-time housing reports provide metro-level analysis of the 25 metropolitan statistical areas that compose the S&P/Case-Shiller Home Price Index and Radar Logic 25-City index.  Our real estate market data and trends typically lead these national indices by 3-4 months.  Additional information about our Data & Market Analytics Platform and data subscription services is available here on our company website.

Here’s a look at the Altos 10-City Composite trends since 2008:

The Altos 10-City Composite is a leading indicator of the S&P/Case-Shiller HPI

Almost finished with our 2009 year-end look at the US Housing Market by region blog post series. Here’s the 2009 year-end Median Ask Price and Active Inventory trends for the major Florida markets – Miami, Orlando, Jacksonville and Orlando,  with some quick analysis based of what we’re seeing in each city.  I’ve also provide a snapshot of the Condo market trends for each city.

We’ll be releasing the January 2010 Real-Time Real Estate Report this week.  Register now to receive this release and download December’s edition while it’s still available. (Yep, it’s free.)

Median Ask Prices: Miami, Orlando, Tampa & Jacksonville Housing Markets

Active Housing Supply: Miami, Orlando, Tampa & Jacksonville

• After strong negative slides from 2007-2008, Miami, Orlando and Tampa showed signs on life in the Spring.  However, all three markets gave back their gains as the year progressed.  The first few weeks of 2010 will be pivotal to see if these 2009 gains resulted from government and mortgage rate incentives or the start of a real recovery.
• Jacksonville’s slide continued throughout 2009 with a slowdown in the negative direction but not a directional trend change.
• Active inventory fell the greatest in Miami, as resale homes moved from active listings (and presumed short sales in many cases) to expired and foreclosured.
• Orlando and Tampa inventory started to level off in late 2009.  Early 2010  indications are that Orlando’s inventory count is starting to rise.

The Condo market trends are moving strongly negative with no respite visible in 2009.  Miami’s condo prices and inventory are moving sharply negative moving into 2010:

Condo Price Trends: Miami, Orlando, Tampa & Jacksonville

Active Condo Listings: Miami, Orlando, Tampa & Jacksonville

It’s an old gambler’s creed and today’s article on DSNews – “Las Vegas Real Estate Posts 2009 Positives Despite Recession” – indicates some numbers consistent with what we’ve been seeing over the past couple of months in Las Vegas.  (Check out – “Year-End 2009 Trends: The Southwest” from December 2009 and Housing in Las Vegas: “C’mon Black” from May 2009 on Seeking Alpha). Most importantly, the price declines are slowing after a couple of years of tough downward pressure, with single-family homes showing a strong push to level than condos:

Las Vegas Condo & Single-Family Home Price Trends

Overlaying the Las Vegas single-family home price trends with Phoenix and Sacramento, two other housing bubble markets, it’s interesting to see that price decline slowdown lagged these markets by about a year:

Housing Price Trends: Las Vegas, Phoenix & Sacramento

Zooming in a little more into the Las Vegas market with a look at the price of new listings hitting the market each week compared to the market ask price:

Price of New Listings compared to Market Ask Price in Las Vegas

We’re seeing that the new homes entering the market each week:

• Have been steady for a few months now
• The gap between the market ask price and the price of new listings is closing compared to 2008
• Bouncing up early in the first two weeks of 2010.

Of course, gamblers also like to say – “two’s a trend, three’s a streak” – so we’ll be keeping an eye on the 7-day values each week until the 90-rolling averages start to show signs of turning in a positive direction.

Right now, I’d say the line on Vegas is a pick ‘em but the smart money is leaning positive.