The housing market has shown signs of life recently. Home
sales have beat expectations and pending sales neared a two-year high. But
prices — the crucial measure of housing-market health — are still falling,
driven down by increasing levels of distressed sales of foreclosed properties.
That means the market, and the broader economy, which derives much of its
strength from housing, are not out of the woods — not by a long shot.
For too long, President Obama and his team have relied on the banks to
voluntarily modify troubled loans. Those efforts were focused on reducing
monthly payments, not principal — a more powerful form of relief.
Now President Obama is trying again. On Tuesday, he announced a new policy of
easier refinancings for loans that are backed by the Federal Housing
Administration. As part of the settlement announced in February, the major banks
will be required to promote loan modifications for troubled borrowers, including
principal reductions for underwater homeowners.
Mr. Obama has also promised a far-reaching investigation into mortgage abuses
that is supposed to yield more accountability from the banks and more money for
foreclosure prevention. He must deliver.
One thing is sure: Waiting for the situation to self-correct, as Mitt Romney has
recommended, won’t fix the problem. The recent good news on sales has been
driven by pent-up demand and warm winter weather that lured buyers. But more
sales won’t translate into higher prices until foreclosures abate.
In the last quarter of 2011, national home prices fell 4 percent, putting prices
back to levels last seen in mid-2002, according to the Standard &
Poor’s/Case-Shiller price index. Moody’s Analytics estimates that 3.3 million
homes are in or near foreclosure and another 11.5 million underwater homeowners
are at risk of foreclosure if the economy or their finances weaken.
Is help really on the way?
The main component of the administration’s new efforts is the recent foreclosure
settlement between the big banks and state and federal officials. In exchange
for immunity from government civil lawsuits over most foreclosure abuses, the
banks will provide $26 billion worth of relief, including principal write-downs,
to an estimated 1.75 million borrowers. That is a pittance compared with the
losses in the housing bust. But by preventing a chunk of additional
foreclosures, it could help ensure that prices do not fall much further before
bottoming out.
The settlement was announced nearly a month ago, but the specific terms have yet
to be released. One concern is that banks may have leeway to tailor loan
modifications in ways that help them clean up their balance sheets, while
leaving many homeowners deeply underwater. Another is that states may be able to
use money from the settlement for purposes other than foreclosure relief.
The investigation that is supposed to be the powerful follow-up to the
settlement has also gotten off to a worryingly slow start. Announced in January
by Mr. Obama, it still has no executive director, raising questions about the
administration’s commitment to truly holding the banks accountable. The longer
it takes to do an investigation, the longer it will take to secure verdicts or
settlements that would include money for further antiforeclosure efforts.
Because the banks held off on foreclosure while the settlement was being
negotiated, reclosure filings are set to rise in the coming year to more than
two million. That means more pain for struggling homeowners — and the economy.
By this point, homeowners should be inundated with relief, not still anxiously
awaiting help.
Neither Congress, nor federal regulators, nor state or federal prosecutors have
yet to conduct a thorough investigation into the mortgage bubble and financial
bust. We welcomed the news that the Justice Department is investigating
allegations that Standard & Poor’s purposely overrated toxic mortgage securities
in the years before the bust. We hope the investigative circle will widen.
But a lot more needs to be done to address the continuing damage from the
mortgage debacle.
Tens of millions of Americans are being crushed by the overhang of mortgage
debt. And Congress and the White House have yet to figure out that the economy
will not recover until housing recovers — and that won’t happen without a robust
effort to curb foreclosures by modifying troubled mortgage loans.
Instead of pushing the banks to do what is needed, the Obama administration has
basically urged them to do their best to help, mainly by reducing interest rates
for troubled borrowers. The banks haven’t done nearly enough. In many instances,
they can make more from fees and charges on defaulted loans than on
modifications.
The administration needs better ideas. It can start by working with Fannie Mae
and Freddie Mac, the government-run mortgage companies, to aggressively reduce
the principal balances on underwater loans and to make refinancing easier for
underwater borrowers. If the president championed aggressive action, and Fannie
and Freddie, which back most new mortgages, also made it clear to banks that
they expect principal reductions, the banks would feel considerable pressure to
go along.
The housing numbers are chilling. Sales of existing homes fell in July by 3.5
percent, while prices were down 4.4 percent in July from a year earlier. In all,
prices have declined 33 percent since the peak of the market five years ago, for
a total loss of home equity of $6.6 trillion.
There’s no letup in sight. Currently, 14.6 million homeowners owe more on their
mortgages than their homes are worth, and nearly half of them are underwater by
more than 30 percent. At present, 3.5 million homes are in some stage of
foreclosure. Nearly six million borrowers have already lost their homes in the
bust.
Reducing principal is a better solution than lowering interest rates, because it
reduces payments and restores equity. Bankers resist, because it could force
them to recognize losses they would prefer to delay. The administration has
resisted, in part because principal reductions are seen as rewarding reckless
borrowers.
But many of today’s troubled borrowers were not reckless. Rather, they are
collateral damage in a bust that has wiped out equity and hammered jobs, turning
what were reasonable debt levels into unbearable burdens.
Housing advocates and bankruptcy experts are calling for the administration to
try new approaches. One would have Fannie and Freddie urge banks to let
underwater borrowers who file for bankruptcy apply their monthly mortgage
payments to principal for five years — in effect, reducing the loan’s interest
rate to zero.
Another solution would be for Fannie and Freddie to ease the rule for
refinancing underwater mortgages for borrowers who are current in their
payments. The lower payments on refinanced loans would help to prevent defaults
and free up money for borrowers to use for paying down principal or consumer
spending.
President Obama is reportedly planning to include housing relief measures in his
new jobs plan. Unless the plan includes strong support for principal reductions
and easier refinancings, it will not get at the root of the problem: too much
mortgage debt and too little relief.
February 25, 2009
The New York Times
By JACK HEALY
Home prices in the United States plunged at the fastest pace on record in
December, a sign that housing is likely to continue declining in the months
ahead as the economy sinks deeper into recession.
Single-family home values in 20 major metropolitan areas fell 18.5 percent in
December compared with a year earlier, according to a data released Tuesday by
Standard & Poor’s Case-Shiller home price index. Housing prices dropped 2.5
percent from November to December.
Nationwide, housing prices in the last three months of 2008 sank to their lowest
levels since the third quarter of 2003.
Prices fell in all of the 20 cities surveyed by Case-Shiller, but the declines
were starkest in Phoenix and Las Vegas as well as much of Florida and Southern
California, where development has all but dried up.
“The Sun Belt continues to get hardest hit in terms of just about any measure,”
said David M. Blitzer, chairman of Standard & Poor’s index committee.
Prices in Phoenix fell 5.1 percent in December alone, and were down 34 percent
since December 2007. In Las Vegas, which was recently rated “America’s emptiest
city” by Forbes magazine, prices dropped 4.8 percent in December and were down
33 percent for the year.
The declines for 2008 were shallowest in Dallas and Denver, where prices fell
about 4 percent.
Housing prices are now falling so quickly that economists worried that potential
buyers will stay on the sidelines and wait for the market to deteriorate
further, reinforcing the downward momentum.
“It’s a deflationary spiral,” said Dan Greenhaus, an analyst in the equity
strategy division of Miller Tabak & Company. “Prices go down, people hold back,
prices go down further, people hold back, and so on and so forth.” Although
houses are now cheaper and mortgage rates have fallen to 5.22 percent from 6.10
percent about a year ago, the rapidly deteriorating economy and rising
unemployment have scared off potential buyers, economists said. The unemployment
rate has risen to 7.6 percent nationwide, and the economy is shedding more than
500,000 jobs every month.
“We continue to believe that it is unlikely that we are anywhere near a bottom
in nationwide home prices,” Joshua Shapiro, chief United States economist at
MFR, wrote in a note.
Since the recession began in December 2007, the pace of declines in housing
prices has accelerated as the financial crisis spread and unemployment rose.
According to the National Association of Realtors, the country’s median home
price was $175,400 in December, down nearly 25 percent from its peak of $230,100
in July 2006.
The two-year decline in real-estate prices followed more than a decade of steady
growth in home prices.
January 29, 2009
Filed at 11:34 a.m. ET
The New York Times
By THE ASSOCIATED PRESS
WASHINGTON (AP) -- Sales of new homes plunged to the slowest
pace on record last month as the hobbled homebuilding industry posted its worst
annual sales results in more than two decades.
The Commerce Department said Thursday that new home sales fell 14.7 percent in
December to a seasonally adjusted annual rate of 331,000, from a downwardly
revised November figure of 388,000.
''This is an awful report...Builders just can't cut back fast enough, so prices
remain under downward pressure,'' Ian Shepherdson, chief U.S. economist for High
Frequency Economics, wrote in a research note.
December's sales pace was the lowest on records dating back to 1963. Economists
surveyed by Thomson Reuters had expected sales would fall to a rate of 400,000
homes.
For 2008, builders sold 482,000 homes, the weakest results since 1982, when
412,000 homes were sold.
The median price of a new home sold in December was $206,500, a drop of 9.3
percent from a year ago. The median is the point where half the homes sold for
more and half for less.
Builders have been forced to slash production during a prolonged and severe
slump in housing that has seen sales and prices plummet. December's sales
activity was depressed by the worst financial crisis in seven decades, which has
made it harder for potential buyers to get mortgage loans.
The inventory of unsold new homes stood at a seasonally adjusted 357,000 in
December, down 10 percent from November. But at the current sales pace, it would
take a more than a year to exhaust the stock as houses are dumped onto a market
already glutted by a tide of foreclosures.
''The inventory of unsold new homes is still too high,'' wrote Joshua Shapiro,
chief U.S. economist at MFR Inc. ''Prices need to fall further to stimulate
sufficient demand to begin to balance the market.''
The sales weakness in December reflected a 28 percent drop in the Northeast and
a 20 percent drop in the West. The South and Midwest posted smaller declines of
12 percent and almost 6 percent, respectively.
Earlier this month, a key gauge of homebuilders' confidence sank to a new record
low, as the deepening U.S. recession and rising unemployment erode chances for a
housing turnaround.
Sales of existing homes, however, posted an unexpected increase last month, as
consumers snapped up bargain-basement foreclosures in California and Florida.
Sales of existing homes rose 6.5 percent from November's pace, the National
Association of Realtors said Monday.
British house prices tumbled at a record 16.1 per cent in November, marking
the sharpest drop in property values for a quarter of a century.
Figures released this morning by Halifax revealed that prices fell 2.6 per cent
in November compared with October, and are 16.1 per cent lower than in November
2007.
The year-on-year decline is deeper than falls recorded during the last recession
in the early 1990s, and is the biggest drop since 1983.
The shock fall emerged just hours before the Bank of England's Monetary Policy
Commitee (MPC) cut the interest rate again by 1 per cent to 2 per cent, after
last month reducing borrowing costs by 1.5 per cent to 3 per cent.
The reduction is likely to be accompanied by a rate cut by the European Central
Bank, which is predicted to fall by 50 basis points in the 15-nation eurozone.
Howard Archer, chief UK and European economist at IHS Global Insight, said:
"Ongoing very tight credit conditions, still relatively stretched housing
affordability on a number of measures, faster rising unemployment, muted income
growth and widespread expectations that house prices form a powerful set of
negative factors are weighing down on the housing market."
The average price of a house in the UK is back to the July 2005 level of
£163,445, but this is 124 per cent higher — or £90,000 — than the figure in
November 1998.
Mr Archer said Halifax's figures had placed further, last-minute pressure on the
Bank to deliver a large cut in rates.
IHS Global Insight predicted that interest rates would fall as low as 0.5 per
cent in the first half of the new year, and could be reduced even further.
Central banks around the world have cut interest rates ahead of today's moves.
Sweden's central bank today cut its key rate by a record 175 basis points, to 2
per cent, the third reduction since October and the biggest since 1992. It
expects rates to remain at 2 per cent throughout next year.
The Riksbank said there was an "unexpectedly rapid and clear deterioration in
economic activity since October".
New Zealand also announced a record cut of 150 basis points, bringing its rate
down to a five-year low of 5 per cent and acknowledging that further cuts would
probably be necessary.
Indonesia made a surprise 25 basis-point cut to its rate. This reduction, the
first since December last year, takes the interest rate to 9.25 per cent.
Yesterday, the Bank of Thailand cut rates by 100 basis points to 2.75 per cent,
partly in response to the recent political turmoil during which the ruling party
was dissolved and the Prime Minister forced out of office.
On Tuesday, the Reserve Bank of Australia surprised with a
larger-than-anticipated 100 basis-point cut to 4.25 per cent.
But Mr Archer added that: "...it is highly questionable how much of further
interest rate cuts by the Bank of England that mortgage lenders would pass on."
Yesterday, Gordon Brown unveiled a rescue package for homeowners who struggle to
meet their mortgage repayments if they lose their jobs or suffer a severe drop
in income.
Those with loans of up to £400,000 — typically borrowers on upper and middle
incomes — will be able to cut payments, with the taxpayer underwriting the risk
of default.
The emergency state guarantee, which will enable homeowners to defer mortgage
interest payments for up to two years, was announced unexpectedly in the debate
following the Queen's Speech yesterday.
The Prime Minister said eight big lenders which account for 70 per cent of the
market — HBOS, Abbey, Nationwide, Lloyds TSB, Northern Rock, Barclays, Royal
Bank of Scotland and HSBC — had signed up to the £1 billion plan.
Northern Rock, the nationalised lender, yesterday announced that it would follow
Royal Bank of Scotland (RBS) in delaying the issue of repossession orders by six
months.
RBS announced that it was taking the same measure on Monday.
Thu Oct 30, 2008
7:54am EDT
Reuters
By Lisa Baertlein
THOUSAND OAKS, Calif (Reuters) - A memento with Depression-era
humor helps Kristin Bertrand keep perspective as her family braces for a
Christmas holiday without their home.
The small ceramic dish she keeps from her grandfather reads: "Cheer up, things
could be worse." Then, in smaller type: "So I cheered up and sure enough things
got worse."
Just a few years ago, Kristin and her husband Mike Bertrand, 36, were confident
they owned their own piece of the American dream. They pulled in $140,000 a
year, owned a house, two cars, a telescope and other gadgets, and had season
tickets to Disneyland for their two kids.
But since they lost their home in May, the Bertrands live in a sparsely
furnished rental in Thousand Oaks, California, and have cut expenses to the
bone.
They've sold Kristin's set of wedding rings, given up a car and the Disneyland
passes to get back on their feet. The dish, taken when Kristin's 90-year-old
grandfather moved to a nursing home, sits on the mantel as a reminder.
"It's going to be a lean holiday for us," said Kristin, 36, who said the family
has put plans to visit relatives in Idaho on the back burner. "I think this year
we need to lay low."
Adding to their worries as the holidays approach, Mike just learned that his
consulting contract, the family's main income, will not be renewed at the end of
October.
The Bertrands' story will be played out in many versions across the United
States this holiday season, where several hundred thousand people who lost their
homes to foreclosure try to redefine how they celebrate with their families.
For the Bertrands, and others, past splurges for special occasions have already
been cut out of the household budget.
The Bertrands have kept their 13-year-old daughter McKaylee and 10-year-old son
Taylor in the loop about their financial troubles all along. The kids have long
stopped asking for money for clothes or fund-raisers, they said.
While the family had once taken McKaylee and a friend to Disneyland to celebrate
her birthday, her latest party was held at home with a borrowed karaoke machine
and a jump rope that guests fashioned from glow-in-the-dark necklaces.
NOT JUST A NUMBER
More than one million U.S. homes were lost in foreclosure from the beginning of
2007 through the end of September this year, according to RealtyTrac. Credit
Suisse estimates 6.5 million loans will fall into foreclosure over the next five
years, with the peak coming this year.
Families who have already lived through the worst of their financial troubles --
due to inflated monthly mortgage payments, the plunge in U.S. home values, or
layoffs -- have prepared for a low-key holiday.
But even people who have not fallen into dire straits expect to tone it down
this year, frightened by a plunge in financial markets that has wiped out
trillions of dollars of asset values and raised the prospect of a global
recession.
Six times as many people say they will cut back on gift-buying as those who plan
to spend more, according to a recent Reuters/Zogby poll. U.S. retailers are
bracing for their most dismal holiday sales season in nearly two decades.
Virginia Washington, a 64-year-old grandmother to 10, is already planning a more
frugal holiday as she struggles to make payments on the $207,000 loan on her
dream retirement home in Tolleson, Arizona, which is now worth about $150,000.
"The spirit will be there, though many of the things you've gotten used to over
the years may not be," she said.
Counselors who help people through the foreclosure process say that many
families just aren't making holiday plans.
"They're not as concerned about what they're going to do for the holidays, it's
more about what they're going to do to keep the home," said MaryEllen De Los
Santos, a housing counseling coordinator with the Adams County Housing Authority
in Commerce City, Colorado.
One outlier is Ann Neukomm, 57, a receptionist from Cape Coral, Florida, who
filed for bankruptcy in May and now faces foreclosure on a mortgage she took out
about two years ago.
She's thinking about using a small inheritance from her father to take her
17-year-old son on a holiday cruise.
"I'd like to do something with him because it's probably going to be the last
time," Neukommm said, referring to her son's 18th birthday, a time when many
American teenagers stop living with their parents.
De Los Santos, the housing counselor, said that in the past, families in trouble
would pour into her office at the beginning of each year. Many of them could not
make mortgage payments because they spent too much on the holidays.
Now she expects more people won't even make it to the holidays to overspend, and
predicts a flood of cases starting in early December.
One question De Los Santos asks clients is: "Do you want to have this kind of
Christmas, or to you want to spend next Christmas in your home?"
FINANCIAL SPIRAL
Archstone Consulting Chief Executive Todd Lavieri said his biggest concern is
unemployment and job insecurity. The United States has lost more than 700,000
jobs since January and experts are bracing for massive layoffs ahead.
"Saving your money to save your house will have a direct impact on holiday
spending, no question about it," said Lavieri, whose group expects this year's
holiday sales to contract when adjusted for inflation.
The Bertrands' plight began when Mike lost his job in 2007. He has worked since,
but always for lower pay.
"I was working, but I was making less money. I kept fighting and struggling to
catch up," Mike said.
In February, he lost a second job. "That was pretty much the final nail in the
coffin," said Mike.
"The fear was overwhelming," Kristin said of the foreclosure saga, which left
her feeling guilty and helpless.
While the family was not required to make mortgage payments during the year that
the Newbury Park house they bought in 2001 was in foreclosure, Mike and Kristin
said nothing felt as good as making their first payment on their rental.
"It was the best therapy," said Mike.
The couple started a support group called Moving Forward
(http://wearemovingforward.org/) to help others manage the emotional toll of
foreclosure. They worry that the holidays will pile additional stress on
families already struggling to keep their heads above water.
"We need to get through it without any casualties," Kristin said.
October 29, 2008
The New York Times
By MICHAEL M. GRYNBAUM
The beleaguered housing market found little relief in August
as home prices across the country dropped at yet another record pace, according
to a closely watched survey released Tuesday.
Home prices in 20 cities fell 16.6 percent in August compared with a year ago,
the biggest annual drop in the history of the Case-Shiller Home Price Index,
released by Standard & Poor’s, the ratings agency.
Every city included in the survey experienced a drop in prices from a year
earlier, a trend that has so far lasted five months. Phoenix and Las Vegas were
hit hardest, with prices down 31 percent in both cities. Prices declined more
than 25 percent in Los Angeles, Miami, San Diego and San Francisco.
Prices dropped a percentage point between August and July, a sign that the pace
of the decline may be slowing slightly. Only two cities — Cleveland and Boston —
had price increase for the month, compared with six in July. Prices were
unchanged in Chicago and Denver.
“The downturn in residential real estate prices continued, with very few bright
spots in the data,” David M. Blitzer, who oversees the survey, said in a
statement.
A 10-city index fell 17.7 percent year-over-year.
The housing slump has continued unabated for months, and its consequences can be
felt throughout the nation’s economy. It has led to the erosion of jobs, pain in
a number of housing-related industries, and, in part, the credit crisis that
caused the collapse of several Wall Street banks. Whirlpool, the appliance
maker, announced more layoffs and additional plants closings on Tuesday, citing
the housing slowdown. Households have also watched their home equity lines
deteriorate.
Lower prices, however, are in some sense the key to recovery, economists said,
although prices may need to fall further to lure buyers back into a market
sagging with unsold inventory.
Sales also appeared to pick up slightly in September, according to reports from
the Commerce Department and the private National Association of Realtors. Sales
of both previously owned and newly reconstructed homes rose. But inventories
remained elevated.
Housing woes are just one of the problems currently ailing the American
consumer, a fact driven home by a disastrous reading on consumer confidence
released on Tuesday by the Conference Board, a private group.
The confidence survey, which dates back decades, plunged to its lowest reading
on record, hitting 38.0 in October from 61.4 in September. Expectations are also
at an all-time low.
The enormous declines in the stock market last month appeared to have taken a
dramatic toll on sentiment among Americans. Nearly half of the 5,000 consumers
surveyed said they expected the job market to deteriorate further, and many
appeared worried about their ability to make purchases over the next few months.
“These moves are likely to have at least partially been driven by the worrying
news flow on the U.S. financial system, but it appears to be the labor market
that is the source of the bulk of the worries,” James Knightley, an economist at
ING Bank, wrote in a research note.
October 19, 2008
The New York Times
By DAVID STREITFELD
and GRETCHEN MORGENSON
SAN ANTONIO — A grandson of Mexican immigrants and a former mayor of this
town, Henry G. Cisneros has spent years trying to make the dream of
homeownership come true for low-income families.
As the Clinton administration’s top housing official in the mid-1990s, Mr.
Cisneros loosened mortgage restrictions so first-time buyers could qualify for
loans they could never get before.
Then, capitalizing on a housing expansion he helped unleash, he joined the
boards of a major builder, KB Home, and the largest mortgage lender in the
nation, Countrywide Financial — two companies that rode the housing boom,
drawing criticism along the way for abusive business practices.
And Mr. Cisneros became a developer himself. The Lago Vista development here in
his hometown once stood as a testament to his life’s work.
Joining with KB, he built 428 homes for low-income buyers in what was a
neglected, industrial neighborhood. He often made the trip from downtown to ask
residents if they were happy.
“People bought here because of Cisneros,” says Celia Morales, a Lago Vista
resident. “There was a feeling of, ‘He’s got our back.’ ”
But Mr. Cisneros rarely comes around anymore. Lago Vista, like many communities
born in the housing boom, is now under stress. Scores of homes have been
foreclosed, including one in five over the last six years on the community’s
longest street, Sunbend Falls, according to property records.
While Mr. Cisneros says he remains proud of his work, he has misgivings over
what his passion has wrought. He insists that the worst problems developed only
after “bad actors” hijacked his good intentions but acknowledges that “people
came to homeownership who should not have been homeowners.”
They were lured by “unscrupulous participants — bankers, brokers, secondary
market people,” he says. “The country is paying for that, and families are hurt
because we as a society did not draw a line.”
The causes of the housing implosion are many: lax regulation, financial
innovation gone awry, excessive debt, raw greed. The players are also varied:
bankers, borrowers, developers, politicians and bureaucrats.
Mr. Cisneros, 61, had a foot in a number of those worlds. Despite his qualms, he
encouraged the unprepared to buy homes — part of a broad national trend with
dire economic consequences.
He reflects often on his role in the debacle, he says, which has changed
homeownership from something that secured a place in the middle class to
something that is ejecting people from it. “I’ve been waiting for someone to put
all the blame at my doorstep,” he says lightly, but with a bit of worry, too.
The Paydays During the Boom
After a sex scandal destroyed his promising political career and he left
Washington, he eventually reinvented himself as a well-regarded advocate and
builder of urban, working-class homes. He has financed the construction of more
than 7,000 houses.
For the three years he was a director at KB Home, Mr. Cisneros received at least
$70,000 in pay and more than $100,000 worth of stock. He also received $1.14
million in directors’ fees and stock grants during the six years he was a
director at Countrywide. He made more than $5 million from Countrywide stock
options, money he says he plowed into his company.
He says his development work provides an annual income of “several hundred
thousand” dollars. All told, his paydays are modest relative to the windfalls
some executives netted in the boom. Indeed, Mr. Cisneros says his mistake was
not the greed that afflicted many of his counterparts in banking and housing; it
was unwavering belief.
It was, he argues, impossible to know in the beginning that the federal push to
increase homeownership would end so badly. Once the housing boom got going, he
suggests, laws and regulations barely had a chance.
“You think you have a finely tuned instrument that you can use to say: ‘Stop!
We’re at 69 percent homeownership. We should not go further. There are people
who should remain renters,’ ” he says. “But you really are just given a
sledgehammer and an ax. They are blunt tools.”
From people dizzily drawing home equity loans out of increasingly valuable
houses to banks racking up huge fees, few wanted the party to end.
“I’m not sure you can regulate when we’re talking about an entire nation of 300
million people and this behavior becomes viral,” Mr. Cisneros says.
Homeownership has deep roots in the American soul. But until recently getting a
mortgage was a challenge for low-income families. Many of these families were
minorities, which naturally made the subject of special interest to Mr.
Cisneros, who, in 1993, became the first Hispanic head of the Department of
Housing and Urban Development.
He had President Clinton’s ear, an easy charisma and a determination to increase
a homeownership rate that had been stagnant for nearly three decades.
Thus was born the National Homeownership Strategy, which promoted ownership as
patriotic and an easy win for all. “We were trying to be creative,” Mr. Cisneros
recalls.
Under Mr. Cisneros, there were small and big changes at HUD, an agency that
greased the mortgage wheel for first-time buyers by insuring billions of dollars
in loans. Families no longer had to prove they had five years of stable income;
three years sufficed.
And in another change championed by the mortgage industry, lenders were allowed
to hire their own appraisers rather than rely on a government-selected panel.
This saved borrowers money but opened the door for inflated appraisals. (A later
HUD inquiry uncovered appraisal fraud that imperiled the federal mortgage
insurance fund.)
“Henry did everything he could for home builders while he was at HUD,” says
Janet Ahmad, president of Homeowners for Better Building, an advocacy group in
San Antonio, who has known Mr. Cisneros since he was a city councilor. “That
laid the groundwork for where we are now.”
Mr. Cisneros, who says he has no recollection that appraisal rules were relaxed
when he ran HUD, disputes that notion. “I look back at HUD and feel my hands
were clean,” he says.
Lenders applauded two more changes HUD made on Mr. Cisneros’s watch: they no
longer had to interview most government-insured borrowers face to face or
maintain physical branch offices. The industry changed, too. Lenders sprang up
to serve those whose poor credit history made them ineligible for lower-interest
“prime” loans. Countrywide, which Angelo R. Mozilo co-founded in 1969, set up a
subprime unit in 1996.
Mr. Cisneros met Mr. Mozilo while he was HUD secretary, when Countrywide signed
a government pledge to use “proactive creative efforts” to extend homeownership
to minorities and low-income Americans.
He met Bruce E. Karatz, the chief executive of KB Home, when both were helping
Los Angeles rebuild after the Northridge earthquake in 1994.
There were real gains during the Clinton years, as homeownership rose to 67.4
percent in 2000 from 64 percent in 1994. Hispanics and African-Americans were
the biggest beneficiaries. But as the boom later gathered steam, and as the Bush
administration continued the Clinton administration’s push to amplify
homeownership, some of those gains turned out to be built on sand.
Mr. Cisneros left government in 1997 after revelations that he had lied to
federal investigators about payments to a former mistress. In the following
years, HUD continued to draw attention in the news media and among consumer
advocates for an overly lenient posture toward the housing industry.
In 2000, Mr. Cisneros returned to San Antonio, where he formed American
CityVista, a developer, in partnership with KB, and became a KB director. KB’s
board also included James A. Johnson, a prominent Democrat and the former chief
executive of Fannie Mae, the mortgage giant now being run by the government. Mr.
Johnson did not return a phone call seeking comment.
It made for a cozy network. Fannie bought or backed many mortgages received by
home buyers in the KB Home/American CityVista partnership. And Fannie’s biggest
mortgage client was Countrywide, whose board Mr. Cisneros had joined in 2001.
Because American CityVista was privately held, Mr. Cisneros’s earnings are not
disclosed. He held a 65 percent stake, and KB had the rest. In 2002, KB paid
$1.24 million to American CityVista for “services rendered.”
‘A Little Too Ambitious’
One of American CityVista’s first projects, unveiled in late 2000, was Lago
Vista — Spanish for “Lake View.” The location was unusual: San Antonio’s proud
and insular South Side, a Hispanic area home to secondhand car dealers, light
industry and pawnshops.
Mr. Cisneros and KB pledged to transform an overgrown patch of land into a
showcase. Homes were initially priced from $70,000 to about $95,000, and Mr.
Cisneros promised that Lago Vista would be ringed with jogging paths and maple
trees.
The paths were never built, and few trees provide shade from the Texas sun. The
adjoining “lake” — at one point a run-off pit for an asphalt plant — is fenced
off, a hazard to neighborhood children. The houses are gaily painted in pink,
blue, yellow or tan, and most owners keep their yards green and tidy.
KB considers Lago Vista a “model community,” a spokeswoman said.
To get things rolling in Lago Vista, traditional bars to homeownership were
lowered to the ground. Fannie Mae, CityVista and KB promoted a program allowing
police officers, firefighters, teachers and others to get loans with nothing
down and no closing costs.
KB marketed its developments in videos. In one from 2003, Mr. Karatz declared:
“One of the greatest misconceptions today is people who sit back and think, ‘I
can’t afford to buy.’ ” Mr. Cisneros appeared — identified as a former HUD
director — saying the time was ripe to buy a home. Many agreed.
Victor Ramirez and Lorraine Pulido-Ramirez bought a house in Lago Vista in 2002.
“This was our first home. I had nothing to compare it to,” Mr. Ramirez says. “I
was a student making $17,000 a year, my wife was between jobs. In retrospect,
how in hell did we qualify?”
The majority of buyers in Lago Vista “were duped into believing it was easier
than it was,” Mr. Ramirez says. “The attitude was, ‘Sign here, sign here, don’t
read the fine print.’ ” He added that some fault lay with buyers: “We were
definitely willing victims.” (The Ramirez family veered close to foreclosure,
but the couple now have good jobs and can make their payments.)
KB and Mr. Cisneros eventually built more than a dozen developments, primarily
in Texas. But the shine slowly came off Lago Vista.
“It started off fabulously,” Mr. Karatz recalled. Then sales slowed
considerably. “It was probably, looking back, a little too ambitious to think
that there would be sufficient local demand.”
And then the foreclosures started. “A lot of people got approved for big
amounts,” says Patricia Flores, another Lago Vista homeowner. “They bit off more
than they could chew.” Families split up under the strain of mortgage payments.
One residence had so much marital turmoil that neighbors nicknamed it “The House
of Broken Love.”
Some homes were taken over and sold at a loss by HUD, which had insured them. KB
was also a mortgage lender, a business many home builders pursued because it was
so profitable. At times, it was also problematic.
Officials at HUD uncovered problems with KB’s lending. In 2005, about two years
after Mr. Cisneros left the KB board, the agency filed an administrative action
against KB for approving loans based on overstated or improperly documented
borrower income, and for charging excessive fees. Because HUD does not specify
where improprieties take place, it is not clear if this occurred at Lago Vista.
KB Home paid $3.2 million to settle the HUD action without admitting liability
or fault, one of the largest settlements collected by the agency’s mortgagee
review board. Shortly afterward, KB sold its lending unit to Countrywide. Then
they set up a joint venture: KB installed Countrywide sales representatives in
its developments.
By 2007, almost three-quarters of the loans to KB buyers were made by the joint
venture. In Lago Vista, residents secured loans from a spectrum of federal
agencies and lenders.
During years of heady growth, and then during a deep financial slide,
Countrywide became a lightning rod for criticism about excesses and abuses
leading to the housing bust — which Countrywide routinely brushed off.
Mr. Cisneros says he was never aware of improprieties at KB or Countrywide, and
worked with them because he was impressed by Mr. Karatz and Mr. Mozilo. Mr.
Mozilo could not be reached for comment.
Still, Countrywide expanded subprime lending aggressively while Mr. Cisneros
served on its board. In September 2004, according to documents provided by a
former employee, lending audits in six of Countrywide’s largest regions showed
about one in eight loans was “severely unsatisfactory” because of shoddy
underwriting.
HUD required such audits and lenders were expected to address problems. Mr.
Cisneros was a member of the Countrywide committee that oversaw compliance with
legal and regulatory requirements. But he says he did not recall seeing or
receiving the reports.
Nor, he says, was there ever a board vote about the wisdom of subprime lending.
“The irresistible temptation to engage in subprime was Countrywide’s fatal
error,” he says. “I fault myself for not having seen it and, since it was not
something I could change, having left.”
Mr. Cisneros left Countrywide’s board last year. At the time, he expressed
“enormous confidence in the leadership.” In 2003, Mr. Cisneros ended his
partnership with KB because, he says, he felt constrained working with just one
builder. He formed a new company with the same mission, CityView, that has
raised $725 million.
Mr. Karatz has a different recollection of why the partnership ended.
“It didn’t become an important part of KB’s business,” he says. “It was
profitable but I don’t think as profitable in those initial years as Henry’s
group wanted it to be.”
Troubles in Lago Vista
Today in Lago Vista, many are just trying to get by. Residents say crime has
risen, and with association dues unpaid, they cannot hire security. Salvador
Gutierrez, a truck driver, woke up recently to see four men stealing the tires
off his pickup. Seventeen houses are for sale, but there are few buyers.
Hugo Martinez, who got a pair of Countrywide loans to buy a two-bedroom house
with no down payment, recently lost his job with a car dealership. He has a
lower-paying job as a mechanic and can’t refinance or sell his house.
“They make it easy when you buy,” Mr. Martinez says. “But after a while, the
interest rate goes up. KB Home says they cannot help us at all.”
Five years ago, Carlo Lee and Patricia Reyes bought their first home, a
three-bedroom house in Lago Vista.
After Mrs. Reyes became ill last year and lost her job, they fell behind on
their payments. Last month, Mr. Reyes was laid off from one of his jobs,
assembling cabinets. He still works part time at a hospital, but unless the
couple come up with missed payments and fees, they will lose their home.
“Everyone isn’t happy here in Lago Vista,” Mr. Reyes says. “Everyone has a lot
of problems.”
Countrywide was bought recently at a fire-sale price by Bank of America. Mr.
Cisneros describes Mr. Mozilo as “sick with stress — the final chapter of his
life is the infamy that’s been brought on him, or that he brought on himself.”
Mr. Karatz was forced out of KB two years ago amid a compensation scandal. Last
month, without admitting or denying the allegations, he settled government
charges that he illegally backdated stock options worth $6 million.
For his part, Mr. Cisneros says he is proud of Lago Vista. “It is inaccurate to
say that we put people into homes that they couldn’t afford,” he says. “No one
was forcing people into homes.”
He also remains bullish on home building, despite the current carnage.
“We’re not selling cigarettes,” he says. “We’re not drawing people into casino
gambling. We’re building the homes they’re going to raise their families in.”
October 16,
2008
The New York Times
By VIKAS BAJAJ
The
American housing market, where the global economic crisis began, is far from
hitting bottom.
Home prices across much of the country are likely to fall through late 2009,
economists say, and in some markets the trend could last even longer depending
on the severity of the anticipated recession.
In hard-hit areas like California, Florida and Arizona, the grim calculus is the
same: More and more homes are going up for sale, but fewer and fewer people are
willing or able to buy them.
Adding to the worries nationwide are rising unemployment, falling wages and
escalating mortgage rates — all of which will reduce the already diminished pool
of would-be buyers.
“The No. 1 thing that drives housing values is incomes,” said Todd Sinai, an
associate professor of real estate at the Wharton School at the University of
Pennsylvania. “When incomes fall, demand for housing falls.”
Despite the government’s move to bolster the banking industry, home loan rates
rose again on Tuesday, reflecting concern that the Treasury will borrow heavily
to finance the rescue.
On Wednesday, the average rate for 30-year fixed rate mortgages was 6.75
percent, up from 6.06 percent last week. While banks are moving aggressively to
sell foreclosed properties, the number of empty homes is hovering near its
highest level in more than half a century.
As of June, 2.8 percent of homes previously occupied by an owner were vacant.
Nearly 1 in 10 rentals was without a tenant. Both numbers are near their highest
levels since 1956, the earliest year for which the Census Bureau has such data.
At the same time, the number of people who are losing jobs or seeing their
incomes decline is rising. The unemployment rate has climbed to 6.1 percent,
from 4.4 percent at the end of 2007, and wages for those who still have a job
have barely kept up with inflation.
In New York and other cities that rely heavily on the financial sector,
economists expect that job losses will increase and that pay heavily tied to
year-end bonuses will decline significantly.
One reliable proxy of housing values — the ratio of home prices to rents —
indicates that in many cities prices are still too high relative to historical
norms.
In Miami, for instance, home prices are about 22 times annual rents, according
to analysis by Moody’s Economy.com. The average figure for the last 20 years is
just 15 times annual rents. The difference between those two numbers suggests
that a home valued at $500,000 today might be worth only $341,000 based on the
long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium
home buyers place on owning rather than renting, spiked across the country
earlier this decade.
It increased the most on the coasts and somewhat less in the middle of the
country. Economy.com’s calculations show that while it remains elevated in many
places, the ratio has fallen sharply to more normal levels in places like
Sacramento, Dallas and Riverside, Calif.
The current housing downturn is much more national in scope and severe than any
other in the postwar period, partly because of the proliferation of risky
lending practices. Today, foreclosures are running ahead of the downturn in the
economy, a reversal of previous housing slumps.
“We are in uncharted waters,” said Brian A. Bethune, an economist at Global
Insight, a research firm.
Colleen Pestana, a real estate agent in Orange County in California, said many
people losing their homes in Southern California used to work at mortgage and
real estate companies. Many of them bet heavily on real estate by upgrading to
bigger houses every few years. Now, many are losing their homes.
At the same time, Ms. Pestana said, her clients who are looking to buy are
having a harder time lining up financing. One of her clients recently had to
give up on a home after the lender that had offered a pre-approved loan changed
its mind — a frequent occurrence, according to real estate agents and mortgage
brokers.
“I am working harder than I have ever had to work to get a deal together and
keep it together,” said Ms. Pestana, who has been a real estate agent for seven
years.
To cushion themselves from potential losses if homes lose value, Fannie Mae and
Freddie Mac, the mortgage finance companies that the government took over in
September, have increased fees on loans made to borrowers who have good but not
excellent credit records, even those who are making down payments as big as 30
percent.
Those higher fees are generally invisible to borrowers because banks factor them
into mortgage interest rates. While the national average rate for a 30-year
fixed-rate mortgage is now 6.75 percent, according to HSH Associates, mortgage
brokers say the rates for many borrowers in the Southwest or Florida can be as
high as 8 percent, especially for so-called jumbo loans that are too big to be
sold to Fannie Mae and Freddie Mac. (Those loan limits vary by area from
$417,000 to roughly $650,000.)
Higher interest rates result in bigger monthly payments, pricing some potential
buyers out of the market. For example, monthly payments are $2,700 on a 6
percent 30-year, fixed-rate loan of $450,000. If the interest rate rises to 7
percent, those monthly payments jump to $3,000. All things being equal, when
rates rise prices generally fall.
This month, Fannie and Freddie canceled a fee increase that would have applied
to markets where home prices are falling, but the companies still have many
other fees in place. In an effort to help drive down rates, the Treasury
Department has announced plans to buy mortgage-backed securities issued by
Fannie and Freddie. The government also recently increased the amount of loans
the companies can buy and hold.
Still, those efforts will take time to have an impact and it is not clear
whether they will be sufficient to get banks to lend more freely, especially in
areas where jumbo loans make up a bigger percentage of lending, like New York
and parts of California and Florida. Economists say that prices in those places
will probably fall further.
In some of those places, price declines are being driven by a sharp increase in
sales of foreclosed homes.
Hudson & Marshall, a Dallas-based auctioneer that holds sales for lenders,
reports that banks are accepting prices that they refused to consider just 12
months earlier. In a recent auction of 110 foreclosed homes in the Las Vegas
area, for instance, the auctioneer’s clients accepted 90 percent of the bids
submitted by buyers, up from 60 percent a year earlier, said David T. Webb, a
co-owner of the company.
Single-family home prices in Las Vegas have already fallen 34 percent from their
peak in the summer of 2006, according to the Standard & Poor’s Case-Shiller home
price index. Prices in San Diego have fallen 31 percent since late 2005.
While those declines have been painful to homeowners in those cities, economists
said the quick decline might help the markets reach bottom faster than in
previous housing cycles, said Edward E. Leamer, an economist at the University
of California, Los Angeles. In a previous boom, home prices peaked in the Los
Angeles area in 1990 but did not hit bottom until 1996. Prices remained near
that low for more than a year before starting to climb again.
“In some areas of California, we are really at appropriate levels,” Mr. Leamer
said of current home prices. But he added: “The risk is that we are going to get
some overshooting, meaning that prices will be lower than they ought to be.”
In Florida, Jack McCabe, a real estate consultant, said that while some cities,
like Fort Myers, are showing tentative signs of a rebound, others like Miami and
Fort Lauderdale are still under pressure. Two homes on his street in Fort
Lauderdale that sold for about $730,000 apiece in 2005 recently sold for
$400,000 — a 44 percent decline.
“The rocket has run out of fuel, and now it’s plunged back down to earth,” he
said.
WASHINGTON -- President George W. Bush on Wednesday signed a massive housing
bill intended to provide mortgage relief for 400,000 struggling U.S. homeowners
and to stabilize financial markets.
Mr. Bush signed the bill without any fanfare or signing ceremony, affixing his
signature to the measure he once threatened to veto in the White House's Oval
Office in the early morning hours. He was surrounded by top administration
officials, including Treasury Secretary Henry Paulson and Housing Secretary
Steve Preston.
"We look forward to put in place new authorities to improve confidence and
stability in markets," White House spokesman Tony Fratto said. He added that the
Federal Housing Administration would begin right away to implement new policies
"intended to keep more deserving American families in their homes."
The measure, regarded as the most significant U.S. housing legislation in
decades, lets homeowners who cannot afford their payments refinance into more
affordable government-backed loans rather than losing their homes. It offers a
temporary financial lifeline to troubled mortgage companies Fannie Mae and
Freddie Mac, and tightens controls over the two government-sponsored businesses.
The House of Representatives passed the bill a week ago; the Senate voted
Saturday to send it to the president.
Mr. Bush didn't like the version emerging from Congress, and initially said he
would veto it, particularly over a provision containing $3.9 billion in
neighborhood grants. He contended the money would benefit lenders who helped
cause the mortgage meltdown, encouraging them to foreclose rather than work with
borrowers. But he withdrew that threat early last week, saying hurting
homeowners couldn't wait -- and even blaming the Democratic Congress' delays in
action for forcing an imperfect solution.
Meanwhile, many Republicans, particularly those from areas hit hardest by
housing woes, were eager to get behind a housing rescue as they looked ahead to
tough re-election contests. Mr. Paulson's request for the emergency power to
rescue Fannie Mae and Freddie Mac helped push through the measure. So did the
creation of a regulator with stronger reins on the government-sponsored
companies, which Republicans have long sought.
Democrats won cherished priorities in the bargain: the aid for homeowners, a
permanent affordable housing fund financed by Fannie Mae and Freddie Mac, and
the $3.9 billion in neighborhood grants.
March 18, 2008
The New York Times
By ALEX TABARROK
Fairfax, Va.
FEAR is ruling the financial markets. Billions of dollars have
been lost in mortgage-related investments. The Federal Reserve worked madly over
the weekend to engineer a takeover of Bear Stearns and avert a systemic
meltdown. But the big fear remains. How low will house prices go?
If prices continue to fall, mortgage defaults will move well beyond the subprime
sector. Trillions of dollars in losses for investors are not impossible. But
that doesn’t mean they are inevitable.
In 1997, inflation-adjusted house prices were close to their average levels over
the previous half-century. Only four years later, the price of the average home
nationwide exceeded anything ever seen before in the United States. Prices
continued to rise for another five years, peaking in 2006 at nearly twice the
average price in 1997 (as can be seen on the graph on the bottom right, which is
based on data collected by the Yale economist Robert Shiller). If house prices
are heading back to the levels seen in 1997, then we are facing catastrophe.
But there are good reasons to believe that much of the increase in prices was a
rational response to changes in fundamental factors like interest rates and
supply. The deeper fundamentals continue to suggest strong housing prices for
the future.
Sure, speculation did run rampant toward the end of the housing boom. (The debut
of the reality television show “Flip That House” on Discovery Home Channel,
followed shortly by “Flip This House” on A&E, was a clear sign that the boom’s
end was near.) Prices will fall further, especially in the speculative
developments built on the outskirts of the major cities. So yes, we overshot the
fundamentals.
Still, especially in coastal areas where zoning regulations have restricted the
supply of land that developers can build on, house prices were driven up by
increasing population, low interest rates and strong economic growth.
More and more people want to live on the coasts, but land is hard to come by in
places like Manhattan and San Francisco. Cities and regions built on ideas —
like Boston, Los Angeles, New York and the San Francisco Bay Area — have grown
even as areas built on manufacturing, like Detroit and the Rust Belt, have
declined. And of course, government isn’t getting any smaller, so Washington and
its suburbs, another hot spot of rising house prices during the boom, will
continue to grow.
Even in places where land seems plentiful, zoning and other land-use regulations
have made it scarce. To meet demand, we should encourage high-density
development, but homeowners fought to restrict housing supply when house prices
were increasing. Now that house prices are falling, the incentives of owners to
restrict supply are even stronger.
Several studies estimate that the average house prices of 2004 were close to
fundamental levels, so we may see prices stabilize near that level.
Granted, a catastrophe is not impossible — it did happen in Japan. House prices
shot up in Japan in the late 1980s, and by 1999 they had collapsed. The graph on
the top right, of Japanese and American house prices, does make for a worrying
comparison. (The data come from the Standard & Poor’s/Case-Shiller national home
price index and a similar index for Japan.)
But the resemblance isn’t as close as the graph makes it appear. The Japanese
run-up in home prices was faster and reached higher levels than the one in the
United States. In addition, the Japanese population at the time wasn’t growing,
and today it’s shrinking. (None of the major presidential candidates favor
drastic reductions in immigration, so population growth in the United States
will continue.) As a result of these and other problems, the Japanese economy
was moribund from 1992 to 2002, which kept housing prices low.
There are two very real problems for the housing market: tougher credit
conditions and slower growth. Here the United States faces a self-fulfilling
prophecy problem.
If the financial markets can predict where and when house prices will stabilize,
then credit conditions can quickly return to normal, the economy can expand and
house prices will indeed stabilize.
But if the financial markets remain uncertain about when the decline in house
prices will end, then fear will tighten credit even further, which would
strangle the housing market and generate even more fear.
We have nothing to fear but fear itself, but fear itself can be pretty scary.
The best way to overcome fear is to look at the long run. The typical homebuyer
keeps a home for 10 years or more, so there is time for those who bought in 2005
and 2006 to weather the current decline in prices. Those who bought at the top
are unlikely to see any windfalls from house appreciation, but they will not
necessarily suffer from buyers’ remorse. Owning a home has its advantages: the
deduction on mortgage interest is substantial and too much of a sacred cow to
ever be repealed, and there is a certain security and satisfaction to owning
your own home.
The collapse of housing prices certainly feels painful, and for some homeowners,
it will be. But the houses are still there, as good as ever. Most of the gains
going up were paper gains, and most of the losses going down are paper losses.
The strength of an economy comes, fundamentally, from what it can produce. Can
America still produce homes? Yes. Can America still produce desirable urban and
suburban areas that people are willing to pay a fortune to live in? Yes.
That’s the real bottom line. The United States has some of the most valuable
real estate in the world. Markets should not forget that.
Alex Tabarrok is a professor of economics
at George Mason University
and the
research director for the Independent Institute.
Wed Feb 20, 2008
5:37pm EST
Reuters
By Michele Gershberg
NEW YORK (Reuters) - A U.S. mortgage meltdown has its roots in lending
discrimination against African-American and Hispanic communities and requires
federal intervention to prevent it from crippling municipal services, civil
rights activist Rev. Jesse Jackson said on Wednesday.
Jackson told the Reuters Housing Summit in New York that nearly 40 percent of
subprime loans went to black and Hispanic families, many of them in districts
once shunned by discriminatory "redlining" lenders who later devised a way to
profit there by selling a flawed financial product.
"They began to stereotype and target and cluster whole communities. It's kind of
like reverse redlining," Jackson said.
Jackson estimates that nearly half of those borrowers could have been eligible
for regular loan packages, but instead were locked into mortgages that threaten
to balloon out of their ability to pay when the adjustable interest rates reset.
"It suggests that if fair lending laws had been enforced ... we would not have
had this global economic crisis," Jackson said. "But while it started by
unenforced civil rights laws, the bleeding has not stopped there. It's now
engulfing the budgets of cities and counties and states."
Jackson also said that the U.S. Department of Justice was slow to respond, if at
all, to concerns of lending discrimination.
An estimated 1.5 million subprime mortgages, traditionally targeted at borrowers
with poor credit histories, will reset to higher interest rates this year,
putting many owners at risk of losing their homes. Another 500,000 will reset in
2009, according to Federal Reserve estimates.
Jackson said the federal government should institute a halt to foreclosure
proceedings and authorize the Federal Housing Administration or another body to
start a major restructuring of subprime loans, with lower interest rates and
payments spread out over a longer period.
He also called on state attorneys general to subpoena the major lenders on their
loan practices and impose penalties on those who have violated the law.
He described President George W. Bush's plan to offer $152 billion in tax
rebates this year to fend off a possible recession as irrelevant to the needs of
home owners facing foreclosure and ignoring the cause of the crisis.
Underscoring the breadth of the real estate recession, sales of existing
homes fell in 45 states and Washington, D.C., in the last quarter of 2007, and
prices dropped in more than half the metro areas it tracks, the National
Association of Realtors said Thursday.
The slide in sales is projected to persist through the first half of this
year, and prices will likely fall throughout 2008, according to a majority of
economists surveyed last month by USA TODAY. The figures reflect job losses in
the Rust Belt states, sinking affordability in the Sunshine states and stricter
lending rules nationwide.
Nationally, home sales fell nearly 21% from October through December, compared
with the same period the year before. At the same time, the median price plunged
by a record 5.8%, to $206,200.
South Dakota was the only state where sales rose — at an impressive 8.9%. Sales
were flat in North Dakota, and no figures were available for Idaho, Indiana and
New Hampshire. John Gustafson of the South Dakota Association of Realtors
credits that state's strong industrial base, low crime rate and affordable home
prices.
The state with the sharpest quarterly sales drop — a stunning 44% — was Nevada,
which was one of the most overheated markets during the real estate boom. In Las
Vegas, the median single-family home dropped about 13% in price. That means
thousands of people who bought homes during the past couple of years with little
or no money down now owe more than their homes are worth.
Luxury condos on the Las Vegas Strip are still faring well, but the
single-family home market is "definitely treading water," says Bruce Hiatt,
owner of Luxury Realty Group, and he projects it will take up to 18 months to
recover.
"Bargain hunters are out there, but the foreclosure issue is presenting its
challenges," he says. "Buyers are reluctant to buy in neighborhoods that have
high foreclosures. They don't want empty houses next to them."
The median price — at which point half the homes cost more, half less — fell in
77 of the metro areas the NAR surveys, with at least 15 areas suffering
double-digit drops. They included Sacramento, Jackson, Miss., and the
Riverside-San Bernardino area of Southern California.
Rich Cosner of Prudential California Realty, which has offices in Riverside, San
Bernardino and Orange counties, says foreclosures are driving down prices.
"The lenders have so many foreclosures, they need to get them sold and will take
a much lower price than a normal home seller," Cosner explains, adding, "I don't
see any change in the market happening in 2008."
But all real estate is local, and prices rose in 73 other metro areas, including
11 that enjoyed double-digit gains. Atop the list: the Cumberland area of
Maryland and West Virginia, followed by Yakima, Wash., and Binghamton, N.Y.
Explaining buyers' attraction to Cumberland, Melanie Prattdimaio, a local real
estate agent, says: "People are relocating here. We have a very low crime rate.
We don't have rush-hour traffic."
January 24, 2008
Filed at 11:04 a.m. ET
The New York Times
By THE ASSOCIATED PRESS
WASHINGTON (AP) -- Sales of existing homes fell in December, closing out a
horrible year for housing in which sales of single-family homes plunged by the
largest amount in 25 years. The median home price dropped for the entire year,
the first time that has occurred in four decades.
The National Association of Realtors reported that sales of single-family homes
and condominiums dropped by 2.2 percent in December to a seasonally adjusted
annual rate of 4.89 million units.
For the year, sales of single-family homes were down by 13 percent, the biggest
drop since a 17.7 percent plunge in 1982. The median price for a single-family
home dropped 1.8 percent to $217,000.
That was the first annual price decline on records going back to 1968. Lawrence
Yun, the Realtors' chief economist, said it was likely that the country has not
experienced a decline in housing prices for an entire year since the Great
Depression of the 1930s.
The new figures underscored the severity of the slump in housing, which has been
battered for the past two years after enjoying a boom in which sales set records
for five consecutive years.
The housing bust has sent shock waves through the entire economy as defaults
have risen, resulting in multibillion-dollar loses for big financial firms whose
investments in subprime mortgages have gone sour.
There is a concern that the housing and credit troubles could be enough to push
the country into a full-blown recession. After global stock markets experienced
a sharp sell-off earlier this week, the Federal Reserve announced a bold
three-quarter point cut in a key interest rate and held out the promise of more
rate cuts to follow.
The Bush administration and congressional leaders are trying to quickly wrap up
negotiations on a stimulus package in an effort to boost consumer and business
confidence.
For December, sales were down in all regions of the country. Sales fell by 4.6
percent in the Northeast, 1.7 percent in the Midwest, 1 percent in the South and
2.1 percent in the West.
The inventory of unsold homes dropped by 7.4 percent, raising hopes that
backlogs that had hit record levels were starting to be reduced, a key factor
necessary to prompt a rebound in the market.
While Yun said he expected sales to start to rebound this spring, other analysts
said housing is likely to remain in the doldrums throughout most of 2008,
reflecting in part the credit crunch, which has caused lenders to tighten their
standards, making it harder for prospective buyers to qualify for loans.
In other economic news, the Labor Department said Thursday that the number of
laid off workers filing claims for unemployment benefits fell for a fourth
straight week, dropping by 1,000 to 301,000.
Many economists cautioned that they still expected layoffs to start rising in
coming weeks, reflecting the sharp economic slowdown that has taken place.
The economy, after racing ahead at an annual rate of 4.9 percent in the
July-September quarter, probably slowed to a weak 1 percent rate in the final
three months of 2007 and may even fall into negative territory in the current
January-March quarter.
A recession is often defined as two consecutive quarters of falling economic
output. Many economists believe the risks of a full-blown downturn are roughly
50-50.
The growing worries about the economy in an election year have captured the
attention of President Bush and congressional leaders who are working to put
together a $150 billion economic stimulus package that will include tax relief
for households and businesses in an effort to bolster economic activity.
The drop in unemployment applications to 301,000 for the week ending Jan. 19
left total claims at the lowest level since 300,000 were recorded during the
week of Sept. 22.
For the week of Jan. 19, 36 states and territories had increases in claims while
17 had declines.
The biggest increase occurred in California, up 27,194, an upsurge blamed on
higher layoffs in construction and service industries, and Florida, with an
increase in layoffs of 8,496, which was attributed in part to higher layoffs in
construction. California and Florida have been particularly hard hit by the
housing slump.
· Tighter mortgage controls and interest rates to blame
· Professional body urges Bank to make rapid cuts
Wednesday January 16 2008
The Guardian
Angela Balakrishnan
House prices across the UK tumbled in December at the fastest
pace in more than 15 years as tighter mortgage lending and higher interest rates
pushed the property market closer to the biggest crash since the early 1990s,
the Royal Institution of Chartered Surveyors says today.
Surveyors are urging the Bank of England to cut interest rates without delay to
attract buyers and help stabilise the market. The latest monthly snapshot of the
housing market by the RICS compares the proportion of surveyors reporting a drop
in prices with those who saw the market climb. The study shows 49.1% more
surveyors reported a fall than a rise. November's level was 40.6%.
The survey offers the bleakest picture since November 1992, when the UK last saw
a severe slump in the housing market as properties shed almost 30% in value
against a backdrop of soaring interest rates.
Price falls were seen across the country, with East Anglia and the West Midlands
showing the heaviest decreases. Only surveyors in Scotland reported some subdued
price rises.
"The Christmas slowdown started much earlier this year and hit harder," said
Jeffrey Hazel, of Geoffrey Collings and Co in King's Lynn, Norfolk.
Even in London, which has been at the forefront of Britain's housing boom,
surveyors said the outlook for 2008 was not promising. "We need one or two very
urgent mortgage interest rate decreases," said Arwel Griffith of Lexicon
Surveying Services in Walthamstow. "Even that might not assist very
substantially in the currently gloomy market."
Ian Perry, a spokesman for the RICS, said: "The housing market is clearly
feeling the pinch from the credit crunch and the round of interest rate hikes in
2007."
The Bank of England raised interest rates five times between August 2006 and
August last year to 5.75% to cool the rampant expansion of the UK economy,
double-digit house price growth and decade-high levels of inflation.
Last summer's credit crunch, sparked by the sub-prime mortgage crisis in the US,
has gripped the world economy, making lenders more cautious. This has made it
difficult for many buyers to get on to the property ladder, dampening demand.
Meanwhile, supply to the market is edging up. The balance of surveyors reporting
a rise in new properties to sell turned positive for the first time since May.
The RICS said the looser supply was partly due to the extension last month of
home information packs to cover all properties as homeowners brought forward
sales of their homes to avoid extra costs.
But Perry said the underlying economic conditions were vastly different from the
early 1990s. "Supply would have to loosen considerably before prices experience
a significant dip," he said. "The coming months will be of great importance to
the market. The Bank of England may have to cut rates further if the market is
to remain in a stable condition."
The Bank's quarter-point interest rate cut last month did little to bring
Christmas cheer for buyers, the RICS said, with the survey showing that 25% more
surveyors reported a fall than a rise in buyer inquiries. But this has eased
from 31% in October as first-time buyers wait on the sidelines in the hope that
interest rates will fall.
Policymakers decided to hold interest rates at 5.5% last week as they juggled a
potential economic slowdown with fears of inflation ticking higher after oil
prices flirted with $100 a barrel this month and as food prices creep higher.
But analysts forecast that borrowing costs would start to fall next month by a
quarter point, possibly ending the year as low as 4%.
Fallout
· London and the south-east, where million-pound homes became
common and properties were snapped up in days, can no longer withstand the
slowdown. Demand from the City is falling as bonuses and jobs suffer the effects
of the credit crunch.
· The RICS says Scotland is the only region which saw price rises, albeit at the
slowest pace since April 2005.
· While the RICS says the West Midlands is bearing the brunt of recent falls,
Nationwide has said this was the most stable region last year.
· Northern Ireland, which is not covered by the RICS survey, was another red-hot
market for housing, making it vulnerable to sharp corrections in prices.
· Northern Ireland and Yorkshire & Humberside were among the first areas to see
price falls during the last quarter of 2007.
Mighty institutions and powerful figures undermined
by pitiful
little property deals
Monday December 31 2007
The Guardian
David Teather
It began with low-income Americans being encouraged to borrow
mortgages they couldn't afford.
The economic butterfly effect would eventually cause deals worth billions of
dollars to fall apart; the first run on a British bank in 140 years; some of the
most powerful figures on Wall Street losing their jobs; wild gyrations on the
markets; and dire warnings that the world is on the brink of recession.
At the start of the year, stockmarkets were at six-year highs and £40bn worth of
mergers and takeovers were awaiting completion. Private equity firms and hedge
funds were gorging themselves on cheap money and a handful of secretive, hugely
wealthy individuals were becoming increasingly influential. But it was the
millions on more modest incomes who would ultimately shape the events of 2007.
As the US housing market cooled and interest rates rose, many on the bottom
rungs of the economic ladder found it difficult to meet their monthly mortgage
repayments.
The first real concerns about sub-prime mortgages emerged at the end of
February, when Wall Street suffered its worst day since the terrorist attacks of
2001. By April one of the biggest sub-prime mortgage lenders in the US had gone
bankrupt and there was talk of a full-blown crisis. Credit more broadly began to
dry up as lenders became nervous.
Fear also spread as it became clear that much of the bad debt had been packaged
up and sold on around the world's financial system. Nobody, not even the banks
themselves, knew who owned the toxic debt.
Some otherwise arcane practices of the financial world such as collateralised
debt obligations and structured investment vehicles suddenly became everybody's
concern.
The flood of private equity money turned into a trickle as it became more
difficult to borrow, derailing deals including an attempt to buy J Sainsbury
and, at the close of the year, an attempt by Lord Harris to take Carpetright
private. Hedge funds too, which rely on leveraging their funds, have had their
wings clipped.
The credit crunch was behind the biggest story of the year, Northern Rock. It
emerged in September that the bank had been forced to apply to the Bank of
England for emergency funds as liquidity had dried up in the market. Savers were
told not to panic. But they did anyway. The next day, there were long lines of
people threading through high streets across Britain, hoping to retrieve their
cash.
The scenes triggered a postmortem into how a major bank - the fifth biggest
provider of mortgages in the country - could reach the brink of collapse without
any apparent action to prevent it from going under.
The inquest has so far given us the phrase "moral hazard" from the governor of
the Bank of England, Mervyn King, who believed it was outside his remit to
rescue a bank that had got into difficulties through risky borrowing on
international money markets. It has also given us the sight of MPs from the
Treasury select committee grappling to discover who from the much lauded
tripartite structure of regulation for the UK financial system - the Bank of
England, the Treasury and the Financial Services Authority - was to blame for
the fiasco.
But it has not given us any definitive answers save that Northern Rock should
not have risked so much on such a finely calibrated business model and should
have seen it coming.
King came under pressure to quit but no one from the tripartite system has
fallen on their sword. Even the architect of the business model, Northern Rock's
chief executive Adam Applegarth, hung on until the middle of November when he
finally resigned.
The stricken bank has received £25bn of taxpayers' cash. There are still two
potential bidders - Sir Richard Branson's Virgin and the Olivant vehicle led by
former Abbey National boss Luqman Arnold. Other options include nationalisation
or a carve-up among high street banks.
As the mortgage crisis spread, Wall Street bosses began dropping like neatly
lined-up dominoes. Stan O'Neal was forced out at Merrill Lynch and Charles
Prince was ousted from the world's largest banking group, Citigroup. The most
powerful woman on Wall Street, Zoe Cruz, lost her job at Morgan Stanley when the
bank recorded losses of $3.7bn. Another Wall Street bank, Bear Stearns, suffered
the first loss in its 84-year history.
The numbers just kept getting bigger. This month the Swiss bank UBS wrote off a
further $10bn of sub-prime loans, on top of $3.4bn already announced. Two days
later the Bank of England joined other central banks in pouring £50bn into the
financial markets in the hope of staving off a meltdown. A succession of Wall
Street banks have turned to sovereign funds in China, Singapore and the Middle
East for injections of cash. The unravelling of events has been a stunning
example of how interdependent the world economy has become.
Confidence appears to be ebbing. Retailers in Britain were forced to slash
prices before Christmas to shift stock. According to the Royal Institute of
Chartered Surveyors, house prices in Britain are falling at their fastest rate
in two years. The outlook for jobs is the worst for a decade. Jon Hunt, who sold
the estate agency Foxtons in April, may, it turns out, have called the top of
the market.
In numbers
$99.29
The oil price reaches its peak just short of $100 a barrel (November 21)
$2
The pound hits $2 for the first time since 1992 (April 16)
£1.1bn
Price HSBC receives selling its headquarters in Canary Wharf (April 30)
$100bn
Ben Bernanke's estimate of total sub-prime losses (July 19
ONTARIO,
California (Reuters) - Between railroad tracks and beneath the roar of departing
planes sits "tent city," a terminus for homeless people. It is not, as might be
expected, in a blighted city center, but in the once-booming suburbia of
Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200
people, including several children, growing as this region east of Los Angeles
has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st
century version of "The Grapes of Wrath," John Steinbeck's novel about families
driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the
nation, the social costs of collapse are adding up in the form of higher rates
of homelessness, crime and even disease.
While no current residents claim to be victims of foreclosure, all agree that
tent city is a symptom of the wider economic downturn. And it's just a matter of
time before foreclosed families end up at tent city, local housing experts say.
"They don't hit the streets immediately," said activist Jane Mercer. Most
families can find transitional housing in a motel or with friends before turning
to charity or the streets. "They only hit tent city when they really bottom
out."
Steve, 50, who declined to give his last name, moved to tent city four months
ago. He gets social security payments, but cannot work and said rents are too
high.
"House prices are going down, but the rentals are sky-high," said Steve. "If it
wasn't for here, I wouldn't have a place to go."
'SQUATTING
IN VACANT HOUSES'
Nationally, foreclosures are at an all-time high. Filings are up nearly 100
percent from a year ago, according to the data firm RealtyTrac. Officials say
that as many as half a million people could lose their homes as adjustable
mortgage rates rise over the next two years.
California ranks second in the nation for foreclosure filings -- one per 88
households last quarter. Within California, San Bernardino county in the Inland
Empire is worse -- one filing for every 43 households, according to RealtyTrac.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now
risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood
where most families are struggling to meet payments and many have lost their
homes.
She has noticed an increase in crime since the foreclosures started. Her house
was robbed, her kids' bikes were stolen and she worries about what type of
message empty houses send.
The pattern is cropping up in communities across the country, like Cleveland,
Ohio, where Mark Wiseman, director of the Cuyahoga County Foreclosure Prevention
Program, said there are entire blocks of homes in Cleveland where 60 or 70
percent of houses are boarded up.
"I don't think there are enough police to go after criminals holed up in those
houses, squatting or doing drug deals or whatever," Wiseman said.
"And it's not just a problem of a neighborhood filled with people squatting in
the vacant houses, it's the people left behind, who have to worry about people
taking siding off your home or breaking into your house while you're sleeping."
Health risks are also on the rise. All those empty swimming pools in
California's Inland Empire have become breeding grounds for mosquitoes, which
can transmit the sometimes deadly West Nile virus, Riverside County officials
say.
'TRICKLE-DOWN EFFECT'
But it is not just homeowners who are hit by the foreclosure wave. People who
rent now find themselves in a tighter, more expensive market as demand rises
from families who lost homes, said Jean Beil, senior vice president for programs
and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks
that would have been in an apartment, now can't afford it," said Beil. "It has a
trickle-down effect."
For cities, foreclosures can trigger a range of short-term costs, like added
policing, inspection and code enforcement. These expenses can be significant,
said Lt. Scott Patterson with the San Bernardino Police Department, but the
larger concern is that vacant properties lower home values and in the long-run,
decrease tax revenues.
And it all comes at a time when municipalities are ill-equipped to respond. High
foreclosure rates and declining home values are sapping property tax revenues, a
key source of local funding to tackle such problems.
Earlier this month, U.S. President George W. Bush rolled out a plan to slow
foreclosures by freezing the interest rates on some loans. But for many in these
parts, the intervention is too little and too late.
Ken Sawa, CEO of Catholic Charities in San Bernardino and Riverside counties,
said his organization is overwhelmed and ill-equipped to handle the volume of
people seeking help.
"We feel helpless," said Sawa. "Obviously, it's a local problem because it's in
our backyard, but the solution is not local."
For the
first time since the Carter administration, homeownership in the United States
is set to decline over a president’s tenure. When President Bush took office in
2001, homeownership stood at 67.6 percent. It rose as the mortgage bubble
inflated but is projected to fall to 67 percent by early 2009, which would come
to 700,000 fewer homeowners than when Mr. Bush started. The decline, calculated
by Moody’s Economy.com, is inexorable unless the government launches a heroic
effort to help hundreds of thousands of defaulting borrowers stay in their
homes.
These days, modest relief efforts are in short supply, let alone heroic ones.
Some officials seem to think that assistance would violate the tenet of personal
responsibility that borrowers should not take out loans they cannot afford. That
is simplistic.
The foreclosure crisis is rooted in reckless — and shamefully underregulated —
mortgage lending. Many homeowners — mainly subprime borrowers with low incomes
and poor credit — are now stuck in adjustable-rate loans that have become
unaffordable as monthly payments have spiked upward. Their predicament is not
entirely of their own making, and even if it were they would need to be bailed
out because mass foreclosures would wreak unacceptable damage on the economic
and social life of the nation.
The relief efforts so far have been too little, too late. In August, the White
House established a program to allow an additional 80,000 borrowers to refinance
their loans through the Federal Housing Administration — on top of 160,000 who
were already eligible. That’s not enough. Foreclosure filings soared to nearly
244,000 in August alone.
Federal regulators and Treasury officials are urging mortgage lenders and
mortgage servicers to do their utmost to modify loan terms for at-risk
borrowers, but saying “please” hasn’t worked. To be effective, modifications
must reduce a loan’s interest rate or balance or extend its term, or some
combination of the three. Gretchen Morgenson reported recently in The Times that
a survey of 16 top subprime servicers by Moody’s Investors Service found that in
the first half of the year, modifications were made to an average of only 1
percent of loans on which monthly payments had increased.
What’s missing is executive leadership to bring together many players, including
lenders, servicers, bankers and various investors. All of them are affected
differently depending on whether and how a borrower is rescued, which makes it
difficult to agree on a rescue plan. But all of them also made megaprofits
during the mortgage bubble. Under firm leadership, they could come up with a way
to modify many loans that are now at risk.
Democratic Congressional leaders have called on the Bush administration to
appoint one senior official to lead a foreclosure relief effort. The White House
dismissed the idea, saying, in effect, that it’s doing enough.
Congress should move forward on other remedies. The most important is to mend an
egregious flaw in the current bankruptcy law that prohibits the courts from
modifying repayment terms of most mortgages on a primary home. Two bills, one in
the House and one in the Senate, would treat a mortgage like other secured debt,
allowing a bankruptcy court to restructure it so that it’s affordable for the
borrower. That would give defaulting homeowners and their advocates much needed
leverage in dealing with lenders and servicers. Creditors would presumably
prefer to cut a deal with a borrower rather than be subject to the decision of a
bankruptcy judge.
The administration and Congress should work to avoid mass foreclosures.
Meanwhile, bankruptcy reform would give borrowers a shot at keeping their homes.
Britain's
house price growth will be halved next year as the global financial crisis
exacerbates the impact of rising mortgage rates, according to Nationwide, the
biggest mortgage lender.
After the
dramatic bail-out of high street bank Northern Rock underlined the impact of the
American 'sub-prime' mortgage crisis on Britain's financial sector, Fionnuala
Earley, Nationwide's group economist, said she expected house price inflation to
slow to around 3 per cent next year.
Thousands of anxious customers queued outside Northern Rock branches for a
second day yesterday, ignoring calls for calm from the Chancellor, Alistair
Darling, and the bank's management, and sparking fears of a full-blown 'run' on
the bank.
Speaking to
Channel 4 News last night, Darling said he had been assured by the Financial
Services Authority that Northern Rock was capable of meeting its financial
obligations to its customers.
In the
first signs of political fallout from the crisis, David Cameron accused Gordon
Brown of failing to rein in public and private borrowing over the last decade,
saying the nation's economic growth is based on a 'mountain of debt'. Writing in
today's Sunday Telegraph, the Tory leader says: 'This government has presided
over a huge expansion of public and private debt without showing awareness of
the risks involved.
'Though the current crisis may have had its trigger in the United States...
under Labour our economic growth has been built on a mountain of debt.'
House price growth was running at just below 10 per cent in August, but
Nationwide believes it will have dropped to 7 per cent by December and continue
slowing throughout next year.
The worldwide credit crunch that pushed Northern Rock to the brink of collapse
could make a housing market slowdown worse, Earley warned. 'I think all it can
do is make it [the market] cooler: that comes through sentiment, and through
expectations.'
With base interest rates at a six-year high of 5.75 per cent, economists said
that the feelgood factor was already evaporating and that the Northern Rock
crisis could deal a fresh blow to confidence.
'This confirms some of the fears that people had, and reinforces the idea that
they need to be more circumspect, and that money is tighter,' said Richard
Hyman, director of retail research firm Verdict.
'It couldn't have come at a worse time: consumer confidence was already heading
south,' said Kevin Hawkins, director general of the British Retail Consortium,
though he added that, as long as Northern Rock was the only casualty, the
effects could be short-lived.
A report from property website Rightmove, released on Friday, showed that
property prices fell in the last month for the first time in three years. It is
expected that, although there will be overall growth in the housing market, some
areas of the UK could suffer significant price decline.
Meanwhile, Northern Rock apologised to customers last night, saying it was
'disappointed to see uncertainty caused'. The apology came amid growing
speculation of a takeover bid, with HSBC and Lloyds TSB both being mooted as
potential suitors. Insiders are predicting that a takeover could occur within
weeks to secure the bank's future. One plan currently being looked at by City
bankers is to divide the company's £100 billion mortgage portfolio between some
of the major banks.
Savers have been rushing to pull out their cash since it emerged last Thursday
that Darling had sanctioned an emergency loan from the Bank of England to
prevent Northern Rock going bust.
One couple had even camped outside Northern Rock's Cheltenham branch in
Gloucestershire overnight, desperate to withdraw the £1m proceeds of a house
sale. 'We were told that because our money was in an online account we wouldn't
be able to withdraw it there and then,' said Fiona Howard. 'That money is our
lifeline, as we are living in rented accommodation at present.'
