CR - is reporting more often going to make a big difference if the methodology & measurement doesn't change much? I ask that because OFHEO results always seem a bit more 'sluggish' or less volatile lets say than the Case-Shiller which seem to go up faster in the boom and down faster in the bust.
Doesn't reporting sluggish response then become an exercise of watching a a pot and waiting for it to boil?
I know it makes for good commentary - but not sure it brings more light to the issue. Is there another issue - such as competition with C/S? Just wonderin'...
You're watching a change take place in the American mood that is unique in your lifetime, or at least since the mid-70s.
It's not just a feeling of less prosperity. It's a feeling of becoming economically vulnerability because of the greed and failures of high-powered people and institutions.
It's bigger than the elections, the stock market or the war. Big powerful men have failed the people, and the people want revenge.
Ironically, this is happening when the first-ever woman is running seriously for president. And not just any woman, either. A tough broad.
There's nothing wrong with the black guy, except that he is not tough enough to take on the powerful and bring them down.
She will start to benefit from the anger against powerful men in a slowly building backlash wave. Just watch.
Recently I saw a post, either here or another blog, about a company in San Diego that just setup shop to walk customers through the "jingle-mail" process. Since purchase money mortgages are non-recourse in CA, I'd assume there is nothing illeagal about such a business model.
A source for potential home buyers could be people who bought a home during the bubble years, have good credit but simply overpaid. A bank could offer these people a loan on a house that is comparable to their present residence but priced 20+% below what was paid for it. In the mortgage contract there could be some clause about how they will only qualify if they walk away from their present mortgage.
Then as a bank you would be making loans, to what would have been qualified borrowers in normal times, in amounts that are far more likely to be repaid. Sort of a "Beggar thy neighbour" policy but applied towards banks.
I wondered yesterday about the raising of conforming limits. It seemed kind of useless since it didn't cover most of the country. All we needed was a way to get the median home price in my area up quickly.
Well what do you know! We have a new way to do it.
"Recently I saw a post, either here or another blog, about a company in San Diego that just setup shop to walk customers through the "jingle-mail" process."
Mish posted it first, but after he did it appeared on every thread in the major economics blogs for several days.
ironically, this is happening when the first-ever woman is running seriously for president. And not just any woman, either. A tough broad.
There's nothing wrong with the black guy, except that he is not tough enough to take on the powerful and bring them down.
Too bad neither stands much of a chance. They will win the blue states big time over McCain and of course the opposite occurs in red zone... McCain crushes either.
Its in the 'tween where it gets interesting. A handful of mostly rural & exurban counties in Ohio, Florida, Missouri, etc., will pick the next Prez and neither Obama (even with Oprah in tow) nor Hillary (even with the Big Dog slinging mud) will carry those places. They might win the popular but will lose the electoral just like 2000.
Go there, to those places, like I do - ask people... you'll see.
walker - try this. Also you may be interested in today's WSJ, page a17.
RhodesianRidgeback - the knock on OFHEO's HPI is that it "only" has conforming loans its sample. Therefore, detractors say, it fails to capture what is going on in the "entire market" as price movements could be 'decoupled' in the jumbo space. So they like CSW better.
I do think that while switching to monthly would be helpful for the most part, the tradeoff will be that in areas with fewer observed repeat sales (their Kalamazoo index, for example) - will just get noisier,not better.
dryfly,
Then what happened in 2006? Ohio, now Democratic. New Hampshire, now Democratic. Arizona, Kansas, now have a Democratic Govenor.
Florida Primary, where the Dem vote did not count, higher Dem turnout then Republican.
The Republicans have so screwed this country that there is a big swing for the Democrats. I go with rich on this one. Though he should not use phrases like "the broad" or "the black guy". Does this make Mccain "the crip"?
McCain is so moderate (he will lose the big race) but mitigate the damage (compared to more rethug-like guys like Romeny and Huckabee) to rethugs, running from their past, for reelection in the house and senate.
Dryfly,
In normal circumstances I'd agree with you about the "red states" vs "blue states" meme. But this year truly is different. Not only has the GOP lost the "security" moms because of the economy, they are in danger of losing the evangelicals as well. Since Mc Cain is the nominee, they may just sit this one out. They did it for many years, they could do it again. Add to that Mc Cain's support for the war, the endorsement of Mc Cain by the decider, and a deteriorating economy, and you have a recipe for a huge shift in voting patterns. I'm with Rich on this one. If Hillary Clinton can remind people of the peaceful, prosperous times under her husband, she's got a good chance at the presidency, "red" states notwithstanding.
boom2bust - thanks - I forgot that the other (read:NAR's) knock on the other two is that they use repeat-sales methodology, and therefore overlook new homes, whose prices may be following some other trajectory. At least that's the argument.
rich - please knock it off with the political threadjacking.
Fannie Mae and Freddie Mac, the government-sponsored mortgage finance companies, will be allowed to buy loans worth as much as $729,750 for loans made between July 31, 2007 and Dec. 31, 2008, an increase over the current $417,000 loan limit, a move that could help struggling homeowners to refinance large mortgages at a lower interest rate. It will also allow the Federal Housing Administration to insure loans as high as $729,750 in expensive markets.
Hillary is not an innovation. Autocracies have passed on to the female relative if no male was available since before Betty (1558) and it won't stop with Benazir (six weeks ago). The super-delegates will take out the surprise candidate (who is indistinguishable from Hillary anyway) and we'll be left with the same choice of cats the powers-that-be had always planned to present to the mice.
We're no better here. Dion will be gone by the time Steve Lipgloss loses his luster, and will be replaced by Mike Torture. We're all living in a post-democracy world.
Should say something on-topic. The conforming limit had to rise. Hillary's gang has to live within commuting distance of the Beltway.
Bush only won Ohio in 04 due to Ken Blackwell, the S of S in Ohio and his campaign manager. This time around there will actually be more than one voting machine in democratic districts so democrats dont have to wait 6 hours to vote, while GOP voters are in and out in 10 minutes. Doors to buildings holding polling places will not get locked at 5:30 PM (only in very democratic areas, and I am not making this up, I saw it personally). The religious wingnuts ware not anywhere near as motivated this time, and there are a lot of religious wingnuts in Ohio. In the Mt west, Bush got a pretty good share of hispanics, not going to happen this time, even with someone reasonably rational on the immigration issue like McCain on the top of the ticket, for starters the platform will be out and out racist, and so good chance for the Dems to pick up states like Colorado and Nevada.
CR - since the fannie/freddie limits are going up for the 18-month period, will the OFHEO index be including those homes as well?
I suspect some will, some won't. Remember they utilize a repeat-sale (or refi) method. So, they need a minimum of two observations for each in their dataset for each occurance used to build the index. Examples:
If home A sold in 5/1997 for $310k (lets assume that was conforming at the time), and just sold 2/2008 for $575k, then yes, that one would be included in the index.
But, home B was jumbo at $425k when it was built in 10/1999, and a "LFKAJ" in 2/2008 at $680k, then that one would not be included, since they don't have the data point on the first sale (as it was not sold to the GSEs).
"walker - try this. Also you may be interested in today's WSJ, page a17."
Mish's post was before that. Look at the timestamps on the two posts. However, it took off fairly quickly from there and was over all the blogs by the end of the day.
I am always fascinated by how these things start on the blogs. While I think blogs are a positive influence, a lot of times they can be like high school gossip. One blog says one thing, another blog links to it, other blogs link to the second one and so on.
A classic example of this was the rumor before Hope Now! that people who owed more than their house was worth would be excluded (which is the opposite of what was the case). It was a post on Atrios according to something he saw on CNN. In three days, this was being quoted as fact on many, many major blogs even though Atrios was the only source if you followed the hyper-links far enough.
Thanks Shnaps. So let me see if I understand the outcome: The FHA will insure the loans, which will provide incentive for refis. Some loans will go bad anyway, which means the taxpayer must pay for them through insurance payouts to lenders. For loans that don't go bad, people in houses valued up to $729,750 get to stay there and not budge much on selling price. If what I have said is right, then this does seem to me to amount to welfare for the upper-middle and upper classes. Do I have this right?
Then what happened in 2006? [...] The Republicans have so screwed this country that there is a big swing for the Democrats. - ed
I think '06 was a Bush referendum that he lost big time. I don't think it was a pro-democratic mandate by any means... and I'm not pro-GOP, just calling it the way I saw it.
When a British Airways Boeing 777 crash-landed just short of the runway at Heathrow Airport a few weeks ago, there was a lively debate about why its twin engines had suddenly lost power at the same time. People might well ask the same question about the twin engines of America's credit systemthe capital markets and the bankswhose simultaneous misfiring has helped drive the country close to, or into, recession.
Mechanical Failure or Pilot error? My vote is Pilot error.
Hmm looks like the FDIC is on a death
watch..
From Mike Whitney
On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to determine the total insured amount for each depositor....as of the day of the failure and return their money as quickly as possible. The agency is modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions. The implication is clear, the FDIC has begun the death watch on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
...welfare for the upper-middle and upper classes. Do I have this right?
If you think a family living in a $700k home in San Jose is the American "upper class", you have it wrong. I love the "not a short sale or OREO" in the description, btw.
Also, you are making a rather dubious assumption that the FHA would so misprice their insurance on this new stuff such that a taxpayer-funded bailout of FHA would be needed.
And since there is only a hair of daylight between Bush and McCain,s policy. Why won't 2008 be the same.
If the Dems don't make this a referendum on Bush, they are fools.
I'm not being facaetious - just a newbie trying to understand. Isn't the FHA a govt. agency? And as such, wouldn't any default that they insure ultimately be paid for with tax dollars? As for that lovely ranch, wouldn't it be occupied by a software engineer family earning well above the median salary (even for the bay area)?
Actually on topic and germane to questions of Home Price Indices!
Answer to RhodesianRidgebackinAZ initial question.
The Case Shiller indices are composites of 10 and 20 major MSA's(Metropolitan Statistical Areas). The composite 10 includes mostly the most bubbly MSA's in the county - 3 in CA, Las Vegas, Miami, DC,NY,Boston- arguably the other 2 Chicago and Denver are less "bubbly" at least traditionally. The composite 20 adds 10 more MSA's of which only Phoenix and Tampa are amongst the most "bubbly" while Portland, Seattle, are second tier in the bubble race and Atlanta, Charlotte, Minneapolis, Detroit, Dallas, and Cleveland are well behind. Needless to say the Composite 10 rose faster and has and will fall faster than the Composite 20. The OFHEO composite includes a weighted aveage of all US MSA's (about 350 of them) and probably much better represents what's happening in the country as a whole. Of course Case-Shiller has a product to sell and pushes its numbers more than OFHEO(the Office of Federal Housing Enterprise Oversight) which is of course a government agency so guess which indices get the heavy media play? All of these indices use the same basic methodology but traditionally the government statistics have lagged, thought recently(surprise) OFHEO got a bump in its budget and will be giving more timely data.
FHA is a gov't agency. But - they operate much like any other insurance company: pay claims out of the premiums they collect. So it costs taxpayers nothing. (If it were to fail, that's another story - is what you are contending? That's a pretty bold assumption, for starters).
I don't know who lives there, I just plucked that one out of the MLS at random to illustrate how very average a $700k home was in the area. Had I not revealed the city and list price, you'd probably think a cop and a schoolteacher live there, right?
I think this goes back to...'we're all subprime now'.
Apparently my comment wasn't taken seriously. The 800lb gorilla in the corner is now an 800.12 lb ±41.07 lb gorilla in the corner.
The OFHEO index is not sufficiently fine grained to be able to report monthly. A quick and dirty to show why:
Exclusions: Thus, mortgage transactions on attached and multi-unit properties, properties financed by government insured loans, and properties financed by mortgages exceeding the conforming loan limits determining eligibility for purchase by Freddie Mac or Fannie Mae are excluded
Gosh, what's a national index that ignores half of California? In addition to exclusions this is repeat sales (new sales another 15% of the market) without hedonic adjustments. For
this reason the HPI is described as a constant quality house price index. Okay, so with 5 million annual sales and likely 4.5 million now qualifying as within their repeat sales window and throwing out the exclusions above there are about 2 million going into index. 170,000 per month. Problem is "on average" with a typical 2:1 difference between busy and slow months. Once you get down to months things like holidays and number of weekdays and short months and long months and reporting delays and weather and mail service start wobbling the data. You just cannot slice this particular baby this thin.
Thanks Shnaps. Honestly, I'm not contending anything. My real question was where the money for payouts comes from. I just didn't articulate well enough. Your latest post gave me the answer.
As for the property you picked in San Jose: Having lived in the Bay Area and now the northeast I would say that no, I would not think a cop or teacher lived there. I was dumb enough to be in school for the boom and am now stuck renting, but I have many friends in similar homes whose salaries are well into the upper percentiles.
Since when does the "median house" have a swimming pool and that kind of internal space? I would expect the median house is much older and smaller and only costs the arm and half the leg.
Funny you say that, Joy. The median age of homes in San Jose is exactly 35 years.
Also, you ever fly over this area? I know it's not exactly scientific, but a peek out the window certainly makes it seem like half of the homes have a pool in the back.
Does someone have a handy cut and paste flashcard on the differences/pros/cons of each of the different indexes for tracking housing prices? I forget.
CR, you were mentioned in an open forum article in today's SF Chron.
Who will pay the mortgage when the homeowner walks? You
The author, Sean Olender, argues that the increase in loan limits is nothing more than welfare for the wealthy. I agree.
The 800lb gorilla in the corner is now an 800.12 lb±41.07 lb gorilla in the corner.
CR - is reporting more often going to make a big difference if the methodology & measurement doesn't change much? I ask that because OFHEO results always seem a bit more 'sluggish' or less volatile lets say than the Case-Shiller which seem to go up faster in the boom and down faster in the bust.
Doesn't reporting sluggish response then become an exercise of watching a a pot and waiting for it to boil?
I know it makes for good commentary - but not sure it brings more light to the issue. Is there another issue - such as competition with C/S? Just wonderin'...
You're watching a change take place in the American mood that is unique in your lifetime, or at least since the mid-70s.
It's not just a feeling of less prosperity. It's a feeling of becoming economically vulnerability because of the greed and failures of high-powered people and institutions.
It's bigger than the elections, the stock market or the war. Big powerful men have failed the people, and the people want revenge.
Ironically, this is happening when the first-ever woman is running seriously for president. And not just any woman, either. A tough broad.
There's nothing wrong with the black guy, except that he is not tough enough to take on the powerful and bring them down.
She will start to benefit from the anger against powerful men in a slowly building backlash wave. Just watch.
Recently I saw a post, either here or another blog, about a company in San Diego that just setup shop to walk customers through the "jingle-mail" process. Since purchase money mortgages are non-recourse in CA, I'd assume there is nothing illeagal about such a business model.
A source for potential home buyers could be people who bought a home during the bubble years, have good credit but simply overpaid. A bank could offer these people a loan on a house that is comparable to their present residence but priced 20+% below what was paid for it. In the mortgage contract there could be some clause about how they will only qualify if they walk away from their present mortgage.
Then as a bank you would be making loans, to what would have been qualified borrowers in normal times, in amounts that are far more likely to be repaid. Sort of a "Beggar thy neighbour" policy but applied towards banks.
Oh, the Clintons are tough enough, but haven't shown they have the WILL.
Obama has everyone all excited, but I'm afraid he's all hat and no cattle.
Edwards would have been the smarter choice. He wasn't under any illusions that the middle class has any real power any more.
I wondered yesterday about the raising of conforming limits. It seemed kind of useless since it didn't cover most of the country. All we needed was a way to get the median home price in my area up quickly.
Well what do you know! We have a new way to do it.
"Recently I saw a post, either here or another blog, about a company in San Diego that just setup shop to walk customers through the "jingle-mail" process."
Mish posted it first, but after he did it appeared on every thread in the major economics blogs for several days.
rich, after you bring the "powerful" down, all there is left to redistribute is poverty.
ironically, this is happening when the first-ever woman is running seriously for president. And not just any woman, either. A tough broad.
There's nothing wrong with the black guy, except that he is not tough enough to take on the powerful and bring them down.
Too bad neither stands much of a chance. They will win the blue states big time over McCain and of course the opposite occurs in red zone... McCain crushes either.
Its in the 'tween where it gets interesting. A handful of mostly rural & exurban counties in Ohio, Florida, Missouri, etc., will pick the next Prez and neither Obama (even with Oprah in tow) nor Hillary (even with the Big Dog slinging mud) will carry those places. They might win the popular but will lose the electoral just like 2000.
Go there, to those places, like I do - ask people... you'll see.
RhodesianRidgebackinAZ, I wrote about the differences between the indices back in August 2007. I hope this helps...
"The Best Home Price Index"
Boom2Bust.com » Blog Archive » The Best Home Price Index
walker - try this. Also you may be interested in today's WSJ, page a17.
RhodesianRidgeback - the knock on OFHEO's HPI is that it "only" has conforming loans its sample. Therefore, detractors say, it fails to capture what is going on in the "entire market" as price movements could be 'decoupled' in the jumbo space. So they like CSW better.
I do think that while switching to monthly would be helpful for the most part, the tradeoff will be that in areas with fewer observed repeat sales (their Kalamazoo index, for example) - will just get noisier,not better.
dryfly,
Then what happened in 2006? Ohio, now Democratic. New Hampshire, now Democratic. Arizona, Kansas, now have a Democratic Govenor.
Florida Primary, where the Dem vote did not count, higher Dem turnout then Republican.
The Republicans have so screwed this country that there is a big swing for the Democrats. I go with rich on this one. Though he should not use phrases like "the broad" or "the black guy". Does this make Mccain "the crip"?
McCain is so moderate (he will lose the big race) but mitigate the damage (compared to more rethug-like guys like Romeny and Huckabee) to rethugs, running from their past, for reelection in the house and senate.
Enough conditional statement for one day.
Dryfly,
In normal circumstances I'd agree with you about the "red states" vs "blue states" meme. But this year truly is different. Not only has the GOP lost the "security" moms because of the economy, they are in danger of losing the evangelicals as well. Since Mc Cain is the nominee, they may just sit this one out. They did it for many years, they could do it again. Add to that Mc Cain's support for the war, the endorsement of Mc Cain by the decider, and a deteriorating economy, and you have a recipe for a huge shift in voting patterns. I'm with Rich on this one. If Hillary Clinton can remind people of the peaceful, prosperous times under her husband, she's got a good chance at the presidency, "red" states notwithstanding.
gracias, Boom2Bust and Shnaps
boom2bust - thanks - I forgot that the other (read:NAR's) knock on the other two is that they use repeat-sales methodology, and therefore overlook new homes, whose prices may be following some other trajectory. At least that's the argument.
rich - please knock it off with the political threadjacking.
CR - since the fannie/freddie limits are going up for the 18-month period, will the OFHEO index be including those homes as well?
If the index remains tied to what the GSE's can purchase, well, the index just became uncorrelated from its history.
If the index will remain tied only to the
Re jumbo conforming limit, does someone know offhand if it is included in the passed senate bill?
417k-and-under prices, it won't be a measure of agency performance.
joseph turner - affirmative.
Fannie Mae and Freddie Mac, the government-sponsored mortgage finance companies, will be allowed to buy loans worth as much as $729,750 for loans made between July 31, 2007 and Dec. 31, 2008, an increase over the current $417,000 loan limit, a move that could help struggling homeowners to refinance large mortgages at a lower interest rate. It will also allow the Federal Housing Administration to insure loans as high as $729,750 in expensive markets.
Hillary is not an innovation. Autocracies have passed on to the female relative if no male was available since before Betty (1558) and it won't stop with Benazir (six weeks ago). The super-delegates will take out the surprise candidate (who is indistinguishable from Hillary anyway) and we'll be left with the same choice of cats the powers-that-be had always planned to present to the mice.
We're no better here. Dion will be gone by the time Steve Lipgloss loses his luster, and will be replaced by Mike Torture. We're all living in a post-democracy world.
Should say something on-topic. The conforming limit had to rise. Hillary's gang has to live within commuting distance of the Beltway.
Since McCain is the nominee, they may just sit this one out. - Trishyla
I doubt that will happen - seriously. They will say it but won't do it. Lotsa reasons - some not very pretty.
Bush only won Ohio in 04 due to Ken Blackwell, the S of S in Ohio and his campaign manager. This time around there will actually be more than one voting machine in democratic districts so democrats dont have to wait 6 hours to vote, while GOP voters are in and out in 10 minutes. Doors to buildings holding polling places will not get locked at 5:30 PM (only in very democratic areas, and I am not making this up, I saw it personally). The religious wingnuts ware not anywhere near as motivated this time, and there are a lot of religious wingnuts in Ohio. In the Mt west, Bush got a pretty good share of hispanics, not going to happen this time, even with someone reasonably rational on the immigration issue like McCain on the top of the ticket, for starters the platform will be out and out racist, and so good chance for the Dems to pick up states like Colorado and Nevada.
CR - since the fannie/freddie limits are going up for the 18-month period, will the OFHEO index be including those homes as well?
I suspect some will, some won't. Remember they utilize a repeat-sale (or refi) method. So, they need a minimum of two observations for each in their dataset for each occurance used to build the index. Examples:
If home A sold in 5/1997 for $310k (lets assume that was conforming at the time), and just sold 2/2008 for $575k, then yes, that one would be included in the index.
But, home B was jumbo at $425k when it was built in 10/1999, and a "LFKAJ" in 2/2008 at $680k, then that one would not be included, since they don't have the data point on the first sale (as it was not sold to the GSEs).
"walker - try this. Also you may be interested in today's WSJ, page a17."
Mish's post was before that. Look at the timestamps on the two posts. However, it took off fairly quickly from there and was over all the blogs by the end of the day.
I am always fascinated by how these things start on the blogs. While I think blogs are a positive influence, a lot of times they can be like high school gossip. One blog says one thing, another blog links to it, other blogs link to the second one and so on.
A classic example of this was the rumor before Hope Now! that people who owed more than their house was worth would be excluded (which is the opposite of what was the case). It was a post on Atrios according to something he saw on CNN. In three days, this was being quoted as fact on many, many major blogs even though Atrios was the only source if you followed the hyper-links far enough.
Thanks Shnaps. So let me see if I understand the outcome: The FHA will insure the loans, which will provide incentive for refis. Some loans will go bad anyway, which means the taxpayer must pay for them through insurance payouts to lenders. For loans that don't go bad, people in houses valued up to $729,750 get to stay there and not budge much on selling price. If what I have said is right, then this does seem to me to amount to welfare for the upper-middle and upper classes. Do I have this right?
if you can beat 'em, join 'em:
Bear Sterns is shorting itself (?!?, well ...and others i guess) on subprime mortgage securities
http://www.bloomberg.com/apps/news?pid=20601087&sid=ap5RXayJzChk&
Then what happened in 2006? [...] The Republicans have so screwed this country that there is a big swing for the Democrats. - ed
I think '06 was a Bush referendum that he lost big time. I don't think it was a pro-democratic mandate by any means... and I'm not pro-GOP, just calling it the way I saw it.
When a British Airways Boeing 777 crash-landed just short of the runway at Heathrow Airport a few weeks ago, there was a lively debate about why its twin engines had suddenly lost power at the same time. People might well ask the same question about the twin engines of America's credit systemthe capital markets and the bankswhose simultaneous misfiring has helped drive the country close to, or into, recession.
Mechanical Failure or Pilot error? My vote is Pilot error.
Hmm looks like the FDIC is on a death
watch..
From Mike Whitney
On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to determine the total insured amount for each depositor....as of the day of the failure and return their money as quickly as possible. The agency is modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions. The implication is clear, the FDIC has begun the death watch on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
Good luck.
FDIC: FIL-2-2008: Notice of Proposed Rulemaking
If the conforming limit is going to be raised regardless of the OFHEO index prces, why not just stop publishing it altogether?
Save a few bucks on analysts.
...welfare for the upper-middle and upper classes. Do I have this right?
If you think a family living in a $700k home in San Jose is the American "upper class", you have it wrong. I love the "not a short sale or OREO" in the description, btw.
Also, you are making a rather dubious assumption that the FHA would so misprice their insurance on this new stuff such that a taxpayer-funded bailout of FHA would be needed.
Save a few bucks on analysts.
Mike2 | 02.08.08 - 12:05 pm | #
Privatize to Shadow Stats.
And since there is only a hair of daylight between Bush and McCain,s policy. Why won't 2008 be the same.
If the Dems don't make this a referendum on Bush, they are fools.
I'm not being facaetious - just a newbie trying to understand. Isn't the FHA a govt. agency? And as such, wouldn't any default that they insure ultimately be paid for with tax dollars? As for that lovely ranch, wouldn't it be occupied by a software engineer family earning well above the median salary (even for the bay area)?
Actually on topic and germane to questions of Home Price Indices!
Answer to RhodesianRidgebackinAZ initial question.
The Case Shiller indices are composites of 10 and 20 major MSA's(Metropolitan Statistical Areas). The composite 10 includes mostly the most bubbly MSA's in the county - 3 in CA, Las Vegas, Miami, DC,NY,Boston- arguably the other 2 Chicago and Denver are less "bubbly" at least traditionally. The composite 20 adds 10 more MSA's of which only Phoenix and Tampa are amongst the most "bubbly" while Portland, Seattle, are second tier in the bubble race and Atlanta, Charlotte, Minneapolis, Detroit, Dallas, and Cleveland are well behind. Needless to say the Composite 10 rose faster and has and will fall faster than the Composite 20. The OFHEO composite includes a weighted aveage of all US MSA's (about 350 of them) and probably much better represents what's happening in the country as a whole. Of course Case-Shiller has a product to sell and pushes its numbers more than OFHEO(the Office of Federal Housing Enterprise Oversight) which is of course a government agency so guess which indices get the heavy media play? All of these indices use the same basic methodology but traditionally the government statistics have lagged, thought recently(surprise) OFHEO got a bump in its budget and will be giving more timely data.
FHA is a gov't agency. But - they operate much like any other insurance company: pay claims out of the premiums they collect. So it costs taxpayers nothing. (If it were to fail, that's another story - is what you are contending? That's a pretty bold assumption, for starters).
I don't know who lives there, I just plucked that one out of the MLS at random to illustrate how very average a $700k home was in the area. Had I not revealed the city and list price, you'd probably think a cop and a schoolteacher live there, right?
I think this goes back to...'we're all subprime now'.
Apparently my comment wasn't taken seriously.
The 800lb gorilla in the corner is now an 800.12 lb ±41.07 lb gorilla in the corner.
The OFHEO index is not sufficiently fine grained to be able to report monthly. A quick and dirty to show why:
Exclusions: Thus, mortgage transactions on attached and multi-unit properties, properties financed by government insured loans, and properties financed by mortgages exceeding the conforming loan limits determining eligibility for purchase by Freddie Mac or Fannie Mae are excluded
Gosh, what's a national index that ignores half of California? In addition to exclusions this is repeat sales (new sales another 15% of the market) without hedonic adjustments. For
this reason the HPI is described as a constant quality house price index. Okay, so with 5 million annual sales and likely 4.5 million now qualifying as within their repeat sales window and throwing out the exclusions above there are about 2 million going into index. 170,000 per month. Problem is "on average" with a typical 2:1 difference between busy and slow months. Once you get down to months things like holidays and number of weekdays and short months and long months and reporting delays and weather and mail service start wobbling the data. You just cannot slice this particular baby this thin.
Thanks Shnaps. Honestly, I'm not contending anything. My real question was where the money for payouts comes from. I just didn't articulate well enough. Your latest post gave me the answer.
As for the property you picked in San Jose: Having lived in the Bay Area and now the northeast I would say that no, I would not think a cop or teacher lived there. I was dumb enough to be in school for the boom and am now stuck renting, but I have many friends in similar homes whose salaries are well into the upper percentiles.
Since when does the "median house" have a swimming pool and that kind of internal space? I would expect the median house is much older and smaller and only costs the arm and half the leg.
Funny you say that, Joy. The median age of homes in San Jose is exactly 35 years.
Also, you ever fly over this area? I know it's not exactly scientific, but a peek out the window certainly makes it seem like half of the homes have a pool in the back.
Although most are too tiny to do legit laps in.