Bo’s Clips: Wall Street Betting on Single Family

As the housing recovery stalls, big banks move in to grab the bargains, leaving low-income buyers languishing. Market analysts speculate that banks may be caught in another housing bubble of their own making.

In Galveston, the city council finally throws in the towel and moves forward to replace public housing units lost in Hurricane Ike five years ago.

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Wall Street betting billions on single-family homes in distressed markets

By Michael A. Fletcher      Washington Post       April 21, 2013

MIAMI — Big investors are pouring unprecedented amounts of money into real estate hard hit by the housing crash, bringing those moribund markets back to life but raising the prospect of another Wall Street-fueled bubble that won’t be sustainable.

Drawn by the prospect of double-figure profit margins on rents and the resale of homes whose prices plummeted in the crash, hedge funds, Wall Street investors and other institutions are crowding out individual home buyers.

If the chain of easy credit and dangerous leverage that started on Wall Street fanned the housing bubble and eventual crash, some analysts find it disturbing that major investors are the ones snapping up the bargains — and eventual big profits — left in its wake.

“There is the possibility that Wall Street and the banks and the affluent 1 percent stand to gain the most from this,” said Jack McCabe, a real estate consultant based in Deerfield Beach, Fla. “Meanwhile, lower-income Americans will lose their opportunity for the American Dream of building wealth through owning a home.”

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Existing home sales edge down, prices rise

By Margaret Chadbourn       Reuters       April 22, 2013

Home resales edged downward in March, pointing to some slowdown in the housing market recovery pace as overall economic activity cools.

The National Association of Realtors said on Monday existing home sales slipped 0.6 percent last month to a seasonally adjusted annual rate of 4.92 million units.

Economists polled by Reuters had expected home resales to rise to a 5.01 million-unit rate.

“The disappointing pace of home sales provides some evidence that positive momentum in the housing sector is beginning to leak lower,” said Millan Mulraine, a senior economist at TD Securities in New York.

Still, the housing market recovery that has helped boost the economy remains intact, and there is some evidence the slowdown in sales may represent supply constraints more than crimped demand.

Sales in March were 10.3 percent higher than the same month last year, and the median price for a home resale was up 11.8 percent, the biggest increase since November 2005, to $184,300.

“The report suggests that the overall thrust of the sector remains positive, with the demand and supply dynamics continuing to favor further price gains,” said Mulraine.

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Before Housing Bubbles, There Was Land Fever

By Robert Shiller       New York Times      April 22, 2013

SINCE 1997, we have lived through the biggest real estate bubble in United States history — followed by the most calamitous decline in housing prices that the country has ever seen.

Fundamental factors like inflation and construction costs affect home prices, of course. But the radical shifts in housing prices in recent years were caused mainly by investor-induced speculation.

Anyone contemplating the purchase of a home wants an idea of where prices will be when it is eventually time to sell, perhaps many years later. For that kind of long-term forecasting, we need to understand the reasons for the recent, violent price cycle, and whether it is likely to repeat itself.

History has much to teach us about real estate bubbles, and some of it is reassuring. The land booms of New York State in the 1790s, Kansas in the 1850s, California in the 1880s and Florida in the 1920s all appear to have been relatively isolated events. And the cycle was not repeated in short order.

But those events were fundamentally different from the recent housing bubble. As relatively local phenomena, involving a fairly small number of adventurers, they did not consume most people’s attention. And a major cause can be easily identified: they developed from the promotion of supposedly valuable lots of land.

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Moving Out And Buying In: Single Ladies Emerge As Homeowners

NPR       April 22, 2013

It’s hard to remember that just a few decades ago it was difficult, if not impossible, for a woman alone to take out a mortgage. Federal legislation changed that.

And yet, it’s still surprising to learn how dominant single women have become in the housing market today: Their share is second only to married couples, and twice that of single men.

In Washington, D.C., Amanda Cowley lives in her dream home — a century-old rowhouse in a gentrifying part of the city. The 37-year-old and her boisterous dog, Sadie, moved in at the end of last year. The renovated first floor has tall windows and big, open space. Upstairs, there are three bedrooms and two bathrooms.

“This is the painting-in-progress piece,” Cowley says, gesturing to the paint cans and tarp that line the hall. It’s quite a do-it-yourself project. But all this space is a big reason Cowley bought the place.

“I wanted to be able to have family come to town and feel comfortable and not be sleeping on my pullout sofa,” she says. She’s even thinking of getting bunk beds for her two nephews.

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Bank of America revenue drops, legal settlement stings

Reuters       April 17, 2013

Bank of America Corp’s (BAC.N) revenue fell across almost all its businesses in the first quarter, and the bank was hit yet again by mortgage mess cleanup costs, showing the difficulties Chief Executive Brian Moynihan faces in moving past the housing crisis.

Many of the bank’s revenue generators – including consumer banking, mortgages and debt, currency and commodities trading – turned in weaker performances. All told, adjusted revenue fell 8.4 percent to $23.85 billion.

Bank of America shares closed down 4.7 percent at $11.70 on Wednesday.

The results suggest that Bank of America’s purchase of Countrywide Financial at the height of the housing crisis is still haunting the bank even though Moynihan has said the end is in sight. They also show that the bank may be recovering from the financial crisis more slowly than Citigroup Inc (C.N), the other big bank that required multiple government bailouts.

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Galveston ends defiance on housing

By Harvey Rice        Houston Chronicle      April 18, 2013

GALVESTON – Faced with the dire financial consequences of defiance, the Galveston City Council voted Wednesday to remove conditions delaying the reconstruction of public housing damaged by Hurricane Ike in 2008.

City Manager Michael Kovacs said Galveston’s financial future would be bleak if the Texas General Land Office made good its threat to cut off millions of dollars in federal disaster aid if the city failed to remove the conditions.

The land office, administering the disaster relief program in Texas, has been locked in a dispute with Galveston leaders elected on an anti-public housing platform last year.

The council complied with the most important land office demand by voting 5-2 to remove its requirement that the city receive promised federal dollars before construction begins at two public housing sites.

Kovacs swayed the majority by pointing out that if the land office compelled the city to repay $309 million in federal funds already spent, it would likely force the city into bankruptcy. The debt would be more than Galveston’s net assets of about $290 million, he said.

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