The Housing Double-Whammy - Back Into the Shark Tank

The nation’s biggest lenders are doing everything they can to reverse the slide in housing prices and put the market back on solid footing. And they’ve had some success, too. In Maricopa County, for example, where prices on some homes dropped more than 60 percent, a housing revival is underway thanks to the persistent manipulation of the banks. In the last year, the median price of a Phoenix-area home increased by 29 percent making Maricopa County the hottest housing market in the country. (Average home prices in that region are up 11.5% since May 2011.) The cheerleading media would like you to believe that the surge in prices is due to shrinking inventory which slipped 33% in the last year. But that’s not it at all. The real reason is that the banks are withholding distressed property which is pushing the average price of a house higher. In the last year, the banks have slashed the number of distressed homes they put on the market by 68%. Fewer severely-discounted houses, means higher median priced homes. That’s the “Phoenix miracle” in a nutshell.

The reason the banks are engaged in such blatant price-fixing is not to save Joe Homeowner from losing more equity on his property, but to prop up the value of billions of dollars of clunker mortgages in their loan book which have plunged more than 32% since the bubble burst in 2006. That’s what this foreclosure shell-game is really all about, preserving the illusion that the banks are solvent.

Of course, there’s a downside to higher prices too, which is that fewer people are able to buy homes. That’s why sales of single-family homes in the Phoenix-area fell 16 percent in June from a year ago and a whopping 22% month-over-month. Some of the experts expect this trend to accelerate as housing prices continue to firm-up. According to California-based analyst Mark Hanson,

“The Phoenix region is a leading indicator to other more ‘distressed’ regions that made up most of the dead-cat bounce in Q1 and Q2 housing.”….Hanson expects July existing home sales to come in at the lowest annualized rate of the year. … Hanson has been warning for months that a drop in distressed supplies would stem the rebound in home sales, and it did just that in May and June.” (“Home Improvement Shows Gains—But May Not Last”, Diana Olick, CNBC)

If Hanson is right, then July’s existing home sales report (next week) could be a real wake-up-call. Lower sales will prove that bank manipulation is, in fact, prolonging the downturn.

This is from Arizona State University’s W P Carey School of Business

“MONTHLY REPORT– – GREATER PHOENIX HOUSING MARKET – JUNE 2012″

“Foreclosure starts on single family and condo homes fell 14.9% between May and June 2012 …….

(And) Recorded trustee deeds (completed foreclosures) on single family and condo homes were down 14% between May and June 2012 and were down 56% from June 2011…”

continue at Counterpunch:

http://www.counterpunch.org/2012/08/17/the-housing-double-whammy/

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