Counterparties: Why your house is getting more valuable

By Ben Walsh
November 30, 2012

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Two things you don’t expect to see together are the nation’s highest foreclosure rate and a housing shortage. Yet as Bloomberg’s John Gittelsohn and Prashant Gopal report, that’s exactly what Stockton, California is experiencing right now. While there are lots of foreclosures, they’re not happening at heavily-discounted prices. “People see a foreclosed home for sale in this area and they’re going to jump on it”, said one longtime Stockton realtor.

There’s also evidence that Obama administration’s much-maligned foreclosure relief program is now picking up pace. Susan Wachter, a Wharton professor, was particularly impressed:

Changes to Obama’s loan-modification program had the biggest impact on reducing pending foreclosures since late 2010 by creating a template that lenders followed, Wachter said. That included incentives to compensate loan servicers for reducing principal on loans for delinquent borrowers. In January, the administration tripled the award to 63 cents for every $1 in writedowns.

Nationally, there’s been some very good housing news of late: the Case-Shiller home price index showed prices rising 3.6% nationally year-on-year. Especially impressive were the gains in areas that have been hard hit by the housing bubble: 20% in Phoenix, 7.6% in Detroit, and 7.4% in Miami.

Bill McBride of Calculated Risk points to new data showing that the government-supported refinance boom has been continuing. Refinancing has a smaller impact on the economy than does a boost in home sales, but it does provide a way for banks to finance a portion of the recovery by giving homeowners more cash to spend each month. In an economy that’s growing at less than 3% annually, even modest increases in consumer spending are helpful. One thing that certainly won’t help: unless Congress acts many of the very same homeowners who’ve gotten help from their lenders will see those savings taxed as income. — Ben Walsh

On to today’s links:

New Normal
The problem with the much-hyped return of US manufacturing: crappy pay – Felix

EU Mess
How Spain ended up with 25% unemployment – Sober Look

Servicey
“It never gets easier, you just make more money” and 9 other rules for I-bankers – Epicurean Dealmaker

Tax Arcana
Most Americans pay less in total taxes than they would have 30 years ago – Binyamin Appelbaum

Alpha
Jeff Gundlach is just waiting for “something to go kaboom” – Bloomberg

The Fed
Examining the dove-to-hawk ratio at the Fed – FT Alphaville

Financial Arcana
Wall Street is still trying to securitize energy efficiency loans to consumers – Slate

Philosopher Bankers
“Greg Davies, head of behavioral and quantitative investment philosophy for Barclays” – Forbes

Investigations
An editor at TheStreet.com passed a stock tip to his dad, then the FBI called – WSJ

Yikes
Citigroup is lowering bonuses and cutting more banking jobs – Bloomberg

Awesome
7 ways of looking at the news that Mitt Romney’s dad got free McDonald’s for life – Gawker

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