SIgns of another downturn are in the air with existing home sales dropping yet another month and jobless claims inching up again. Households are tightening up as credit card debts shrink.

In the Realtors group’s report, the number of existing homes for sale at the end of January fell 0.5% to 3.27 million. That represents a 7.8-month supply at the current sales pace, up from a 7.2-month supply in December.

This is a staggering statistic which underscores how difficult it is for banks to pull out of this hole.

Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year. That number represent 24% of all residential homes loans in America…. The aggregate dollar value of negative equity was $801 billion at the end of last year, up $55 billion from $746 billion in Q3 2009.

New home sales reached record lows in January as the economy appears to be headed for a double dip, dropping 11 percent last month to a seasonally adjusted annual rate of  309,000 units… the lowest since 1963 !!

January’s weakness was evident in all regions except the Midwest, where sales posted a 2.1 percent increase. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.

The drop in sales pushed the median sales price down to $203,500. That was down 5.6 percent from December’s median sales price of $215,600, and off 2.4 percent from year-ago prices.

New home sales for all of 2009 had fallen by almost 23 percent to 374,000, the worst year on record.

Fannie is now into short term loans through a private financial firm, to boot.

The government-controlled mortgage investor has established the program with Guggenheim Partners LLC, a New York-based financial-services concern, which provides short-term funding to mortgage firms through its NattyMac subsidiary.

The Protecting Tenants at Foreclosure Act protects renters at the expense of the mortgage holders.

Under the Protecting Tenants at Foreclosure Act, which Congress passed last May, tenants like Pearson are usually eligible to stay after the property has been foreclosed as long as they have a valid lease and are paying their rent regularly. Even renters on a month-to-month lease get 90 days to leave.

But tenant advocacy groups charge that lender representatives, including some unscrupulous real estate agents, have been preying on tenants’ ignorance. They pressure renters by sending them misleading letters that drive some out.

The numbers are not pretty , reflecting the absence of a primary driver in the tech arena.

Jobs – Between November 2008 and November 2009, employment in Santa Clara and San Mateo Counties dropped 6.1 percent, compared to 3.8 percent nationally. Silicon Valley lost 90,000 jobs between the second quarter of 2008 and 2009, bringing total employment down to 2005 levels. The “green” economy accounted for 12,000 jobs in the region.
Venture capital funding plummeted, and office vacancy rates were up 33% percent in 2009.
Workers took a 5% cut in income between 2007 and 2009.
Competition for talent with China and India, among other geographies.

Timeshares are long term financial commitments where owners do not have control over. Over 10 percent year increases are exorbitant.

…Her bill for 2010 totals $1,650, up 20% from last year plus a $250 charge to make up for “the deadbeats who have abandoned their time shares…Time-share mortgage defaults rose each quarter in 2009 compared with 2008, ARDA says. In the third quarter of last year, 2.9% of time-share mortgages went into default vs. 2.2% in 2008. About 8% of time-share mortgages were in default as of 2008. Maintenance fees have grown an average of 12% a year since 2005….ARDA’s Nusbaum says industry woes can be traced largely to developers no longer being able to package mortgage debt as asset-backed securities sold to Wall Street. … Developers have historically lent directly to customers. Cash back from investors on the sale of bundled mortgages was used to build more resorts. The mortgage-backed security market all but vanished in the 2008 financial crisis, and the industry has had to halt most new construction and cut back on free cruises, air tickets and hotel rooms given as incentives for customers listening to a sales pitch.

The HAMP program is giving these homeowners the shaft given that the banks are simply maximizing profits at the expense of the government and the mortgagees.

cutting principal is entirely voluntary, and most lenders aren’t doing so, housing counselors and attorneys say. “I don’t think it’s common at all,” said Helene Reynaud, vice president of national grants for the National Foundation for Credit Counseling. “When we ask our counselors, they never seem to see them. Or very, very rarely.” … Even if a homeowner gets a “trial” modification - and makes each new payment on time - they can still lose their home. “The foreclosure and loan modification proceed on two separate tracks,”…Homeowners who have been turned down for a modified mortgage report that servicers often don’t spell out why they deny an application, say housing advocates. With no formal appeals process, HAMP makes it extremely difficult for homeowners and their counselors to figure out whether their applications were properly reviewed.

Citigroup is trading 6 months of rent for the deed of these homes. How lucky are these borrowers ?

Citi said Thursday it is launching the pilot program, dubbed “Foreclosure Alternatives,” this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.
In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi’s program, like other “deed in lieu of foreclosure” efforts, allows the homeowner to avoid a completed foreclosure. While the owner must still leave the home after six months, the program results in a less severe hit to the borrower’s credit score.

With wages stagnant and credits tightened, can the housing market really recover ?

The average, inflation-adjusted annual wage of Silicon Valley tech workers, including bonuses and stock options, tumbled from $120,100 in 2000 to a low of $87,300 in 2002, and stood at roughly $105,500 in the first six months of 2009.