[click to expand]

For the Senior Loan Officer Opinion Survey, the Fed surveys approximately sixty large domestic banks and twenty-four U.S. branches and agencies of foreign banks on a quarterly basis generally covering changes in the bank lending practices and demand for loans.

It is a critical component of understanding the future of the housing market since bank underwriting now defines the types of properties and individuals being lent to, versus the prior free-for-all.

The July survey showed that for the first time, lending standards for prime loans actually eased – the first time in over 4 years. Alt-A (non-traditional) did not. The chart shows how the rate of tightening peaked around the Lehman bankruptcy circa September 2008.

Regarding residential real estate lending, a few large banks reported having eased standards on prime mortgage loans, while a modest net fraction of the remaining banks reported having tightened standards on such loans.

This is a critical first step in a long road toward an eventual housing recovery. Although one month does not make a trend, the pendulum has to make its way back to the middle position – a location it hasn’t seen in a long time.

There has been concern that the supposed increase in regulations our post-financial reform will prevent lending from easing in a meaningful amount to get the economy moving again.

However, the Financial Stability Board and Basel Committee for Banking Supervision [subscription] said in a joint statement Wednesday that the global economy won’t suffer if banks are forced to adopt tighter standards on capital and liquidity. I’m not sure how tighter regs don’t impair economic growth assuming “reckless” isn’t part of the equation, but perhaps it would reduce volatility we saw in the housing market.

The statement summarizes an interim report on the long-term effects on the economy of forcing banks to hold more capital and more liquid assets, relative to their overall balance sheet. The findings rebut banking sector complaints that such requirements would crimp lending to the real economy.

The July 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices [Federal Reserve]
Fed Senior Loan Officer Opinion Survey Chart [Miller Samuel]

Absorption defined for the purposes of this chart as: Number of months to sell all listing inventory at the annualized pace of sales activity.

The absorption rate is generally well below the 10-year average for properties under $3m.

July 2010

[click image to expand]

Manhattan Absorption Archive 2009 [Miller Samuel]
Manhattan Absorption Archive 2010 [Miller Samuel]

Note: This chart series does not include shadow inventory (properties ready for market but not yet listed for sale) so this anlaysis understates the rate of condo absorption. The Uptown (Northern Manhattan) data set is too thin for a reliable presentation.

[click to expand]
[supply and demand (in that order)] Housing PPI Turns Down

Some other interesting stuff that’s been accumulating in my RSS reader…

• [Business Insider] Another Reason Bill Gross Thinks Housing Must Be Stimulated To Save The Economy
• [Curbed] Casting Calls: What Not to Wear Seeks NYC Broker for Intervention
• [DNAinfo] Several Sex Shops, Peep Shows and Bars Located Near Ground Zero, Report Says
• [The Real Deal] Fannie, Freddie going co-op?
• [Mortgage Porter] LQI: The Potential Kiss of Death for On-Time Closings
• [Marcus & Millichap] Capital Gains Tax Set to Rise at Year End; Transaction Activity May Edge Higher as Long-Term Owners Lock in Profits
• [Law Blog] Who’s a Pirate? Turns Out, the Answer’s Not So Simple

[click to query exchange rates]

Foreign consulates in New York City are some of the more valuable sites in the city. In the valuation of single family residences, especially mansions, an alternative use to a single family (as in something priced $5 to $50M) can be a residence for the ambassador to the UN to reside.

Periodically NYC gets a surge in foreign demand when the exchange rate goes haywire. We saw this a few years ago with the “Irish Carpenter” phenomenon. NYC is very proactive with maintaining good relationships with foreign governments because it is an important resource its economy.

However, in facing budgetary shortfalls due to the struggling economy, the city had plans to tax the real estate holdings of foreign missions per the New York Law Journal’s article:

Breaking News: State Department Action Scuttles City Taxation of Foreign Mission

Despite the city’s success in years of litigation, the U.S. Court of Appeals for the Second Circuit said yesterday that the State Department had decided to designate an exemption from property taxes as a “benefit” under the Foreign Missions Act, 22 U.S.C. §4301 for The Permanent Mission of India to the United Nations and as well as the representative of the Mongolian People’s Republic.

A long time revenue drain for hosting the UN in NYC has been the non-payment of parking tickets by diplomats is steeped in tradition. Sounds like more of the same.

[click to open report]

Trulia released its Price Reduction Report for August 2010.

25 percent of the home listings on the market in the United States as of August 1, 2010 have experienced at least one price reduction. This makes August the fourth straight month in increases for national price reduction levels. The total dollar amount slashed from home prices in America’s 50 largest cities was $30.1 billion, and the average discount on price-reduced homes continued to hold at 10 percent off of the original listing price.

The number of homes with price reduction has been rising since bottoming out in March 2010, the month before the expiration of the tax credit.

With one out of every four homes experiencing at least one price reduction, sellers are feeling no relief this summer, in a market climate of fewer qualified buyers and widespread uncertainty about the job market. If buyers are unqualified to buy, it doesn’t matter how low interest rates are or how discounted a home is,” says Pete Flint, co-founder and CEO of Trulia.”

Although there is only a little more than one year since this metric has been published, the last 3 months are the only period without the federal tax deduction as part of the federal stimulus program. If there is seasonality in play, we would expect the price reduction percentage to peak now and next month to see stabilization or reduction as the demand for housing improves in the fall. However I suspect we may see a continued increase in this metric through at least the end of the year as the lighter demand caused by the poaching of demand back to last spring from the tax credit takes hold.

Top 5 cities with highest number of price reductions

[click to open full list]

Top 5 cities with lowest number of price reductions

[click to open full list]

Trulia Home Price Reduction Report [Trulia.com]

I have a great discussion with Jon Gollinger, Founder and CEO, Accelerated Marketing Partners who sets me straight on the concept of accelerated marketing as a process (hint: it’s not all about auctions).

In early 2009, he and I were part of a New York Times page one story on his marketing prowess.

Jon pulls no punches when it comes to understanding the consumer – they are the ones who set market price.  I have long admired his skill in creating a market environment that attracts real participation, best exemplified in his company slogan:

“You bid it, you win it.”

Check out the podcast.

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

[click to open study]

In the just released paper from the Boston Fed: “Reasonable People Did Disagree: Optimism and Pessimism About the U.S. Housing Market Before the Crash” by Kristopher Gerardi, Christopher Foote and Paul Willen.

I loved this paper! and could name most of the economists who took the actions outlined in the abstract below before I read the paper its self – to the uninitiated the paper names the names.

You’ve got the Optimists, the Pessimists and the Agnostics.

Many economists, skeptical that a bubble existed, attempted to justify the historic run-up in housing prices based on housing fundamentals. Other economists were more uncertain, pointing to some evidence of bubble-like behavior in certain regional housing markets. Even these more skeptical economists, however, refused to take a conclusive position on whether a bubble existed. The small number of economists who argued forcefully for a bubble often did so years before the housing market peak, and thus lost a fair amount of credibility, or they make arguments fundamentally at odds with the data even ex post. For example, some economists suggested that cities where new construction was limited by zoning regulations or geography were particularly “bubble-prone,” yet the data shows that the cities with the biggest gyrations in house prices were often those at the epicenter of the new construction boom.

In other words, economic theory has to catch up to the housing market’s gyrations and we have to sort out a heckava alot of very smart chatter.

[The Economist via Business Insider] Roubini: Even If The Economy Doesn’t Technically Double Dip, It’s Still Going To Be Awful

Some other interesting stuff that’s been accumulating in my RSS reader…

• [BankThink] New Appraisers Pushed Beyond Qualifications
• [BankRate] New York has highest closing costs
• [Freakonomics/NYT] iPhone Users Have More Sex
• [The Mess That Greenspan Made] Deaf Painters and the U.S. Tax Code
• [The Real Deal] Extell loses first site ever with West Side parcel
• [Time] Why Bernanke Isn’t Doing More to Boost the Economy
• [FT] US house mortgage arrears mount
• [HousingWire] Homebuyer Demand All But a ‘Standstill’: Altos Research

This clip was way back from August 3rd (tip ‘o cap to Credit Slips), but its worth a listen to. Hopefully consumers will have more protection, something that we forgot about in the last boom – I’m a big fan of Elizabeth Warren.

For each week’s Eye on Real Estate Show on WOR NewsTalk Radio 710, we include a segment called “The BlogCast” where I discuss housing related (sometimes a stretch) posts from some of my favorite blogs and web sites. They cover topics that are current, funny or simply a “must read”.

Saturday’s BlogCast covered the following blog posts:

[Yo! Chicago] The king of the $1 reduction? I’m pretty sure I’ve found the king of the $1 reduction, or a strong contender for the title at the very least…

[Atlantic/Megan McArdle] Why Pay off the House Early? A number of commenters have asked me why I want to pay off my house early, when I could simply be piling up that cash and putting it in treasury bonds….

[Kenneth Harney/WaPo] Home shoppers beware of click-fix digital makeovers Try to picture this real estate scenario — virtually. Like most shoppers searching for a home, you start on the Web, checking out listings and locations. You find a house that appears to be what you’re after, and you tap into the photos section of the listing to see the interior shots…

[Freakonomics/NYT] Dirty Data?Are e-mail attachments bad for the environment?…

I’ve neglecting posting my Blogcast links for the past few weeks, but hey, I was calling in from vacation.

If you missed this past Saturday’s show or any prior show, you can listen to the podcast at any time or subscribe to it for free via iTunes to always get the latest show delivered automatically to your computer or handheld device. My Blogcast is usually in the first hour of the show.

Listen to the most recent Eye on Real Estate podcast.

Subscribe to the free weekly Eye on Real Estate podcast.

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Or visit the Eye on Real Estate Website.