U.S Homeowners struggling

One in five U.S. homeowners with mortgages in america owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows.
About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.
Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows.
First American said the value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half the decline in California. Forty-three U.S. states and Washington, D.C., were included in the study.
While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation.
"The economic slowdown is broadening," said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. "As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country."
Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.
Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington, D.C., had a 44 percent increase.
"Even I continue to be surprised at the tentacles of this financial and economic debacle," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices."
Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation's unemployment rate to rise above 9 percent before the recession ends, up from January's 7.6 percent.

Dollar at new high

The US dollar extended gains to hit a fresh 3-year high against a basket of currencies on Monday as another U.S. bailout for American International Group sparked a flight into perceived safer assets.
The troubled insurer also reported a record fourth quarter loss of $61.7 billion, extending hefty stock market losses.
The dollar index .DXY hit a high of 88.956, its highest since April 2006 as European stock markets fell 4 percent .FTEU3. The U.S. currency's gains also took the pound to its lowest in just over a month at $1.4036 .
"There's no good news out there and that is leaving the euro and sterling looking really heavy right now. Stock markets are working in the dollar's favour," a London-based trader said.

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The euro extended losses against the dollar on Tuesday as U.S. stocks turned negative after Federal Reserve Chairman Ben Bernanke said more must be done to secure financial market stability.

Euro buying hit a session low of $1.2522 , according to Reuters data, after earlier rising as high as $1.2677. It was last changing hands at $1.2542, down 0.3 percent on the day.

Bernanke told Congress the government must take bold action to fight the crisis even if it means a rise in government debt. Some analysts said that was good for the dollar buyers because it suggested U.S. authorities would do whatever it takes to help the economy recover.

A weak U.S. housing report and Bernanke's warning that the near-term economic prospects remain uncertain, also dulled risk-taking, prompting investors to move away from stocks and other currencies and toward the relative safety of the dollar.

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Spanish Lending falls again

The fall in Spanish home sales accelerated in the final quarter of 2008, a report showed on Tuesday, reflecting a collapsing property sector that has helped tip the fourth-largest euro zone economy into recession.

Some 113,274 homes were bought and sold in the fourth quarter, down 13.5 percent from 130,884 in the third, Spain's College of Registrars said.
The drop was sharper than a 8.6 percent fall between the second and third quarters.
For the year, 561,420 sales were registered, down 28.8 percent from 2007.
The average value of Spanish mortgages declined for a fourth consecutive quarter, falling 1.84 percent year on year to 136,148 euros ($174,400), the college said.
Average mortgage values fell 6 percent in 2008, it said.
Figures from Spain's National Statistics Institute published last month showed mortgages in Spain fell 23 percent in November compared to a year earlier, reflecting both weaker demand and tighter bank lending.

Most analysts say Spanish house prices will fall by up to 30 percent from their highs, though some see greater declines as possible as the end of a decade-long residential construction boom coincides with credit market turmoil. Add into this the cost of buying euros and the Spanish property market seems to be in some pain.

Pounds to Euros exchange rate = 1.1128

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House prices continue to fall

House prices fell by 1.8% in February as sharp interest rate cuts and improved affordability failed to restore market confidence, the UK's biggest building society said today.
According to Nationwide's latest snapshot of the housing market, the average price of a UK home has fallen by 17.6% over the past 12 months, dropping by more than £31,000 to £147,746. Prices are now 20% down on their October 2007 peak of £186,044.
The society said that despite swingeing interest rate cuts, which have brought the Bank of England base rate down to 1%, its lowest ever level, would-be buyers were still holding back.
Nationwide's chief economist, Fionnuala Earley, said: "Early signs of increased interest in housing, as reported by the pick-up in new buyer enquiries, have yet to filter into sales, but do suggest that falling prices and interest rates are raising curiosity now, which could flow through quickly once confidence returns."
However, she added: "Further cuts in rates will be welcome in the housing market, but the economic conditions that require them will mean that there is unlikely to be a swift turnaround in the housing market in 2009."
Figures published this week by the British Bankers' Association showed an upturn in the number of mortgages approved for house purchases in January, and estate agents have been reporting an increase in interest from potential buyers.
Some will have been encouraged by recent price falls and falling interest rates, which have made homes much more affordable for first-time buyers. However, mortgages remain hard to come by and lenders are still offering their best deals to those with large deposits

Low end property owners reap the benefits

HOMEOWNERS whose properties are worth less than $500,000 are reaping the greatest rewards of government grants and low interest rates.
Economists say prices will rise by 5 or 6 per cent in Sydney suburbs where the median house price is below half-a-million dollars thanks to demand by first-time buyers.

Auction volumes picked up yesterday as the market swings into gear for the year after a lacklustre end to 2008 when Sydney property prices slipped more than 4 per cent. Weekly clearance rates in the past fortnight reached a peak of 70.8 per cent but the number of properties auctioned was low.

Agents say the most activity is among first-home buyers who are taking advantage of state and federal grants worth up to $24,000.

On Friday, Reserve Bank Governor Glenn Stevens flagged further rate cuts and said the effect of successive falls in the cash rate were only beginning to have an impact.

He said he expected a recovery in the housing market to begin later this year.

Australian Property prices monitors' senior economist Liam O'Hara said the upper end of the market would continue to fall or remain flat while the interest rate cuts would further boost activity at the bottom end.

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Mortgage approvals fall 43 percent year over year in January

Reuters - The number of mortgages approved for house purchase picked up slightly in January from December but remained more than 43 percent lower than a year ago, the British Bankers' Association said on Tuesday.
The BBA said mortgage approvals totalled 23,376 last month. That compared with 22,416 in December and a record low of 17,574 in November.
Total mortgage lending was 2.9 billion pounds in January, down from 3.3 billion in December.
The report highlights the continued downward pressure on British house prices which have fallen around 17 percent in a year as the credit crunch has made it harder and more expensive to get finance.

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