Global property cycle's peaked, Morgan Stanley says - MarketWatch

Global property cycle's peaked, Morgan Stanley says - MarketWatch: "Growing evidence of real-estate 'bust'
Fallout for consumers and corporate profits, eonomist says
E-mail | Print | | Disable live quotes By Chris Oliver, MarketWatch
Last Update: 6:47 AM ET Jun 29, 2006


HONG KONG (MarketWatch) -- Evidence is mounting that the global property cycle is turning down, as rising interest rates and heightened inflationary pressures combine to put the brakes on demand for real estate, according to a Morgan Stanley report.
The shift ushers in an end to what's been a six-year rally during which the twin forces of globalization and financial innovation fed an upturn in the property cycle that became a worldwide phenomenon, said economist Andy Xie, in an Asia Pacific strategy report released Thursday.
'Due to deflation shocks, global inflation has been low, which allowed major central banks to keep interest rates very low, in turn fueling property,' Xie said. 'As inflation picks up simultaneously around the world, interest rates are rising everywhere, and the property boom is turning into a bust.' "

Big Shock is on the Way!

Payment Shock in Store For ARM Borrowers, More Foreclosures in Future? - NationalRealtyNews.com: "Payment Shock in Store For ARM Borrowers, More Foreclosures in Future?
Thursday, June 22, 2006 - By Staff Writer, National Realty News

STUART, FL - Many borrowers who mortgaged their homes with adjustable rate mortgages while rates were at historic lows will soon be in store for a payment shock and the economy overall will certainly feel the effects. Some experts say prepare for a rise in delinquency rates and foreclosures.

Bankrate.com reports that over the next 18 months, more than $1 trillion of adjustable-rate mortgages will be hitting their first reset date. Assuming the average loan amount is $200,000, that amounts to 500,000 mortgages. The typical homeowner will be forced to seriously readjust their monthly budget when they go from paying on an interest only loan or a loan with a low starting rate to one that now requires playing catch up on the principal. Many borrowers will simply not be prepared for a sudden change that may require them to pay double more than they paid the previous month for their mortgage. Industry experts say this will fuel another year of increases in mortgage delinquency rates and foreclosures.

The effects will be evident in the economy overall, as well. That consumer who is suddenly paying more for their mortgage - and who is already feeling the heat due to high fuel prices - is most likely forced to cut back on spending money elsewhere - especially for consumer products and services. "
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BUILDER CONFIDENCE FALLS

The confidence level of the nation's home builders continues to decline in 2006, falling this month to its lowest reading since April 1995, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The seasonally adjusted HMI stands at 42, down four points from May's revised reading of 46. An HMI above 50 indicates that more builders view sales conditions as good versus poor. According to NAHB, declining demand from investors, rising mortgage interest rates, and continued affordability issues all contributed to the decrease in builders' outlook for the new home market.

All three HMI components declined in June. The component measuring sales expectations declined five points to 50, while the components gauging current single-family sales and buyer traffic decreased to 47 and 29, respectively. Home builder confidence edged down across the nation in June, and in the West builder confidence declined one point to a seasonally adjusted HMI of 61.
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Smart money is leaving the real estate market

Rockford's Newspaper Rock River Times | rockford illinois news information: "Dr. Christopher Thornberg, a member of the forecast staff, told a blog called The Housing Panic: “Actually, what we are seeing is a very typical slowdown in the market so far—there is nothing particularly soft about it (the landing in bubble markets). The claim is that because unit sales are falling but prices are still going up, that this is an unusual slowing. The fact is that most breaking markets start with activity, and it takes three to four quarters for that to take all the wind out of price appreciation. How hard it will be, remains to be seen.”"
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49% Foreclosure Increase in San Diego

Foreclosures Continue to Rise in Southern California, Says Default Research: "Real estate bubble continues to deflate in Southern California, expert says

RISMEDIA, June 20, 2006—The number of foreclosures escalated throughout Southern California, with a rise of 29.09% since January 2006, according to Default Research (www.defaultresearch.com), the rapidly growing real estate research company for foreclosure properties.

While Riverside had the highest increase of 56.45%, San Diego County had an increase of 49%, followed by Los Angeles up 16.2%.
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Interest Rates Set To Move Higher

Inflation Outlook Likely to Push Rates Still Higher
Wednesday, June 14, 2006 - By Staff Writer, The Originator Times
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STUART, FL – Mortgage professionals everywhere have been wondering if interest rates will continue to rise and whether the Fed will hike short-term rates for the 17th consecutive time on June 29.
Looking at this week’s key economic briefings and results, all signs points to yes. The Fed will likely increase short-term rates by a quarter of a point. Anticipating this action, the bond market is apt to similarly push long-term mortgage rates higher."
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Bubble Trouble? What to make of all the real estate trend news

Bubble Trouble? What to make of all the real estate trend news: "Some economists -- typically, those who have staked their professional reputations on being dark-horse skeptics -- are predicting nothing short of a global economic apocalypse. Others -- often those on the take from the real estate industry -- scoff at such dire visions. Don't listen to the doomsayers, they say, 'we're in for a soft landing.'
But how these perspectives affect the average gal with a mortgage or the ordinary dude with a dream of buying his own house is anything but clear. So who do you listen to, and what does it all mean?
On a basic level, the real estate experts can't really quibble about the basic facts: Many once-hot markets are showing signs of a cold front this summer. The Federal Reserve Board is expected to raise interest rates again to ward off inflation, and banks have begun to curb their promiscuous dispensing of risky, low-down loans. These factors will contribute to making real estate less appealing to many investors. Sure, people still need to live in houses, but the people who need to pour extra dollars somewhere may take a breather from speculative acrobatics to search for other investment circuses. (Can you say 'oil futures' three times fast?) "
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