Economy Watch: Existing Home Sales See Uptick in March
Existing home sales were up unexpectedly; the Fed proposes new mortgage underwriting rules to make lending more stable and sane; and a couple of dysfunctional millionaires see their baseball team taken away.
By Dees Stribling, Contributing Editor
The National Association of Realtors reported on Wednesday that existing home sales were up unexpectedly in March on the heels of an unexpected rise in housing starts, which was reported on Tuesday by the U.S. Census Bureau. So the housing market still has a few surprises up its tattered sleeves.
Existing home sales rose to an annualized rate of 5.1 million units in March, up from 4.92 million units in February, a 3.7 percent gain month-over-month. Compared with March 2010, however, the annual rate was down 6.3 percent. The median price for an existing home dropped to $159,600, which is 5.9 percent lower than the median last year, NAR also reports.
The ever-chipper Lawrence Yun, chief economist at NAR, asserts that tight lending standards are holding the market back. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain, primarily because some buyers are finding it too difficult to obtain a mortgage,” he says in a statement.
Fed wants new rules for mortgages
The Federal Reserve proposed new mortgage underwriting rules on Wednesday, including such why-didn’t-they-think-of-that-in-2005 ideas as applying a “general ability to repay” standard. That is, lenders need to verify such things as a borrower’s employment status, credit history, debt-to-income ratios and other basic conditions. In short, underwriters must do their jobs.
More subtly, the Fed is also proposing a definition for a “qualified mortgage” that would receive “special protection from liability.” That is, lenders who create non-standard mortgages–with such features as negative amortization, interest-only payments or a term longer than 30 years–would have less protection from lawsuits should the mortgages blow up in their faces.
The new rules would not be the death of subprime mortgages, however. In “rural or underserved areas,” and in some other circumstances, lenders could still underwrite them.
MLB takes the Dodgers
Major League Baseball seized control of the Los Angeles Dodgers’ day-to-day operations on Wednesday. That isn’t precisely a story of broad economic import, but on the other hand, it does involve America’s pastime at the beginning of a new season, and seems to show just how much damage dysfunctional multimillionaires can do to any organization.
Also, there’s a tenuous real estate component, since the millionaires in question are Frank and Jamie McCourt, who have been quarreling in their divorce proceedings over who owns the franchise. Once upon a time, Frank McCourt founded the McCourt Co., a CRE developer in Boston. A divorce proceeding is one thing, but MLB took control of the business for more fundamental missteps, such as the McCourts’ taking $100 million or so from the Dodgers to fuel their lifestyle, a series of questionable loans taken out by Frank McCourt, and the hiring of a pricey Russian psychic to help the Dodgers win games by beaming positive brain waves in the general direction of the team.
Wall Street seems to have forgotten that entire business about Standard & Poor’s warning the U.S. government about public debt, thus scoring a go-go session on Wednesday. The Dow Jones Industrial Average gained 186.79 points, or 1.52 percent, while the S&P 500 and the Nasdaq were up 1.35 percent and 2.1 percent, respectively.