IMF Calls Real Estate Prospects ‘Dismal’

The International Monetary Fund waxed gloomy in a report on Wednesday.

October 7, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Jakob Montrasio

The International Monetary Fund said in a report on Wednesday that the prospects for the global real estate sector are “dismal.” That’s especially the case in countries such as the United States, Ireland and Spain, the organization asserted, but also in places that have thus far seen less real estate turbulence, including Canada and much of the Asia-Pacific region.

“Especially in the United States, given the limited success of mortgage modification programs and the shadow inventory from foreclosures and delinquencies, this has renewed fears of a double dip in real estate markets,” the report noted. “A lot will depend on the path of economic recovery: if employment creation remains low, risks of a double dip in housing naturally increase.”

As for Asia, the IMF warned of that “anecdotal evidence” suggests that a number of markets are “overheating.” A bubble, to use more prosaic terms, and the IMF posits that places such as Beijing, Nanjing, Shanghai and Shenzhen are at the most risk of blowing up in investors’ faces.

ADP Jobs Numbers Not Encouraging

It’s nearly the time of the month when the federal government issues employment numbers, and so it’s also time for the monthly ADP report, which sometimes predicts the official numbers fairly closely and sometimes does not. In any case, the ADP National Employment Report released Wednesday said that payroll employment was down 39,000 jobs–a surprise, since most economists had been predicting an increase. Then again, August’s initial ADP report of 10,000 jobs lost was later revised to 10,000 jobs gained.

Construction jobs led the decline, with a 28,000 drop in September, and manufacturing and financial services were down 17,000 and 13,000, respectively, according to ADP, which only measures private sector jobs. There was a modest uptick of 6,000 jobs in the service sector, however.

Also out on Wednesday was the Challenger Job-Cut Report, which put layoff intentions at 37,151 in September, compared with 34,768 in August. Government layoffs were up, while layoffs in the retail and industrial-goods sectors were down, the report noted. Hiring intentions for the retail sector climbed to 114,000 in September, which represents a mushrooming from a year ago, when retail hiring didn’t even total 2,000.

Wells Fargo Not Pausing Foreclosures

Other banks might be pausing foreclosures in some places, but Wells Fargo said on Wednesday it wasn’t going to slow down. “We audit our results regularly and stand by our foreclosure filings,” Franklin Codel, the bank’s CFO, told Reuters on Wednesday.

Also on Wednesday, the San Francisco banking giant agreed to modify more than 8,700 mortgages to the tune of $772 million in lost value–a whopping $88,500 or so on average for each mortgage. The goal of taking such a loss on the loans, which were payment-option ARMs sold by Wachovia and Golden West Corp. (both since acquired by Wells Fargo), seems to be to forestall even more expensive legal action because the marketing of these loans products, back in the bubble days, was considerably less than honest.

After Tuesday’s exuberance, Wall Street took a breather on Wednesday and turned in a mixed performance. The Dow Jones Industrial Average gained 22.93 points, or 0.21 percent, while the S&P 500 lost a scant 0.07 percent and the Nasdaq was down 0.8 percent.