Economy Watch: Real Estate Unimpressed with Recession’s End
- Sep 21, 2010
The nation and the real estate industry seemed unimpressed on Monday by the news that the period lately known as the Great Recession was deemed to have ended in June. June 2009, that is–small wonder no one noticed back then.
Yet that’s the determination of the Business Cycle Dating Committee of the National Bureau of Economic Research, a nonprofit economic think tank that ponders these things quite a while before announcing its verdict. But the committee stressed that this pronouncement doesn’t mean that it believes everything is OK, lest it be laughed at mightily.
“The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007,” the committee noted in a statement on Monday. “The basis for this decision was the length and strength of the recovery to date.”
Even with an end last summer, it was a long recession. The recession beginning in December 2007 lasted 18 months, which makes it the longest of any recession since World War II. To find recessions nearly as long, one has to look back to the 1970s and early ’80s. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months, according to the committee.
Is GMAC Halting Some Foreclosures?
GMAC Mortgage, which not so many years ago feasted on a bonanza on subprime lending, was reported by Bloomberg on Monday to be halting foreclosures in 23 states, for the time being at least. The states affected were mainly said to be in the Midwest and on the East Coast, including such foreclosure-heavy places such as Florida, New Jersey and Illinois.
Later on Monday, Reuters reported that GMAC denied that such a thing was happening, asserting only that some of its “outside vendors” were “suspending foreclosures,” citing a company spokesperson. The Bloomberg story, which that news organization said it stands by, cited a GMAC memo.
Why would GMAC even consider such a move? It could be that the company needs a little longer to deal with problems with the documentation of the mortgages it wants to foreclose. Not only were underwriting standards loose in the mortgage industry the early to mid-2000s, documentation was sometimes the legal equivalent of the back of a napkin.
“There’s nothing like a real estate downturn to flush out defects with mortgage documents,” a real estate attorney who declined to be named told CPE. Now attorneys who represent borrowers–especially in the so-called judicial foreclosure states–are aggressively demanding that lenders such as GMAC have all their documentation correct.
Home Builders Still Glum
According to the National Association of Home Builders on Monday, builder confidence in the market for newly built, single-family homes stayed unchanged in September from the previous month’s low level of 13, as measured by the latest National Association of Home Builders/Wells Fargo Housing Market Index.
“The stall in the nation’s housing market continues,” said NAHB chief economist David Crowe in a statement, but he also couldn’t resist adding a soupçon of optimism. “We do expect that moderate improvement in the job market will help boost consumer confidence and improve conditions for new-home sales in this year’s final quarter,” he predicted.
Wall Street seemed to like the recession’s end, with the Dow Jones Industrial Average heading skyward on Monday, ending up 145.77 points, or 1.37 percent. The S&P 500 advanced 1.52 percent and the Nasdaq gained 1.74 percent.