Guess first please and then read it all.

(Really sharp blog readers may remember I asked this question in November 2010 but the percentage has changed since then–KSH).

Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom.

Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow.

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While better than expected, Friday’s employment numbers showed that the national economy still had a long way to go to fully recover. Though down from its peak of 10.1 percent in late 2009, April’s unemployment rate reflects only those Americans who are still actively looking for work.

As such, economists said the April jobs report was part of a larger picture of the economy that remained mixed. The rise in the unemployment rate reflects the survey of households, which indicated a 190,000 decline in employment in April. And recent data on initial jobless claims and other employment indicators have been weak.

“Millions of people are unemployed and many have left the labor market and given up,” Mr. Shapiro said. “Against that we are maybe creating 244,000 jobs. That is all well and good but it just shows you how much further we have to go to make a dent into what has happened in the labor market.”

“It gets the basic debate out there about the economy,” he added. “Is all we have seen the product of government stimulus, and are all the problems coming back or not?”

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It’s obviously been a good week for the Obama administration. But it comes at a dangerous time, for both the administration and the economy. The excitement over tracking down Osama bin Laden could end up making the president and his advisers less panicked over the state of the economy. And they should be a little panicked.

For the second straight year, the recovery seems to be at risk of stalling. The economy grew at an annual rate of only 1.8 percent last quarter ”” eerily similar to the 1.7 percent growth last spring, just when job growth started slowing down. Fully 80 percent of people say the economy is in fairly bad or very bad shape, according to a New York Times/CBS Poll last month. More people say it’s getting worse than getting better, the opposite of a few months ago.

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The first failing, of which Mr Obama in particular is guilty, is misstating the problem. He likes to frame America’s challenges in terms of “competitiveness”, particularly versus China. America’s prosperity, he argues, depends on “out-innovating, out-educating and out-building” China. This is mostly nonsense. America’s prosperity depends not on other countries’ productivity growth, but on its own (actually pretty fast) pace. Ideas spill over from one economy to another: when China innovates Americans benefit.

Of course, plenty more could be done to spur innovation. The system of corporate taxation is a mess and deters domestic investment. Mr Obama is right that America’s infrastructure is creaking (see article). But the solution there has as much to do with reforming Neanderthal funding systems as it does with the greater public spending he advocates. Too much of the “competitiveness” talk is a canard””one that justifies misguided policies, such as subsidies for green technology, and diverts attention from the country’s real to-do list.

High on that list is sorting out America’s public finances….

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More than half of Americans (55%) describe the U.S. economy as being in a recession or depression, even as the Federal Open Market Committee (FOMC) reports that “the economic recovery is proceeding at a moderate pace.” Another 16% of Americans say the economy is “slowing down,” and 27% believe it is growing.

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There are structural problems in the economy as growth slows and middle-class incomes stagnate. There are structural problems in the welfare state as baby boomers spend lavishly on themselves and impose horrendous costs on future generations. There are structural problems in energy markets as the rise of China and chronic instability in the Middle East leads to volatile gas prices. There are structural problems with immigration policy and tax policy and on and on.

As these problems have gone unaddressed, Americans have lost faith in the credibility of their political system, which is the one resource the entire regime is predicated upon. This loss of faith has contributed to a complex but dark national mood. The country is anxious, pessimistic, ashamed, helpless and defensive.

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The share of renters who spend more than half their income on housing is at its highest level in half a century and it’s no longer just low-income tenants who are feeling the pain, according to a Harvard University study scheduled for release Tuesday.

About 26 percent of renters ”” or 10.1 million people ”” spent more than half their pre-tax household income on rent and utilities in 2009. That’s because incomes slipped dramatically from their peak at the start of the decade even as rents kept rising.

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I have been wanting to discuss a horrifically misleading article for a week now: Americans Shun Cheapest Homes in 40 Years as Ownership Fades.

It is an object lesson in how an industry spokesgroup, engaging in biased analysis, used poor econometric models to create misleading data. That led to others making bad assumptions based on that data, which in turn leads to an unsupported conclusions. To wit, that home prices are now cheap (they are not) and home ownership is being shunned (it is not). Thus, the end result is a misleading Bloomberg.com article on residential Real Estate that is unfortunately based on these terribly flawed NAR metrics.

The reality is quite different than the spin. No, it is not, as objective data reveals, especially cheap.

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Americans are more pessimistic about the nation’s economic outlook and overall direction than they have been at any time since President Obama’s first two months in office, when the country was still officially ensnared in the Great Recession, according to the latest New York Times/CBS News poll.

Amid rising gas prices, stubborn unemployment and a cacophonous debate in Washington over the federal government’s ability to meet its future obligations, the poll presents stark evidence that the slow, if unsteady, gains in public confidence earlier this year that a recovery was under way are now all but gone.

Capturing what appears to be an abrupt change in attitude, the survey shows that the number of Americans who think the economy is getting worse has jumped 13 percentage points in just one month. Though there have been encouraging signs of renewed growth since last fall, many economists are having second thoughts, warning that the pace of expansion might not be fast enough to create significant numbers of new jobs.

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Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.

In the end, she decided it wasn’t worth it.

“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”

The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership….

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Even when home prices stop sliding in much of the country, or sales by distressed borrowers level off, there’s a whole other wave of pent-up sellers waiting on the sidelines.

“You’ve had a lot of people who’ve held homes off the market because they don’t want to compete with foreclosures. It’s likely to be a buyer’s market for awhile, mainly because there are so many homes on the market and there is still a limited supply of qualified buyers,” Vitner said. “The supply of buyers is being limited by high unemployment and the large number of people with homes they can’t sell.”

Here’s one grim indication of where housing stands. Before the housing bubble burst, residential investment accounted for about 6.3 percent of the nation’s economic activity. Today, that number has fallen to around 2.4 percent, according to Michael Mussa, a former World Bank chief economist now with the Peterson Institute for International Economics, a research group.

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Church of Our Saviour, Oatlands, which reached an amicable property settlement Feb. 20 with the Diocese of Virginia, has bought a 24-acre site for its new home, only a mile north of its current location in rural Loudoun County. The parish will buy Oaksworth Farm, a former Christmas-tree farm and vineyard, for $1,870,000, said the Rev. Elijah White, rector of Our Saviour since 1977.

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Last summer, as President Obama’s premier plan to save millions of Americans from foreclosure foundered, the administration tossed a new life preserver to homeowners.

Officials unveiled a $1 billion program to offer loans to help the jobless pay their mortgages until they could find work again. It was supposed to take effect before the end of the year, but as of today, the program has yet to accept any applications.

“We wait and wait, and they keep saying it’s coming,” said James Tyson, 50, a Philadelphia homeowner who lost his job a year ago.

That could be an epitaph for the administration’s broader foreclosure prevention effort…

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I estimate that Fannie and Freddie alone are hiding $200 billion worth of bad loans on their books simply because there is no market for these foreclosed homes. Ditto for the largest servicer banks such as Wells Fargo, Bank of America, JPMorgan Chase and Citigroup. To clean up this mess with finality is going to cost $1 trillion or so in round numbers. But nobody in Washington wants to go there.

The Obama Administration and the Congress need to put aside their respective fantasy world views and focus on the horrible economic reality ongoing in the housing and banking sectors. It may be that the degree of self-delusion in Washington has reached the point that only another financial catastrophe can wake us from out collective distraction. But if President Obama really believes he can win reelection with housing prices falling from now till November 2012, then perhaps those who liken him to Louis XIV are right.

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High residential vacancies are killing many housing markets, as foreclosed homes sit on the market and depress sale prices and property values.

And it’s only getting worse: The national vacancy rate crept up to just over 13% according to last week’s decennial census report. That’s up from 12.1% in 2007.

“More vacant homes equal more downward pressure on home prices,” said Brad Hunter, chief economist for Metrostudy, a real estate information provider.

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Update: Here is an interesting local illustration from California–Vacant homes a clue to Santa Ana’s census drop.

Before the financial crisis, many Americans had never heard of Fannie Mae or Freddie Mac. Today, we own them.

The federal government took over Fannie and Freddie after bailing them out in 2008. The bailout cost taxpayers more than the bailouts of GM, Goldman Sachs, Bank of America and Citigroup combined.

By 2010, roughly 90 percent of all new mortgages issued in this country went through the U.S. government. For all intents and purposes, the $1.5 trillion U.S. mortgage market is now a government-run industry.

How did we get here?…

Read or listen to it all.

The state budget squeeze is fast becoming a city budget squeeze, as struggling states around the nation plan deep cuts in aid to cities and local governments that will almost certainly result in more service cuts, layoffs and local tax increases.

The cuts are widespread. Ohio plans to slash aid to Columbus, Cleveland, Cincinnati and other cities and local governments by more than a half-billion dollars over the next two years under the budget proposed last week by its new Republican governor, John R. Kasich. Nebraska passed a law this month eliminating direct state aid to Omaha and other municipalities. The governors of Wisconsin and Michigan have called for sending less money to Milwaukee, Detroit and other local governments.

And it is not only Republicans who are cutting aid to cities: Gov. Andrew M. Cuomo of New York, a Democrat, decided not to restore $302 million in aid to New York City that was cut last year, while Gov. Deval Patrick of Massachusetts, another Democrat, has called for cutting local aid to Boston and other cities by some $65 million.

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The new-home sales numbers for February came out…[yesterday], and they are horrible.

The government estimates that 19,000 new single-family homes were sold during the month. That is the lowest figure for any month since the figures began to be compiled in 1963. At a seasonally adjusted annual rate, that works out to an annual pace of 250,000. That, too, is the lowest ever.

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By 2006, most of the steel mills in Youngstown, Ohio, had been gone for decades. The population was shrinking year after year. So the city launched a bold plan to redeem itself.

The plan: Quit trying to redeem itself….Youngstown walked away from the most fundamental assumption of economic development and city planning: The idea that a city needs to grow.

“We needed as a city to recognize that we’re a smaller city,” says Bill D’Avignon, head of Youngstown city planning. “We’re not going to grow; we’re never going to be the Youngstown we thought we were going to be.”

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Christians in south Punjab Province are accusing senior district officials of supporting local Muslims who allegedly demolished 150 Christian graves and desecrated holy relics ”“ and are now threatening Christians seeking legal redress.

In the Kot Addu area of Muzaffargarh district, Waseem Shakir told Compass by telephone that an influential Muslim group last Nov. 6 took illegal possession of a 1,210-square yard piece of land designated as a Christian cemetery and set up shops on it. Official records state that the portion of land was allotted as a Christian cemetery, he said.

“Local Muslims demolished 150 Christians’ graves and desecrated the cross and biblical inscriptions on the graves in a bid to construct shops on the property,” said Shakir, a resident of Chak (Village) 518, Peer Jaggi Morr, Kot Addu. “Only five marlas [151.25 square yards] are all that is left for the Christians to bury their dead now.”

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When the Diocese realigned in November 2008, a small minority of our members elected to leave their churches to worship elsewhere. The following April, the Diocese was sued on behalf of those people, and two years later we are still in the midst of what will be a precedent-setting case to defend our property under Texas law.

In the weeks since our last court hearing, on Feb. 8, our lawyers have been conferring and negotiating with the plaintiffs’ attorneys over the terms surrounding Judge John Chupp’s Jan. 21 ruling, which favored the plaintiffs. Since the Jan. 21 ruling did not dispose of the case, the parties are engaged in a process of “discovery” which permits them to obtain and examine one another’s records. Some of the documents requested by the plaintiffs previously have been delivered to them for inspection, and other documents currently are being prepared.

In addition, lawyers for the parishes and missions of the Episcopal Diocese of Fort Worth and lawyers representing the minority breakaway faction (affiliated with the Protestant Episcopal Church in the United States of America) are making arrangements for the inspection, requested by attorneys and representatives of the minority faction, of all our property, including the Diocesan Center, Camp Crucis, and all our churches. This inspection is being arranged pursuant to a Request for Entry Upon Property filed by the minority faction pursuant to Rule 196.7(a)(1) of the Texas Rules of Civil Procedure.
This rule provides that any party to a lawsuit may request and obtain entry upon the property of another party to the lawsuit “to inspect, measure, survey, photograph, test, or sample the property or any designated object or operation thereon.” The Rule is customarily and routinely invoked whenever there is litigation between competing parties with respect to which party has a right to title or possession of property. This is nothing to be alarmed about, though the other side is attempting to use it for propaganda purposes, to promote the impression that they have prevailed in the litigation, when, in fact, it is far from over.

Previous rulings by the Trial Court in the litigation pending in Tarrant County ”“ including the interlocutory Declaratory Judgment ”“ have no effect on the right of the minority faction to inspect the properties. According to Rule 197(a), the right of a party to inspect property in the possession of the other party exists until “the earlier of 30 days before the end of the discovery period or 30 days before trial.”

The motivation that underlies the minority faction’s decision to incur the thousands of dollars in expense for the inspection of the property in the Diocese is unknown to the attorneys and officers of the Diocese. Unfortunately, however, the Diocese will incur substantial expense, because the inspections by the minority faction must be supervised by the attorneys representing the Diocese and its parishes and missions.

Attorneys representing both sides of the dispute are attempting to schedule the inspections so as to minimize disruption of regularly scheduled activities and events sponsored by the Diocese and its parishes and missions.

Only 1 American in 7 has faith a lasting economic recovery has taken hold and a plurality say they are personally worse off than they were two years ago.

Almost half of the respondents in a Bloomberg National Poll conducted March 4-7 believe the U.S. is in a “fragile” rebound and could fall back into recession. More than a third of the country believes the U.S. never emerged from recession.

Sixty-three percent of Americans say the nation is on the wrong track, compared with 66 percent who said so in December, which was the lowest in the national mood in the one and a half years the Bloomberg poll has been conducted.

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Moody’s downgraded its credit rating on Spain Thursday, citing worries over the cost of the banking sector’s restructuring and the government’s ability to achieve its borrowing reduction targets.

The agency said it was reducing its rating by one notch to Aa2 and warned that a further downgrade could be in the offing if there are indications that Spain’s fiscal targets will be missed and if the public debt ratio increases more rapidly than currently expected, or if the funding requirements for the so-called savings banks””the cajas””are greater than anticipated.

Though noting the government’s resolve in dealing with its problems and that Spain’s debt sustainability is not under threat, Moody’s said that “Spain’s substantial funding requirements””not only those of the sovereign, but also those of the regional governments and the banks””make the country susceptible to further episodes of funding stress.”

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Please note the above title is from the print edition–KSH.

How might home buying change if the federal government shuts down the housing finance giants Fannie Mae and Freddie Mac?

The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs.

Read it all from the front page of yesterday’s New York Times.

Out of a possible 100% what percentage do you think it is?

You have to guess before you look.

Northern Rock is poised to launch a range of mortgages offering up to 90 per cent of a property’s value, marking the nationalised bank’s return to riskier lending three years after its collapse and government bail-out….

Northern Rock’s aggressive boom-time lending practices, including the Together mortgage that offered borrowers up to 125 per cent of their property value, caused one of the most high-profile failures of the financial crisis.

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1. There’s still a glut of houses on the market.

At the current pace, it would take about seven months to sell all of the newly built houses on the market, and eight months to sell all of the existing homes on the market. In an ordinary market, it would take about six months to sell all of the homes on the market. This excess supply tends to push prices down.

2. Distressed sales account for a huge chunk of all home sales.

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The average U.S. borrower in the throes of foreclosure hasn’t made a mortgage payment in 17 months, up from nearly 11 months two years ago ”” and the time frame may get even longer.

Banks and mortgage servicers, who collect payments for lenders, are taking more time to complete foreclosures because of huge volumes of defaulted mortgages. Other factors include time-consuming reviews for loan modifications and additional delays that followed revelations late last year about improperly filed foreclosure documents in tens of thousands of cases.

Last year, the number of days that the average borrower in foreclosure went without making a payment stretched from 410 in January to 507 in December, says LPS Applied Analytics, which tracks 37 million mortgages. Before the foreclosure crisis, the norm was more like 250 days, says Herb Blecher, LPS senior vice president.

Read it all.