Monday News Snippets

Signs of Life from the Real Estate Market

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In ZIP codes across the country, as once-inflated property prices bottom out housing sales are increasing.

No. 1 Fairfield, Calif.

ZIP: 94533 Metro area: Vallejo-Fairfield

Annual home sale increase: 226%

Fourth-quarter sales: 342

Median home price: $179,500

Median home price change: -19.0%

Nondistressed sales percentage: 17%*

No. 21 Deltona, Fla.

ZIP: 32738Metro area: Deltona-Daytona Beach-Ormond Beach

Annual home sale increase: 2%

Fourth-quarter sales: 126

Median home price: $104,500

Median home price change: -13.0%

Nondistressed sales percentage: 40%

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Treasury's toxic asset plan could cost $1 trillion.

The Obama administration's latest attempt to tackle the banking crisis and get loans flowing to families and businesses will create a new government entity, the Public-Private Investment Program, to help purchase as much as $1 trillion in toxic assets on banks' books.

The plan on toxic assets will use the resources of the $700 billion bank bailout fund, the Federal Reserve and the Federal Deposit Insurance Corp.

The toxic asset program will have three major parts:

_A public-private partnership to back private investors' purchases of bad assets, with government support coming from the $700 billion bailout fund. The government would match private investors dollar for dollar and share any profits equally.

_Expansion of a recently launched Fed program that provides loans for investors to buy securities backed by consumer debt as a way to increase the availability of auto loans, student loans and credit card debt. Under Geithner's plan for the toxic assets, that $1 trillion program would be expanded to support purchases of toxic assets.

_Use of the FDIC, which insures bank deposits, to support purchases of toxic assets, tapping into this agency's expertise in closing down failed banks and disposing of bad assets.

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Mortgages May Be Near the Bottom

Mortgage rates are unlikely to go much below the average 4.75% on a 30-year they were at Thursday, partly because there are fewer lenders.

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Foreclosures last year were up 81% from 2007 and 225% from 2006.

Banks repossessed more than 850,000 properties in 2008 compared with about 404,000 in 2007.

Houses in some stage of foreclosure totaled 303,410 in December, up 17% from the previous month and up nearly 41% from December 2007. These filings came despite (foreclosure) moratoriums.

US foreclosure rate 2008 1.8%2008 Properties with filings 2,330,483Change from 07 to 08 81.2%

Florida foreclosure rate 2008 4.5%2008 Properties with filings 385,308Change from 07 to 08 133.1%

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Bad to the Bone

Banks are holding truly bad assets that are surely worth something, but not worth anywhere near the marks banks have placed on them.

Someone from the Treasury, the FDIC, and/or the Fed will be buying something troubled that may once have even resembled an asset.

We have an estimated $2 trillion in “bad assets” out there, the vast majority tied in some way, shape or form to residential or commercial mortgage credit. Which means that any argument over the real value/intrinsic value/future value of a debt/security/asset — call it what you will — ultimately comes down to a question of what you believe about the underlying collateral.

Investors have clearly spoken in terms of what they believe that collateral to be worth.

And it’s far less than what many banks can afford to sell at.

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Newspapers Wade Into An Online-Only Future

As the business model for newspapers cracks apart, there are those who are lamenting and those who are inventing.