Illinois Attorney General Lisa Madigan is suing Countrywide Financial Corp., claiming that the company knowingly put borrowers in mortgages they couldn’t afford leading to thousands of residents losing their homes.
Read more at http://www.chicagobusiness.com/cgi-bin/news.pl?id=29947
Tuesday, June 24, 2008
Monday, June 23, 2008
Chicago - Local housing workforce slides with market
The local housing industry has lost nearly 17,000 jobs in the past two years as construction companies, mortgage brokers and other businesses battered by the residential real estate slump have slashed their payrolls.
Saturday, June 21, 2008
Tampa, FL - Condo Plans Clothing-Optional Pool in Hopes of Selling Units
A Hillsborough County housing complex is planning to have a clothing-optional pool in an effort to sell units in a slumping market. A spokeswoman for the project's developer said one pool is being set aside for nude swimmers, sunbathers and hot-tub users at the Arbors at Branch Creek. Christine Pirkle, director of sales for project-developer Eden Condominiums, said they came up with the strategy for the 390-unit complex to set it apart from other condos. The rules still must be approved by condo owners, but most of the complex is being rented out. Landscaping is also needed to keep out prying eyes. No one younger than 18 will be allowed in the pool area.
[Source: Tampa Trib]
[Source: Tampa Trib]
Thursday, June 19, 2008
Operation Malicious Mortgage - Fraud charges for 400
Federal probe dubbed Operation Malicious Mortgage nets indictments of more than 400 in schemes said to have caused $1 billion in losses.
In a probe over three and a half months, dubbed Operation Malicious Mortgage, the Justice Department and the Federal Bureau of Investigation uncovered 144 mortgage-fraud cases. U.S. authorities arrested 60 people on Wednesday alone in 15 districts around the country.
"Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department's commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets," Deputy U.S. Attorney General Mark Filip said.
The multiagency operation primarily went after lending fraud, foreclosure-rescue scams and mortgage-related bankruptcy schemes.
FBI Director Robert Mueller said that this agency will continue to direct resources toward combating both mortgage fraud and corporate-securities fraud.
Reports of mortgage fraud have been on the rise over the past year, following the implosion of the subprime-mortgage market.
The two former Bear Stearns managers were charged in a nine-count indictment Thursday alleging wire fraud, conspiracy and securities fraud. Prosecutors said that they misled investors about the rapidly tanking value of the two funds, which had invested heavily in subprime mortgages
In a probe over three and a half months, dubbed Operation Malicious Mortgage, the Justice Department and the Federal Bureau of Investigation uncovered 144 mortgage-fraud cases. U.S. authorities arrested 60 people on Wednesday alone in 15 districts around the country.
"Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department's commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets," Deputy U.S. Attorney General Mark Filip said.
The multiagency operation primarily went after lending fraud, foreclosure-rescue scams and mortgage-related bankruptcy schemes.
FBI Director Robert Mueller said that this agency will continue to direct resources toward combating both mortgage fraud and corporate-securities fraud.
Reports of mortgage fraud have been on the rise over the past year, following the implosion of the subprime-mortgage market.
The two former Bear Stearns managers were charged in a nine-count indictment Thursday alleging wire fraud, conspiracy and securities fraud. Prosecutors said that they misled investors about the rapidly tanking value of the two funds, which had invested heavily in subprime mortgages
Tuesday, June 17, 2008
Length of credit crunch 'astounding'
The credit crisis is set to continue for many more months, it has been claimed.
According to analysts speaking at the Reuters Investment Outlook Summit, the continuing uncertainty surrounding US house prices - along with the rise in mortgage defaults - could tip the world's largest economy into recession.
This is due to cash-strapped banks retaining ever-tighter credit criteria, due to their fears of exposing themselves to further bad debts.
Greg Peters, an executive at Morgan Stanley, termed the fact that the credit crunch was still ongoing "astounding" - given the dramatic loosening of interest rates from the Federal Reserve.
He added: "Who would have considered that the Fed [would] aggressively cut rates, and in addition to that, create all these special facilities for the investment and securities industry, and yet we're still in the state that we're in?""
We have fundamental uncertainty about what is going to happen with house prices," head of the National Bureau of Economic Research Martin Feldstein also told delegates.
According to analysts speaking at the Reuters Investment Outlook Summit, the continuing uncertainty surrounding US house prices - along with the rise in mortgage defaults - could tip the world's largest economy into recession.
This is due to cash-strapped banks retaining ever-tighter credit criteria, due to their fears of exposing themselves to further bad debts.
Greg Peters, an executive at Morgan Stanley, termed the fact that the credit crunch was still ongoing "astounding" - given the dramatic loosening of interest rates from the Federal Reserve.
He added: "Who would have considered that the Fed [would] aggressively cut rates, and in addition to that, create all these special facilities for the investment and securities industry, and yet we're still in the state that we're in?""
We have fundamental uncertainty about what is going to happen with house prices," head of the National Bureau of Economic Research Martin Feldstein also told delegates.
Saturday, June 14, 2008
Real estate experts are bracing for price drops of as much as 50%
Hard hit cities like Sacramento, Phoenix and Las Vegas are set for more steep losses. Some real estate experts are bracing for price drops of as much as 50%.With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce.
But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%.
"The housing boom was unprecedented in U.S. history," said Michael Youngblood, a portfolio analyst with FBR Investment Management, "and the correction will be as well."
Many erstwhile bubble cities have sustained particularly brutal hits. The median-price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com. In Riverside, Calif. prices fell 29%, while San Diego prices dropped 26%.
Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines.
Outside California, hard-hit markets include Phoenix (-18.8%), Las Vegas (-22%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%).
Youngblood expects that these markets will likely endure total price drops of 50% or more.
The smart money
Indeed, prices are falling faster and further than in any other post-war housing bust. During the bust in Austin, Tex., which started in 1986 and is one of the worst on record, prices fell 25%, according to Local Market Monitor, a financial data provider. And that cycle took four years to bottom out.
In other major downturns, prices in Los Angeles fell by 21% during a six-year period in the 1990s, and Honolulu home prices saw a decline of 16% in the five years starting in 1994.
Youngblood's forecast "is quite plausible," said Nicholas Perna, of the economic consulting firm Perna Associates. He finds it especially significant that the smart money, investors in the S&P Case/Shiller Home Price Index, are still buying futures as if they expect prices to continue to plummet.
The index, which tracks the sale price of specific homes as they are sold and resold over the years, is considered to be one of the most accurate home price indicators.
Thursday, June 12, 2008
Blight of US home foreclosures may take years to heal
The economic blight of mounting home foreclosures in some American communities could take years to heal, according to government officials and housing advocates.Tens of thousands of financially stretched Americans face the prospect of having their homes repossessed in coming months, more than two years after the property bubble burst, triggering one of the deepest housing market slumps in decades.
Rising foreclosures have acted as a drag on economic growth and some cities are struggling to cope with increased trash and crime tied to abandoned properties and, in some cases, entire streets.
"The large number of multi-family dwellings entering foreclosure presents a serious challenge to cities," the president of the Federal Reserve Bank of Boston, Eric Rosengren, warned in a speech Friday.
The nationwide downturn has particularly affected California, Illinois, Michigan, Nevada, Ohio and Florida.
"We anticipate that by this time next year, whole neighborhoods and whole communities will be greatly impacted by vacant property issues," said Marietta Rodriguez, the national director of home ownership programs for NeighborWorks America, which was created by Congress in the 1970s to help boost home ownership.
The problem has become so acute that NeighborWorks set up a special foreclosure operation last year aimed at minimizing home repossessions. A similar Treasury-backed program called HOPE NOW has also been established.
Economists predict that the housing market will eventually rebound, but recent surveys suggest this will not happen anytime soon.
A May 14 report by the research firm RealtyTrac said US foreclosure actions struck a record 243,353 cases in April, a 65 percent jump from a year ago.
Some 1.5 million foreclosures were initiated in 2007, marking a 53 percent spike from the prior year, according to the Federal Reserve.
"The Federal Reserve views the current high rate of mortgage foreclosures as an urgent problem," Fed governor Randall Kroszner said at a NeighborWorks forum in Cincinnati, Ohio, several weeks ago.
Wednesday, June 11, 2008
Beverly Hills, Calif. and Greenwich, Conn. have been hit by steep price declines, and a jump in foreclosures
Three of the nation's richest zip codes saw particularly steep home-price declines in the three months ending April 30, compared with the previous three months.
In Palm Beach, Fla. (zip code 33480), median home prices fell 38% during that period, according to the real estate Web site Trulia. Prices in Greenwich, Conn. (06831), dropped 15%, while homes in Wayzata, Minn. (55391), are selling for 28% less.
Prices in other wealthy towns also declined: Gladwyne, Penn. (19035), was down 6%, and Beverly Hills (90210), Lincoln, Mass. (01773), and Ladue, Mo. (63124), each slid 2%.
"What I'm finding is that million dollar plus homes declined 4% or so [over the past 12 months]," said Don Kelly, a spokesman for Zaio, which is building a national data base of home value appraisals.
And foreclosure data tracks the pricing information. In Beverly Hills, filings nearly doubled to 41 in the first four months of this year, up from 22 in the same period last year, according to RealtyTrac, which compiles foreclosure stats. In Palm Beach, there were 34 foreclosure filings, up from 9 in the period a year ago. Greenwich had 23, up from 10, while Wayzata had 18, compared with 14 a year ago. Kenilworth, Gladwyne and Medina had just one each, while Lincoln had none.
In Palm Beach, Fla. (zip code 33480), median home prices fell 38% during that period, according to the real estate Web site Trulia. Prices in Greenwich, Conn. (06831), dropped 15%, while homes in Wayzata, Minn. (55391), are selling for 28% less.
Prices in other wealthy towns also declined: Gladwyne, Penn. (19035), was down 6%, and Beverly Hills (90210), Lincoln, Mass. (01773), and Ladue, Mo. (63124), each slid 2%.
"What I'm finding is that million dollar plus homes declined 4% or so [over the past 12 months]," said Don Kelly, a spokesman for Zaio, which is building a national data base of home value appraisals.
And foreclosure data tracks the pricing information. In Beverly Hills, filings nearly doubled to 41 in the first four months of this year, up from 22 in the same period last year, according to RealtyTrac, which compiles foreclosure stats. In Palm Beach, there were 34 foreclosure filings, up from 9 in the period a year ago. Greenwich had 23, up from 10, while Wayzata had 18, compared with 14 a year ago. Kenilworth, Gladwyne and Medina had just one each, while Lincoln had none.
Sunday, June 8, 2008
4 great reasons to rent
Renting can actually be better for your pocketbook and lifestyle.
Before the housing boom went bust this year, homeownership was considered a good investment. But now, with the rash of mortgage foreclosures, renting may be a more attractive option. Here’s why.
1. Renting can save money
According to popular myth, renters are just throwing their money away. But the reality is that when you buy a home, you’re paying for closing fees, mortgage interest, property taxes, private homeowners’ insurance and maintenance — costs that return nothing on your investment. You’d be better off banking that money or putting it into the stock market. In fact, a recent study by Fidelity Investments indicates that stocks provided investors with nearly 4.6% higher average returns in the past 45 years than real estate.
2. Homeowners’ tax deductions are overstated
Conventional wisdom says that buying a home saves you money because the mortgage interest is tax-deductible. But a study by the National Multi Housing Council – a national advocacy group representing the interests of large apartment firms in the U.S. -- points out that half of homeowners don’t get a break, because even with mortgage interest and property taxes, their total deductions do not exceed the standard federal tax deduction ($10,900 for couples and $5,450 for singles).
3. More options are available to renters
With fewer houses and condos selling, more owners are converting their properties into rentals or providing incentives to lure prospective tenants. In condo-heavy cities such as Palm Beach, Fla., for example — where the vacancy rate has jumped 2.5% — investors are undercutting apartment rates to generate interest. “A lot of people are offering three free months to attract renters,” says Robert Smith, a real-estate adviser in Orlando, Fla. “And modern apartments offer amenities that may be unaffordable in a new home.”
4. Renting gives you flexibility
Buying a home is a big commitment. If you have to move for any reason — say, for work — your property would need to appreciate by at least 10% for you to recover your sales costs, which typically takes about five years. Renting allows you the freedom and mobility you need to find the right job before you tie yourself to a massive home investment.
Before the housing boom went bust this year, homeownership was considered a good investment. But now, with the rash of mortgage foreclosures, renting may be a more attractive option. Here’s why.
1. Renting can save money
According to popular myth, renters are just throwing their money away. But the reality is that when you buy a home, you’re paying for closing fees, mortgage interest, property taxes, private homeowners’ insurance and maintenance — costs that return nothing on your investment. You’d be better off banking that money or putting it into the stock market. In fact, a recent study by Fidelity Investments indicates that stocks provided investors with nearly 4.6% higher average returns in the past 45 years than real estate.
2. Homeowners’ tax deductions are overstated
Conventional wisdom says that buying a home saves you money because the mortgage interest is tax-deductible. But a study by the National Multi Housing Council – a national advocacy group representing the interests of large apartment firms in the U.S. -- points out that half of homeowners don’t get a break, because even with mortgage interest and property taxes, their total deductions do not exceed the standard federal tax deduction ($10,900 for couples and $5,450 for singles).
3. More options are available to renters
With fewer houses and condos selling, more owners are converting their properties into rentals or providing incentives to lure prospective tenants. In condo-heavy cities such as Palm Beach, Fla., for example — where the vacancy rate has jumped 2.5% — investors are undercutting apartment rates to generate interest. “A lot of people are offering three free months to attract renters,” says Robert Smith, a real-estate adviser in Orlando, Fla. “And modern apartments offer amenities that may be unaffordable in a new home.”
4. Renting gives you flexibility
Buying a home is a big commitment. If you have to move for any reason — say, for work — your property would need to appreciate by at least 10% for you to recover your sales costs, which typically takes about five years. Renting allows you the freedom and mobility you need to find the right job before you tie yourself to a massive home investment.
Thursday, June 5, 2008
Homes in foreclosure top 1 million
Mortgage bankers report hits grim a benchmark in first quarter, showing a record number of homes in jeopardy.
More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb.
The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.
The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That's up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007.
The seasonally-adjusted rate of homeowners behind on their mortgage payments also hit a record high. Nearly 3 million home loans, or 6.4%, have missed at least one payment, while about 737,000 are at least three months past due, but not yet in foreclosure.
Grim numbers
"The figures aren't surprising, but they're pretty ugly nonetheless," said Michael Larson, real estate analyst with Weiss Research. "We're talking higher delinquencies and foreclosures pretty much across the board."
And he doubts that there's much reason to expect the foreclosure crisis to abate until next year at the earliest, adding that it could be a couple of years or more before foreclosure rates retreat to more normal historical averages.
"It's the same story we've been seeing for a while now - we had too much reckless lending, and buyers who got over-extended," he said. "We've had an unprecedented decline in home prices on a nationwide basis, which is public enemy number one for mortgage loans. And now you've got an overall economy that has slowed adding to this toxic stew."
Good credit, bad credit
Much of the problem lies with subprime loans given to borrowers with weaker credit records, especially those loans that had adjustable rates. Nearly four out of ten subprime ARM loans are a month or more late, or in foreclosure. And subprime ARMs account for 39% of the loans that fell into foreclosure during the quarter.
Prime fixed-rate loans, which are considered very low risk, have also seen sharp increases in their delinquency and foreclosure rates, although they are performing far better than the riskier loans on the market.
There are 431,000 prime loans in foreclosure, a seasonally adjusted rate of 1.2% that is more than double the 0.5% rate a year ago.
The report showed about 1.2 million prime mortgages are now a month or more past due, a seasonably adjusted rate of 3.7% of those loans. That's up from a rate of 2.6% a year ago.
According to Jay Brinkman, MBA's vice president for research and economics, the prime loan segment was hurt by so-called Alt-A loans, which didn't require income verification for buyers with good credit. Prime loans are also getting into trouble in places such as Florida and California, which have seen sharp home price declines.
"You still have people with prime fixed rate loans who lose their jobs, who get a divorce or have an illness come up, and can no longer afford a house," Brinkman said. "In areas where there's been home price appreciation, you can get out of that with the sale of a home or some other negotiation."
Getting worse before it gets better
This marks the sixth straight quarter in which a record percentage of loans went into foreclosure.
The trend has led to a widespread decline in home prices, as well as huge losses for banks and other financial firms that issued or invested in the loans.
Nearly half of the homes in foreclosure are concentrated in six states. But those states are undergoing two very different types of housing meltdowns.
California, Florida, Arizona and Nevada have been hit by a hangover after a home building boom in the middle of the decade, which was fueled by rising home prices and investors snatching up real estate using risky mortgages. Those four states have nearly 400,000 homes in foreclosure, or a third of the nationwide total. Roughly 3.6% of all of the loans in these states are now in foreclosure.
"Clearly things in California and Florida are going to get worse before they get better," said Brinkman.
The other two states that are ground zero for the crisis - Michigan and Ohio - have been hit by the more traditional economic woes stemming from rising job losses, particularly in the automotive sector.
More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb.
The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.
The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That's up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007.
The seasonally-adjusted rate of homeowners behind on their mortgage payments also hit a record high. Nearly 3 million home loans, or 6.4%, have missed at least one payment, while about 737,000 are at least three months past due, but not yet in foreclosure.
Grim numbers
"The figures aren't surprising, but they're pretty ugly nonetheless," said Michael Larson, real estate analyst with Weiss Research. "We're talking higher delinquencies and foreclosures pretty much across the board."
And he doubts that there's much reason to expect the foreclosure crisis to abate until next year at the earliest, adding that it could be a couple of years or more before foreclosure rates retreat to more normal historical averages.
"It's the same story we've been seeing for a while now - we had too much reckless lending, and buyers who got over-extended," he said. "We've had an unprecedented decline in home prices on a nationwide basis, which is public enemy number one for mortgage loans. And now you've got an overall economy that has slowed adding to this toxic stew."
Good credit, bad credit
Much of the problem lies with subprime loans given to borrowers with weaker credit records, especially those loans that had adjustable rates. Nearly four out of ten subprime ARM loans are a month or more late, or in foreclosure. And subprime ARMs account for 39% of the loans that fell into foreclosure during the quarter.
Prime fixed-rate loans, which are considered very low risk, have also seen sharp increases in their delinquency and foreclosure rates, although they are performing far better than the riskier loans on the market.
There are 431,000 prime loans in foreclosure, a seasonally adjusted rate of 1.2% that is more than double the 0.5% rate a year ago.
The report showed about 1.2 million prime mortgages are now a month or more past due, a seasonably adjusted rate of 3.7% of those loans. That's up from a rate of 2.6% a year ago.
According to Jay Brinkman, MBA's vice president for research and economics, the prime loan segment was hurt by so-called Alt-A loans, which didn't require income verification for buyers with good credit. Prime loans are also getting into trouble in places such as Florida and California, which have seen sharp home price declines.
"You still have people with prime fixed rate loans who lose their jobs, who get a divorce or have an illness come up, and can no longer afford a house," Brinkman said. "In areas where there's been home price appreciation, you can get out of that with the sale of a home or some other negotiation."
Getting worse before it gets better
This marks the sixth straight quarter in which a record percentage of loans went into foreclosure.
The trend has led to a widespread decline in home prices, as well as huge losses for banks and other financial firms that issued or invested in the loans.
Nearly half of the homes in foreclosure are concentrated in six states. But those states are undergoing two very different types of housing meltdowns.
California, Florida, Arizona and Nevada have been hit by a hangover after a home building boom in the middle of the decade, which was fueled by rising home prices and investors snatching up real estate using risky mortgages. Those four states have nearly 400,000 homes in foreclosure, or a third of the nationwide total. Roughly 3.6% of all of the loans in these states are now in foreclosure.
"Clearly things in California and Florida are going to get worse before they get better," said Brinkman.
The other two states that are ground zero for the crisis - Michigan and Ohio - have been hit by the more traditional economic woes stemming from rising job losses, particularly in the automotive sector.
Ohio has about 61,000 homes in foreclosure, while Michigan has about 54,000. The foreclosure rate in those two states is 3.9%.
There is a glimmer of good news. The rate of homes going into foreclosure in Ohio and Michigan was narrowly lower than it was in the fourth quarter, and 18 other states also saw a decline in that rate.
Brinkman said he hoped that means the crisis is at or near a bottom in much of the country, and that foreclosure prevention efforts have started to have an effect. But he added that a slight improvement in one quarter doesn't necessarily mean the end is near.
Indeed, the rate of homes going into foreclosure continued to climb sharply higher in California and Florida, as has the rate of loans in those states that are 90 days or more past due but not yet in foreclosure. Brinkman said that in markets like these, where home prices have fallen so far from the market's peak, finding solutions to keep a home out of foreclosure are more difficult.
Overdue Loans to Florida Banks Quadruple
If that were not enough, the state's lenders have unusually low cash reserves to protect against mortgage defaults. About 41% of Florida-chartered banks were unprofitable the first three months of this year. That's twice the number of banks that bled red ink last year. These not-so-encouraging trends emerged from reports released the past week by the Federal Deposit Insurance Corp. Experts blame a chain reaction ignited by a two-year plunge in real estate values. It's not just problem home mortgages, but also developers defaulting on loans used to buy land and finance condominium towers. "We're still on the downside of the curve. We've not reached a bottom," Miami banking expert Ken Thomas said.
[Source: St. Petersburg Times]
[Source: St. Petersburg Times]
Monday, June 2, 2008
Worst-ever drop for U.K. house prices
Weakness accelerates, equates to 2.5% drop from April to May.
LONDON - British house prices fell sharply in May, posting the largest monthly drop in the history of a widely followed housing index, mortgage lender Nationwide said.
Meanwhile, the Confederation of British Industry's monthly distributive trades survey showed a second consecutive monthly drop in retail sales and building inflation pressures. Together, the housing data and the retail figures highlighted the Bank of England's increasingly stark monetary-policy dilemma, economists said.
House prices fell for the seventh consecutive month, dropping 2.5% from April, and were 4.4% lower than they were in May 2007, Nationwide said. The string of seven monthly price declines is also the longest since 1992, during the housing crash of the early 1990s.
The average U.K. house price now stands at 173,583 pounds ($343,824), down from 178,555 pounds ($353,672) in April, Nationwide said. House prices and U.K. consumer spending are closely correlated, economists say.
The drop exceeded consensus expectations for a 0.6% monthly decline and a fall of 1.9% from a year ago. Those were compiled in a Dow Jones Newswires survey of economists.
"The pace of house-price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market," said Fionnuala Earley, Nationwide's chief economist.
The Nationwide data echo a host of other indicators pointing to a weak housing market. Earlier this week, housing-data provider Hometrack's monthly survey found May home prices fell 0.6% in May, marking the eighth consecutive monthly drop.
Earley said falling house prices combined with rising inflation will continue to present a difficult dilemma for the Bank of England's rate-setting Monetary Policy Committee.
Policymakers are wrestling with surging inflation pressures, which tend to dictate restrictive monetary conditions and with worries that tightening credit, falling house prices and other factors, which tend to dictate easier monetary conditions, will spur a sharp economic slowdown.
Asked about their year-on-year sales volumes, 28% of retailers said they increased while 42% said they had declined, for a balance of -14 points. The net balance was -26 points in April.
The CBI said the price of goods in the year to May increased at the fastest rate in 16 years due to rising costs for energy, food and raw materials. A balance of 56% of firms said average selling prices increased, the largest percentage since May 1992, the CBI said.
Sales are expected to recover slightly in June, by a balance of +6 percentage points, the survey found.
"It is encouraging that retailers can see some recovery in sales next month, but they are not optimistic about the business outlook, and retail conditions are likely to remain tough," said Ian McCafferty, the CBI's chief economic adviser, in a statement.
The Bank of England has cut its key lending rate three times since December, to 5%. The MPC voted 8-1 earlier this month to leave the rate, also called the bank rate, on hold due to inflation worries. See full story.
Nationwide's Earley, however, said rapid declines in house prices might persuade the central bank to make additional rate cuts sooner rather than later.
"Stronger-than-expected inflation appears to have shattered hopes of an early cut in the bank rate in June, but more downbeat economic and housing-market data could lead more MPC members to join David Blanchflower in voting for preemptive cuts," she said, referring to the May MPC meeting's lone dissenter. Blanchflower called for a quarter-point cut at the May meeting.
Earley said borrowers are better positioned to weather the storm than they were in the 1990s, however.
Fewer homeowners bought at the top of the market in the current cycle, she said. And most borrowers have put down larger deposits than they did in the 1980s, despite looser credit conditions in the housing market in recent years.
Also, a greater proportion of borrowers have repaid capital rather than just interest, she said. Around 85% of loans issued in 1988-89 were on an interest-only basis, compared to 30% in 2006-07.
LONDON - British house prices fell sharply in May, posting the largest monthly drop in the history of a widely followed housing index, mortgage lender Nationwide said.
Meanwhile, the Confederation of British Industry's monthly distributive trades survey showed a second consecutive monthly drop in retail sales and building inflation pressures. Together, the housing data and the retail figures highlighted the Bank of England's increasingly stark monetary-policy dilemma, economists said.
House prices fell for the seventh consecutive month, dropping 2.5% from April, and were 4.4% lower than they were in May 2007, Nationwide said. The string of seven monthly price declines is also the longest since 1992, during the housing crash of the early 1990s.
The average U.K. house price now stands at 173,583 pounds ($343,824), down from 178,555 pounds ($353,672) in April, Nationwide said. House prices and U.K. consumer spending are closely correlated, economists say.
The drop exceeded consensus expectations for a 0.6% monthly decline and a fall of 1.9% from a year ago. Those were compiled in a Dow Jones Newswires survey of economists.
"The pace of house-price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market," said Fionnuala Earley, Nationwide's chief economist.
The Nationwide data echo a host of other indicators pointing to a weak housing market. Earlier this week, housing-data provider Hometrack's monthly survey found May home prices fell 0.6% in May, marking the eighth consecutive monthly drop.
Earley said falling house prices combined with rising inflation will continue to present a difficult dilemma for the Bank of England's rate-setting Monetary Policy Committee.
Policymakers are wrestling with surging inflation pressures, which tend to dictate restrictive monetary conditions and with worries that tightening credit, falling house prices and other factors, which tend to dictate easier monetary conditions, will spur a sharp economic slowdown.
Asked about their year-on-year sales volumes, 28% of retailers said they increased while 42% said they had declined, for a balance of -14 points. The net balance was -26 points in April.
The CBI said the price of goods in the year to May increased at the fastest rate in 16 years due to rising costs for energy, food and raw materials. A balance of 56% of firms said average selling prices increased, the largest percentage since May 1992, the CBI said.
Sales are expected to recover slightly in June, by a balance of +6 percentage points, the survey found.
"It is encouraging that retailers can see some recovery in sales next month, but they are not optimistic about the business outlook, and retail conditions are likely to remain tough," said Ian McCafferty, the CBI's chief economic adviser, in a statement.
The Bank of England has cut its key lending rate three times since December, to 5%. The MPC voted 8-1 earlier this month to leave the rate, also called the bank rate, on hold due to inflation worries. See full story.
Nationwide's Earley, however, said rapid declines in house prices might persuade the central bank to make additional rate cuts sooner rather than later.
"Stronger-than-expected inflation appears to have shattered hopes of an early cut in the bank rate in June, but more downbeat economic and housing-market data could lead more MPC members to join David Blanchflower in voting for preemptive cuts," she said, referring to the May MPC meeting's lone dissenter. Blanchflower called for a quarter-point cut at the May meeting.
Earley said borrowers are better positioned to weather the storm than they were in the 1990s, however.
Fewer homeowners bought at the top of the market in the current cycle, she said. And most borrowers have put down larger deposits than they did in the 1980s, despite looser credit conditions in the housing market in recent years.
Also, a greater proportion of borrowers have repaid capital rather than just interest, she said. Around 85% of loans issued in 1988-89 were on an interest-only basis, compared to 30% in 2006-07.
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