Real estate bubble continues to burst; Countrywide Financial Corp.

The real estate bubble continues its slow pop as conditions worsen around the country:

Countrywide Financial Corp. said Tuesday its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults among the most creditworthy borrowers.

Yahoo News

Lenders sent California homeowners the highest number of mortgage default notices in more than a decade during the second quarter, the result of flat or falling prices, anemic sales and a market struggling with the excesses of the 2004-2005 home-buying frenzy, a real estate information service reported.

Inman News

The foreclosure rate on Wisconsin homes remained high throughout the first half of 2007, driven by rising interest rates and the soft housing market, an industry monitor reported Tuesday.
Wisconsin as a whole had 9,229 foreclosure filings in the first half of 2007, up nearly 23 percent compared with 2006, a year in which foreclosures jumped 34 percent, according to newly released data compiled by ForeclosuresWI.com, a provider of Wisconsin foreclosure resources and statistics.
Filings for the month of June 2007 were up more than 8 percent from May.
Milwaukee County foreclosure filings are nearly 48 percent higher compared with the first half of 2006.

Business Journal of Milwaukee

With increasing defaults and foreclosures, banks will tend to dump properties on the market, as they attempt to sell their foreclosed properties. Even a small number of such dumpings will create tremendous downward pressure on prices. Lower prices will make it impossible for owners to sell or refinance "upside down" properties, as the debt on those properties will exceed the market value.
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Previous - May foreclosures
Too much equity?
Worldwide bubble

Four steps to suicide for the Pennsylvania legislature.

Here is a brief summary of events related to the Pennsylvania legislature over the past five months:

1) Summer - 2005 - The Pennsylvania legislature (both parties) passed a very large legislative pay raise for themselves and appellate judges.

2) The resulting uproar among voters continues to this day. One Pennsylvania Supreme Court Justice was voted out of office two days ago in an unprecedented retention vote loss, even though repeal of the pay raise may be imminent.

3) Members of the legislature now cower in fear that the voters will remember the pay raise in 2006.

4) The legislature plans to vote on November 21 on a proposal to impose an average of $4,000 in higher taxes on the purchase and sale of homes in Pennsylvania.

The first three items are well known to Pennsylvania voters. The last item is not a joke. With their political lives virtually teetering on the edge of a cliff, some legislators will actually be stupid enough to support an increase in the realty transfer tax.

James Lileks once wrote that the worst campaign speech begins with the phrase, "let me explain why I voted to raise your taxes."

Referenda for tax increases regularly lose at the polls. Politicians who support tax increases are routinely thrown out of office. George Bush I was defeated in 1992 largely because he reneged on his "no new taxes" pledge.

In fact, the proposed tax increase could cost home sellers as much as $10,000 or more. Sellers will have to pay the tax twice if they are buying a new home to replace the home they are selling. The sellers will also be faced with the need to lower the price of their old home by several thousand dollars just so a buyer can afford the buyer's portion of the new taxes. The seller will still owe the seller's portion. The seller will then pay an additional transfer tax when he purchases his new home (unless he is smart enough to buy his new home in a different state).

Voting the responsible legislators out of office will be a small consolation if we face losses like those that are contemplated in the new tax. Contact your legislator before November 21st. Remind them that the primary election is only six months away - unless you have a few thousand dollars you don't mind throwing away.

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Update

The text of the proposed bill is here.