Home sales up

The September Pending Home Sales Index from the National Association of Realtors (NAR) spiked 6.1% to 110.1, consolidating a 6.4% gain in August. It was far better than expected, and the index's highest level since December 2006, when it stood at 112.8. A panel of analysts surveyed by Briefing.com had forecast a 1.2% rise. Analystshave traced much of the improvement to the government's first-time homebuyer tax credit program, which gives up to $8,000 in tax credit to new homebuyers. It's estimated that between 200,000 and 400,000 additional sales have been made because of the credit. "What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," says Lawrence Yun, NAR's chief economist. "Clearly, buyers were eager to get business done before the credit's November expiration," said Mike Larson, a real estate analyst for Weiss Research. "So I wouldn't be surprised to see some give back in pending sales over th e next month or two."

MBA -- Quarterly Mortgage Bankers Performance Report

The Mortgage Bankers Association (MBA) just released its most recent Quarterly Mortgage Bankers Performance Report measuring the performance of independent mortgage bankers and subsidiaries of banks, thrifts and hedge funds. Why do you care? Because along with the news that mortgage brokers are making a profit come all sorts of helpful stats that give a snapshot of the state of the market:

• Simple average borrower FICO score for loan originations was 721 in the second quarter 2009, compared to 714 in the first quarter 2009.

• Average pull-through (the number of closings divided by the number of loan applications) rose to 73 percent in the second quarter 2009 from 67 percent in the first quarter 2009.

• 96 percent of the firms in the study posted pre-tax net financial profits in the second quarter 2009. In the first quarter 2009, 85 percent of the companies posted profits. Only 53 percent of the companies were profitable in the fourth quarter 2008.

• The average production volume for each firm was $280.9 million in the second quarter 2009, compared to $213.9 million in the first quarter 2009 and $125.6 million in the fourth quarter 2008.

• The average gross dollar volume for both refinancings and purchases increased in the second quarter 2009. The share of refinancings to total originations for this sample dropped to 62 percent in the second quarter, from 66 percent in the first quarter. This share was still significantly higher than 42 percent for the fourth quarter 2008.

Bye bye TARP repayments

The government is highly unlikely to recoup all the money it plowed into AIG, Citigroup, Fannie Mae and General Motors, but CIT is the first bailout to go to zero -- in just 11 months. The New York-based small business lender we reported about yesterday said all its common and preferred shares will be canceled, wiping out the $2.3 billion Troubled Asset Relief Program (TARP) investment the Treasury Department made last December. CIT, with $71 billion in assets, missed its quarterly dividend payment due in August. According to a report issued last month by SNL Financial, there were 32 other TARP recipients that did so as well, and eight of the banks behind on their dividend payments have at least $100 million in Treasury loans, including two that are publicly trying to raise capital – a tough task at the moment.

First Bancorp (FBP), San Juan, Puerto Rico, a $20 billion institution that took $400 million in TARP funds in January. It recently shook up its board and named a new CEO, after an investigation by the board's audit committee. A spokesman said the bank stopped paying dividends this summer under federal guidelines that say a bank can pay out dividends only if it is making enough profit to do so. Other big banks that have missed TARP payments are First Banks, Pacific Capital Bancorp., Dickinson Financial, Central Pacific Financial, and Anchor Bancorp.

Home sales up

The September Pending Home Sales Index from the National Association of Realtors (NAR) spiked 6.1% to 110.1, consolidating a 6.4% gain in August. It was far better than expected, and the index's highest level since December 2006, when it stood at 112.8. A panel of analysts surveyed by Briefing.com had forecast a 1.2% rise. Analysts have traced much of the improvement to the government's first-time homebuyer tax credit program, which gives up to $8,000 in tax credit to new homebuyers.

It's estimated that between 200,000 and 400,000 additional sales have been made because of the credit. "What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," says Lawrence Yun, NAR's chief economist. "Clearly, buyers were eager to get business done before the credit's November expiration," said Mike Larson, a real estate analyst for Weiss Research. "So I wouldn't be surprised to see some give back in pending sales over the next month or two."

Fed meets on rates

Federal Reserve officials will meet this week to weigh economic data against the risk, reinforced by a persistently weak job market, that a burgeoning recovery remains on shaky ground. A 3.5 percent annualized jump in third quarter gross domestic product revived debate between analysts who believe a sustainable turnaround is under way, and those who think growth will falter once a heavy dose of stimulus fades. An immediate shift in the central bank's policy, including any tinkering with its pledge to keep interest rates low for an "extended period," appears unlikely.

The third quarter GDP report on Friday signaled the end of the recession, but government stimulus, including the "cash for clunkers" incentive for auto purchases and a $8,000 tax credit for first time homebuyers, may be the main reason. Despite signs factory activity is picking up, consumers are facing major challenges. Chief among them is a jobless rate just below 10 percent, which is expected to continue climbing into next year. Even those who have managed to hold onto their jobs have stagnant incomes. The employment outlook raises doubts about whether growth can be sustained when the effects of the government's stimulus program fade.

Construction spending up

The Commerce Department says total construction spending was up 0.8 percent in September, much better than the 0.3 percent drop that analysts had forecast. The August performance was revised down to show a 0.1 percent drop rather the 0.8 percent gain first reported. The overall increase reflected a 3.9 percent rise in spending on residential construction, the biggest jump in housing activity since July 2003.

A big part of the activity in recent months may have reflected a rush by builders to start projects that could qualify for a tax credit of up to $8,000 offered by the government to first time home buyers, and that tax credit is due to expire on Nov. 30, although there’s an extention for potential buyers who have sales agreements signed by the end of April. Those buyers would have until the end of June to close on their new homes. Total construction spending grew to $940.28 billion at an annual rate in September. It was the first increase after four straight declines but still left construction spending 13 percent below the level of a year ago.

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