Mortgage delinquencies continue to climb

According to credit reporting agency TransUnion, 6.89% of mortgage payments were 60 or more days past due in Q409 - up from 4.58% in the final three months of 2008. The previous record delinquency rate was 6.25% in the third quarter of 2009. FJ Guarrera, vice president of TransUnion's financial services business unit, says the fourth-quarter uptick was due in part to normal seasonal spending shifts. Consumers are more likely to have trouble paying bills during the last few months of the year as they run low on cash because of holiday spending. But he says that even accounting for normal season patterns, there is some reason to be concerned about the pace of increase moving higher. "To see continuing growth in the first quarter would certainly raise an eyebrow."

TransUnion tracks mortgages that are two months past due as an indicator of potential foreclosure, because of the difficulty involved in coming up with three payments to bring an account current. The agency said the delinquency rate stayed highest in Nevada, at 16.2%, and Florida, at 14.9%. Arizona and California, the other two states hit hardest by the housing crisis, were third and fourth, at 11.3% and 11% respectively. The highest growth rates compared with the third quarter were in the District of Columbia, Louisiana and Delaware. Guarrera noted that many homeowners still have adjustable rate mortgages written in late 2006 or early 2007 due to reset to higher rates in coming months, and that could drive foreclosures even higher, especially in areas where home prices have fallen to the point where values are lower than mortgages. "We're not out of the woods yet," he said.

Government jobs ballooning

Amity Shlaes at Bloomberg.com points out the growth of government. In the 1990s, former President Bill Clinton and House Speaker Newt Gingrich managed to reduce the federal workforce to less than 2 million, excluding the postal service. But from January 2000 to January 2010 -- first under President George W. Bush after Sept. 11, then under Barack Obama -- the number of non-postal employees in the federal government grew 15 percent, to 2.18 million from 1.89 million. The rise came in Homeland Security positions, Veterans Administration jobs, Justice Department posts, and so on. This increase would mean less if the private sector had grown as well. But over the same period, private-sector employment decreased by 3 percent, to about 107 million from about 110 million. In short, the relative picture changed.

Jobs with Uncle Sam aren’t just more numerous than they used to be. They’re better. Wages and benefits for federal civilian workers were more than double the average total compensation in the private sector: $119,982 versus $59,909. In the treacherous period between December 2007 and mid-2009, the number of federal employees earning more than $100,000 doubled, rising to 66,500 or so. The new relative appeal of a government job sends a message that private-sector work, especially self-employment or a job at a start-up, may not be worthwhile. Recent wipeouts of big businesses and the recessionary struggles of smaller ones only reinforce that message. So do politicians’ occasional disparagement of “risk.” Shlaes concludes: Today, the U.S. economy has more competition than it did in the 1950s. So the kind of policy change that would affect the jobscape, such as eliminating the capital-gains tax and simplifying the income tax, is necessary. But you won’t hear abou t those radical measures in the Reid-McConnell jobs debate of February 2010. That’s a shame, because right now there are young people deciding whether they will be employers or mere employees.

DSNews.com - 33 months of coming foreclosures

The Standard & Poor’s (S&P) report we mentioned yesterday in connection with short sales also said the hidden supply of REOs and pending foreclosures will likely take 33 months – or nearly three years – to clear if liquidation rates hold steady. Even more unsettling is that S&P called its estimate “conservative” because the company’s analysis was based on the number of properties the company believes to be lurking in the shadows right now – repossessed homes that banks have not put on the market and already delinquent mortgages that will likely turn into foreclosures. S&P’s assessment does not take into account any loans that have yet to show serious signs of distress. The ratings agency did not give a specific number of loans in its calculated shadow supply, but said the original balance of currently seriously delinquent and REO loans stands at $426.3 billion. An earlier study by Amherst Securities estimates the dark cloud to hold about 7 million loans, whil e First American CoreLogic puts it at 1.7 million. Analysts at Standard & Poor’s said in the report, “It is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market.”

New home construction up

The Commerce Department announced today that construction of new homes climbed to an annual rate of 591,000 during the month, up 2.8% from December's revised rate of 575,000. Economists surveyed by Briefing.com expected January housing starts to rise to an annual rate of 580,000. The number of building permits issued during January fell 4.9% to a seasonally adjusted annual rate of 621,000. Economists had predicted building permits would fall to 620,000. "It's a positive surprise on all fronts and shows that overall demand has moved higher. That's an important element to watch as we move through a cycle going from incentive-based to more organic growth," said Craig Peckham, equity trading strategist at Jefferies & Co. in New York.

Groundbreaking for single-family homes rose 1.5 percent last month to an annual rate of 484,000 units after declining 3 percent in December. Starts for the volatile multifamily segment increased 9.2 percent to a 107,000 unit annual pace after rising 12.6 percent in December. New building permits, which give a sense of future home construction, fell 4.9 percent to 621,000 units last month after rising to a 14-month high of 653,000 units in December, the Commerce Department said. That's compared to analysts' forecasts for 620,000 units. The inventory of total houses under construction fell 2.3 percent to a record low 503,000 units last month, while the total number of units authorized but not yet started eased 0.9 percent to 94,300 units.

MBA - loan applications down

The Mortgage Bankers Association's (MBA) Market Composite Index, a measure of mortgage loan application volume, decreased 2.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.5 percent compared with the previous week. The Refinance Index decreased 1.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 4.0 percent from one week earlier. The unadjusted Purchase Index increased 1.0 percent compared with the previous week and was 18.4 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 1.1 percent. The four week moving average is down 1.2 percent for the seasonally adjusted Purchase Index, while this average is up 1.8 percent for the Refinance Index. The refinance share of mortgage activity decreased to 69.3 percent of total applications from 69.7 percent the previous week. The adjustable-rate mortgage (ARM) share
of activity decreased to 4.4 percent from 4.5 percent of total applications from the previous week. The survey covers over 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990 = 100.

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Mortgage Delinquencies Rise for 12th Straight Quarter: Up 50 Percent Y.O.Y.

The latest estimates are for another five million delinquent mortgages to go through foreclosure (or alternatively, short sales) over the next few years. Currently, there is an estimated 7.7 million households in some stage of pre-default delinquency. Thus, whatever grudging progress that has been made in clearing out some of the excess housing inventory will likely suffer a set back as these 5 million homes come out of the shadows and enter the real estate inventory of homes of for sale. 5 million homes represent approximately one years sales. The WSJ reports that the problem is “largely concentrated in Arizona, California, Florida and Nevada. The shadow inventory is equivalent to 27 months of sales in Orlando, 24 months in Miami and 18 months in Las Vegas.” Here’s the WSJ: John Burns, chief executive of the consulting firm, said investor demand for foreclosed homes remained strong. Thus, he said, prices were likely to be about level over the next few years, despite the looming foreclosure supply, if the economy continued to recover and mortgage interest rates didn’t rise sharply. But if the economy slumped anew and interest rates jumped, he said, “that’s going to cause prices to fall further.” The S&P study also says that the “overhang” of foreclosed homes expected to go on the market points to lower home prices. Some borrowers are catching up on payments after having their loan terms modified, but S&P says current trends suggest that 70% of such borrowers eventually will redefault.”

5 Million More Foreclosures: 7.7 Million Homes Inpre-Default Delinquency

Mortgage delinquencies of 60 or more days rose for the 12th straight quarter, hitting a record high 6.89% in Q409, according to market research by credit bureau TransUnion. The rate of deceleration seen in previous quarters in the rise in delinquencies appears “short lived,” the credit bureau said. Year-over-year, the delinquency rate is up about 50% from 4.58% delinquent in Q408. TransUnion, one of the major US credit bureaus, conducts a survey of exactly 27m credit files from its total consumer base, or about one in every nine consumer files in its database of 250m consumer files each quarter, a spokesperson previously told HousingWire. States with the highest delinquency rates in Q409 were led by Nevada with 16.19% delinquent. Florida came in second with 14.93% delinquent. North Dakota had the lowest delinquency rate of 1.84%, while South Dakota and Alaska came in only slightly higher at 2.46% and 2.84% respectively, TransUnion said. Thirty-eight Metropolitan Statistical Areas (MSAs) showed decreasing delinquency rates since Q309, including Corvallis, OR; Lafayette, IN; and Sharon, PA. “At a more granular level, variations in delinquency highlight the fact that the recession and the eventual recovery are both regional phenomena tied for the most part to localized house price conditions and unemployment levels,” said FJ Guarrera, vice president of the TransUnion financial services business unit, in a press statement. Guarrera added: “We’re not out of the woods yet. The continuing rise in foreclosures, in conjunction with low consumer confidence in the housing market, continues to hinder housing value appreciation and impede recovery in the mortgage industry.”