Home values stabilizing

Real estate website Zillow.com said home values in the United States stabilized in the third quarter and fewer mortgages were "underwater," but impending foreclosures could threaten to delay a housing market recovery. According to the recent quarter's Zillow Real Estate Market Report, which encompass the national data and 156 metropolitan areas, the number of single-family homes with mortgages underwater, or in negative equity, dipped to 21 percent in the third quarter, down from 23 percent in the second quarter, as home values stabilized in the short term and more underwater homeowners lost their homes to foreclosure.

Negative equity has been one of the biggest problems for homeowners, disqualifying many from home loan refinancing and preventing them from selling their homes. U.S. home values posted their 11th consecutive quarterly decline, falling 6.9 percent year-over-year to a Zillow Home Value Index of $190,400. But the rate of year-over-year decline shrank for the third quarter in a row, meaning home values did not decline as dramatically compared with the third quarter of 2008 as they did in the second or the first quarters. In addition, the Zillow Home Value Index, which measures the value of all homes and not just those that sold in a particular period, remained relatively flat in the short term, declining 0.4 percent from the end of the second quarter to the end of the third. "The next several months will be critical to the housing market," Stan Humphries, Zillow chief economist, said. "Previously, we'd been expecting to see increasing foreclosure rates during the real estate m arket's slow winter season, a confluence of events that would likely drive inventory up and prices down."

Consumer spending down

The Federal Reserve says total consumer borrowing in September fell a seasonally adjusted $14.8 billion, or 7.2%, to $2.456 trillion in September, in the longest streak of declines since the Federal Reserve started keeping records in 1943. The decline was more than expected -- economists from Briefing.com had predicted a decline in total borrowing of $10 billion in September. August saw a downwardly revised $9.9 billion decrease in total consumer borrowing, and September's total borrowing is down 7.3% from last year. Last August, consumer credit contracted for the first time since January 1998. Revolving credit, which includes credit card debt, tumbled $9.9 billion, or 13.3%, to $898.9 billion. That's a 10% decrease from the previous year.

Nonrevolving credit, which includes car and student loans, fell by $4.9 billion, or 3.7%, to $1.567 trillion. That's a 3.8% drop from last year. Nonrevolving credit, which includes car and student loans, fell by $4.9 billion, or 3.7%, to $1.567 trillion. That's a 3.8% drop from last year. "These are not minor declines we've seen over the past few months," said Sean Maher, economist at Moody's Economy.com. "Credit is falling at a fairly rapid pace. Consumer credit will not see a turnaround until unemployment begins to moderate," Maher said. "Until that time, people are staying in the trenches."

Freddie Mac -- $5 billion net loss

Late Friday, mortgage giant Freddie Mac posted a $5 billion net loss in Q309 and $10.4 billion net worth in Q309. It purchased or guaranteed $125 billion in mortgage loans and mortgage-related securities, including $91 billion in single-family refinancing, allowing more than 78,000 borrowers in Q309 to modify under the Administration’s Home Affordable Modification Program (HAMP), through which the Treasury allocates capped incentives to servicers that pursue modifications for at-risk borrowers. The company’s single-family guarantee portfolio continued to deteriorate in the quarter, with the single-family delinquency rate climbing to 3.33% as of September 30, from 2.78% at June 30 as foreclosure timelines increased and a high volume of seriously delinquent loans were kept in trial modification periods in HAMP. “We continued to see some positive housing market developments, including higher volumes of home sales and modest increases in house prices in certain areas of t he country,” said CEO Charles Haldeman. “However, we believe that factors like high unemployment, excess inventory and rising foreclosures will continue to impede a full recovery for some time and put further downward pressure on house prices. We expect to request additional funds from Treasury as this prolonged deterioration of market conditions continues to negatively impact our financial results.”

120 banks fail in 2009

Five more banks failed late Friday, bringing the 2009 tally to 120. The biggest to fall was United Commercial Bank of San Francisco, which had 63 U.S. branches and operations in Hong Kong and Shanghai. The bank held deposits totaling $7.5 billion. The others were United Security Bank of Sparta, Ga., Home Federal Savings Bank of Detroit, Prosperan Bank of Oakdale, Minn., and Gateway Bank of St. Louis, Mo. So far 2009 has seen more than four times the number of banks that were closed in 2008. It's the highest total since 1992, when 181 banks failed. Customers of the failed banks are protected by the Federal Deposit Insurance Fund (FDIC), which currently covers customer accounts in failed banks up to $250,000. An average of 11 banks have failed per month this year, and the FDIC's coffer is having trouble under the strain. The fund now stands below $10 billion, down significantly from $45 billion a year ago. Bank failure costs are expected to total $100 billion over the n
ext four years.
 

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