Foreclosures down - but not for long
Foreclosure rates fell in January compared with the previous month, but remained sharply higher than a year ago, according to a new report by the foreclosure tracking Web site RealtyTrac. The month-to-month decrease in foreclosures is most likely a temporary improvement, said Rick Sharga, vice president of marketing at RealtyTrac, and has to do with the holiday season. “Because of the holiday season, offices that do the processing are closed,” said Sharga. “The drop in foreclosures [in January] is something we’ve seen a couple of years now. I don’t think this the beginning of a downward trend.” The number of Americans receiving foreclosure notices was down 9.7 percent in January from December 2009, but 15 percent higher than last January. In all, 315,716 properties generated a foreclosure notice. That means one in every 409 homes in America received a foreclosure notice. (Foreclosure notices are defined as a default notice, bank repossession or auction sale not
ice.) Real estate Web site Zillow.com also released a report last night that found one in five US mortgages were “underwater" during the fourth quarter. The ten states with the highest foreclosure rates were little changed from the previous month. According to the RealtyTrac report, Nevada remains No. 1, with one in every 95 properties in the state getting a foreclosure notice, even though the state showed a 18 percent decrease in foreclosures from the previous year. Arizona ranked second with one in every 129 households receiving a notice, followed by California (one in 187 households), Florida (one in 187 households) and Utah (one in every 231 households). South Dakota had the lowest rate, with one in every 25,820 properties receiving a foreclosure notice.
Jobless claims drop
According to the Labor Department, there were 440,000 initial jobless claims filed in the week ended Feb. 6, down 43,000 from a revised 483,000 the previous week. Economists were expecting initial claims to drop to 465,000, according to a consensus estimate from Briefing.com. The 4-week moving average of initial claims, which smoothes out volatility in the measure, was 468,500. That's down 1,000 from the previous week's revised average of 469,500. The government said 4,538,000 people filed continuing claims in the week ended Jan. 30, the most recent data available. That's down 79,000 from the preceding week's revised 4,617,000 claims. Economists were expecting continuing claims to have declined 2,000 to 4,600,000. The 4-week moving average of continuing claims was 4,603,500, a drop of 17,750 from the preceding week's revised average of 4,621,250. As usual, many economists say the decline in continuing claims reflects a growing number of filers who have dropped off the jo bless rolls into extended unemployment benefits.
Commercial real estate is the next crisis
The Congressional Oversight Panel said in a report that mounting commercial real estate losses could endanger the banking system and thwart economic recovery. A total of $1.4 trillion in commercial real estate loans will require refinancing in the next four years, and more than half of those loans are underwater, written for properties whose value has dropped like a rock. The expected losses when loans go bad could hit between $200 billion to $300 billion and threaten 3,000 small and mid-size banks with a disproportionate share of commercial real estate assets on their books, according to the panel. The report is intended to "wave a red flag" to the White House and Congress that the commercial real estate loan market is going to get a lot worse before it gets better. "We're at a point where even as TARP is ramping down another major challenge in our economy is ramping up," said Elizabeth Warren, the oversight panel's chairwoman. "We need to start now, before the system is
on the brink of collapse to figure out a plan," she added. The panel's research found that 2,988 banks are heavily invested -- with more than three times their assets tied up -- in commercial real estate loans. Of that number, 2,500 banks each have less than $1 billion in assets. The panel offers a number of possible solutions for policymakers to head off a commercial real estate crisis, including stress tests for banks, injecting capital into these small banks, buying their toxic assets, or guaranteeing loans.
White House Council of Economic Advisers issues annual report
The annual report by the White House Council of Economic Advisers will be delivered to Congress today, and will look at the actions President Obama took to deal with the recession over the past year. The report will examine the current economic crisis, including the steps the government took to shore up the financial and housing markets. It also looks at the need to reduce the federal government's deficit and to tackle long-standing problems such as health care costs, climate change and living standards. Obama has made job creation his central focus in his second year in office. He has recently traveled the country promoting tax credits for small businesses, the source of many new hires. And on Tuesday, he brought together congressional leaders to push for a bipartisan agreement on legislation to boost hiring. Council Chairwoman Christina Romer expects an average of 95,000 jobs a month to be created in 2010 and the nation's GDP to expand at a 2.5% rate. Romer called the r eport "a page-turner." Good to hear - if it's like everything else coming out of the White House these days it'll be an enthralling work of fiction.
NAR - Home sales surge
According to the latest survey by the National Association of Realtors (NAR), sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases. Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate 1 of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008. Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier. Lawrence Yun , NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels t rending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.” NAR President Vicki Cox Golder , owner of Vicki L. Cox & Associates in Tucson, Ariz., said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Double dip in house prices?
According to data compiled by Zillow, a real estate sales and data services provider, there are signs that the feared “double-dip” in house prices may have taken hold of US housing prices in as many as one in five major housing markets. While some individual markets have experienced a bottoming out and increase in prices, 29 of the 143 markets Zillow tracks is now showing signs of a possible double dip in home values. In those markets, home values have flattened or have begun to decrease again after showing at least five consecutive monthly increases during 2009 — what Zillow called early signs of what could a double dip. The Zillow Home Value Index put the national median price at $186,200 in Q409, a 5% decrease from Q408. Compared to Q309, prices declined 0.5% during the last quarter of 2009. The index is a measure of median home values of all single-family residences, condominiums and cooperatives, both on the market and not for sale. Q409 marked the 12th consecuti ve quarter of year-over-year declines, Zillow said. “The good news is that, for those markets that will see a double dip in home values before reaching a definitive bottom, this second dip will not be a return to the magnitude of depreciation seen earlier, but rather will look more like a modest aftershock of the earlier downturn,” said Zillow chief economist Stan Humphries.
20% of homes underwater
Real estate website Zillow.com says one of every five U.S. home owners owed more on their mortgage than their home was worth in the fourth quarter. The percentage of American single-family homes with mortgages in negative equity rose to 21.4% in the fourth quarter from 21% in the third quarter, according to the Zillow Real Estate Market Reports. U.S. home values declined again in the fourth quarter, as the Zillow Home Value Index fell 5% year-over-year and down 0.5% quarter-over-quarter, to $186,200. It was the 12th consecutive quarter of year-over-year declines, the reports showed. "The prevalence of markets in or near a double-dip situation shows that we are not yet at the bottom, in terms of home values," Stan Humphries, Zillow chief economist, said in an interview.
One in five, or 29 of the 143 markets tracked by Zillow, had at least five consecutive month-over-month increases in home values during 2009 before values began to flatten or fall again in the second part of the year. These markets included the Boston, Atlanta and San Diego metropolitan areas. Zillow said it defines a "double dip" as two periods of sustained declines in home values separated by a brief period of stabilization or recovery. Foreclosure resales remained high, making up 20.3% of all U.S. home sales in December. Foreclosure resales also made up the majority of sales in several metropolitan areas, including Merced, California, at 68.3%; Las Vegas, at 64 percent, and Modesto, California, at 62%. Additionally, 28.5 percent of home sales nationwide sold for less than what the seller originally paid. Home values increased year-over-year in 27 of 143 markets and remained flat in 15.
DSNews.com - Jumbo market getting worse
Delinquencies on prime jumbo loans continue to climb, and Fitch Ratings says they could reach 10 percent as early as next month. Loan performance among high-end mortgages within private residential mortgage-backed securities (RMBS) showed further weakness in January, as serious delinquencies rose for the 32nd consecutive month, Fitch said. According to Fitch’s data, overall, prime jumbo RMBS at least 60 days past due swelled to 9.6 percent in January, up from 9.2 percent in December 2009. The prime sector of the jumbo market was the only one in which new delinquencies increased from a year ago, Fitch said. Although prime jumbo delinquencies began to rise in the second quarter of 2007, the company says they accelerated in 2009 nearly tripling over the course of the year. Fitch notes that delinquency rates on pre-2005 loans remain well below that of more recent originations. The five states with the highest volume of prime jumbo loans outstanding – California, New York,
Florida, Virginia, and New Jersey – comprise approximately two-thirds of the $381 billion jumbo loan market. Florida saw the biggest monthly jump of these states. It holds only 6 percent of the market share, but now has the highest serious delinquency rate at 16.6 percent, according to Fitch’s analysis.
MBA - mortgage applications down
The Mortgage Bankers Association (MBA) said rates on 30-year fixed-rate mortgages, the most widely used loan, fell below 5 percent for the first time since the week ended Dec. 18, but U.S. mortgage applications dipped last week. The MBA's Weekly Mortgage Applications Survey for the week ending February 5 decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.6 percent compared with the previous week. The Refinance Index increased 1.4 percent from the previous week and the seasonally adjusted Purchase Index decreased 7.0 percent from one week earlier. The unadjusted Purchase Index decreased 1.1 percent compared with the previous week and was 7.5 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 3.8 percent. The four week moving average is up 0.8 percent for the seasonally adjusted Purchase Index, while this average is up 4.8 percent for the Refinance Index. The refinance share of mortgage activity increased to 69.7 percent of total applications from 69.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.5 percent of total applications from the previous week.
Economy to cool
According to a Reuters poll of 80 economists, U.S. economic growth is set to cool after a burst of activity late last year and expectations for a jobless recovery will prompt the Federal Reserve to keep interest rates on hold until well into the second half of 2010. Gross domestic product is forecast to grow by an annualized 2.7 percent this quarter, nearly halving from a 5.7 percent expansion between October and December last year. For all of 2009, the world's biggest economy contracted by an estimated 2.4 percent but economists expect it to grow 2.9 percent this year. Those median forecasts are similar to a poll of the same analysts taken last month. Forecasts for the first quarter varied widely, from a contraction of 0.4 percent to 4.5 percent annualized growth. Two economists predicted the economy would contract again at some point in the first half of the year. "The economy shows signs of recovery in terms of activity and volumes, but persistent challenges in bank le nding and policy-making will probably translate into a slow recovery for the job market," said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago. "Long-term rates are likely to benefit from renewed volatility in international markets, and we anticipate a strengthening in the dollar." Consumer price inflation is expected to average 2.1 percent in 2010 and 2.0 percent in 2011, according to the poll. Core inflation, which removes volatile food and energy costs, is seen at 1.4 percent in 2010 and 1.5 percent in 2011.
Trade deficit widens
The US Commerce Department says the trade deficit surged to a larger-than-expected $40.18 billion in December, the biggest imbalance in 12 months. The wider deficit reflected a rebounding economy that is pushing up demand for imports. The December deficit was 10.4 percent higher than the November imbalance and much larger than the $36 billion deficit that economists had expected. For December, exports of goods and services rose for an eighth consecutive month, climbing 3.3 percent to $142.70 billion, reflecting strong gains in sales of commercial aircraft, industrial machinery and U.S.-made autos and auto parts. Imports were up 4.8 percent in December to $182.88 billion, led by a 14.8 percent surge in oil imports which rose to the highest level since October 2008. For all of 2009, the deficit totaled $380.66 billion, the smallest imbalance in eight years, as a deep recession cut into imports. However, economists believe the deficit will rise in 2010 as U.S. demand for imp orts outpaces U.S. export sales. Last year's decline in the value of the dollar against the euro, the joint currency of 16 European nations, and several other major currencies has helped make American goods more competitive on overseas markets. That will help lift the fortunes of America's beleaguered manufacturing sector. However, the export gains are expected to be outpaced by an even larger rebound in imports.
Builders bet on spec houses
Home builders are ramping up speculative construction to attract last-minute home buyers who want to tap the soon-to-expire tax credit. "We know that we're going to have more people out now," says Lance Wright, co-owner of CastleRock Communities in Houston, Texas. "Buying is an emotional decision. Seeing the actual product that you're moving into will certainly make it easier." Ken Campbell, chief executive of California-based Standard Pacific Corp., agrees. Buyers trying to beat the tax credit's expiration "will buy a house somewhere," he says. "It does make a difference if the home is ready, available to go." Late last year, builders lost sales because they didn't have enough houses to satisfy a flurry of demand from buyers looking to take advantage of a federal tax credit for first-time buyers before they expired on Nov. 30. Builders expect buyers will wait until the last minute."
As we roll into March and April, more people are going to become aware of the fact that there's a deadline, and it's for real," says Rob Bowman, president of Lancaster, Pa.-based Charter Homes & Neighborhoods. It's difficult to measure the total number of spec homes nationwide, but according to a survey conducted by John Burns Real Estate Consulting, based in Irvine, Calif., home builders have about three finished homes with no buyer per community. That's up slightly from 2.8 finished homes in November but much lower than the peak of six finished homes in July 2008. "Every builder I talk to around the county is starting a spec home or two [per community] for the spring season, provided they have the cash to do it," said Jody Kahn, a John Burns vice president. The strategy is risky. If the buyers don't materialize, builders could be saddled with unsold homes that will require heavy discounting to sell, hurting profits and slowing the housing recovery. New homes may also con tinue to lose market share to lower-priced foreclosed houses. Indeed, some economists expect an avalanche of foreclosures in the months ahead as lenders release homes they have been keeping off the market.
DSNews.com - FHA Defaults hit 9%
The latest numbers from the Federal Housing Administration (FHA) show that the percentage of loans it backs that are at least 90 days past due hit 9.12% at the end of 2009. That figure is up from 6.82% one year earlier – a 34% increase. FHA officials have repeatedly cited a rise in loan defaults as inevitable given the agency’s exponential growth in market share. The FHA currently backs about 30 percent of all new loans for home purchases and 20 percent of refinanced loans. Those figures represent an increase of nearly 1,000 percent since 2006, when private lenders began to pull back and the credit crunch set in. According to the agency, the bulk of its problem loans stem from originations made in 2007 and 2008.
Officials say tighter underwriting standards make more recent and new loans less likely to default. In fact, HUD said in its fiscal year 2011 budget that it expects new business from FHA to generate a $6 billion overall profit, although that number will be eclipsed by projected losses of $19 billion from insuring soured loans. In the fourth quarter of 2009, lenders originated $86.1 billion in FHA single-family loans, up 21 percent compared to the same period in 2008. Sixty percent, or $51.8 billion, of the fourth-quarter financing was used to fund home purchases. For the full 2009 year, FHA insured 5.8 million loans, with an aggregate balance of $752.6 billion – a 24 percent increase compared to 2008’s business.
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