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White House: Unemployment To Average 9.8% In 2010 - 08/29/09 08:11 AM
This past week the White House downgraded their assessment of the economy when they contracted their GDP projection for 2010 from 3.2% to 2% and increased their original unemployment outlook from below 8% to 9.8%.
There are two concerns with unemployment. The first is the actual percent, and the second is the duration. What the White House is predicting, and keep in mind they have been behind the curve on this recession for the past two years, is that 2010 is going to be worse than 2009 in terms of sustained high unemployment. Unemployment is expected to average "only" 9.3% for 2009.
What … (11 comments)
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New Home Sales, Mortgage Rates, and the $1.25 Trillion Dollar Question - 08/29/09 07:39 AM
According to the Census Bureau, new home sales jumped 9.6% from June to July to a seasonally adjusted annual rate of 433,000.
This is the highest rate of home sales since August of 2008. However, new home sales are still down -13.4% from last July.
The inventory of unsold new homes fell -3.2% from last month to 271,000 and is down -35.3% from last year. This is a massive improvement and as a result, the month's supply of housing fell to a 7.5 month supply.
There are all positive indicators for the new home market. As new homes are built, jobs are created, … (2 comments)
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Mortgage Purchase Applications Showing Stability - 08/27/09 08:15 AM
The MBA reported on Wednesday that the mortgage purchase application index rose 1% this past week to 280.5.
While the reading of 280.5 does not represent overly encouraging demand for real estate, the index has slowly risen for four consecutive weeks.
The 30-year fixed rate mortgage rose from 5.15% to 5.24% for the week ending August 21st.
Between the recent surges in existing and new home sales, as well as the past four weeks of mortgage purchase applications, it appears that demand has stabilized thanks to precipitous home value declines, an $8,000 first time home buyer tax credit, and a $1.25 trillion Fed funny … (2 comments)
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CNBC's Diana Olick on "Cure Rates" - 08/25/09 11:22 PM
On Monday CNBC's Diana Olick wrote a post about mortgage cure rates. For those of you who haven't read her stuff before, I recommend it. She is one of a very small minority of housing analysts who understand the comprehensiveness of the housing market.
A cure rate is a term used to represent the percentage of delinquent loans that are returned to "current" status each month.
In other words, for every 100 loans that are delinquent, how many of the owners will get caught up with the payment they have missed.
According to Fitch Ratings, Olick writes that from 2000-2006, 45% of loan delinquencies were … (4 comments)
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The Real Story Behind Case-Shiller Home Price "Increases" - 08/25/09 10:38 PM
Case-Shiller announced today that home prices rose in June from May by 1.4% for both the 10-city and 20-city indexes.
I'm still trying to figure out why this makes headlines and why people think that this indicates that the housing market is bottoming.
Of course home prices rose from May to June. They did it in 2007 and 2008 too. They do it every year. It is called a seasonal variance.
According to the NAR the median home value rose from $222,700 to $229,000 in May of 2007 to June of 2007.
And then again in 2008, the median home value rose from … (4 comments)
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81 Bank Failures...And Surging - 08/23/09 04:16 PM
On July 3rd, more than half-way through the year, I wrote a post that the number oif bank failures had reached 52. Now here we are, less than two months later and that number has exploded to 81. We have had nearly 30 bank failures in less than two months. That is a pace of nearly one every other day.
The most notable of the bank failures this weekend was Guaranty Bank, it was the third largest this year.
The systemic cause of these failures is falling asset prices, specifically residential and commercial real estate. The problem is that despite aggressive monetary efforts by the government, asset values are … (5 comments)
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Mortgage Rates, Existing Home Sales, And The $1.25 Trillion Dollar Question - 08/23/09 03:50 PM
With existing home sales rebounding this past month to the fastest pace since the financial crisis made land-fall in September, it begs the question, was the Fed's monetary policy of purchasing $1.25 trillion in mortgage backed securities worth the cost?
To put this Fed monetary intervention into perspective, it was nearly the size of the TARP and the stimulus package...combined. And yet despite this, it has not received much attention. Part of the reason may be because it is not "tax-payer" money, it is new money that the Fed has printed.
The implications of the Fed's $1.25 trillion monetary policy is that rates … (1 comments)
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NAR: Home Values Fell -15.1% Year Over Year In July - 08/22/09 10:58 PM
With all of the talk about a housing bottom, I thought I would point out a small little statistic that the media continues to overlook...home values are still falling. And they are still falling in all four regions that the NAR tracks.
Specifically, the median home value fell by -15.0% in the Northeast, -5.9% in the Midwest, -7.1% in the South, and -28% in the West.
According to the most recent NAR existing home sales report, the national median home value fell -15.1% from July of 2008 to July of 2009.
Here is what the year over year percentage change in … (4 comments)
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Observations on NAR's Existing Home Sales Report - 08/22/09 10:39 PM
The NAR published their monthly existing home sales report on Friday which showed that home sales rose 7.2% in July from June on a seasonally adjusted rate and are up 5% from last year at this same time.
This is clearly good news as the real estate market needs a massive increase in demand in order to absorb the excess supply of homes that is sitting on the market as well as the foreclosures that are about to hit the market.
The interesting statistic within the report that didn't make the headlines but is just as relevant is that housing inventory, the number of homes … (4 comments)
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A (New) Record 13.16% of All Mortgages At Least 30 Days Late - 08/20/09 11:19 PM
The MBA announced today in their quarterly delinquency report that a new record 13.16% of all mortgages were at least 30 days late or already in the process of foreclosure. This was an increase from the previous record of 12.07% during the first quarter of 2009.
The MBA's chief economist, Jay Brinkmann, was quoted as saying, "As for the outlook, it is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves." His prognosis, while not unique, is cause for concern as many economists don't expect the unemployment rate to peak until mid 2010. Banking analyst … (4 comments)
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Mortgage Purchase Applications Rise 3.9% The Past Week - 08/20/09 07:49 AM
According to the MBA, after five consecutive weeks in which the mortgage purchase application index remained below 270, signaling weak demand for real estate, the index rose 3.9% this past week to 277.7.
The 30-year fixed rate mortgage fell from 5.38% to 5.15% for the week ending August 14th.
Mortgage purchase applications are an indicator of future demand for real estate. Typically a potential buyer will apply for a mortgage, write a contract that goes "pending", and then eventually close on the property for a "sale".
The reason why demand is a critical component of a housing recovery is because the number … (3 comments)
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Housing Permits Lose Steam In July - 08/18/09 11:07 PM
According to the Census Bureau total housing permits fell by -1.8% in July from June to a seasonally adjusted annual rate of 560,000.
Interestingly the decline in housing permits in July was driven by multi-family units. According to the Census Bureau, single family housing permits were up 5.8% from last month but 2-4 unit properties were down -21.7% and 5+ unit properties were down -26.3% from the previous month.
Compared to last year single family housing permits were down -20.3%, 2-4 unit properties were down -48.6% and 5+ unit properties were down -73.2%.
This data is a representation of the broader real estate market. While demand … (2 comments)
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All Real Estate Is Local, But... - 08/17/09 10:40 PM
The NAR published their quarterly metro home value report this past week. While there were some bright spots like Elmira, NY, which showed 11.3% year over year appreciation, there is also continued systemic weakness throughout our countries housing markets.
Broadly speaking, the median home value fell -15.6% from the 2Q of 2008 to the 2Q of 2009, this is the steepest decline on record for this quarterly report.
Additionally, all four regions within the United States were down. The Northeast, Midwest, South, and West experienced home value declines of -9.7%, -8.6%, -10.3%, and -26.6% respectively. While all real estate is local, every … (4 comments)
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Home Value Declines Continue to Drive Sales - 08/16/09 05:06 PM
The NAR published their quarterly home sales report this past week which shows the rate of home sales for all 50 states as well as the District of Columbia.
Of the 51 total markets, 41 of them showed year over year home sales declines from the 2Q of 2008 to the 2Q of 2009.
The year over year data, the weather man's guide, is a better indicator than month over month data as it accounts for seasonal variances as well as providing a larger scope to interpret the information, in other words, a frame of reference. It is this year over year perspective … (6 comments)
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Consumer Confidence Falls In August - 08/16/09 08:49 AM
According to the Reuters/University of Michigan Surveys of Consumers, confidence fell in August to 63.2 from a July reading of 66.
Additionally, the measure of consumer expectations fell to 62.1, the lowest reading since March.
The reason these numbers are somewhat alarming is because not only has the pace of job losses slowed, but the stock market has rallied nearly 45% from March. And yet the confidence and expectations of the consumer remain weak.
Remember, in March, according to the Bureau of Labor Statistics, we saw 652,000 jobs lost. As recently as July there were "only" 247,000.
It is possible that this … (4 comments)
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Bank Failures Surge to 77 - 08/16/09 08:28 AM
Colonial Bank became the biggest bank failure this year, the 6th biggest of all time, and the largest since Washington Mutual, as the FDIC took over the company on Friday, according to an article written by Alison Vekshin, David Mildenberg and Dakin Campbell in Bloomberg.com
Additionally, four more banks were taken over this weekend, bringing the total this year to 77.
This is more than triple the number of bank failures that we saw in 2008 when there were only 25, and we still have over four months left to the year.
The reason why the number of bank failures are escalating is because of the number … (4 comments)
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The Weather Man's Guide To Understanding Real Estate Data - 08/15/09 08:10 AM
Due to some recent improvements in seasonal housing data and statistics, a lot of people (Jim Cramer) and media outlets (AP) are beginning to sound the drum for a housing bottom.
I thought it would be worth pointing out that much like the weather, the majority of real estate data is best interpreted in a year over year comparison versus month over month. The reason for this is because real estate is a seasonal industry, much like the weather is. Home values, the number of listings, and the number of sales, are driven by the time of the year.
You don't see weather men or women comparing … (4 comments)
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RealtyTrac: Foreclosure Filings Set New Record In July - 08/13/09 07:30 AM
According to RealtyTrac, foreclosure filings set a new record in July as they rose 7% from June and are up 32% year over year.
According to James J. Saccacio, RealtyTrac's chief executive, "July marks the third time in the last five months where we've seen a new record set for foreclosure activity".
In other words, despite calls of a housing bottom by CNBC's Jim Cramer and even the AP, the housing market is still deteriorating and home values are still eroding.
This escalation of foreclosure activity also brings into question the effectiveness and long-term sustainability of the Obama Administration's $75 billion loan modification … (4 comments)
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Pending Home Sales vs. Existing Home Sales - 08/12/09 08:33 AM
With all of the talk about the recent strength in pending home sales over the past couple of months, there continues to be a headwind-effect between pending contracts and actual existing sales that are reported by the NAR.
The relationship between the two indicators has revealed that pending home sales appear to be taking a longer time to close, more like 60 days rather than 30 days, and a smaller percentage of the total pending contracts are actually making it to a successful close.
This attrition rate could be attributed to a couple of influences including the new appraisal HVCC guidelines, the complexities of short sales or … (2 comments)
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Mortgage Purchase Applications Remain Steady But Weak - 08/12/09 08:06 AM
The Mortgage Bankers Association announced today that the mortgage purchase application index remains steady but weak as it rose just 1.1% from last week to 267.3.
It is the fifth consecutive week that the index has been below 270.
The 30-year fixed rate mortgage jumped from 5.17% to 5.36% for the week ending the July 31, 2009.
This data continues to reinforce two ongoing trends. First, while demand for real estate appears to have bottomed from the lows we saw in January in the NAR existing home sales report, the current demand is being outpaced by the rate of homes going into foreclosure. In … (0 comments)
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Fannie Mae Needs Additional $10.7 Billion - 08/09/09 08:40 AM
CNNMoney.com is reporting that the mortgage giant Fannie Mae needs another $10.7 billion from the Treasury in the wake of a $14.8 billion quarterly loss.
This $14.8 billion quarterly loss is an improvement from the previous quarter in which the company lost $23.2 billion.
Fannie Mae's non-performing loans, much like those of Citigroup, Wells Fargo, and Bank of America, are on the rise.
According to the article, "The value of non-performing loans on its books increased to $171 billion as of June 30, compared with $144.9 billion on March 31 and $119.2 billion on December 31."
These non-performing loans are the … (6 comments)
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Bank of America Disappoints On Their Loan Modification Efforts - 08/09/09 08:32 AM
According to a recent CNBC article by Albert Bozzo, participation by banks in the governments$75 billion program to modify home loans has been off to a slower start than expected.
Interestingly, Wells Fargo and Bank of America, both of whom have had significant increases in their non-performing assets, are two of the most reluctant banks to modify loans.
Wells Fargo has extended loan modifications to just 12% of eligible borrowers.
Bank of America has extended loan modifications to just 13% of eligible borrowers. One would think because of the TARP money as well as billions in loan guarantees Bank of America has received from the government that their … (34 comments)
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AP: "Welcome to the bottom: Housing begins slow rebound" - 08/08/09 05:16 PM
For those of you who read my last post and disagreed with Deutsche Bank's report that nearly 50% of all mortgages will be underwater by 2011, a recent AP report may be more up your alley, so long as you don't think a rising tide of foreclosures will negatively impact property values.
The AP writes, "It was - note the past tense - the worst housing recession anyone but survivors of the Great Depression can remember."
The recent AP article goes on to say, "By every measure, except foreclosures, the housing market has stabilized and many areas are recovering, according to a spate of data … (9 comments)
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AP: Government Tax Receipts On Pace For 18% Decline This Year - 08/08/09 09:01 AM
The AP is reporting that government tax receipts are on pace to decline by 18% this year, the most significant decline since 1932 during great depression.
According to the article, "Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever."
The tax receipts paint a more accurate picture of the economy than perhaps the GDP report or the unemployment report which are influenced by government spending and … (5 comments)
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Deutsche Bank: Half of All Mortgages To Be Underwater By 2011 - 08/07/09 04:19 AM
According to a new report put out by Deutsche Bank, half, or approximately 25 million homeowners will be underwater with their mortgage by 2011, the year in which Deutsche Bank expects home prices to finally stabilize.
Les Christie and CNNMoney.com are reporting that the Deutsche Bank forecast goes further than any other estimates that have been calculated to date, "First American CoreLogic estimated 11 million homeowners -- and rising -- were underwater by the end of 2008. Moody's Economy.com estimated 15 million at the end of March and projected 17.5 million by early 2010. Zillow.com reported that 20 million were already underwater at the end of … (61 comments)
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Wells Fargo "Earnings" - 08/06/09 10:00 PM
Wells Fargo reported earnings on July 22nd which showed a surge in non-performing assets, not unlike the earnings report that Bank of America reported.
According to a Reuters article, non-performing assets soared 45% from the first quarter.
Non-performing assets typically are loans that the borrower has stopped making payments on.
Wells Fargo non-performing commercial and commerial real estate loans surged 69% from the 1st quarter.
While Wells Fargo, as well as the rest of the banking industry, has been the beneficiary of favorable government tax breaks, loan guarantees, TARP money, accounting principles, the PPIP, and the grand-daddy of all refinancing booms, it continues to remain under … (6 comments)
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Mortgage Purchase Applications Struggle To Gain Ground - 08/06/09 08:49 AM
The Mortgage Bankers Association announced on Wednesday that the mortgage purchase application index rose just 0.9% from the previous week to 264.4.
This is the fourth consecutive week in which the index has remained below 265, a signal that demand for real estate continues to face a headwind.
The broader measure for the purchase index, the 4-week moving average, is down -2%.
The 30-year fixed rate mortgage fell from 5.36% to 5.17%.
While the NAR's pending home sales index continues to show strength, the MBA's purchase application index is telling a different story.
The reason this index is relevant is because it … (4 comments)
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NAR: Housing Affordability Falls To A 6-Month Low - 08/05/09 08:44 AM
According to the NAR, housing affordability fell again in June to a reading of 159.2. This is the lowest reading since December when we saw 159.1.
The decline in housing affordability is due to a trend of rising mortgage rates, an increase in the median home value which is driven by seasonal variances, and a decline in median family income to the lowest point in over a year.
What may come as a surprise to many though is that despite this fall in housing affordability, pending home sales were the strongest they have been in over a year in June.
The evidence … (4 comments)
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NAR: Pending Home Sales Up 6.7% Year Over Year - 08/05/09 08:30 AM
The NAR announced on Tuesday that pending home sales rose for the fifth consecutive month to a reading of 94.6, this represents a 6.7% year over year increase and a 3.6% month over month increase, all good things.
What remains to be seen is just how many of these pending contracts will actually translate into closed sales. Over the past several months the relationship between pending home sales and existing home sales has remained strained due to appraisal and underwriting constraints.
The other material fact that needs to be considered when talking about pending home sales and demand is how those … (4 comments)
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Loan Modifications: Do Loan Servicers Want You To Default? - 08/04/09 08:40 AM
Peter S. Goodman wrote an article in the New York Times on July 30th making the case as to why loan servicers may be financially benefiting from homeowners defaulting on their loans which could explain the reluctance of these loan servicers to modify loans and make them more affordable.
Goodman writes, "Mortgage companies, some of which are affiliated with the nation's largest banks, are paid to manage pools of loans owned by investors. The companies typically collect a percentage of the value of the loans they service. They extract their share regardless of whether borrowers are current on their payments. Indeed, their percentage often increases … (8 comments)
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Bank Failures Surge To 69 In 2009 - 08/01/09 11:47 AM
CNNMoney.com is reporting that five more banks failed on Friday bringing the total to 69 for 2009. According to the article it is estimated that the failures will cost the FDIC $912 million.
As recently as July 10th there were "only" 53 bank failures, meaning that the pace of bank failures has escalated in recent weeks.
There was a total of 25 bank failures in 2008.
The reason for the deterioration of the banking system is falling asset values, specifically commercial and residential real estate.
The solution is found in repealing or reforming an obscure tax code that dates back to 1986.
… (6 comments)
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Mark MacKenzie
Phoenix,
AZ
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Mark MacKenzie Real Estate Planning
Office Phone: (480) 600-0330
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