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Housing sales fall, factory output increases
The National Association of Realtors said its seasonally adjusted index of sales agreements fell 16 percent from October to a November reading of 96. It was the first decline following nine straight months of gains and the lowest reading since June. The drop was far larger than the 2 percent expected from economists surveyed by Thomson Reuters, and analysts were surprised. "This was bound to happen at some point, although not by this much," wrote a startled Jennifer Lee, senior economist with BMO Capital Markets. "Gulp," she added. "It will be at least early spring before we see notable gains in sales activity as homebuyers respond to the recently extended and expanded tax credit," Lawrence Yun, the Realtors' chief economist, said in a statement.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer of future sales. Pending sales were down 26 percent from October in the Northeast and Midwest, 15 percent in the South and 3 percent in the West. "This sudden drop risks the stability housing markets have enjoyed in recent months," wrote Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. The good news is that orders to U.S. factory output posted a big gain in November, according to the Commerce Department. That data was the latest evidence of a strong turnaround in manufacturing as industries from China to Europe show signs of recovery. Orders rose by 1.1 percent in November, more than double the 0.5 percent increase economists had forecast. The increases were widespread with the exception of autos and aircraft, which posted declines. The Institute of Supply Management had reported Monday that its key gauge of U.S. factory activity showed manufacturing was expanding in December at the fastest pace in more than three years.
Olick on HAMP
Diana Olick from CNBC is back from vacation and is no fan of President Obama's HAMP bailout: "Clearly the housing boom of the past decade was fueled far more by faulty mortgage products than low interest rates, and to find proof of that you need look no further than the government's own mortgage bailout. The Home Affordable Modification Program (HAMP) is trying desperately to keep these faulty mortgages alive by changing their interest rates, but many many borrowers are unable to meet even the lower monthly payments. The underwriting, the lending, the products themselves are simply irreparable. And we're about to find out how monetary policy affects the housing market, as the Fed winds up its $1.25 trillion program to buy Fannie and Freddie securities, thereby artificially keeping interest rates low by keeping demand high. The Fed claims its on track to pull out March 31st, as planned. Add that to current shenanigans in the bond market which are pushing mortgage interest rates up already, and you'll get that monetary policy whether you like it or not. What's interesting in all of this is that the action in the housing market right now is cash-only buyers/investors. They're sidestepping the mortgage market entirely. But as I said, these are investors, by and large, and not real organic home buyers. The housing market, while it may have become a commodities market over the past decade, is inherently not one and therefore cannot recover with investors alone."
Financial crisis not over
According to several top economists at the annual American Economic Association, America's financial crisis is nowhere near over. That stands in sharp contrast to rising optimism in the banking sector, which analysts say has benefited disproportionately from government bailout efforts. "The recession is not over," said Michael Intriligator, professor of economics at the University of California, Los Angeles. He predicted economic output would not return to pre-crisis levels until 2013, while the job market would not fully recover until 2016. U.S. gross domestic product expanded 2.2 percent in the third quarter, but the sustainability of the recovery remains the subject of fierce debate. Simon Johnson, an economist at MIT's Sloan School of Business, said that by propping up the financial sector, government efforts to date are only delaying another inevitable crash. By giving large financial institutions the assurance that they are too big to fail, and thereby offering an implicit guarantee to excess risk-taking, Barack Obama has made the problem worse. "The crisis is just beginning," Johnson said. "Have bankers won? In the short-term, absolutely. The immediate opportunity for change has already been missed."
Bankers optimistic
As if to bolster what Simon Johnson said above, Jim O'Neill, head of global economic research at Goldman Sachs (a banker), is wildly optimistic, claiming that the global economic rebound is likely to be even stronger than many have anticipated and developed markets have the potential to outperform emerging markets. Goldman Sachs analysts estimate that the world economic growth will be 4.4 percent this year and 4.5 percent in 2011. Investors should be "really hopeful" about the US economy, after Monday's ISM survey results, according to O'Neill. "It looks like you've got an environment with stronger than expected growth, with policy makers at least in the West still saying 'we're not doing anything guys, go ahead and party,'" said Clive McDonnell, a regional strategist at BNP Paribas Securities.
DS News.com - Mortgage-Related Failures Hit Record Level in 2009
According to MortgageDaily.com, a source of mortgage news for the mortgage industry, more than 200 mortgage-related firms ended operations or failed last year, the highest number since the site began tracking the data in 1998. The previous record was set in 2007, but 2009 now marks the worst year in the industry. Up from the revised 124 closings in 2008, the closings of 225 mortgage-related operations were tracked in 2009 at the mortgage graveyard – a journal of failed lenders maintained by MortgageDaily.com. As banks account for most of the country’s residential originations, MortgageDaily.com said the annual surge in mortgage-related failures was fueled by a 400 percent spike in bank failures. In addition, credit union failures, including corporate and state-regulated institutions, were up by more than a third. Ocala, Florida-based Taylor Bean & Whitaker Mortgage Corp. was among last year’s most notable failures. The company was forced into bankruptcy after it was suspended by the Federal Housing Administration (FHA) in August. Lend America, based in Melville, New York, lost FHA approval in November and suffered a similar fate. Tied to the failure of Taylor Bean, Montgomery, Alabama-based Colonial Bank was seized by the Alabama State Banking Department in August and sold to BB&T.
US auto sales hit 30 year low in 2009
US auto sales are expected to have hit a 30-year low of about 10 million when figures are released today, but analysts expect more than 1 million cars and light trucks to have been sold in December, the best monthly performance since Cash for Clunkers in August. Financial firms wrote 5.5 percent more car loans in the third quarter compared with the prior three months, Experian Automotive says. Fourth-quarter figures aren’t yet available, but Jesse Toprak, vice president of the auto pricing tracker TrueCar Inc., said December saw an uptick in auto-loan approvals for consumers with average or above-average credit. Today, a top-tier borrower can get a 36-month auto loan with an average monthly rate of 5.74 percent, down from 6.65 percent a year ago, according to Informa Research Services. But the cost has risen for people in the bottom tier: The average rate has climbed to 18.56 percent, from 16.47 percent a year ago.
CMBS Delinquencies May Grow 58% in Next Six Months
According to monthly research by credit-rating agency Realpoint, the delinquent unpaid balance for commercial mortgage-backed securities (CMBS) rose “substantially” in November – more than 16% – to $37.93bn from the previous month, and the rate of growth looks likely to continue. Multifamily loans surpassed retail loans in November as the largest contributor to overall CMBS delinquency, Realpoint said. The sector accounted for 1.23% of the CMBS universe, but 26% of total delinquency. The overall delinquent unpaid balance of CMBS rose “an astounding” 440% from one year earlier, when $7.03bn of unpaid balance was delinquent in November 2008. Realpoint indicates the rate of growth in delinquency looks unlikely to let up as the market heads into 2010. “Overall, following the delinquency reporting of the $4.1bn Extended Stay Hotel loan and the experienced average growth month-over-month, we now project the delinquent unpaid CMBS balance to continue along its current trend and grow to between $50bn and $60bn by mid 2010,” Realpoint researchers wrote in the December 2009 report. With these figures, Realpoint expects delinquent CMBS to grow as much as 31-58% by mid-2010. Realpoint researchers project the delinquency percentage to grow between 5% and 6% through Q110, potentially surpassing the 7-8% mark under heavy stress scenarios through mid-2010.
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Above Post Written by: Chris Mclaughlin with Short Sale Riches.com
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