Wednesday, March 24, 2010

New Home Sales, Modifications, and Other News

by Bill McBride on 3/24/2010 04:11:00 PM

1) New Home sales. New Home sales were at a record low in February. The weather might be partially to blame for the February record, but the reality is there are just too many existing home units available - so new home sales and single family housing starts will be under pressure for some time - and also housing related employment.

New home sales will probably get a boost in March and April from the homebuyer tax credit. To qualify, homebuyers must sign a contract by the end of April and close by the end of June. Since new home sales are counted when the contract is signed, any boost will happen in March or April. For existing home sales, the boost will come when the deal closes, so the boost to sales will come in May or June.

2) Modification Programs

  • BofA announced a principal reduction plan for certain Countrywide borrowers.

  • CNBC's Diana Olick reports that Treasury might announce a principal reduction program in the next few days: Bank Of America's Mortgage Write Down—Just the Start?
    The reason this program is so important though is because we know something is in the works over at Treasury to do something like it. We may even get news of that later this week, according to some of my sources.
  • The Special Inspector General for TARP criticized HAMP today. The report was critical of the changing goals (no way 3 to 4 million will avoid foreclosure), the performance metrics, the marketing of the program, the low conversion rate to permanent status, and the high risk of re-default. The report notes that Treasury expects between 50% and 66% of temporary modifications will become permanent, and 40% of borrowers in the program will re-default (either while temporary or permanent). Those are horrible numbers.

    3) And in other news today:

  • John Keefe at MarketWatch writes: Durable Goods For February Show A Weak Pulse

  • Fitch downgraded Portugal (one of the PIIGS): Fitch Downgrades Portugal's Debt

  • Also from the WSJ: Debt Fears Drop Euro to 10-Month Low

    4) And on the Consumer financial protection agency from Jodi Kantor at the NY Times: Behind Consumer Agency Idea, a Fiery Advocate
    Ask Elizabeth Warren, scourge of Wall Street bankers, how they treat consumers, and her no-nonsense bob will shake with indignation. She will talk about morality, about fairness, about what she calls their “let them eat cake” attitude towards taxpayers. If she is riled enough, she might even spit out the Warren version of an expletive.

    “Dang gummit, somebody has got to stand up on behalf of middle-class families!” she exclaimed in a recent interview in her office here.