by Calculated Risk on 4/16/2008 01:20:00 AM

From the WSJ: Merrill Upped Ante as Boom In Mortgage Bonds Fizzled On Thursday

Merrill will report $6 billion to $8 billion in new write-downs, according to a person familiar with the matter. The latest would bring its total since October to more than $30 billion ...

$30 billion here, $30 billion there ... it really is starting to add up.

by Calculated Risk on 4/15/2008 06:36:00 PM

From some stories today:

“With the traditional home buying season now well underway, we have not seen the bump in sales activity that we normally would this time of year.”
Sandy Dunn, NAHB president, April 15, 2008

The seasonal boost in sales between February and March was less than half its normal level and a record low. The weak start to the home buying season also saw another record dive in the median sales price ...
DataQuick on Southern California, April 15, 2008

"[T]here are cases where people as early as 18 to 24 months ago had one value on that property, and as they started to sell it or refinance it, they realize that valuation was 40% below what it was 18 to 24 months ago, and they're walking away from those homes in those markets."
Dowd Ritter, CEO Regions Financial Corp., April 15, 2008

March is a key month for both new and existing home sales.

Another year, another lost selling season.

by Calculated Risk on 4/15/2008 04:40:00 PM

From the WSJ: WaMu Reports $1.14 Billion Loss

Washington Mutual Inc., which has been rocked by the meltdown in the housing market, swung to a first-quarter loss of $1.14 billion amid increased provisions for credit losses.
...
WaMu on Tuesday also announced the closing of the $7 billion cash injection it announced last week.
...
WaMu's provision for credit losses soared to $3.51 billion from $234 million a year earlier. Net charge-offs, loans it doesn't think are collectable, rose to $1.37 billion from $737 million a year earlier. Non-performing assets rose to 2.87% of total assets from 1.02%.

A billion here, a billion there.

by Calculated Risk on 4/15/2008 04:20:00 PM

From the Regions Financial conference call:

Steven Alexopoulos, JP Morgan - Analyst: In terms of home equity, the second lien that went delinquent, or into default in the quarter, what were you typically doing there? Where were you writing them down, holding the judgment, or are you going through with buying out the first and going through foreclosure?

Dowd Ritter, Regions Financial Corp. - CEO & President: No, I would say basically the jump there that you see, is when we talked about valuation decline and, you know, probably anybody you talk to at any bank that lived through the late 80's and the early 90's, to me, the biggest difference in what's happening right now is, I'll use the word velocity, and it's how fast things have changed, and the biggest change that we've seen, quarter over quarter, and even if you go back and look at third to fourth and comparing them, is property valuations in certain markets. I would tell you that in a few of those that you saw us basically write off, we did not write them down, and because some of those -- they did have firsts, but there are cases where people as early as 18 to 24 months ago had one value on that property, and as they started to sell it or refinance it, they realize that valuation was 40% below what it was 18 to 24 months ago, and they're walking away from those homes in those markets.
emphasis added

Wow. The CEO of Regions is seeing 40% price declines in some markets over the last 1 1/2 to 2 years.

by Calculated Risk on 4/15/2008 02:02:00 PM

From DataQuick: Southland home sales log tepid gain; record price drop

The onset of spring did little to thaw Southern California's semi-frozen housing market: The seasonal boost in sales between February and March was less than half its normal level and a record low. The weak start to the home buying season also saw another record dive in the median sales price, the result of depreciation, slow sales for higher-priced abodes and growing sales for discounted homes fresh out of foreclosure.

A total of 12,808 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 18.8 percent from 10,777 the previous month but down 41.4 percent from 21,856 in March 2007, according to DataQuick Information Systems.

Over the past 20 years Southland sales have risen by an average of 38 percent between February and March. Last month's 18.1 percent increase from February was the lowest in DataQuick's statistics, which go back to 1988.

March was the seventh consecutive month in which sales have fallen to the lowest level on record for that particular month. On average, March sales have been about twice as high - 25,407 - as last month.

Foreclosure resales - houses sold after being foreclosed on - continue to dominate many inland neighborhoods. More than one out of three Southland homes that resold last month, nearly 38 percent, had been foreclosed on at some point in the prior year. This time last year such sales were only 8 percent of the market. At the county level, foreclosure resales ranged from 28.8 percent in Los Angeles County to 56.4 percent in Riverside County.
...
The median price paid for a Southland home was $385,000 last month, the lowest since $380,000 in April 2004. Last month's median was down 5.6 percent from February's $408,000, and down a record 23.8 percent from $505,000 in February 2007. That peak median of $505,000 was reached several times last spring and summer.
...
Foreclosure activity is at record levels ...
emphasis added

Grim.

by Calculated Risk on 4/15/2008 01:40:00 PM

The DataQuick numbers for SoCal will be available soon.

From Jon Lansner at the O.C. Register: March home price ($506,000) is a 4-year low

DataQuick’s final count of Orange County home-buying activity last month shows the median selling price for all residences at $506,000 — the lowest since March ‘04 and off 19.6% from a year ago. Buyers grabbed 1,663 homes last month down 46.9% from a year ago. It’s the 30th consecutive month where total sales failed to beat the year-ago level.

by Calculated Risk on 4/15/2008 01:00:00 PM

Click on graph for larger image. The NAHB reports that builder confidence was at 20 in April, unchanged from 20 in March. Usually housing bottoms look like a "V"; this one will probably look more like an "L". (this refers to activity like starts and sales, but will probably also be apparent in the confidence survey).

Here are the individual components.

From NAHB: Builder Confidence Remains Unchanged In April

Builder confidence in the market for new single-family homes remained unchanged for a third consecutive month in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI held at 20, up marginally from the record low of 18 set in December of 2007 (the series began in January of 1985).

“With the traditional home buying season now well underway, we have not seen the bump in sales activity that we normally would this time of year,” said Sandy Dunn, NAHB president and a home builder from Point Pleasant, W.Va. “At this point, all eyes are on Congress and its efforts to craft meaningful legislation to help support the housing market and stabilize our nation’s economy before it heads deeper into recession.”
emphasis added

Also from the NAHB: Nation Now In Mild Recession, Says NAHB Chief Economist

The deepening slump in the nation’s housing markets has seriously eroded consumer sentiment and pushed the economy into a mild recession, according to the chief economist for the National Association of Home Builders (NAHB).

“The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers,” said NAHB’s David Seiders. “It’s now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario.”
...
Given the ongoing erosion in housing finance markets and buyer demand, Seiders has adjusted NAHB’s official housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30 percent. A month ago, Seiders expected housing starts to bottom out in the third quarter, with a 27 percent decline for 2008.

“This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009,” Seiders said.

by Calculated Risk on 4/15/2008 10:14:00 AM

Greg Morcroft at MarketWatch provides an overview of regional bank results: Bad loans paint grim landscape for regional banks

Several of the nation's major regional banks, from the Deep South through the Midwest, said on Tuesday that plummeting housing prices and other financial strains on borrowers are forcing large loan write-offs and provisions for bad loans, undermining quarterly profits.
...
They also said they expect the pain to continue through 2008.

Here are a couple of examples. From Regions Financial Corp in Alabama:

Net loan charge-offs rose to $125.8 million, or an annualized 0.53% of average net loans, in the first quarter of 2008, up from $107.5 million, or an annualized 0.45%, in the prior quarter.

"The linked-quarter increase was primarily driven by the previously discussed residential homebuilder portfolio and the company's home equity portfolio, both of which are closely tied to the housing market slowdown," Regions said.

And from U.S. Bancrop:

In Minnesota, U.S. Bancorp saw quarterly loan-loss provisions soar to $485 million from $177 million.

"Declining home prices in many of our markets, in addition to stress in the residential home building and mortgage-related industries, are expected to continue through the balance of the year," the company said.

The individual bank losses might not grab the headlines (like the billions in losses at the large investment banks), but the losses at the regional banks are starting to grow. The regional banks will probably be hit hard later this year by defaults on construction & development (C&D) loans and commercial real estate (CRE) loans.

by Calculated Risk on 4/15/2008 09:36:00 AM

From Bloomberg: U.S. Foreclosures Jump 57% as Homeowners Walk Away

U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.

More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and Florida had the highest foreclosure rates. Filings rose 5 percent from February.
...
``We're not near the bottom of this at all,'' said Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California and chairman of the Fisher Center for Real Estate at the University of California at Berkeley. ``The foreclosure process will accelerate throughout the year.''

It is very likely that the foreclosure activity will continue to increase throughout 2008, negatively impacting inventory and house prices.

Note that the "walk away" headline isn't supported by any evidence in the article.

by Calculated Risk on 4/14/2008 09:45:00 PM

Here are two scary stories:

From CNN: Riots, instability spread as food prices skyrocket

Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods have brought the issue to a boiling point and catapulted it to the forefront of the world's attention, the head of an agency focused on global development said Monday.

From the WSJ: Russian Output Slumps As Oil Hits New Highs

Russian output fell for the first time in a decade in the first three months of this year, according to the International Energy Agency, which represents industrialized oil-consuming countries. It said Russian production averaged about 10 million barrels a day, a 1% drop from the first-quarter of 2007.

These stories are related. High food prices are due in large part to high oil prices.

Falling oil prices would really help cushion the U.S. recession. If oil prices stay high because of global demand - then at least U.S. exports will probably be strong. But if oil prices stay high because of falling production, then the recession will be much worse than I currently expect. And the impact on the World's poor will be severe.

These stories are much scarier than the TED spread expanding again.