by Calculated Risk on 9/18/2008 03:03:00 PM

The Fed released the Q1 2008 Flow of Funds report today: Flow of Funds.

Household percent equity was at an all time low of 45.2%.

Click on graph for larger image in new window.

This graph shows homeowner percent equity since 1952.

When prices were increasing dramatically in recent years, the percent homeowner equity was declining because homeowners were extracting equity from their homes. Now, with prices falling, the percent homeowner equity is declining even faster.

Note: approximately 31% of households do not have a mortgage. So the 50+ million households with mortgages have far less equity than 45.2%.

The second graph shows household real estate assets and mortgage debt as a percent of GDP. Household assets as a percent of GDP is now declining. Mortgage debt as a percent of GDP has declined for the last two quarters.

More later ...

by Calculated Risk on 9/18/2008 02:40:00 PM

From DataQuick: Bay Area home sales near bottom again, median price plunges

The pace of Bay Area home sales reversed its July uptick and dropped again last month ... A total of 7,232 new and resale houses and condos were sold in the nine-county Bay Area in August. That was down 4.7 percent from 7,586 in July, and down 0.9 percent from 7,299 in August 2007, according to San Diego-based MDA DataQuick.

Last month's sales total was the second-lowest for an August, behind 6,688 sales in August 1992, in MDA DataQuick's statistics, which go back to 1988.

The median prices declined sharply, but we have to be careful with median prices because of the mix of homes can change (many low priced homes are being sold through foreclosure):

The median price paid for all new and resale houses and condos sold in the Bay Area last month was $447,000, down 4.9 percent from $470,000 in July and down a record 31.8 percent from $655,000 in August 2007, according to MDA DataQuick.

Last month's median stood at the lowest point since January 2004, when it was $440,000. The median peaked at $665,000 in June, July and August of 2007.

Foreclosure resales are a significant portion of sales:

Across the Bay Area, foreclosure resales made up 36.1 percent of all resales last month, up from 33.3 percent in July and 4.4 percent a year ago. The figure represents the percentage of homes resold in August that had been foreclosed on at some point in the prior 12 months.

At the county level, foreclosure resales ranged from 8.6 percent of resales in San Francisco to 61.3 percent in Solano County. In the Bay Area's other seven counties, August foreclosure resales were as follows: Contra Costa, 54.4 percent; Marin, 13.5 percent; Napa, 39 percent; Santa Clara, 24.7 percent; San Mateo, 16.6 percent; Sonoma, 41.6 percent.

by Calculated Risk on 9/18/2008 01:24:00 PM

From Bloomberg: BNY Mellon Institutional Cash Fund Hit by Lehman Debt Losses (hat tip Kevin Jesse)

An institutional fund run by Bank of New York Mellon Corp. designed to work like a money-market account fell to less than $1 a share after losses on debt issued by bankrupt Lehman Brothers Holdings Inc.

The $22 billion BNY Institutional Cash Reserves fell to $0.991 a share on Sept. 16, according to an e-mail sent by a bank representative to one client. BNY Mellon has ``isolated the Lehman assets in the fund into a separate structure,'' Ivan Royle, a spokesman for the New York-based company, said today ...

From Reuters: Putnam shuts $15 billion money market fund

Asset manager Putnam Investments said on Thursday that it had closed its $15 billion Prime Money Market Fund due to redemption pressures.

by Calculated Risk on 9/18/2008 12:08:00 PM

From the NY Times: (hat tip Barry Ritholtz)

Editors’ Note
An earlier version of this article cited two sources who were said to have been briefed on a conversation in which John J. Mack, chief executive of Morgan Stanley, had told Vikrim S. Pandit, Citigroup’s chief executive, that “we need a merger partner or we’re not going to make it.” On Thursday, Morgan Stanley vigorously denied that Mr. Mack had made the comment, as did Citigroup, which had declined to comment on Wednesday.

The Times’s two sources have since clarified their comments, saying that because they were not present during the discussions, they could not confirm that Mr. Mack had in fact made the statement. The Times should have asked Morgan Stanley for comment and should not have used the quotation without doing more to verify the sources’ version of events.

by Calculated Risk on 9/18/2008 11:55:00 AM

Here is the A2/P2 spread from the Fed's commercial paper report. The A2/P2 Spread hit 280bp yesterday. This is literally off the chart compared to any previous period.

Click on graph for larger image in new window.

This is the spread between high and low quality 30 day nonfinancial commercial paper.

What is commercial paper (CP)? This is short term paper - less than 9 months, but usually much shorter duration like 30 days - that is issued by companies to finance short term needs. Many companies issue CP, and for most of these companies the risk of default is close to zero (think companies like GE (update: well maybe not GE anymore) or Coke). This is the high quality CP. Here is a good description.

Lower rated companies also issue CP and this is the A2/P2 rating. This doesn't include the Asset Backed CP - that is another category. (see commercial paper table).

Usually the spread between the A2/P2 and AA paper shows the concern of default for the A2/P2 paper. But right now this also shows the lack of liquidity in the system.

by Calculated Risk on 9/18/2008 10:16:00 AM

This is quite a decline in mortgage rates over the last few weeks.

From MarketWatch: Freddie Mac: 30-year fixed-rate mortgage average drops

Freddie Mac said Thursday the 30-year fixed-rate mortgage average ... was 5.78% with an average 0.6 point for the week ending Sept. 18, compared with 5.93% last week. Last year at this time, the average rate was 6.34%.

by Calculated Risk on 9/18/2008 09:09:00 AM

From CNBC: Morgan Stanley in Advanced Merger Talks With Wachovia

Morgan Stanley ... is in advanced merger talks with Wachovia Bank ... Morgan will begin formal merger negotiations with Wachovia sometime Thursday.

Update: Removed NY Times quotes since the NY Times has corrected the story.

by Calculated Risk on 9/18/2008 08:44:00 AM

From the Fed:

Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.

Federal Reserve Actions

The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks.

The FOMC has authorized increases in the existing swap lines with the ECB and the Swiss National Bank. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion.

In addition, new swap facilities have been authorized with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada.

All of these reciprocal currency arrangements have been authorized through January 30, 2009.

by Calculated Risk on 9/18/2008 08:39:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Sept. 13, the advance figure for seasonally adjusted initial claims was 455,000, an increase of 10,000 from the previous week's unrevised figure of 445,000. The 4-week moving average was 445,000, an increase of 5,000 from the previous week's unrevised average of 440,000.

Click on graph for larger image in new window.

The first graph shows weekly claims. The four moving average is at 440,000.

This is a very high level, and indicates continued weakness in the labor market.

by Calculated Risk on 9/18/2008 01:13:00 AM

The Hang Seng market is off 7.4%

The Shanghai composite is off 5.8%

The Nikkei is only off 3%

Another night, another Asian rout.