by Calculated Risk on 9/18/2008 05:01:00 PM

From the Financial Times: No bidders come for Washington Mutual

Hopes of finding a buyer for Washington Mutual dimmed on Thursday as an auction for the beleaguered US bank had yet to attract any bids. ... Goldman Sachs is conducting the auction for Seattle-based WaMu ... The lack of interest means that Goldman may soon have to evaluate other options for the bank.

What if you held an auction and no one came? Maybe they can put WaMu on eBay.

by Calculated Risk on 9/18/2008 04:42:00 PM

From ABC: Top Broker: NYC Real Estate Already in Steep Decline

Manhattan's finest co-op apartments may have already lost a fourth of their value as a result of the financial crisis, and the worst is yet to come, says leading New York estate broker Kathy Sloane, of Brown Harris Stevens.

Remember when New York city was considered immune?

Kudos to NY agent Noah Rosenblatt of UrbanDigs. When I spoke with Noah at the Inman conference in late July, he told me there were clear signs of a slowdown in New York city, and he thought the RE market would get much worse.

by Calculated Risk on 9/18/2008 03:59:00 PM

From Bloomberg: Moody's Raises Loss Forecast on Subprime, Jumbo Loans (no link yet). Moody's increased their loss forecasts for certain securitized subprime and Jumbo-prime mortgages, and cautioned about related downgrades of securities and financial firms.

Losses will reach an average of 22 percent on subprime loans underlying bonds created in 2006 ... That's up from an estimate of 14 percent to 18 percent made in January.

Losses on jumbo loans in 2006 bonds will rise to 1.6 percent to 2.1 percent, versus initial estimates of 0.35 percent and 0.60 percent.

Notice the sharp increase in losses for prime jumbo loans in 2006 bonds.

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.