by Calculated Risk on 10/21/2008 12:41:00 AM

Here are the graphs for housing starts and builder confidence based on the data released while out I was out hiking last week.

Click on graph for larger image in new window.

Total housing starts were at an annual pace of 817K units in September, the lowest rate since Jan 1991 (798K SAAR).

Starts for single family structures (544K) were the lowest since Feb 1982 (541K). The Census Bureau has been tracking starts since Jan 1959, and the lowest month for single family structures was Oct 1981 (523K units SAAR) - so it is possible that a new record low will be set in October 2008.

The second graph shows the builder confidence index from the National Association of Home Builders (NAHB).

Builder confidence index was at a record low in October.

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).

by Calculated Risk on 10/21/2008 12:11:00 AM

From The Times: Iceland agrees emergency $6bn deal with IMF

The credit crunch claimed its first sovereign scalp last night as Iceland readied itself to accept an International Monetary Fund (IMF) bailout. ... The IMF may provide about $1 billion in emergency cash for Iceland with the balance lent by Norway, Sweden and Denmark and additional money possibly coming from Russia and Japan.
...
The IMF is likely to attach stringent conditions to the loan, including the stipulation that Iceland quickly deleverage its three nationalised banks Kaupthing, Landsbanki and Glitner.

Quite a fall for Iceland.

Note: I'm back from my hiking trip in Zion and Bryce. I'll post a few pictures when I get a chance. Best to all.

by Calculated Risk on 10/20/2008 05:31:00 PM

From the WSJ Real Time Economics: Fitch: Housing Prices Have 10% to Go Before Stabilizing

“Fitch’s analysis shows that the 29% rise in prices realized between 2004 and 2006 ... has been reversed. With prices returning to early 2004 levels, Fitch believes that most of the additional 10% decline ... will occur over the next eighteen months. Fitch then expects declines thereafter to moderate.”

by Calculated Risk on 10/20/2008 03:41:00 PM

From DataQuick: Southland home sales up, prices down; foreclosures now half the market (hat tip Peter Viles at L.A. Land)

Southern California home sales shot up by an unprecedented 65 percent last month from the dismal, record lows of a year ago, when a credit crunch slammed the brakes on home financing. September sales also posted a rare gain over August as price cuts lured more buyers. Foreclosure resales rose to half of all transactions.

A total of 20,497 new and resale houses and condos closed escrow in the six-county Southland in September, up 5.8 percent from 19,366 in August and up 64.6 percent from 12,455 in September 2007, according to San Diego-based MDA DataQuick, a real estate information service.

Last month's sales were the highest for any month since December 2006 and the year-over-year gain was the highest for any month in DataQuick's statistics, which go back to 1988. However, last month's sales were still the second-lowest for any September since 1996 and were 17 percent below the 20-year sales average for that month.
...
"The pitifully low September 2007 sales numbers weren't tough to beat. More impressive was that this September's sales volume bucked the seasonal norm and rose above August. Steep price declines, especially inland, have improved housing affordability quite a bit and may keep sales levels well above the record lows we saw late last year and early this year. It will depend on the severity of this economic downturn," said John Walsh, MDA DataQuick president.

"You have to view last month's sales in the proper context," he cautioned. "They represent escrow closings, which reflect purchase decisions made in mid-to-late summer. That was before the dramatic worsening of the nation's economic crisis in recent weeks. Over the next few weeks our sales data will begin to show how the meltdown in financial markets this fall has impacted housing demand."
...
Fifty percent of all existing homes that closed escrow in September had been foreclosed on at some point in the prior year. That's up from 45.5 percent in August and 12.6 percent in September last year.

At the county level, such foreclosure resales ranged from 36.8 percent of September resales in Orange County to 68.9 percent in Riverside County. In Los Angeles County foreclosure resales were 39.1 percent of all resales; in San Diego 47.3 percent; San Bernardino 63.1 percent and in Ventura County 44.0 percent.
...
Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels ...

DataQuick shows median house prices have fallen significantly in SoCal, but these median prices are distorted by the mix of houses sold.

by Calculated Risk on 10/20/2008 12:38:00 PM

The yield on 3 month treasuries: 0.93% up from up from 0.72% (BETTER)

The TED spread: 3.04 down from 3.59 yesterday (BETTER)

The two year swap spread from Bloomberg: 111.5 down from 122.2 (BETTER)

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. Another $40 billion announced today/ No Progress.

The A2P2 spread is 4.36 for Friday from 4.49 for Thursday. slightly better.

Industry contacts. I'm tracking some financing deals there are being held up right now. If these deals complete that would be a good sign (I'll post something when this happens). No improvement yet.

I'll add a couple more indicators, but this is progress.

Note: I'm returning from Zion and Bryce today. I'll be home tonight. Sorry for not responding to all the emails.

by Calculated Risk on 10/20/2008 10:14:00 AM

From the WSJ: Bernanke Signals Support For Second Stimulus

U.S. Federal Reserve Chairman Ben Bernanke on Monday threw his support behind a second round of fiscal stimulus by the government to limit the risk of a "protracted" slowdown in the economy.

"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Mr. Bernanke said in prepared remarks to the House Budget Committee.

Mr. Bernanke offered many caveats, however. Any stimulus should be "well-targeted," he said, and focused on ways to "help improve access to credit by consumers, homebuyers, businesses, and other borrowers."

Meanwhile, "any program should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit," Mr. Bernanke said.

Although there are some signs of a thaw in the credit markets, most indicators suggest the economy is already in free fall.

by Calculated Risk on 10/20/2008 08:44:00 AM

From MarketWatch: More signs of thaw apparent as money-market tensions ease

The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.05875%, down sharply from 4.41875% on Friday.
...
The rate remains abnormally high, but it's climbed down from peaks set earlier this month as financial institutions all but halted loans to each other amid fears of further bank failures.

The TED spread is now down to 3.2. Still very high, but showing progress.

by Calculated Risk on 10/19/2008 09:56:00 PM

From Bloomberg: ING Gets $13.4 Billion Injection From the Netherlands

ING Groep NV, the biggest Dutch financial-services firm, will get 10 billion euros ($13.4 billion) from the Netherlands after warning Oct. 17 of its first quarterly loss ...

ING will scrap this year's final dividend and sell the government non-voting preferred securities that won't dilute existing shareholders and will lift the bank's core Tier 1 capital to about 8 percent ... The securities pay 8.5 percent annual interest, Dutch Finance Minister Wouter Bos told reporters today.

The bailout continues ...

by Calculated Risk on 10/19/2008 11:46:00 AM

From the NY Times: F.B.I. Struggles to Handle Wave of Financial Fraud Cases

Since 2004, F.B.I. officials have warned that mortgage fraud posed a looming threat, and the bureau has repeatedly asked the Bush administration for more money to replenish the ranks of agents handling nonterrorism investigations, according to records and interviews. But each year, the requests have been denied, with no new agents approved for financial crimes, as policy makers focused on counterterrorism.

According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels.
...
In 2004, one senior F.B.I. official, Chris Swecker, warned publicly that a flood of fraudulent mortgage deals had the potential to become “an epidemic.” Yet the next year, as public warnings about fraud in the subprime lending markets began to approach their height, the F.B.I. had the equivalent of only 15 full-time agents devoted to mortgage fraud out of a total of some 13,000 agents in the bureau.

That number has grown to 177 agents, who have opened 1,522 cases. But the staffing level is still hundreds of agents below the levels seen in the 1980s during the savings and loan crisis.

People having been sounding the alarm on mortgage fraud for several years - and the FBI still only has 177 agents devoted to mortgage fraud. Amazing.

by Calculated Risk on 10/19/2008 09:33:00 AM

From the WaPo: U.S. Bank Plan Hits Snag in Rules (hat tip Mark)

The Treasury Department is pressing federal banking regulators to change longstanding rules that are in the way of its plan to invest $250 billion in American banks, raising questions about the independence of the regulatory agencies.

Treasury's plan, announced Tuesday, rests on the ability of banks to use the government's money to buttress their core capital, the financial foundation that supports a bank's operations. Those foundations have been eroded by recent losses, limiting lending to customers and damaging the broader economy.

But under federal banking regulations at the time of the announcement, investments with the conditions attached by Treasury cannot be counted as core capital because that category is reserved for only the most stable kinds of funding.

Now, federal regulators are rushing to clear the road for the rescue plan. The Federal Reserve issued new rules Thursday evening creating a special exception for Treasury's investment. Other agencies are considering following suit.

It is the latest in a string of ad hoc measures to address the financial crisis, highlighting the haste of Treasury's massive and historic interventions and, critics say, a breakdown of the traditional separation between policymakers and banking regulators.
...
In what amounted to a partial nationalization of the banking system, Treasury announced that it would invest $125 billion in nine of the nation's largest banks and an additional $125 billion in the rest of the industry. In exchange, the banks would give the government an unusual kind of stock called senior preferred shares. Holders of these shares are excluded from shareholder votes on company business, but they receive annual interest payments and their shares have priority in the event of a bankruptcy.

"The senior preferred shares will qualify as Tier 1 [core] capital," Treasury said in a release announcing the program.

Treasury officials said yesterday that they knew that the rules on core capital needed to be changed to make that true.

Just another interesting twist.

Note: I'll be back home sometime tomorrow - sorry I haven't responded to all the emails.