by Calculated Risk on 12/05/2008 10:15:00 AM

Update: 10% of Homeowners with mortgages. Approximately 31% of homeowners have no mortgage.

From the Mortgage Bankers Association (MBA): Delinquencies Increase, Foreclosure Starts Flat in Latest MBA National Delinquency Survey

The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.99 percent of all loans outstanding at the end of the third quarter of 2008, up 58 basis points from the second quarter of 2008, and up 140 basis points from one year ago on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.
...

The seasonally adjusted total delinquency rate continues to be the highest recorded in the MBA survey.
...
The percentage of loans in the foreclosure process at the end of the third quarter was 2.97 percent, an increase of 22 basis points from the second quarter of 2008 and 128 basis points from one year ago. The percentage of loans in the process of foreclosure set a new record this quarter.
emphasis added

All new records. There is more detail in the press release:

The seasonally adjusted delinquency rate increased 41 basis points to 4.34 percent for prime loans, increased 136 basis points to 20.03 percent for subprime loans ... The seriously delinquent rate, the non-seasonally adjusted percentage of loans that are 90 days or more delinquent, or in the process of foreclosure, was up from both last quarter and from last year. ... Compared with last quarter, the seriously delinquent rate increased for all loan types. The rate increased 52 basis points for prime loans to 2.87 percent, increased 171 basis points for subprime loans to 19.56 percent ...

Most concerning is the surge in the prime delinquency rate. The prime problem appears to be concentrated in a few states (California and Florida lead the way), and is mostly due to prime ARM loans.

by Calculated Risk on 12/05/2008 08:31:00 AM

From the BLS:

Nonfarm payroll employment fell sharply (-533,000) in November, and the unemployment rate rose from 6.5 to 6.7 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. November's drop in payroll employment followed declines of 403,000 in September and 320,000 in October, as revised. Job losses were large and widespread across the major industry sectors in November.

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 533,00 in November and October was revised down to a loss of 320,000 jobs. The economy has lost 1.25 million jobs over the last 3 months alone!

The unemployment rate rose 6.7 percent; the highest level since 1993.

Year over year employment is now strongly negative (there were 1.87 million fewer Americans employed in Nov 2008 than in Nov 2007). This is an extremely weak employment report and I'll have more soon ...

by Calculated Risk on 12/04/2008 11:05:00 PM

Home builder Kimball Hill filed for bankruptcy protection back in April. Now they are closing down ... and this reminds me of this great photo. Click on photo for larger image in new window. This photo of a Kimball Hill advertisment was taken at the Sacramento Airport by Itamar in January 2008. Hmmm ... bubble anyone?

From the Sacramento Bee: Another home builder falls

The prolonged housing downturn has claimed a new casualty, Chicago-based Kimball Hill Homes, a Sacramento and north San Joaquin Valley home builder since 1995.

The firm announced Tuesday it is going out of business.

The announcement came eight months after the privately held, medium-size builder filed for Chapter 11 bankruptcy protection. It builds houses in Sacramento, Rancho Cordova and Stockton.

by Calculated Risk on 12/04/2008 07:37:00 PM

About two weeks ago I posted about a friend's company obtaining a new loan for expansion, and also including an expanded revolving line of credit. Although this was just one story - and a fairly small loan of around $100 million - I saw this as a positive step.

Hold the presses. The bank just pulled their funding. Not good.

by Calculated Risk on 12/04/2008 05:00:00 PM

From Brad Setser at Follow the Money: China is starting to sound like a normal creditor country

Most creditors believe that the debtor needs to take the lead in addressing their own problems. China is, apparently, no different.

Brad references two articles, the second, James Fallows' interview with China's Gao Xiqing is here: “Be Nice to the Countries That Lend You Money” Worth reading ...

Also there were stories floating around this morning about People's Bank of China Gov. Zhou Xiaochuan making an unscheduled visit to the U.S. Actually it is a scheduled meeeting according to Dow Jones: China, US Open Talks But Breakthroughs Unlikely

People's Bank of China Gov. Zhou Xiaochuan left for the U.S. soon after giving his morning speech at the [Strategic Economic Dialogue] SED. He will attend the Group of 30 meeting in the U.S. being hosted by Timothy Geithner, Obama's nominee for Treasury Secretary.

According to a person at the international department of the PBOC who declined to be named, Zhou will attend the G30 meeting in New York from Dec. 4-6.

by Calculated Risk on 12/04/2008 03:25:00 PM

The stunning flight to treasuries continues across the board.

Click on graph for larger image in new window.

The 10-year yield fell to a record low of 2.59% today.

The graph shows the 10 year yield since 1962. The smaller graph shows the teh year yield for this year - talk about cliff diving!

The yield on 3 month treasuries is 0.005% (bad). Let's just call it zero! I think we know where the banks are parking all that TARP money - in three month treasuries!

Here are a few other indicators of credit stress once again suggesting little progress over the last few days.

The three month LIBOR has decreased slightly to 2.19%. The three-month LIBOR rate peaked (for this cycle) at 4.81875% on Oct. 10. (unchanged)

The TED spread is at 2.18, basically unchanged. (unchanged) The TED spread is stuck above 2.0, and still too high. The peak was 4.63 on Oct 10th. I'd like to see the spread move back down to 1.0 or lower. A normal spread is around 0.5.

The A2P2 spread decreased to 4.64 from a record (for this cycle) 5.86 on Friday (probably related to the holiday). This is way too high. (Bad).

This is the spread between high and low quality 30 day nonfinancial commercial paper. If the credit crisis eases, I'd expect a significant decline in this spread - and the graph makes it clear this indicator is still in crisis.

The two year swap spread from Bloomberg: 115.00, slightly higher. (slightly worse). This spread peaked at near 165 in early October, so there has been significant progress, but I'd like to see this below 100.

For the LIBOR, the TED spread, and the two-year swap, there has been clear progress - but there is still a ways to go. For the A2P2 spread (and all treasury yields), the markets are still in crisis.

The weekly Federal Reserve balance sheet update will be released this afternoon ... might be interesting.

by Calculated Risk on 12/04/2008 02:43:00 PM

From Fed Chairman Ben Bernanke: Housing, Mortgage Markets, and Foreclosures

Home sales and single-family housing starts held unusually steady through the 2001 recession and then rose dramatically over the subsequent four years. National indexes of home prices accelerated significantly over that period, with prices in some metropolitan areas more than doubling over the first half of the decade. One unfortunate consequence of the rapid increases in house prices was that providers of mortgage credit came to view their loans as well-secured by the rising values of their collateral and thus paid less attention to borrowers' ability to repay.

However, no real or financial asset can provide an above-normal market return indefinitely, and houses are no exception. When home-price appreciation began to slow in many areas, the consequences of weak underwriting, such as little or no documentation and low required down payments, became apparent. Delinquency rates for subprime mortgages--especially those with adjustable interest rates--began to climb steeply around the middle of 2006. When house prices were rising, higher-risk borrowers who were struggling to make their payments could refinance into more-affordable mortgages. But refinancing became increasingly difficult as many of these households found that they had accumulated little, if any, housing equity. Moreover, lenders tightened standards on higher-risk mortgages as secondary markets for those loans ceased to function.
...
As house prices have declined, many borrowers now find themselves "under water" on their mortgages--perhaps as many as 15 to 20 percent by some estimates. In addition, as the economy has slowed and unemployment has risen, more households are finding it difficult to make their mortgage payments. About 4-1/2 percent of all first-lien mortgages are now more than 90 days past due or in foreclosure, and one in ten near-prime mortgages in alt-A pools and more than one in five subprime mortgages are seriously delinquent. Lenders appear to be on track to initiate 2-1/4 million foreclosures in 2008, up from an average annual pace of less than 1 million during the pre-crisis period.

Predictably, home sales and construction have plummeted. Sales of new homes and starts of single-family houses are now running at about one-third of their peak levels in the middle part of this decade. Sales of existing homes, including foreclosure sales, are now about two-thirds of their earlier peak. Notwithstanding the sharp adjustment in construction, inventories of unsold new homes, though down in absolute terms, are close to their record high when measured relative to monthly sales, suggesting that residential construction is likely to remain soft in the near term.

"Predictably"? ROFLOL. Hey, hoocoodanode?

Most of the speech focuses on foreclosure prevention, and I'll get to that later.

by Calculated Risk on 12/04/2008 12:47:00 PM

CR does requests ...

Click on graph for larger image in new window.

This graph shows the 4-week average of initial weekly unemployment claims (blue, right scale), and total insured unemployed (red, left scale), both as a percent of covered employment.

This normalizes the data for changes in insured employment.

By these measures, the current recession is already worse than the '01 recession, but not as bad as the '90/'91 recession. I'll try to add the unemployment rate too.

by Calculated Risk on 12/04/2008 10:50:00 AM

From the WSJ: November Is as Bad as Feared

Retailers reported some of the weakest sales figures in years for November, with many missing downbeat expectations, but Wal-Mart Stores Inc. continued its recent outperformance as it topped estimates on increased store traffic and transaction size.

Layoffs everywhere it seems:

From Bloomberg: AT&T Plans to Reduce 12,000 Jobs, Spending as Slump Deepens

From Bloomberg: State Street Joins Fidelity, Legg Mason in Shedding Fund Jobs

State Street Corp., the world’s largest money manager for institutions, plans to cut 1,700 jobs, the latest in a wave of financial-sector layoffs during the worst year for U.S. stocks since the Great Depression.

State Street will shed about 6 percent of its 28,700 employees by March ...

From MarketWatch: DuPont cuts view, plans major workforce reduction

DuPont Co. slashed its fourth-quarter earnings forecast on Thursday and announced plans to dismiss 6,500 workers, including contractors, due to the downturn in the construction market and a sharp drop off in consumer spending.

And from the WSJ: Nokia Sees Shrinking Handset Market

Nokia Corp., the world's largest mobile handset maker, Thursday cut its global handset market forecasts for the second time in three weeks, warning that the slowdown has accelerated more rapidly than expected.

From Bloomberg: Factory Orders in the U.S. Decrease 5.1%, Most in 8 Years

Orders placed with U.S. factories in October fell by the most in 8 years, signaling a decline in manufacturing will contribute to deepening the recession.

Demand dropped 5.1 percent, more than forecast and the biggest fall since July 2000, after a revised 3.1 percent decrease in September, the Commerce Department said today in Washington. ...

``The general deterioration in both domestic and external demand suggests bleaker times lie ahead for America's factories,'' Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report.

This isn't intended to be exhaustive - just a sample of the headlines.

by Calculated Risk on 12/04/2008 08:46:00 AM

The DOL reports:

In the week ending Nov. 29, the advance figure for seasonally adjusted initial claims was 509,000, a decrease of 21,000 from the previous week's revised figure of 530,000. The 4-week moving average was 524,500, an increase of 6,250 from the previous week's revised average of 518,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending Nov. 22 was 4,087,000, an increase of 89,000 from the preceding week's revised level of 3,998,000.

It is time for a long term graph!

Click on graph for larger image in new window.

This graph shows the four week moving average of initial weekly unemployment claims. The moving average is at 524,500, the highest level since the early '80s - and higher than the peaks of the last two recessions.

This graph is not adjusted for changes in population or increases in the workforce.

Continued claims are now at 4.087 million - the highest level in 26 years.

Note that the weekly unemployment claims tends to peak towards the end of a recession - just something to remember.

Also, the Monster Employment index came in very weak:

The Monster Employment Index fell seven points in November, as further economic uncertainty and workforce reductions continued to weigh on U.S. online recruitment activity. Year-over-year, the Index is now down 22 percent, with U.S. online job availability at its lowest level since 2004.

The BLS reports tomorrow ...