by Calculated Risk on 8/13/2009 08:30:00 AM

The DOL reports weekly unemployment insurance claims increased to 558,000:

In the week ending Aug. 8, the advance figure for seasonally adjusted initial claims was 558,000, an increase of 4,000 from the previous week's revised figure of 554,000. The 4-week moving average was 565,000, an increase of 8,500 from the previous week's revised average of 556,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Aug. 1 was 6,202,000, a decrease of 141,000 from the preceding week's revised level of 6,343,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims increased this week by 8,500 to 565,000, and is now 93,750 below the peak of 18 weeks ago. It appears that initial weekly claims have peaked for this cycle.

The number is still very high (at 558,000), indicating significant weakness in the job market. The four-week average of initial weekly claims will probably have to fall below 400,000 before the total employment stops falling.

The DOL report shows seasonally adjusted insured unemployment at 6.2 million, down from a peak of about 6.9 million. This raises the question of how many unemployed workers have exhausted their regular unemployment benefits (Note: most are still receiving extended benefits, although this is about to change).

The monthly BLS report provides data on workers unemployed for 27 or more weeks, and here is a repeat of that graph ...

The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are almost 5.0 million workers who have been unemployed for more than 26 weeks (and still want a job). This is 3.2% of the civilian workforce.

It is more difficult to calculate the number of workers who have exhausted their extended claims, but that number is expected to rise sharply over the next few months.

by Calculated Risk on 8/13/2009 12:35:00 AM

Jim doesn't think much of this deal ...

by Calculated Risk on 8/12/2009 07:13:00 PM

Here is some national data on the number of distressed sales in Q2, and the types of homebuyers. This is from a survey by Campbell Communications (excerpted with permission).

Source: Summary Report--Real Estate Agents Report on Home Purchases and Mortgages, Campbell Communications, June 2009

Click on graph for larger image in new window.

The Campbell survey broke REOs down into damaged and move-in ready.

According to this national survey of real estate agents, over 63% of sales were distressed sales in Q2. This is higher than the numbers reported by NAR. From NAR:

Distressed properties ... accounted for 31 percent of sales in June ... Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April ...

The Campbell numbers seem high to me. In Sacramento over 70% of sales in June were distressed, and I'd expect that area to well above the national level. But the NAR numbers seem low.

The second graph breaks out sales by buyer type.

According to the Campbell survey over 70% of sales in Q2 were to first-time buyers and investors.

Although we don't have historical data for distressed properties - or buyer types - this does suggest a market that is far from normal with few move-across or move-up buyers.

by Calculated Risk on 8/12/2009 04:39:00 PM

From California AG Jerry Brown: Brown Orders Mortgage Foreclosure Consultants to Post $100,000 Bond or Face Prosecution (ht Matt at O.C. Register)

Threatening possible criminal and civil prosecution, Attorney General Edmund G. Brown Jr. today ordered 386 mortgage foreclosure consultants to post $100,000 bonds and register with his office.

He also ordered more than two dozen companies to justify suspicious loan modification claims made in "slick advertising," online and through the mail.
...
Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office within 10 days and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation. Eighty-five of these consultants are based in Los Angeles County, 133 in Orange County, 47 in the Inland Empire, 68 in San Diego County and seven in the Bay Area.
...
The State Bar of California today announced that it has obtained resignations from two lawyers and filed charges against a third for their loan modification activities.

And check out some of this advertising that Brown demanded loan consultants substantiate:

· Brown directed Irsfeld, Irsfeld & Younger, LLP as corporate counsel for JL Richman, doing business as Home Retention Programs of Glendale, Calif. to substantiate its claims including: "Our team has 10 years of success in negotiating 90% of all mortgage loan modification requests to a successful outcome….For the modification requests we accept, our modification failure rate is less than 1%."

· Brown directed 21st Century Real Estate Investment Corporation of Rancho Cucamonga to substantiate its written solicitations including: "[y]our proposed loan modification is a 30 year fixed/3.5% interest rate with a monthly payment of $495. Your monthly savings is $705. Total savings over a 30-year period is $253,800. . . . Your first payment will be negotiated to begin March 2009 - payable to your current lender for $495."

· Brown directed Mortgage Modification Solutions of Irvine to substantiate its claims including: "Our services are due to the FEDERAL MANDATE which makes it mandatory for mortgagees, upon the default of a single family mortgage, to engage in loss mitigation actions" and "Why $3995.00 is nothing compared to what you can accomplish in return? #1- It's 10 times more expensive to hire a CPA or a Financial Advisor to exclusively analyze & Research your financial affairs to create a plan acceptable to the Banking standards."

· Brown directed Alliance Law Center of San Diego to substantiate its letters to consumers stating: "Final Notice: 3/11/09, our review of certain information indicates you may be a victim of federal disclosure violations and/or predatory lending violations, therefore your loan may be invalid, and you may qualify for a loan modification saving you thousands of dollars."

The tips on avoiding scams can't be repeated enough.

by Calculated Risk on 8/12/2009 02:15:00 PM

From the FOMC:

Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
emphasis added

by Calculated Risk on 8/12/2009 01:08:00 PM

I just reread the previous Fed statement to refresh my mind on a few key sentences. Here is the statement from the June 24th meeting.

On the Fed funds rate, I expect no change to this sentence: "The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

But I expect some changes to the economic conditions paragraph. The key phrase last month was "the pace of economic contraction is slowing", and it will be interesting to see if the Fed sees the end of contraction now.

As I noted last week, the $300 billion program to buy Treasury securities is almost over, so there will probably be a comment on this program. More in an hour ...

by Calculated Risk on 8/12/2009 10:00:00 AM

Just using Sacramento as an example ... I wish the NAR broke out the data like this!

Click on graph for larger image in new window.

The Sacramento Association of REALTORS® is now breaking out monthly resales by equity sales (normal resales), and distressed sales (Short sales and REO sales). Here is the July data.

They started breaking out REO sales last year, but this is only the second monthly report with short sales. Over two thirds of all resales (single family homes and condos) were distressed sales in July.

Total sales in July were off 7% compared to July 2008; the second month in a row with declining YoY sales.

The second graph breaks out sales by financing type for each July since 2002. (July 2004 was missing, June was used).

This shows the significant shift to FHA loans and cash buyers (usually investors). Speculators used conventional loans during the bubble, but now cash flow investors are mostly buying with cash.

This suggests most of the activity in distressed bubble areas like Sacramento is first-time home buyers using government-insured FHA loans (and taking advantage of the tax credits), and investors paying cash.

Investors and first-time home buyers will be buying mostly in the low-to-mid priced areas. Inventories are down in the low priced areas, but with 67% distressed sales, there will be few move-up buyers for the higher priced areas.

by Calculated Risk on 8/12/2009 08:30:00 AM

The Census Bureau reports:

The ... total June exports of $125.8 billion and imports of $152.8 billion resulted in a goods and services deficit of $27.0 billion, up from $26.0 billion in May, revised. June exports were $2.4 billon more than May exports of $123.4 billion. June imports were $3.5 billion more than May imports of $149.3 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through June 2009.

Imports were up in June, mostly because of a spike in oil prices. Exports also increased in June. On a year-over-year basis, exports are off 22% and imports are off 31%.

The second graph shows the U.S. trade deficit, with and without petroleum, through June.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices increased to $59.17 in June - up about 50% from the prices in February - and the fourth monthly increase in a row. Import oil prices will rise further for July and August.

It appears the cliff diving for U.S. trade might be over - especially for U.S. exports.

by Calculated Risk on 8/11/2009 11:48:00 PM

From the WSJ: Feeling Roomy, J.P. Morgan Shops Its Space (ht BR)

J.P. Morgan Chase & Co. is marketing 23 office properties ... with a combined 7.1 million square feet of space, includes four notable towers: One Chase Manhattan Plaza, near Wall Street; Four New York Plaza, also in the Financial District; the former headquarters of Washington Mutual in a downtown Seattle skyscraper that also houses the city's art museum; and a landmarked 1929 Art Deco building in Houston, the former headquarters of Texas Commerce Bank.

The portfolio is believed to be the largest single portfolio of office properties to hit the market this year and could raise more than $1 billion.

JPMorgan acquired most of this office space as part of recent acquisitions.

And a great quote:

"Vacant space right now is not ideal," said David Aubuchon, an analyst with Robert W. Baird & Co. ...

No kidding! Not in a period with rapidly rising office vacancy rates.

Note: Aubuchon is comparing to a few years ago when vacant space was considered valuable by some CRE investors under the assumption that rents would increase sharply.

by Calculated Risk on 8/11/2009 10:32:00 PM

From Bloomberg: Blackstone, U.S. Bancorp, Ford May Bid for Ailing Guaranty Bank

Blackstone Group LP, Gerald Ford’s Flexpoint and U.S. Bancorp are considering bids for assets of Guaranty Financial Group Inc., the Texas lender that said last month it will probably fail, people familiar with the situation said.
...
Guaranty, whose backers include billionaire Carl Icahn and Omni Hotels owner Robert Rowling, would be the biggest bank to collapse this year and the largest failure since the seizure last September of Washington Mutual Inc.

Soon.

And on Colonial Bank from The Birmingham News: Alabama State Banking Board meets; can't say if Colonial Bank a topic

A meeting of the Alabama State Banking Board that was to be held Wednesday regarding the future of Montgomery-based Colonial BancGroup has been canceled.

The board met on Monday, said Elizabeth Bressler, general counsel for the Alabama State Banking Department. Under Alabama law, she said she could not comment on what happened at that meeting or whether it involved Colonial.

Guaranty, with over $14 billion in assets, will probably not be the largest bank to fail for very long. Colonial had over $26 billion in assets according to their most recent filing.

Corus only has about $7.6 billion in assets.