by Calculated Risk on 2/12/2010 09:15:00 AM

From Bloomberg: China Raises Bank Reserve Requirement to Cool Economy

China ordered banks to set aside more deposits as reserves for the second time in a month to cool the fastest-growing economy after loan growth accelerated and property prices surged.

The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.

And from Eurostat: Euro area and EU27 GDP up by 0.1%

GDP increased by 0.1% in both the euro area1 (EA16) and the EU271 during the fourth quarter of 2009, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the third quarter of 2009, growth rates were +0.4% and +0.3% respectively.

Germany's economy stalled (no change), and Latvia saw the biggest decline (-3.2%).

And Greece's economy shrunk by 0.8%, possibly exacerbating the Greek debt crisis.

Note: Europe numbers are quarter-to-quarter. In the U.S. the GDP is annualized.

by Calculated Risk on 2/12/2010 08:30:00 AM

On a monthly basis, retail sales increased 0.5% from December to January (seasonally adjusted), and sales were up 4.7% from January 2009 (easy comparison).

Click on graph for larger image in new window.

This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).

This shows that retail sales fell off a cliff in late 2008, and appear to have bottomed.

The red line shows retail sales ex-gasoline and shows the increase in final demand ex-gasoline has been sluggish.

The second graph shows the year-over-year change in retail sales since 1993.

Retail sales increased by 4.7% on a YoY basis. The year-over-year comparisons are easy now since retail sales collapsed in late 2008. Retail sales bottomed in December 2008.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.8 billion, an increase of 0.5 percent (±0.5%)* from the previous month and 4.7 percent (±0.5%) above January 2009.
...
Gasoline stations sales were up 29.0 percent (±1.5%) from January 2009

by Calculated Risk on 2/12/2010 12:52:00 AM

From Reuters: New Jersey governor declares fiscal emergency

New Jersey Governor Chris Christie on Thursday declared a "fiscal emergency," allowing him to reserve or freeze state spending as part of his plan to tackle one of the largest 2011 deficits among U.S. states.
...
The deficit in the current budget, which ends on June 30, is $2.2 billion, while the gap in the following budget has spiked to $11 billion from a forecast of $8 billion in November ... the largest per-capita budget shortfall of any U.S. state

Just a late night budget update ...

by Calculated Risk on 2/11/2010 08:43:00 PM

One of the key problems with a short sale is making sure the buyer is an unrelated party; "an arm’s length transaction".

I'm aware of a property being offered as a short sale in SoCal where the agent is the wife of the owner, and she has been, uh, unhelpful to some prospective buyers. I just heard last night that the lender has reached a short sale agreement with a buyer who just happens to be a close friend of the agent. Why am I not surprised? Perhaps this is the best deal for the lender, but I have my doubts.

Jim the Realtor has a "rant" about another agent who apparently took a short sale listing, never put it in the MLS, and then - apparently after getting a short sale agreement - put the listing in the MLS for a few minutes because the lender required a copy of the listing ... I have more doubts about this being the best deal for the lender.

I don't think either of the above deals meets the HAFA requirements. Of course both of the transactions above are not HAFA short sales.

And remember Jillayne's discussion of the Short Sale Negotiator? Under HAFA, those fees have to come out of the real estate commission:

The amount of the real estate commission that may be paid, not to exceed 6% of the contract sales price, and notification if any portion of the commission must be paid to a contractor of the servicer that has been retained to assist the listing broker with the transaction.

Finally, I'd suggest HAFA go a step further and have the lender hire the real estate agent for short sales and deed-in-lieu transactions, not the owner. I think there is too much incentive for under-the-table payments to the current homeowner, aka short sale fraud.

by Calculated Risk on 2/11/2010 05:15:00 PM

The countdown continues ...

The following graph is from the Atlanta Fed Financial Highlights, and shows the Fed MBS purchases by week:

Click on graph for larger image.

From the Atlanta Fed:

The Fed purchased a net total of $12 billion of agency-backed MBS through the week of February 3, bringing its total purchases up to $1.177 trillion, and by the end of the first quarter 2010 the Fed will have purchased $1.25 trillion (thus, it is 94% complete).

In the first nine months of the program (January-September 2009), the Fed’s average weekly purchase of MBS was $23.3 billion. Since October 2009, however, it has declined to $14.6 billion per week; the Fed needs to purchase only about $9.2 billion per week through March 2010 to reach its goal.

The Fed purchased an additional $11 billion net in MBS through the week of Feb 10th, bringing the total to $1.188 trillion or just over 95% complete.

Mortgage rates were just under 5% last week, from Freddie Mac: 30-Year Fixed-Rate Mortgage Dips Below 5 Percent Again

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.97 percent with an average 0.7 point for the week ending February 11, 2010, down from last week when it averaged 5.01 percent. Last year at this time, the 30-year FRM averaged 5.16 percent.

However, with the Ten Year Treasury yield increasing today to 3.73% (from around 3.6% last week), I expect rates to be above 5% again next week.

by Calculated Risk on 2/11/2010 03:06:00 PM

A few stories of interest ...

Press Release: Citi to Pilot Foreclosure Alternatives Program to Help Distressed Borrowers

In exchange for the deed on their property, CitiMortgage will allow borrowers to stay in their homes for a period of up to six months. At the end of the six months, the borrower will turn over the property deed to CitiMortgage, and CitiMortgage will provide a minimum of $1,000 in relocation assistance to the borrowers. Citi will also provide relocation counseling by trained professionals and will cover certain monthly property expenses if Citi determines that the borrower can no longer afford them. Payment of utilities costs will be the responsibility of the borrower. Other costs incurred by the borrower, such as homeowner's association and escrow fees, will be determined on a case-by-case basis considering the borrower's specific financial circumstances. As part of the agreement, borrowers must maintain the property in its current condition and agree to bi-monthly meetings during which trained relocation professionals will help the borrower prepare for the next chapter of their lives.

This is a pilot program, but this is part of the short sale / deed-in-lieu movement that will be a huge story this year. This is being driven by the Treasury's HAFA program - and this is why I think foreclosures will be down in 2010, but total distressed sales up. Although Citi doesn't mention it, HAFA requires a full release of the debt and waiver of all claims against the borrower.

The TARP Congressional Oversight Panel put out a report today on Commercial Real Estate (CRE): Commercial Real Estate Losses and the Risk to Financial Stability. This isn't anything new, but it provides a good overview of the CRE issues.

On Greece. As expected there was a political announcement of support today, but few details. From the NY Times: Europe Commits to Action on Greek Debt

European leaders ... promised “determined and coordinated action” to safeguard the euro as they sought to persuade jittery bond market investors that Greece would not be allowed to default on its government debt.
...
Further work by finance ministers on assistance for Greece, and the conditions that would be attached to any aid, will take place early next week.

by Calculated Risk on 2/11/2010 12:38:00 PM

From HotelNewsNow.com: Super Bowl XLIV boosts Miami weekly performance

Overall, the U.S. industry’s occupancy ended the week virtually flat with a 0.8-percent decrease to 48.4 percent, ADR [average daily rate] dropped 4.8 percent to US$95.34, and RevPAR [revenue per available room] fell 5.6 percent to US$46.14.

The numbers are a comparison to the same week in 2009.

The following graph shows the occupancy rate by week since 2000, and the rolling 52 week average occupancy rate. It is possible the occupancy rate has bottomed, but at a very low level.

Click on graph for larger image in new window.

Note: the scale doesn't start at zero to better show the change.

The graph shows the distinct seasonal pattern for the occupancy rate; higher in the summer because of leisure/vacation travel, and lower on certain holidays.

Starting this week (data released next week), we should expect the occupancy rate to increase sharply as business travel increases. Over the same 12 week period last year, the occupancy rate averaged 56% - well below the normal level of around 63%, but significantly above the current rate.

So next week will be a real test for business travel (although weather will probably be an issue).

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 2/11/2010 11:03:00 AM

Here is the Economic Forecast from the Economic Report of the President. The last column is average payroll jobs per month per year.

Click on table for larger image in new window.

The forecast is for an average of 95,000 non-farm payroll jobs to be added per month in 2010, with the unemployment rate averaging 10.0% and real GDP growth of 3.0%.

Although there is no way to directly calculate the unemployment rate based on payroll jobs growth - because the data is from different surveys and depends on the number of people in the work force and other factors - there is a fairly strong relationship between payroll jobs and the unemployment rate.

Based on my estimates, it would seem that 3.0% real GDP growth in 2010 would lead to about 160,000 payroll jobs per month and a slight decline in the unemployment rate.

Conversely, 95,000 jobs per month is probably consistent with real GDP growth at just over 2%, and an increase in the unemployment rate to over 10%. Based on their forecast for real GDP growth of 3%, it appears they are being conservative on their jobs forecast.

by Calculated Risk on 2/11/2010 08:35:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Feb. 6, the advance figure for seasonally adjusted initial claims was 440,000, a decrease of 43,000 from the previous week's revised figure of 483,000 [revised from 480,000]. The 4-week moving average was 468,500, a decrease of 1,000 from the previous week's revised average of 469,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Jan. 30 was 4,538,000, a decrease of 79,000 from the preceding week's revised level of 4,617,000.

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 decreased this week by 1,000 to 468,500.

According to MarketWatch some of recent increase was due to administrative backlogs in several states:

With today's report, the official said the backlogs had been "washed out".

The current level of 440,000 (and 4-week average of 468,500) are still high and suggest continuing job losses.

by Calculated Risk on 2/11/2010 12:01:00 AM

Press Release: U.S. Foreclosure Activity Decreases 10 Percent in January

RealtyTrac® ... today released its January 2010 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 315,716 U.S. properties during the month, a decrease of nearly 10 percent from the previous month but still 15 percent above the level reported in January 2009. The report also shows one in every 409 U.S. housing units received a foreclosure filing in January.

REO activity nationwide was down 5 percent from the previous month but still up 31 percent from January 2009; default notices were down 12 percent from the previous month but still up 4 percent from January 2009; and scheduled foreclosure auctions were down 11 percent from the previous month but still up 15 percent from January 2009.

“January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January,” said James J. Saccacio, chief executive officer of RealtyTrac “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works.”
emphasis added

There probably was an increase in foreclosure activity in February, since many of the trial modifications have now ended. However I also think a key theme in 2010 will be short sales, and that might mean fewer foreclosures in 2010 than in 2009 - but still more distressed sales (just a different mix).