by Calculated Risk on 6/17/2010 08:34:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending June 12, the advance figure for seasonally adjusted initial claims was 472,000, an increase of 12,000 from the previous week's revised figure of 460,000. The 4-week moving average was 463,500, a decrease of 500 from the previous week's revised average of 464,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending June 5 was 4,571,000, an increase of 88,000 from the preceding week's revised level of 4,483,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The four-week average of weekly unemployment claims decreased this week by 500 to 463,500 (the "decrease" was because last week was revised up).

The dashed line on the graph is the current 4-week average. Initial weekly claims first fell to this level in December 2009, and have been at the same level for about 6 months. The current level of 472,000 (and 4-week average of 463,500) is still high, and suggests ongoing weakness in the labor market.

by Calculated Risk on 6/16/2010 09:29:00 PM

A quick roundup ...

Remember MERS? From American Banker: Challenges to Foreclosure Docs Reach a Fever Pitch (ht Terry)

From HuffPost: Fannie Mae, Freddie Mac Shares To Be Pulled From NYSE (ht Paulo)

Homebuilder Toll Brothers warns: Demand Choppy, Sales Down

Europe News

From CNBC: Europe Will Soon Publish Bank Stress Tests: ECB Official

Iceland: Court rules Foreign currency indexed loans illegal

From the NY Times: France and Spain Act to Rein in Budgets

TARP Update

From Bloomberg: Former Taylor Bean Chief Farkas Charged With Fraud

Lee Farkas, the former chairman of Taylor, Bean & Whitaker Mortgage Corp., was accused by the U.S. of helping run a more than $1.9 billion fraud scheme that unsuccessfully attempted to steal money from the government’s Troubled Asset Relief Program.

From CNBC: More Than 90 Banks Miss TARP Payments (ht Scott, Ron)

Housing Starts plummeted in May

Click on graph for larger image in new window.

Total housing starts were at 593 thousand (SAAR) in May, down 10% from the revised April rate of 659,000 (revised down from 672 thousand), and up 24% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).

Single-family starts collapsed 17.2% to 468,000 in May.

Industrial Production and Capacity Utilization increased

This graph shows Capacity Utilization. This series is up 9.4% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 73.7% is still far below normal - and 7.2% below the the pre-recession levels of 80.5% in November 2007.

Best to all.

by Calculated Risk on 6/16/2010 06:19:00 PM

Just a few weeks ago, new Toll CEO-designate Doug Yearley, Jr. noted:

"With demand increasing in many areas, we are very focused on growth."

Uh, nevermind ...

From Toll today (ht Brian):

Joel H. Rassman, chief financial officer, stated: ... "While much of the attention surrounding the recent decline in housing indicators has focused on the expiration of the housing tax credit, we believe our customers' buying decisions have been driven more by consumer confidence than by the tax credit. As we noted in our second-quarter earnings press release of May 26, 2010, we believe the volatility in the financial markets and the high U.S. unemployment rate continue to weigh on the nation's psyche. Additionally, in the past several weeks, concerns about the financial crisis in Europe and escalating regional political tensions, coupled with worries about the oil spill in the Gulf of Mexico and its effects on the economy and the environment have negatively impacted the outlook of American consumers.

"In the three weeks following our earnings conference call on May 26, 2010, our per-community deposits have been running about 20% behind the comparable period in last year's third quarter and our per-community traffic has been running about 3% behind. Thus, for the first six weeks of our FY 2010 third quarter beginning May 1, 2010, we are slightly ahead of last year's third-quarter pace of contracts signed on a per community basis. However, we have 21% fewer communities than one year ago.

Slightly ahead on a community bases - with 21% fewer communities. Do the math - they are running close to 20% below last year. And 40% below last year over the last three weeks (20% fewer deposits and 21% fewer communities).

"Although demand in recent weeks has been quite choppy, in general, we continue to believe that the housing market has emerged from its darkest period of late 2008 through early 2009. ... At the moment, consumers view the economic glass as half empty: volatile financial markets, global deficit concerns and the oil spill in the Gulf are all contributing to this gloom. We believe that once the employment picture begins to brighten and the economy stabilizes, consumer confidence will improve and the housing market should begin a steadier recovery."

And there you have what might be the popular Q2 meme: blame the oil spill for poor results.

by Calculated Risk on 6/16/2010 04:44:00 PM

Here is a little different story ...

From The Iceland Weather Report: Foreign currency loans deemed illegal (ht Steinn)

The Icelandic supreme court ruled this afternoon that Icelandic loans indexed to a foreign currency are illegal.

This is hugely significant for thousands of people in this country.

From The Reykjavík Grapevine: Supreme Court Rules Loans Pinned to Foreign Currency Illegal (ht Warlock)

Two cases were connected to the ruling involving car loans taken from the companies Lýsingu hf. and SP-fjármögnun that were pinned to foreign currency. With the collapse of the Icelandic crown in 2008, many people who took out such loans - at a time when the crown was strong - saw their debts double almost overnight.

It was apparently pretty common in Iceland for car and some home loans to be indexed to a basket of foreign currencies. However when the Iceland Krona collapsed, the borrower was stuck with a much higher payment (and debt) than expected. Apparently many borrowers in eastern European countries also borrowed using these "basket of foreign currency" indexes.

Reader Warlock mentions that these loans appeared cheaper than other loans, and were frequently used to buy expensive foreign autos - and the financing was also from abroad. Just another risk for some banks, especially if this ruling spreads to other countries.

by Calculated Risk on 6/16/2010 01:44:00 PM

From Dina ElBoghdady at the WaPo: Lenders go after money lost in foreclosures

Here is an excerpt:

Carlos Cortez and his wife['s] ... second lender came after them for $70,000 when their short sale was completed on his Manassas Park townhouse in 2008.

Cortez knew that was a possibility, but he went through with the sale because his real estate agent said the lender was engaging in scare tactics.

James Scruggs, an attorney at Legal Services of Northern Virginia, said the lender appears to have backed off after Cortez argued that that the loan officer falsely qualified him and his wife for a home-equity line by fabricating key details about their finances.

Tanta (my former co-blogger an a mortgage banker) sent me an email about this in 2007:

Back in my day working for a servicer ... the absolute all time last possible thing you could get me to do is send an attorney barging into court demanding a deficiency judgment if I had any reason whatsoever to fear that my own effing loan officer was implicated in fraud on the original loan application. Any borrower with half a brain will raise that as a defense, and any judge even slightly awake will not only deny the deficiency but probably make the lender pay all costs, or worse. And I'd call that justice.

It is unclear how often lenders are pursuing borrowers for deficiencies - but it is clearly happening more often now. This is one reason why people involved in short sales or considering "walking away" should consult an attorney. I suspect this is part of the reason for the recent surge in personal bankruptcy filings.

by Calculated Risk on 6/16/2010 12:41:00 PM

From the Financial Times: Spain to reveal bank ‘stress tests’ results

“The Bank intends to make public the results of these stress tests, showing estimated loan losses, the consequent capital requirements and the contribution of promised balance sheet reinforcements, so that the markets have a perfect understanding of the circumstances of the Spanish banking system,” [Miguel Angel Fernández Ordóñez, governor of the Bank of Spain, said on Wednesday].
excerpt with permission

And from the Financial Times: Berlin agrees to release stress test results

The German government has dropped its resistance to publishing the results of bank stress tests ... A spokeswoman for the finance ministry said on Wednesday that Berlin was currently “co-ordinating” with its EU partners about how the results of existing annual stress tests could best be presented ...

Transparency is helpful - although this might show a number of banks require additional capital. In the U.S., the government provided capital from TARP until the banks could raise private capital.

Note that the EU and the UK conduct annual stress tests - this is just an issue of making the results public. I think the U.S. should conduct annual stress tests of all the largest financial institutions, and make the economic scenarios and results public every year.

by Calculated Risk on 6/16/2010 09:25:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production advanced 1.2 percent in May after having risen 0.7 percent in April. Manufacturing output climbed 0.9 percent last month, its third consecutive monthly gain of about 1 percent, and was 7.9 percent above its year-earlier level. Outside of manufacturing, the output of mines edged down 0.2 percent, and the output of utilities increased 4.8 percent. The jump in utilities reflected unseasonably warm temperatures that boosted air conditioning usage in May after uncharacteristically temperate weather in April reduced heating demand. ... The capacity utilization rate for total industry rose 1.0 percentage point to 74.7 percent, a rate 6.2 percentage points above the rate from a year earlier but 5.9 percentage points below its average from 1972 to 2009.

Click on graph for larger image in new window.

This graph shows Capacity Utilization. This series is up 9.4% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 73.7% is still far below normal - and 7.2% below the the pre-recession levels of 80.5% in November 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

This is the highest level for industrial production since Nov 2008, but production is still 7.9% below the pre-recession levels at the end of 2007.

Still a long way to go.

by Calculated Risk on 6/16/2010 08:30:00 AM

Click on graph for larger image in new window.

Total housing starts were at 593 thousand (SAAR) in May, down 10% from the revised April rate of 659,000 (revised down from 672 thousand), and up 24% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).

Single-family starts collapsed 17.2% to 468,000 in May. This is 30% above the record low in January 2009 (360 thousand).

The second graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over a year.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Housing Starts:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 593,000. This is 10.0 percent (±10.3%)* below the revised April estimate of 659,000, but is 7.8 percent (±9.7%)* above the May 2009 rate of 550,000.

Single-family housing starts in May were at a rate of 468,000; this is 17.2 percent (±7.9%) below the revised April figure of 565,000.

Building Permits:
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 574,000. This is 5.9 percent (±2.2%) below the revised April rate of 610,000, but is 4.4 percent (±2.6%) above the May 2009 estimate of 550,000.

Single-family authorizations in May were at a rate of 438,000; this is 9.9 percent (±2.1%) below the revised April figure of 486,000. Authorizations of units in buildings with five units or more were at a rate of 117,000 in May.

Note that permits fell sharply, suggesting another significant decline in housing starts next month. This is way below expectations (I took the under!), and is good news for the housing market longer term (there are too many housing units already), but bad news for the economy and employment short term.

by Calculated Risk on 6/16/2010 07:11:00 AM

The MBA reports: Mortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 21.1 percent from the previous week. This is the highest Refinance Index recorded in the survey since May 2009. The seasonally adjusted Purchase Index increased 7.3 percent from one week earlier, which is the first increase in six weeks.
...
“Mortgage applications for home purchases increased last week, the first increase in over a month. Refinance applications also picked up significantly over the week,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “While it is clear that purchase applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now.”
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.82 percent from 4.81 percent, with points decreasing to 0.89 from 1.02 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The purchase index has collapsed following the expiration of the tax credit suggesting home sales will fall sharply too. This is the lowest level for 4-week average of the purchase index since February 1997.

by Calculated Risk on 6/15/2010 11:59:00 PM

From the WSJ: Currency Fall Curbs Europe's Taste for New York Property

Although there are no hard figures, the article mentions ab estimate of 15% to 20% of Manhattan condo buyers are Europeans. Apparently demand from European buyers has declined sharply.

Click on graph for larger image in new window.

This graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices. Foreign buying - especially from Europeans because of the strong euro - was one of the reasons NY house prices had only fallen 21.1% from the peak.

With the weaker euro, and a substantial number of condos coming on the market later this year, prices will probably fall further in New York.