by Calculated Risk on 11/03/2010 07:32:00 AM

The MBA reports: Mortgage Purchase Applications Increase, while Refinance Applications Decline in Latest MBA Weekly Survey

The Refinance Index decreased 6.4 percent from the previous week. This is the third straight week the Refinance Index has decreased. The seasonally adjusted Purchase Index increased 1.4 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.28 percent from 4.25 percent, with points increasing to 1.07 from 1.00 (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 four-week moving average of the purchase index decreased 2.7% last week, and is about 30% below the levels of April 2010. This suggests existing home sales will remain weak through the end of the year.

by Calculated Risk on 11/02/2010 11:59:00 PM

Just a preview - tomorrow will be busy ...

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for +20,000 payroll jobs in October - still weak, but an improvement over the 39,000 jobs reported lost in September.

All day: Light vehicle sales for October. Light vehicle sales are expected to increase in October to around 12.0 million (Seasonally Adjusted Annual Rate), from 11.76 million in September. If correct, this will be highest sales rate in 2 years (excluding Cash-for-clunkers in August 2009).

10:00 AM: Manufacturers' Shipments, Inventories and Orders for September. The consensus is for a 1.8% increase in orders. Also important will be the growth in inventories, and the inventory-to-sales ratio.

10:00 AM: ISM non-Manufacturing Index for October. The consensus is for an increase to 54.0 from 53.2 in September.

2:15 PM: FOMC statement released. The key will be how the FOMC will implement the 2nd round of quantitative easing.

by Calculated Risk on 11/02/2010 06:54:00 PM

To make it easier to review the most recent version of frequently updated graphs, I've created a set of graph galleries (thanks to Ken!).

The Graph Galleries are grouped by Employment, New Home Sales, and much more. There are tabs for each gallery.

Clicking on a tab will load a gallery. Then thumbnails will appear below the main graph for all of the graphs in the selected gallery. Clicking on the thumbnails will display each graph.

The title below each large image is a link to the related blog post on Calculated Risk (I'll put the date in the title to show the most recent update).

To access the galleries, just click on a graph on the blog - or click on "Graph Galleries" in the menu bar above.

As an example, clicking on this graph (based on the most recent employment report), will open the "employment" chart gallery and display this graph - with thumbnails for other employment related graphs.

The "print" key displays the full size image of the selected graph for printing from your browser.

Note: The graphs are free to use on websites or for presentations. All I ask is that online sites link to my site http://www.calculatedriskblog.com/ (or to the graphics gallery), and that printed presentations credit www.calculatedriskblog.com.

Enjoy. Best to all.

by Calculated Risk on 11/02/2010 04:46:00 PM

Since apparently there is an election today, here is a reminder from Sandhya Somashekhar at the WaPo of the key issue: Economic worries overshadow other issues

[O]ne issue is [in voters'] minds like no other this year: the economy. Nearly 40 percent of voters in a recent Washington Post poll rated the nation's fiscal[CR Note: they meant "economic"] situation as their top concern in the days leading to the election ...

Yes - as always - it's the economy.

The good news is the robo-calls and election ads will stop.

by Calculated Risk on 11/02/2010 12:35:00 PM

LPS Applied Analytics released their September Mortgage Performance data today. According to LPS:

• The average number of days delinquent for loans in foreclosure is now 484 days
• In five judicial states (NY, FL, NJ, HI and ME), the average exceeds 500 days
• Over 4.3 million loans are 90 days or more delinquent or in foreclosure
• New problem loans (60+ days delinquent) are back on the rise

Click on graph for larger image in new window.

This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages.

According to LPS, 9.27 percent of mortgages are delinquent, and another 3.84 are in the foreclosure process for a total of 13.11 percent. It breaks down as:
• 2.64 million loans less than 90 days delinquent.
• 2.32 million loans 90+ days delinquent.
• 2.05 million loans in foreclosure process.

For a total of 7.02 million loans delinquent or in foreclosure.

This is similar to the quarterly data from the Mortgage Bankers Association.

by Calculated Risk on 11/02/2010 10:00:00 AM

The Census Bureau reported the homeownership and vacancy rates for Q3 2010 this morning.

Click on graph for larger image in new window.

The homeownership rate was at 66.9%, the same level as in Q2. This is at about the level of early 1999.

Note: graph starts at 60% to better show the change.

The homeownership rate increased in the '90s and early '00s because of changes in demographics and "innovations" in mortgage lending. The increase due to demographics (older population) will probably stick, so I've been expecting the rate to decline to around 66%, and probably not all the way back to 64% to 65%. I'll revisit this soon - and the impact on the homebuilders.

The homeowner vacancy rate was at 2.5% in Q3 2010. This is the same level as in Q2, and below the of 2.9% in 2008.

A normal rate for recent years appears to be about 1.7%.

This leaves the homeowner vacancy rate about 0.8% above normal. This data is not perfect, but based on the approximately 75 million homeowner occupied homes, we can estimate that there are close to 600 thousand excess vacant homes.

The rental vacancy rate declined to 10.3% in Q3 2010 from 10.6% in Q2.

This decline fits with the Reis apartment vacancy data and the NMHC apartment survey. This report is nationwide and includes homes for rent.

It's hard to define a "normal" rental vacancy rate based on the historical series, but we can probably expect the rate to trend back towards 8%. According to the Census Bureau there are close to 41 million rental units in the U.S. If the rental vacancy rate declined from 10.3% to 8%, then 2.3% X 41 million units or about 950 thousand excess units would have to be absorbed.

This suggests there are still about 1.55 million excess housing units. These excess units will keep pressure on housing starts, rents and house prices for some time.

NOTE: The graphs in this post link to a new Gallery graphics tool (Thanks Ken!). This CR Gallery is a collection of current graphs from the blog. There are tabs for several categories: Employment, New home Sales, etc.

Click on a tab, and a gallery is loaded. Then thumbnails appear below the main graph for all of the graphs in the selected gallery. Click on the thumbnails to view each graph. The title below each large image is a link to the related blog post on Calculated Risk (or click on the main image to view the blog post).

The "print" key displays the full size image of the selected graph for printing from your browser. Enjoy!

by Calculated Risk on 11/02/2010 09:14:00 AM

Yesterday M&T Bank bought Wilmington Trust. From the WSJ: A Fire Sale in Wilmington

Wilmington announced that M&T Bank would buy it, in an all-stock deal, for about $3.84 a share, compared with Friday's $7.11 close. Wilmington did so while releasing results that showed third-quarter, tangible book value dropped to $3.84 compared with $7.92 in the second quarter. ... Most striking is the speed of the deterioration in the loan book.

Click on graph for larger image in new window.

This table is from the Wilmington Trust press release yesterday. It shows that commercial real estate - construction nonperforming assets jumped from $240.7 million at the end of Q2 to $461.9 million at the end of Q3. Quite a jump ...

Here is the M&T Bank presentation too.

And from the conference call:

CEO: “Credit quality clearly remains the big story. So, let me say a few more things on that subject. The negative effects of the protracted recessionary environment in Delaware, and how these pressures are challenging the financial health of many of our borrowers, simply cannot be over stated. In the third quarter, evidence mounted that had things were getting worse for some of our borrowers. And even some of our strongest clients began to feel the pressure. The financial conditions of more of our borrowers weakened, their cash flows tightened, and appraisals continued to show significant declines in collateral valuations. These issues manifested themselves in our credit metrics, to a significantly greater degree than in the second quarter.

By the end of the third quarter, we had evaluated more than 92% of our Commercial Real Estate/Construction and mortgage loans, and the trend line is not encouraging. It appears to us, that there is no significant economic or real estate recovery on the horizon. This gives us little assurance that our loan portfolio will strengthen significantly in the near term, and our capital position will not erode further.”

So much for extend and hope ... and it sounds like this merger might have been driven by a regulatory review:

Analyst: Don, the Company obviously had credit issues, but the decline in TC, book value, etc., the magnitude of increase of non-performers still was pretty surprising. Can you talk at all about whether or not a specific event drove this quarter's results? Was there a regulatory exam, if not, what changed so dramatically in the last 90 days?

Wilmington Trust, CEO: Well, what we saw an acceleration in the deterioration of the credit quality of many of our customers over this quarter. We receive a lot in terms of the appraisal information that we gathered. all indicating that both the magnitude and velocity of this credit deterioration was -- was very significant for us.

Analyst: When was your last exam?

Wilmington Trust CEO: We are -- our soundness exam started some time at the end of June, beginning of July. And we are still going through the exit process at this point.

Sounds like a possible push from the regulators. I wonder how many other regional banks have similar issues?

by Calculated Risk on 11/01/2010 09:12:00 PM

From the Financial Times: Debt costs jump for Dublin and Lisbon(ht Nemo)

Borrowing costs for Ireland and Portugal shot up as investors took fright at European proposals to force them to take a greater share of losses in future state bail-outs. ... The moves ... follow agreement at last week’s European Union summit on a Franco-German proposal on a mechanism to resolve future Greek-style sovereign debt crises.
excerpt with permission

The yield on the Ireland 10-year bonds jumped to 7.1%, and the spread to the German 10-year bonds is at 462 bps - both are new highs. The yield on the Portugal 10-year bonds increased to 6.1%, and Greece 10-year bonds are now yielding 10.7%.

by Calculated Risk on 11/01/2010 05:45:00 PM

More from the Q3 2010 GDP underlying detail tables ...

Note: Residential investment (RI), according to the Bureau of Economic Analysis (BEA), includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Click on graph for larger image in new window.

This graph shows the various components of RI as a percent of GDP for the last 50 years. Usually the most important components are investment in single family structures followed by home improvement.

Investment in home improvement was at a $146.6 billion Seasonally Adjusted Annual Rate (SAAR) in Q3 (1.0% of GDP), significantly above the level of investment in single family structures of $110.0 billion SAAR, or 0.75% of GDP.

Brokers' commissions also declined sharply in Q3 as the number of existing homes sold fell off a cliff in Q3. This has pushed brokers' commissions (0.33% of GDP), to the lowest level since 1982, as a percent of GDP.

Brokers' commissions peaked at 0.91% of GDP in Q3 2005. In nominal terms, commissions have declined from an annual peak rate of $116.5 billion in Q3 2005, to an annual rate of $48.2 billion in Q3 2010 - a decline of over 58%.

And investment in multifamily structures - already at a series low as a percent of GDP (since 1959) - declined further in Q3. This might be the low for multifamily structures since multifamily starts increased in recent months.

by Calculated Risk on 11/01/2010 03:29:00 PM

From the National Multi Housing Council (NMHC): Across-the-Board Improvement in the Apartment Industry, According to NMHC Quarterly Survey of Apartment Market Conditions

The Market Tightness Index, which measures changes in occupancy rates and/or rents, decreased from 83 to 77, but remained well above the “break-even” mark of 50. Sixty percent of respondents said markets were tighter, meaning lower vacancies and/or higher rents.
...
“While demand for apartment residences and apartment properties is still below the peak levels seen in the last decade, the further shift from owning to renting may well add to apartment demand in the near-term, while population growth and a rebound in household formation should strengthen demand over the longer term. But at some point, economic growth will have to shift into a higher gear for the apartment industry to see conditions continue to register improvements of this level.” [said NMHC Chief Economist Mark Obrinsky]

Click on graph for larger image in new window.

This graph shows the quarterly Apartment Tightness Index.

The index has indicated tighter market conditions for the last three quarters (from very weak conditions).

A reading above 50 suggests the vacancy rate is falling. Based on limited historical data, I think this index will lead reported apartment rents by about 6 months to 1 year.

This fits with the recent Reis data showing apartment vacancy rates fell in Q3 to 7.2% from 7.8% in Q2.

Also this data is a survey of large apartment owners only. The data released in late July from the Census Bureau showed the rental vacancy rate was steady in Q2 for all rental units in all areas. The Census Bureau will release the Q3 vacancy rates tomorrow, along with the homeownership rate.

A final note: The results of this survey suggest the rental market might have bottomed. I heard from a few sources that effective rents increased slightly over the first half of 2010 at some large apartment complexes. Just something to be aware of ... (I've posted about this before).