by Calculated Risk on 11/08/2011 05:45:00 PM

Important: REO inventories have declined over the last few quarters. This is a combination of more sales and fewer acquisitions due to the slowdown in the foreclosure process. However there are many more foreclosures coming (I'll have more on this later).

From Fannie Mae today: Fannie Mae Reports Third-Quarter 2011 Results

Fannie Mae today reported a net loss of $5.1 billion in the third quarter of 2011, compared to a net loss of $2.9 billion in the second quarter of the year. The company’s third-quarter loss was driven primarily by two factors: $4.9 billion in credit-related expenses, the substantial majority of which were related to its legacy (pre-2009) book of business; and $4.5 billion in fair value losses driven primarily by losses on risk management derivatives due to a significant decline in swap interest rates during the quarter. These losses were partially offset by $5.5 billion in net revenues.
...
The Acting Director of the Federal Housing Finance Agency (“FHFA”) will submit a request to Treasury on Fannie Mae’s behalf for $7.8 billion to eliminate the company’s net worth deficit.

The combined REO (Real Estate Owned) inventory for Fannie, Freddie and the FHA¹ decreased to 226,961 at the end of Q3 from 249,501 units at the end of Q2. The "F's" REO inventory decreased 23% compared to Q3 2010 (year-over-year comparison).

¹ FHA is for August, not Q3. The FHA is having system problems and hasn't reported for September yet.

Click on graph for larger image.

This graph shows the REO inventory for Fannie, Freddie and FHA¹ through Q3 2011.

The REO inventory for the "Fs" increased sharply in 2010, but may have peaked in Q4 2010. However there may be a new peak when the foreclosure dam eventually breaks - however I expect quite a few modifications as part of the settlement, and probably a bulk REO selling program from Fannie and Freddie.

I'll update the FHA data when it is released, and add the PLS and FDIC REO inventory.

by Calculated Risk on 11/08/2011 04:10:00 PM

From Steve Green at the Las Vegas Sun: Las Vegas house prices continue to slide, down 9 percent from year ago

“In less than four years, more than 100,000 homes in Las Vegas have been lost through foreclosure. That’s 18 percent of our privately owned housing stock: that’s nearly one home in five. And we’re nowhere near finished with foreclosures. In all likelihood, we have another 100,000 yet to go, and at the current rate, that’s another four years,” [housing analyst and SalesTraq President] Larry Murphy said.

According to Case-Shiller, house prices have declined almost 60% from the peak in Las Vegas ... no wonder foreclosure are so high.

And according to Core Logic, there were 426 thousand first mortgages in Las Vegas at the end of Q2 - and 270 thousand of these were in negative equity (about 63%). Another 100,000 foreclosures might be low.

by Calculated Risk on 11/08/2011 12:44:00 PM

Update: Reports are Italian Prime Minister Silvio Berlusconi will resign after 2012 budget is approved.

First Greece:
• The Athens News is reporting Lucas Papademos will be the interim Prime Minister and that elections will be held on Feb 19th. "Lucas Papademos, an economist and former central banker, will be the new prime minister of Greece, a ruling Pasok source has told Reuters."

• The EU is asking for all parties in Greece to sign a committment letter. However New Democracy leader Antonis Samaras is balking. From the Athens Times: Samaras sees written committments unnecessary

New Democracy leader Antonis Samaras has maintained his opposition this evening to European demands that Greek leaders sign a letter in support of the October 27 Eurogroup agreements for Greece as a condition for disbursing the 6th tranche of bailout loans.

"There is national dignity. I have already and repeatedly explained why, in order to protect the Greek economy and the euro, the implementation of the decisions of October 26 has become inevitable. I will not allow anyone to doubt my word" he emphasised, in an official announcment.

The European Union has asked Greece to produce a letter promising implementation the bailout deal and have it signed by the outgoing and new Greek prime minister, the finance minister, the opposition leader and the central bank chief, a minister told reporters on Tuesday.

The Greek 2 year yield is up to 105%, and the Greek 1 year yield is down to 221%.

On Italy:
• The Italian 10 year yield is at 6.77%.

• From the NY Times: Berlusconi Loses Majority After Ally Asks Him to Resign

Prime Minister Silvio Berlusconi of Italy won a budget vote in Parliament on Tuesday but the tally showed that he no longer has the support of the majority, a huge humiliation that raised the pressure on him to resign in the face of an escalating debt crisis that has hobbled Greece, threatens Italy and could infect the rest of Europe.

• From the Financial Times: Live blog: Eurozone crisis

Berlusconi is due to meet Giorgio Napolitano, head of state, in just over an hour. Napolitano, 86, the most respected political figure in Italy according to opinion polls, is expected to suggest that the prime minister step down in the national interest.

Greece is just a sideshow now - this is now about Italy and the entire EMU.

by Calculated Risk on 11/08/2011 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings in September was 3.4 million, up from 3.1 million in August. Although the number of job openings remained below the 4.4 million openings when the recession began in December 2007, the level in September was 1.2 million higher than in July 2009 (the most recent trough for the series). The number of job
openings has increased 38 percent since the end of the recession in June 2009.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for September, the most recent employment report was for October.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and blue columns stacked) are pretty close each month. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

In general, the number of job openings (yellow) has been trending up, and are up about 22% year-over-year compared to September 2010.

Quits increased in September, and have been trending up - and quits are now up about 11% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").

All current employment graphs

by Calculated Risk on 11/08/2011 07:46:00 AM

From the National Federation of Independent Business (NFIB): Small Business Confidence Has Minor Uptick

NFIB’s Small-Business Optimism Index gained 1.3 points, nudging the Index up to 90.2. This is below the year-to-date average of 91.1, only slightly better than the average since January 2009 of 89.1.

“Consumer sentiment remains at very low levels and is reflected in the 26 percent of small business owners who cite ‘poor sales’ as their biggest problem,” said NFIB Chief Economist Bill Dunkelberg. ...

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image.

The first graph shows the small business optimism index since 1986. The index increased to 90.2 in October from 88.9 in September. This is the second increase in a row after declining for six consecutive months.

The second graph shows the net hiring plans for the next three months.

Hiring plans were low in October, but still positive and the trend is up.

According to NFIB: “Over the next three months ... a seasonally adjusted net three percent of owners planning to create new jobs. This is down 1 point from September and 2 points below August, the month that has, thus far, posted the strongest reading for 2011. For some context, in an expansion, this number should exhibit double digit readings."

Twenty six percent of small business owners reported that weak sales continued to be their top business problem in September.

In good times, owners usually report taxes and regulation as their biggest problems.

The optimism index declined sharply in August due to the debt ceiling debate and only rebounded modestly in September and October. This index has been slow to recover - probably due to a combination of sluggish growth, and the high concentration of real estate related companies in the index.

by Calculated Risk on 11/07/2011 10:14:00 PM

From Nick Timiraos at the WSJ: Nevada Foreclosure Filings Dry Up After ‘Robo-Signing’ Law

Foreclosure filings in Nevada plunged in October during the first month of a new state law stiffening foreclosure-processing requirements.
...
Nevada’s state Assembly passed a measure that took effect on Oct. 1 ... the Nevada law makes it a felony—and threatens to hold individuals criminally liable—for making false representations concerning real estate title. Individuals are also subject to civil penalties of $5,000 for each violation.
...
The Nevada law makes an important technical change to those rules by forbidding trustees from handling foreclosures if the trustee is a subsidiary of foreclosing bank.

BofA uses ReconTrust, a wholly owned subsidiary, to handle foreclosures. With this new law, BofA will have to use another trustee.

According to DataQuick, foreclosure resales were about 56% of the Las Vegas market in September - and this probably means Nevada existing home sales will decline sharply in October. Foreclosures will probably pick up again once the lenders feel they are complying with the new law.

by Calculated Risk on 11/07/2011 07:31:00 PM

Another song below from our friends at versusplus.com: "In the Greek Midwinter"

Earlier the Fed released their quarterly Senior Loan Officer survey. This showed banks tightening lending to European banks and firms, but not in the U.S ...

Other earlier posts:
• Sluggish Growth and Payroll Employment
• CoreLogic: House Price Index declined 1.1% in September
• Italy: 10 Year bond yields continue to increase

by Calculated Risk on 11/07/2011 04:40:00 PM

Another update: I've been using inventory numbers from HousingTracker / DeptofNumbers to track changes in inventory. Tom Lawler mentioned this back in June (Tom also discussed how the NAR estimates existing home inventory - they don't aggregate data from local boards!)

• In a few months, the NAR is expect to release revisions for their existing home sales and inventory numbers for the last few years. The sales revisions will be down (the NAR has pre-announced this), and the inventory is expected to be revised down too.

• Using the deptofnumbers.com for monthly inventory (54 metro areas), it appears inventory will be back to late 2005 levels this month. Unfortunately the deptofnumbers only started tracking inventory in April 2006.

Click on graph for larger image.

This graph shows the NAR estimate of existing home inventory through September (left axis) and the HousingTracker data for the 54 metro areas through October. The HousingTracker data shows a steeper decline in inventory over the last few years (as mentioned above, the NAR will probably revise down their inventory estimates in a few months).

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the November listings - for the 54 metro areas - declined 16.8% from the same week last year. The graph shows monthly inventory change (this is preliminary for November).

This is just "visible inventory" (inventory listed for sales). There is a large percentage of distressed inventory, and various categories of "shadow inventory" too.

All Existing Home Sales and Inventory graphs

by Calculated Risk on 11/07/2011 02:17:00 PM

The Federal Reserve released the quarterly October 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices today. The survey had a special question on lending to European banks and firms. With regards to banks, the tightening was "considerable", however to European firms the tightening was "moderage":

About one-half of the domestic bank respondents, mostly large banks, indicated that they make loans or extend credit lines to European banks or their affiliates or subsidiaries, and about two-thirds of the foreign respondents indicated the same. Among those domestic and foreign respondents, a large share--about two-thirds--reported having tightened standards on loans to European banks over the third quarter. Many domestic banks indicated that the tightening was considerable.

About three-fifths of the domestic respondents, mostly large banks, and all foreign respondents indicated that they make loans or extend credit lines to nonfinancial firms that have operations in the United States and significant exposures to European economies. Among those domestic and foreign respondents, a moderate fraction indicated that they had tightened standards on C&I loans to such firms.

On the U.S. Commercial and Industrial (C&I):

A small net fraction of domestic banks reported having eased standards on C&I loans during the third quarter, in contrast to more widespread reports of such easing in previous quarters. This moderate net reduction in easing was concentrated in loans to large and middle-market firms rather than in loans to smaller firms. ... Reports of weaker demand for C&I loans outnumbered reports of stronger demand in a reversal from recent quarters, particularly with respect to demand from large and middle-market firms.

For Commercial Real Estate:

Domestic banks continued to report little change in their standards on CRE loans, which were widely described in a special question in the previous survey as being at or near their tightest levels since 2005. In contrast, a large fraction of foreign respondents reported having tightened standards on CRE loans, in a substantial shift from the net easing reported by those institutions in the prior two surveys.

And on consumer lending:

Modest fractions of banks reported having eased standards on consumer credit card loans and on other non-auto loans. As in the previous survey, somewhat larger fractions of banks reported having eased standards on auto loans.

There are several charts here.

So far the European financial crisis hasn't led to tighter lending standards in the U.S., but standards are already pretty tight.

by Calculated Risk on 11/07/2011 01:16:00 PM

In October 2010, the Irish 10 year yield moved above 6.6%, and by the end of November the yield hit 9% and Ireland asked for help.

Now the Italian 10 year yield is at 6.65% and there is a sense of deja vu.

From the NY Times: Italy Bonds Push Higher

Interest rates on Italian bonds rose to new euro-era records on Monday, close to the level that earlier forced Greece, Ireland and Portugal to seek financial rescues.

And from the WSJ: Reasons to Be Fearful as Italian Yields Spike

Greek, Irish, and Portuguese 10-year bond yields spent an average of 43 trading days above 5.50% before they climbed above 6.00%, notes Gary Jenkins, head of fixed income at Evolution Securities.

The move to 6.50% took 24 days, while the move to 7.00% was even quicker, taking just 15 days, he said. An Italian treasury bill sale on Thursday will be a good test.

Italy's deficit to GDP is only around 4% - that is much lower than the other countries in trouble. But Italy already has a high debt to GDP ratio (around 118%), and slow (or no) growth ... not a good combination.