by Calculated Risk on 3/01/2007 03:31:00 PM

I recommend Kash's post and graphs today: New Data on House Prices

by Calculated Risk on 3/01/2007 03:04:00 PM

From the Census Bureau:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during January 2007 was estimated at a seasonally adjusted annual rate of $1,180.2 billion, 0.8 percent below the revised December estimate of $1,189.3 billion. The January figure is 1.2 percent below the January 2006 estimate of $1,194.5 billion.

Note: all dollars are seasonally adjusted, but not price adjusted.

Click on graph for larger image.

Construction spending can be divided into three parts: private residential construction, private nonresidential construction, and public construction.

Private residential construction spending continues to fall. Based on Starts, residential construction spending will continue to fall for most of 2007 as housing units currently under construction are completed.

One of the keys for the general economy is for private nonresidential construction to offset some of the declines in private residential construction. For private nonresidential, spending was flat from December to January, but spending is still 14.7% ahead of January 2006.

Unfortunately for the general economy, the typical pattern is for nonresidential investment in structures to follow residential construction with a typical lag of 4 to 5 quarters for structures (see Investment Lags).

by Calculated Risk on 3/01/2007 11:05:00 AM

From the WSJ: Mortgage Defaults Start to Spread

The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.

At issue are mortgages made to people who fall in the gray area between "prime" ... and "subprime" ... A record $400 billion of these midlevel loans -- which are known in the industry as "Alt-A" mortgages -- were originated last year, up from $85 billion in 2003 ... Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.
...
Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. "The credit deterioration has been almost parallel to what's been happening in the subprime market," says UBS mortgage analyst David Liu.

by Calculated Risk on 3/01/2007 11:02:00 AM

From Bloomberg: Countrywide Says Late Payments on Subprime Loans Rose

Countrywide Financial Corp., the biggest U.S. mortgage lender, said payments were late at the end of last year on almost 20 percent of the subprime loans it tracks for other companies and investors who own them.

Delinquencies of at least 30 days on "nonprime" loans, those made to borrowers whose credit rating fell short of the highest criteria, widened to 19 percent as of Dec. 31 from 15 percent a year earlier, the Calabasas, California-based lender said in an annual regulatory filing with the U.S. Securities and Exchange Commission. The rate stood at 17 percent at the end of September, according to the company's last quarterly filing.

by Calculated Risk on 3/01/2007 12:15:00 AM

“It is impossible to get a number. And I don’t think they even know.”
Richard X. Bove, an analyst with Punk Ziegel & Company on big investment bank’s exposure to subprime loans.

NY Times: Calm Returns to Market, but Worries Persist Over Subprime Loans. Excerpts:

Wall Street now faces risks on two fronts. First, it stands to earn less from originating, packaging and trading mortgage-backed securities. Second, it will have to absorb more of the losses from loans when borrowers are no longer making payments.
...
For some analysts, the bigger risk to Wall Street is simply that the spigot has been turned off.

“Does the flow of mortgages to the securitization machine slow?” asked Jeffrey Harte, an analyst with Sandler O’Neill. “That’s what I’m most worried about.”

Volume is falling. Production of nonagency mortgage securities fell almost 50 percent between January and February, according to preliminary numbers compiled by Inside Mortgage Finance. The data indicate that new subprime and Alt-A loans fell significantly in February.

There is much more in the NY Times article.