by Calculated Risk on 3/16/2007 09:15:00 AM

David Streitfeld writes in the LA Times: A town right on the default line

In California, Perris is at the epicenter of mortgage problems. From November to January, 177 homes in Perris' central ZIP Code have received notices of default, the first step toward foreclosure.

That's about 1 of 53 houses ... The neighboring towns of Lake Elsinore and Moreno Valley came in second and third.

A few doors away from De Leon's house sits a second empty property foreclosed on by its lender. "A divorce," he explains. "The husband couldn't afford it alone. He was paying $2,500 a month. Ridiculous."

A few blocks away is a third foreclosure, this one only a frame skeleton abandoned by its builder. A young woman who answers the bell at a fourth house .... She pays rent to someone who pays the owner, she says; please go away.
...
There are other signs of distress. De Leon's development, called the Villages of Avalon, has an unusual number of homes for sale, considering it's so new that the Google Earth satellite scan still shows much of it as dirt.

At the top of his street, next to the charred shell of a house that mysteriously burned a few months ago, is a house for sale. The house immediately next door is on the market too. A few doors away from De Leon's home in the other direction is a third house looking for a buyer. Some owners are trying to rent their places out, advertising with little signs on the front lawn.

by Calculated Risk on 3/16/2007 02:56:00 AM

From Reuters: Mortgage Meltdown Pulls in More Than Those on Edge

[Lori Gay, president and chief executive of Los Angeles Neighborhood Housing Services] said she has begun meeting with lenders, at their request, to try to stave off what could be "the biggest foreclosure bloodbath that we've ever had."

"We are seeing every age group, every single income level now, people with similar problems, and I haven't seen that in my career," she added.

And on commercial real estate, from the WSJ: Subprime Troubles Bite Into Office-Space Sector

Fallout from the imploding subprime-mortgage market is spreading to regions of the country where the once-torrid mortgage business generated jobs and filled office buildings.

No place is this more apparent than Orange County, Calif., where mortgage lenders including New Century Financial Corp. and Ameriquest Mortgage Co., a unit of ACC Capital Holdings Corp., have laid off workers, and landlords are bracing for a dive in what was previously one of the nation's strongest office markets. Employment in Orange County's mortgage-lending and consumer-finance sector has fallen 6.4% to 51,200 in the fourth quarter of 2006, from a peak of 54,600 in the fourth quarter of 2005, according to the Labor Department.

by Calculated Risk on 3/15/2007 07:57:00 PM

Recently we've seen two interesting maps: the MBA delinquency map and the BusinessWeek "Map of Misery" showing the percentage of loans with payment options by state.

Here is the BusinessWeek Map of Misery. This map is from BusinessWeek's cover story: Nightmare Mortgages

If we combine the maps, are we looking into the future?

Click on Map for animated GIF combining the two maps.

No wonder Goldman Sachs expressed concern yesterday about "the credit quality of ... prime ARMs with very low initial interest rates ... deteriorating at pace that is similar to that of subprime ARMs."

This map shows what might happen in the near future with delinquency rates.

by Calculated Risk on 3/15/2007 05:14:00 PM

From Bloomberg (hat tip Brian): Toll Calls Spring `A Bust,' Can't Predict Recovery

"When will the market rebound?" [Toll Brothers Inc. Chief Executive Officer Robert Toll] said at a conference in Las Vegas today. "Who knows? The Shadow knows. I have no idea. I would've thought that it would've rebounded by now and I would've been dead wrong, and I was."
...
"You saw no jump in all the other markets and the spring selling season, or the prime selling season, was pretty much a bust on a per community basis," Toll said.

The Wall Street consensus was for a bottom in Q1 2007. That view is "no longer operative". I'll try to call the bottom for New Home sales, a couple of quarters before it happens, but IMO it is still too early to even try.

by Calculated Risk on 3/15/2007 02:33:00 PM

From Reuters: Mortgage malaise may bring recession: Merrill

House prices could tumble 10 percent this year and force the United States into recession if a credit crunch taking shape in the mortgage market gathers steam, Merrill Lynch said in research notes this week.
...
"It is not inconceivable (given what is happening now to mortgage originations) that we end up with something closer to a 10 percent decline in home prices this year," Merrill Lynch said.
...
However, if the inflation-fighting Federal Reserve were to keep rates unchanged to contain price growth -- instead of cutting by 1 percentage point in the second half of 2007 as Merrill expects -- then this would put the probability of an outright recession in the second half at "very close to 100 percent."

Wow. And I though I was bearish on housing. My prediction was for a 1% to 3% nationwide price decline in 2007 (as measured by OFHEO).