by Calculated Risk on 6/10/2009 01:08:00 PM

Here is a new tool from Political Calculations: Predicting Mortgage Rates and Treasury Yields

This is based off the chart I posted last Friday and is very timely with the Ten Year Yield pushing 4%.

Using their tool, with the Ten Year yield at 3.99%, this suggests that 30 year mortgage rates will rise to 5.8% based on the historical relationship between the Ten Year yield and mortgage rates.

According to the MBA the "average contract interest rate for 30-year fixed-rate mortgages increased to 5.57 percent" last week. So rates will probably be higher this week.

BTW, I first used the term "Bernanke's conundrum" in 2005 to describe what I thought would happen when the Fed rate was low following the housing bust - and the long rate started to rise.

by Calculated Risk on 6/10/2009 11:27:00 AM

From Lingling Wei and Kris Hudson: Relief for Commercial Real-Estate Debt? It Seems Possible

... developers and investors complain that only those who are delinquent can talk to servicers of ... CMBS. But now the Treasury is considering issuing guidance that would allow servicers to start talking about ways to avoid defaults and foreclosures sooner, possibly at least two years ahead of the maturity date of a loan ... The Treasury guidance, which could be released within weeks, would essentially enable loan-modification talks to take place without triggering tax consequences ... when CMBS offerings are created, the underlying mortgages are legally held by tax-free trusts. The trusts can be forced to pay taxes if the underlying loans are modified before they become delinquent, according to current CMBS rules.
...
Of particular concern is $154.5 billion of CMBS loans coming due between now and 2012. About two-thirds of that likely won't qualify for refinancing, according to a recent report by Deutsche Bank. The bank projected that the default rates on the $700 billion of outstanding CMBS eventually could hit at least 30%, and loss rates, which take into account the amounts recovered by lenders, could reach as much as 13%, more than the peak seen during the commercial-real-estate collapse of the early 1990s.

This is a follow up to:

S&P on CMBS: Potential Downgrades from AAA to A

CRE Mortgage Servicers Seek up to 5 Year Extensions (with Fitch comments)

From Bloomberg: U.S. Commercial Mortgage Defaults May Rise to 17-Year High

by Calculated Risk on 6/10/2009 08:43:00 AM

The Census Bureau reports:

The ... total April exports of $121.1 billion and imports of $150.3 billion resulted in a goods and services deficit of $29.2 billion, up from $28.5 billion in March, revised. April exports were $2.8 billon less than March exports of $123.9 billion. April imports were $2.2 billion less than March imports of $152.5 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through April 2009.

Both imports and exports declined again in April. On a year-over-year basis, exports are off 21% and imports are off 31%!

The second graph shows the U.S. trade deficit, with and without petroleum, through April.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices increased slightly to $46.60 in April - the second monthly increase in a row - and following eight consecutive monthly declines. Spot prices have increased sharply since April, so the decline in the trade deficit due to lower oil prices is over for now.

by Calculated Risk on 6/10/2009 08:37:00 AM

The MBA reports:

The Market Composite Index, a measure of mortgage loan application volume, was 611.0, a decrease of 7.2 percent on a seasonally adjusted basis from 658.7 one week earlier.
...
The Refinance Index decreased 11.8 percent to 2605.7 from 2953.6 the previous week and the seasonally adjusted Purchase Index increased 1.1 percent to 270.7 from 267.7 one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 5.57 percent from 5.25 percent ...
emphasis added

The Purchase Index is now at the level of the late '90s.

30-year fixed mortgage rates were at 4.81% two weeks ago, and are now at 5.57%. With the 10 year yielding 3.9%, mortgage rates will probably rise again this week.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Although we can't compare directly to earlier periods because of the changes in the index, this shows no pick up in overall sales activity.

by Calculated Risk on 6/10/2009 01:47:00 AM

When I saw the title of the following article, I was wary that the median price was being distorted by the mix of homes being sold (a mix of more low end homes lowers the median). But Peter Hong at the LA Times gives some specific examples of prices going back 20 years or more.

From the LA Times: Median home prices drop below 1989 levels in some parts of Southland

To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.
...
But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.

And another example ...

[Patricia] Hynes bought her three-bedroom home in Lancaster brand-new for $119,000 in 1989 ... Her home is an island in a sea of repos. Houses on both sides have fallen into foreclosure; one is priced $10,000 less than the amount she paid 20 years ago.

Nearby, a four-bedroom, 2,100-square-foot home sold in May for $89,000.

Most of these areas are suffering negative absorption (families are moving out) and are the least desirable areas in SoCal. And there are more foreclosures coming ...

Another tsunami of foreclosures is threatening to swamp an already saturated market. In Palmdale and Lancaster, 903 homes were sold in April, but according to ForeclosureRadar, more than 7,500 are in some stage of foreclosure.

Some buyers who thought they were getting bargains didn't. In Lancaster, Beatrice's eldest son, Daniel, bought a house near his father's for $175,000 in April 2008; comparable properties are now selling for about $95,000.

Get ready for 1979 prices!