by Calculated Risk on 7/24/2009 10:36:00 AM

This morning the Census Bureau reported the homeownership and vacancy rates for Q2 2009. Here are a few graphs ...

Click on graph for larger image in new window.

The homeownership rate increased slightly to 67.4% and is now at the levels of Q2 2000.

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 expect the rate to decline to the 66% to 67% range - and not all the way back to 64% to 65%.

The homeowner vacancy rate was 2.5% in Q2 2009.

This is the lowest vacancy rate since mid-2006, but still very high. A normal rate for recent years appears to be about 1.7%.

This leaves the homeowner vacancy rate about 0.8% above normal, and with approximately 75 million homeowner occupied homes; this gives about 600 thousand excess vacant homes.

The rental vacancy rate increased to a record 10.6% in Q2 2009.

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 40 million rental units in the U.S. If the rental vacancy rate declined from 10.6% to 8%, there would be 2.6% X 40 million units or about 1.04 million units absorbed.

These excess units will keep pressure on rents and house prices for some time.

by Calculated Risk on 7/24/2009 08:02:00 AM

To start BFF off ...

Guaranty Financial Group filed an 8-K with the SEC last night (ht Russ). Here are a few excerpts:

[T]he Company no longer believes that it will be possible for the Company or the Bank to raise sufficient capital to comply with the Orders to Cease and Desist described in the Company’s Current Report on Form 8-K filed on April 8, 2009. In light of these developments, the Company believes that it is probable that it will not be able to continue as a going concern.
emphasis added

That is more than your typical 'going concern' warning.

Current stockholders will get nothing:

The Company continues to cooperate with the OTS and the FDIC as they pursue potential alternatives for the business of the Bank. Any such transaction would not be expected to result in the receipt of any proceeds by the stockholders of the Company.

The bank has consented to be seized:

[T]he OTS has directed that the Board of Directors of the Bank consent to the OTS exercising its statutory authority to appoint the FDIC as receiver or conservator for the Bank. ... The Board has complied with the OTS demand for such consent, but the appointment of a receiver or conservator has not yet occurred.

Its subsidiary, Guaranty Bank, is deep in the hole:

[T]he Bank’s core capital ratio stood at negative 5.78% as of March 31, 2009. The Bank’s total risk based capital ratio as of March 31, 2009 stood at negative 5.52%. Both of these ratios result in the Bank being considered critically under-capitalized under regulatory prompt corrective action standards.

It is just a matter of when. Guaranty Financial will be the largest bank failure this year with approximately $14 billion in assets.

Here is a story from Brendan Case at the Dallas Morning News: Guaranty Bank may face federal control

by Calculated Risk on 7/24/2009 12:51:00 AM

One of the key elements of the new California budget is to have the state use money that is normally allocated to cities. This is a crushing blow to the finances of many cities. Here is an example from the O.C. Register: State revenue raids could bankrupt city, officials say

Placentia city officials are howling in effort to keep state hands out of their coffers. The plan to seize millions could bankrupt the city, they say.

"We may have to declare bankruptcy – that's how serious this is," said City Administrator Troy Butzlaff. "This is something the system can't endure. We just avoided bankruptcy by doing all the right things; by cutting back, by getting concessions from staff, by cutting $4.5 million over last year's budget."
...
Butzlaff said earlier this week the state legislators' budget proposals could take roughly $900,000 from gas tax money, $800,000 from property tax money, and $400,000 from the Redevelopment Agency.
...
"Some of my cities are in good shape, some are teetering on the edge," [State Sen. Bob Huff, R- Diamond Bar] said. "It's not fair for the state to outsource its miseries to the local level."

by Calculated Risk on 7/23/2009 09:22:00 PM

From Matt Padilla at the O.C. Register: DA raids Ladera homes tied to alleged loan-aid scam

Investigators with the Orange County District Attorney early Thursday morning searched three Ladera Ranch homes tied to an alleged foreclosure rescue scam.
...
Attorney General Jerry Brown last week said he has filed suit against the men for allegedly charging homeowners $4,000 in upfront fees and then failing to get them cheaper payments on their home loans.
...
Earlier in the week District Attorney Tony Rackauckas told a group of community leaders his office is expanding investigations into real estate fraud.

Elizabeth Henderson, an assistant DA who spoke at the same event in Garden Grove, said 30% of the cases handled by the office’s major fraud unit are tied to real estate, up from an average 10% in past years ...

“We want to send people to jail,” she said.

Once again some of these scamsters are former subprime mortgage brokers. I bet many people hope Ms. Henderson is successful!

by Calculated Risk on 7/23/2009 07:14:00 PM

Another preview for BFF ...

From Bloomberg: Lubert-Adler Said to Mull Bid for Chicago’s Corus Bankshares

Lubert-Adler Partners LP, the Philadelphia-based private-equity firm, is among at least four investors weighing bids for Corus Bankshares Inc. ... The Federal Deposit Insurance Corp. has indicated that the bank ... may be seized as soon as Aug. 6, the people said.

It is just a matter of when ...