by Calculated Risk on 8/31/2009 09:05:00 AM

From the Chicago Tribune: Chicago's a renters' market, but vacancies, delinquencies on rise

More apartments are available in Chicago, and at prices that have slipped since the beginning of the year, creating a renter's market and allowing some consumers to trade up to better housing. ... according to a study scheduled to be released Monday by DePaul University's Institute for Housing Studies.
...
"If anything, I think [DePaul] is reporting less than what I see," said Jack Markowski, president of Community Investment Corp., a non-profit mortgage lender to multifamily buildings that started seeing increases in multifamily mortgage delinquencies 18 months ago. Multifamily buildings, he said, "are vulnerable right now."
...
Landlords, seeking to cover their costs, are lowering rents to attract tenants, and the study found that rents declined in all sizes of buildings and in all city neighborhoods except for the North Side.
...
The level of multifamily mortgages foreclosed on in Chicago during the year's second quarter, at 0.8 percent of the total supply, was twice as high as it was in the comparable year-ago period, said James Shilling, a DePaul professor and director of the institute.

"It only gets worse," Shilling said of the predicament the rental market finds itself in. "There's downward pressure on rents and upward pressure on vacancy rates. I think for the rest of 2009 and 2010 we'll see more defaults."

by Calculated Risk on 8/30/2009 11:14:00 PM

Click on graph for larger image in new window.

This graph is the Shanghai SSE composite index. I used to post this graph with the subtitle "Cliff Diving"!

Now the Shanghai composite is off more than 20% from the recent peak, and off close to 5% tonight. I guess this is 'mini-me' Cliff Diving ...

The U.S. futures are also off tonight, but not significantly:

CBOT mini-sized Dow

Futures from barchart.com

CME Globex Flash Quotes

And the other Asian markets are mostly red too.

Best to all.

by Calculated Risk on 8/30/2009 06:46:00 PM

Every Friday, in just about every bank failure press release, the FDIC mentions a loss share agreement with the acquiring bank. As an example, in the press release regarding Mutual Bank of Harvey, Illinois on July 31st:

As of July 16, 2009, Mutual Bank had total assets of $1.6 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, United Central Bank agreed to purchase essentially all of the assets.

The FDIC and United Central Bank entered into a loss-share transaction on approximately $1.3 billion of Mutual Bank's assets.
emphasis added

For those interested in every detail, here are the Single Family Loss Share Agreement (page 54) and Commercial Loss Share Agreement {page 89) between the FDIC and United Central Bank (the acquirer).

From the WSJ: FDIC Shoulders Big Losses on Loans

[T]he Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. ...

So far, the FDIC has paid out $300 million to a handful of banks under the loss-share agreements. ... The agency estimates the loss-share deals cut will cost it $11 billion less than if the agency seized the assets and sold them at fair-market value.
...
In most cases, the FDIC agrees to cover 80% of future losses on a big portion of the assets, and 95% on the rest. The FDIC says it doesn't anticipate facing the 95% loss-coverage scenario on any deal. ... Many of the loss-share deals will be in place for up to 10 years.

These agreements definitely make the deals more attractive to potential buyers because the limit the downside.

The article notes that the FDIC "had just $10.4 billion in its deposit-insurance fund at the end of June", but that includes reserves for future losses. And since the FDIC expects losses of $14 billion from these loss share agreements, they should have already reserved for those losses.

Still many of these agreements will be in place for 10 years, and there is the potential for much higher losses.

by Calculated Risk on 8/30/2009 03:16:00 PM

Professor Hamilton has changed the emoticon on his site to neutral. Hamilton has been generally negative since early 2007 ...

Date	Status
Sep 13, 2006
Feb 21, 2007
Apr 25, 2007
Jun 27, 2007
Oct 5, 2007
Jan 4, 2008
Aug 30, 2009

If you've only been following Econbrowser since 2008, you may have thought that the crabby countenance in the upper-right corner of our main page was a permanent fixture, conveying our general grumpiness about the state of the economy or perhaps life in general. Despite having been stuck in the pessimistic mode for quite some time now, the emoticon was in fact always intended to be a dynamic feature, adjusted from time to time to provide readers with our overall impression of incoming data. The table on the left provides links to each occasion that our Little Econ Watcher's countenance has changed in the past.

Last week's data persuaded me to move the Econbrowser Emoticon back into neutral, signifying that I now judge overall output to be growing slowly rather than declining. Here are details on the evidence that prompted this change in assessment, and what it signifies.

See Hamilton's post for the reasons for the change. I think we are a long way from a smiley face.

by Calculated Risk on 8/30/2009 10:47:00 AM

Here is a graph of bankruptcy filings vs. mortgage delinquencies (including homes in foreclosure process) by state for Q2 2009.

Click on graph for larger image in new window.

The bankruptcy filings data is from the American Bankruptcy Institute.

The mortgage delinquency data is from the Mortgage Bankers Association.

No surprise - there is a clear correlation, although each state has different bankruptcy laws that can impact the relationship (see Florida).

Here is a sortable table to find the data for each state (use scroll bar to see all data).