by Calculated Risk on 9/30/2009 08:42:00 AM

The MBA reports: Mortgage Applications Decrease

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.8 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index decreased 0.8 percent from the previous week and the seasonally adjusted Purchase Index decreased 6.2 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.94 percent from 4.97 percent ...

Click on graph for larger image in new window.

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

The Purchase index declined to 270.4, and the 4-week moving average declined to 283.9.

Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.

by Calculated Risk on 9/29/2009 11:20:00 PM

Here is some national data on the types of homebuyers in August. This is from a survey by Campbell Communications (excerpted with permission).

Source: Tracking Real Estate Market Conditions, a whitepaper regarding the Campbell/Inside Mortgage Finance Monthly Survey on Real Estate Market Conditions.

Click on graph for larger image in new window.

The Campbell survey breaks out sales by buyer type.

According to the Campbell survey about 64% of sales in August were to first-time buyers and investors.

Survey results show that first-time homebuyers, motivated by first-time homebuyer tax credit, made up the largest component of demand in August 2009. In the summer months, current homeowners also make up a significant component of demand. (Note: rounding on graph figures precludes totaling to 100%.)

For comparison, here is the same breakdown for Q2.

According to the Campbell survey over 70% of sales in Q2 were to first-time buyers and investors.

Whenever the tax credit expires (whether or not is extended), the percent of first time buyers will decline.

by Calculated Risk on 9/29/2009 07:46:00 PM

From the WSJ: CIT in Last-Ditch Rescue Bid

CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in outstanding debt ... The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured company. ... If not enough bondholders agreed to the plan, the company could seek to execute the restructuring in bankruptcy court, the person said. The result could potentially be one of the largest Chapter 11 bankruptcy-court filings in U.S. history.

The writing was on the wall in July when CIT obtained a $3 billion emergency loan secured by all of their assets. As I noted in July, the emergency loan just kicked the can down the road.

Now it appears CIT is at the end of the road ...

by Calculated Risk on 9/29/2009 07:26:00 PM

From Dow Jones: Citi Prices $5B Four-Part FDIC-Backed Deal-Source

Citigroup Inc. priced a $5 billion government-backed bond Tuesday, its second benchmark-sized bond offering this month under the U.S. Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program ... Since November of last year, when the FDIC program was launched, Citi has issued $49.6 billion of these deals ...

If the TLGP is extended, Citi might be the only user.

Also, the FDIC earlier today announced a plan to "require insured institutions to prepay their estimated quarterly risk-based assessments" for the next three years. This plan would raise approximately $45 billion.

Bloomberg has a story on the costs: Bank of America, 3 Other Banks’ FDIC Fees May Top $10 Billion

Bank of America, the biggest U.S. lender by deposits, may owe $3.5 billion under the FDIC proposal for banks to prepay three years of premiums, based on the lowest assessment rate multiplied by the bank’s $900 billion in second-quarter U.S. deposits.
...
U.S. bank premiums range from 12 cents per $100 in deposits for the safest lenders to 45 cents for banks the U.S. considers risky, said Chris Cole, senior regulatory counsel for the Independent Community Bankers of America.
...
Based on the current assessment and each bank’s deposits, Wells Fargo & Co.’s fee may be $3.2 billion based on its $814 billion in deposits, JPMorgan Chase & Co. may pay $2.4 billion and Citigroup Inc. $1.2 billion.

Ouch.

by Calculated Risk on 9/29/2009 04:12:00 PM

Note: Looking ahead, Thursday and Friday will be heavy economic news days with vehicle sales (how bad will the post-clunker slump be?), construction spending, personal income and outlays for August, the employment report on Friday and more.

A couple of market graphs ... the S&P 500 was first at this level in March 1998; about 11 1/2 years ago.

Click on graph for larger image in new window.

The first graph shows the S&P 500 since 1990.

The dashed line is the closing price today.

The S&P 500 is up 57% from the bottom (384 points), and still off 32% from the peak (505 points below the max).

The second graph is from Doug Short - Instead of comparing the markets from the peak (See: the Four Bad Bears), Doug Short matched up the market bottoms for four crashes (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.