by Calculated Risk on 4/05/2010 05:47:00 PM

From Diana Olick at CNBC: Let the Short Sales Begin

I'm ... starting to hear rumblings among the number crunchers that the wave of foreclosures we keep hearing about is about to hit with a thunderous roar.

Servicers are ramping up the mod process and pushing those who don't qualify out the door more quickly than ever.

I don't know about a "thunderous roar", but I do think we will see more distressed sales soon. Most trustee sales seem to be "postponed" each month, and perhaps the lenders were just waiting for the HAFA short sales program to begin. That program started today and anyone considering a short sale should ask their lender if they qualify.

by Calculated Risk on 4/05/2010 03:15:00 PM

The Ten Year treasury yield hit 4.0% this morning for the first time since Oct 2008. Mortgage rates are moving up too and that probably means that refinance activity will decline sharply.

Click on graph for larger image in new window.

Refinance activity picks up when mortgage rates fall (for obvious reasons), and this graph shows the monthly refinance activity (MBA refinance index) and the 30 year fixed mortgage rate and one year adjustable mortgage rate (both from the Freddie Mac Primary Mortgage Market Survey) - and the Fed Funds target rate since Jan 1990.

Notice that following the '90/'91 and '01 recessions, the Fed kept lowering the Fed Funds rate because of high unemployment rates. This spurred refinance activity. The Fed can't lower the Fed Funds rate now - and could only spur refinance activity if they restarted the MBS purchase program.

The second graph shows the weekly MBA refinance activity, and the Ten Year Treasury yield.

When the ten year yield drops sharply, usually refinance activity picks up. And when the yield increases, refinance activity declines.

With the yield on the Ten Year Treasury increasing to 4%, and the end of the Fed MBS purchase program last week, mortgage rates will probably rise and refinance activity will fall sharply.

by Calculated Risk on 4/05/2010 12:26:00 PM

The Financial Times reports that if (when) Greece needs to call on the emergency loan package from the IMF-Eurozone, Germany officials argue Greece should pay 6.0% to 6.5% on the Eurozone loans - the same as they are currently paying on 10 year bonds. Others are arguing for borrowing rates in the 4 to 4.5% range - similar to rates paid by Ireland and Portugal.

See the Financial Times: German stand on loan rates to Greece

Eurozone leaders agreed at the end of March to offer Greece an emergency loan package from the International Monetary Fund and the eurozone if it was unable to raise debt in the market, but they insisted the interest rate on the European portion of a bail would be unsubsidised.

I guess it depends on the definition of "unsubsidised".

Apparently the Asian central banks are not interested in Greek Bond issues, from the WSJ: Greek Bond May Get Cool Asian Response

"We wouldn't want to be involved" in the bond issue, one fund manager in Hong Kong said. "The fiscal situation in Greece remains very fragile, so we want to wait for a more concrete plan on how to resolve their debt problem."

by Calculated Risk on 4/05/2010 10:00:00 AM

March ISM Non-Manufacturing index 55.4% vs 53.0 in February

This shows further growth in the service sector, although employment contracted for the 27th consecutive month.

From the Institute for Supply Management: March 2010 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in March for the third consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president – supply management for Hilton Worldwide. "The NMI (Non-Manufacturing Index) registered 55.4 percent in March, 2.4 percentage points higher than the seasonally adjusted 53 percent registered in February, and indicating growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 5.2 percentage points to 60 percent, reflecting growth for the fourth consecutive month. The New Orders Index increased 7.3 percentage points to 62.3 percent, and the Employment Index increased 1.2 percentage points to 49.8 percent.
...
Employment activity in the non-manufacturing sector contracted in March for the 27th consecutive month. ISM's Non-Manufacturing Employment Index for March registered 49.8 percent. This reflects an increase of 1.2 percentage points when compared to the seasonally adjusted 48.6 percent registered in February.
emphasis added

by Calculated Risk on 4/04/2010 11:59:00 PM

Click on graph for larger image in new window.

This graph shows the office vacancy rate starting 1991.

Reis is reporting the vacancy rate rose to 17.2% in Q1 2010, up from 17.0% in Q4, and up from 15.2% in Q1 2009. The peak following the previous recession was 16.9%.

From the Financial Times: Signs that worst is over for commercial property

New figures from Reis ... showed that the vacancy rate in the US office sector climbed to 17.2 per cent during the first three months of the year..
...
"We expect less of a bloodbath in fundamentals in 2010 versus 2009, but rents will still decline and vacancies will still continue to rise," said Victor Calanog, director of research at Reis. ... During the first quarter, asking rents and effective rents, which include special offers and concessions, both fell by just 0.8 per cent.
excerpts with permission

Even though vacancy rates will probably rise further and rents continue to decline, it does appear the rate of deterioration has slowed.

Reis should release the Mall and Apartment vacancy rates over the next few days, and those will probably be at record levels.