by Calculated Risk on 4/21/2010 08:07:00 AM

The MBA reports: Mortgage Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 13.6 percent on a seasonally adjusted basis from one week earlier. ...

“Treasury rates fell last week causing a decline in mortgage rates. As a result, refinance applications picked up over the week, as some borrowers took advantage of this recent rate volatility to lock in a low fixed-rate loan,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Purchase applications continued to increase coming out of the Easter holiday, as we approach the end of the homebuyer tax credit, and are up modestly over last month.”

The Refinance Index increased 15.8 percent from the previous week and the seasonally adjusted Purchase Index increased 10.1 percent from one week earlier. ...

The refinance share of mortgage activity increased to 60.0 percent of total applications from 58.9 percent the previous week. ...

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.17 percent, with points increasing to 0.98 from 0.91 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

So far the increase in activity because of the expiration of the tax credit has been "modest". I expect any increase this year to be less than the increase last year ...

by Calculated Risk on 4/20/2010 10:18:00 PM

Jennifer Schonberger at Motley Fool interviews Professor Robert Shiller: Shiller: The Housing Recovery Could Be on Shaky Ground.

A couple of comments from Shiller, first on house prices:

Robert Shiller: Home prices have been going up for nearly a year now, according to our data, the S&P/Case-Shiller indices ... Normally we could extrapolate that kind of upward trend because historically home prices have shown a lot of momentum. But I think we're in a very unusual circumstance because of the massive bailouts, the homebuyer tax credits, the Fed's purchase of mortgage-backed securities -- and these things are coming to an end. So it's an unusual period. So I don't trust the trend that we have. I'm worried that it might get reversed.

And on asset prices:

Shiller: We have had kind of a mini-bubble in the stock market and the housing market. It wasn't just because of rate cuts. It was also because of government stimulus and bailouts. So the question is: Are we at risk for even more price increases, and another bubble? I think we are at risk, but I'm not predicting it. I think it's more likely we don't do so well from here.

by Calculated Risk on 4/20/2010 06:48:00 PM

From Tamar Lewin and Sam Dillon at the NY Times: School Districts Warn of Even Deeper Teacher Cuts (ht Ann)

School districts around the country ... are warning hundreds of thousands of teachers that their jobs may be eliminated in June.

... their usual sources of revenue — state money and local property taxes — have been hit hard by the recession. In addition, federal stimulus money earmarked for education has been mostly used up this year.
...
Districts in California have pink-slipped 22,000 teachers. Illinois authorities are predicting 17,000 public school job cuts. And New York has warned nearly 15,000 teachers that their jobs could disappear in June.

Secretary of Education Arne Duncan estimated that state budget cuts imperiled 100,000 to 300,000 public school jobs. In an interview on Monday, he said the nation was flirting with “education catastrophe.”

These cuts will make the employment situation worse. This is also a reminder that the Federal stimulus spending peaks in Q2, and then starts to decline in Q3.

by Calculated Risk on 4/20/2010 04:00:00 PM

As a followup to the previous post, here is some more data from DataQuick:

"We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods. We're also seeing some lenders become more accommodating to work-outs or short sales, while others appear to be getting stricter about delinquencies. It's very noisy out there," [John Walsh, DataQuick president] said.

The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for 47.5 percent of all default activity a year ago. In first-quarter 2010 that fell to 40.9 percent.

California's mid- to high-end housing markets were more likely to have seen a rise in mortgage defaults last quarter, though the concentration of default activity - measured by defaults per 1,000 homes - remained relatively low in those areas.

For example, zip codes statewide with median home sale prices of $500,000-plus saw mortgage defaults buck the overall trend and rise 1.5 percent last quarter compared with the prior quarter, while year-over-year the decline was 19 percent (versus a 40.2 percent marketwide annual decrease). Collectively, these zips saw 4.5 default notices filed for every 1,000 homes in the community, compared with the overall market's rate of 9.3 NODs for every 1,000 homes statewide.

In zip codes with medians below $500,000, mortgage default filings fell 5.8 percent from the prior quarter and declined nearly 43 percent from a year earlier. However, collectively these zips saw 10.5 NODs filed for every 1,000 homes - more than double the default rate for the zips with $500,000-plus medians.

On average, homes foreclosed on last quarter spent 7.5 months winding their way through the formal foreclosure process, beginning with an NOD. A year ago it was 6.8 months. The increase could reflect, among other things, lender backlogs and extra time needed to pursue possible loan modifications and short sales.

Foreclosure resales accounted for 42.6 percent of all California resale activity last quarter. It was up from a revised 40.6 percent the prior quarter, and down from 57.8 percent a year ago, the peak.

The foreclosure rates in the mid-to-high end areas will never be as high as in the low end areas, but the percentage of total foreclosures will probably continue to increase. I also expect the average time in the foreclosure process to start to decrease this year as the lenders start clearing out the backlog.

by Calculated Risk on 4/20/2010 02:06:00 PM

Click on graph for larger image in new window.

This graph shows the Notices of Default (NOD) by year through 2009, and for Q1 2010, in California from DataQuick.

Although the pace of filings has slowed, it is still very high by historical standards.

From Alejandro Lazo at the LA Times: California foreclosures drop 4.2% as lenders work with troubled borrowers

Across California, a total of 81,054 homes received a notice of default in the first quarter compared with 84,568 in the fourth quarter of 2009 and a record 135,431 in the first quarter of 2009.

In terms of new NOD filings, the peak was probably in 2009. A few key points:

There are a record number of homes in the foreclosure process and the timeline from the filing of the initial NOD to REO has been extended significantly. There are so many homes in the pipeline the number of distressed sales (foreclosures and short sales) will probably increase sharply throughout 2010 - even if NODs decline.

Many of these NODs are probably in mid-to-high end areas (as opposed to the flood of low end foreclosures in 2008). As I've been noting for over a year, prices have probably bottomed in some low end areas, but we will probably see further price declines in many mid-to-high end areas.

Although NODs will probably decline in 2010, the number will still be very high. The number of filings in Q1 alone would be a normal year.