by Calculated Risk on 5/12/2010 07:21:00 AM

The MBA reports: Refinance Applications Surge, Purchase Applications Drop in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 3.9 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 14.8 percent from the previous week and the seasonally adjusted Purchase Index decreased 9.5 percent from one week earlier. ...

“The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefitted US mortgage borrowers last week. Rates on 30-year mortgages dropped to their lowest level since mid-March. As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later.”

... The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.96 percent from 5.02 percent, with points decreasing to 0.91 from 0.92 (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.

We expected the Purchase Index to increase in April - and then turn down in May since the tax credit expired at the end of April (buyers need to close by June 30th). The tax credit related peak in purchase activity is probably behind us.

As Fratantoni noted, the decline in mortgage rates (below 5% again on a 30 year fixed) resulted in a surge in refinance applications last week.

by Calculated Risk on 5/11/2010 11:59:00 PM

A follow up to a post two weeks ago ... keep an eye on the Shanghai index (in red). It appears China's economy is slowing.

Click on graph for larger image in new window.

This graph shows the Shanghai SSE Composite Index and the S&P 500 (in blue).

The SSE Composite Index is at 2,622.67 mid-day - down about 300 points from 2 weeks ago.

by Calculated Risk on 5/11/2010 09:17:00 PM

From Jon Stewart at the Daily Show: A Nightmare on Wall Street

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
A Nightmare on Wall Street
www.thedailyshow.com

by Calculated Risk on 5/11/2010 05:17:00 PM

The Sacramento Association of REALTORS® is breaking out monthly resales by equity sales (conventional resales), and distressed sales (Short sales and REO sales), and I'm following this series as an example to see mix changes in a distressed area.

Click on graph for larger image in new window.

Here is the April data.

The Sacramento Association started breaking out REO sales in 2008, but they have only broken out short sales since June 2009 - so we almost have one year of data.

In April, 63% of all resales (single family homes and condos) were distressed sales.

Note: This data is not seasonally adjusted, although the decrease in sales in April is a little surprising because of the tax credit.

The second graph shows the percent of REO, short sales and conventional sales. The percent of short sales is near the high set in December and will probably continue to increase later this year (2010 is the year of the short sale!).

The percent of REOs has been generally declining (seasonally there are a larger percentage of REOs in the winter).

Also total sales in April were off 9.1% compared to April 2009; the eleventh month in a row with declining YoY sales - even with the tax credit buying this year!

On financing, over 58 percent were either all cash (27.2%) or FHA loans (30.9%), suggesting most of the activity in distressed former bubble areas like Sacramento is first time home buyers using government-insured FHA loans, and investors paying cash.

by Calculated Risk on 5/11/2010 03:16:00 PM

Testimony from SEC Chairman Mary Schapiro before the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises: Severe Market Disruption on May 6, 2010

This is an overview of what happened, what didn't happen (fat finger, unusual trading in Proctor & Gamble) and possible action to be taken (single stock trading curbs). On changes:

[W]e must consider the various types of “time out” mechanisms that can help maintain a fair and orderly market, both for the broad market and for individual stocks.

For example, we must ask whether the general, market-wide circuit breaker provisions that currently are on the books (none of which were triggered on May 6) need to be revised. I note that a vitally important element of the market-wide circuit breakers is that they apply across all stock and options trading venues and all venues for trading equity security-related futures, because markets for all equity security-related products are closely linked.

I believe that we also must consider the various types of time out mechanisms that can be applied to individual stocks. Although the prices of many stocks on May 6 declined in proportion with the broader market decline that occurred in securities and futures index products, the prices of many other individual stocks declined much, much more (before snapping back largely to the prices at which they were trading prior to the precipitous decline). At this point, the root cause of the sudden disappearance of liquidity in many stocks is unclear. ...

In addition to time out mechanisms, we will consider any other steps that potentially could prevent or help minimize the harm that occurred on May 6. These include: (1) exchange-level erroneous order filters; (2) “collars” on the prices at which market orders or aggressively priced limit orders can be executed; (3) limitations on the size of market orders or aggressively priced limit orders; and (4) eliminating the practice of displaying stub quotes that were never intended to be executed.