RSS Feed by Calculated Risk on 5/19/2010 09:44:00 PM
Wednesday, May 19, 2010
Summary: Busy Day
1) Press Release from the MBA: Delinquencies, Foreclosure Starts Fall in Latest MBA National Delinquency Survey
2) Comments from MBA conference call.
3) Two key graphs: Mortgage Delinquencies by Period and by State
The Euro is back up a little to 1.23 dollars.
And CNBC Pre-Market Data shows the S&P 500 futures off
Moody's: CRE Prices Decline 0.5% in March
by Calculated Risk on 5/19/2010 06:49:00 PM
Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index declined 0.5% in March. This is a repeat sales measure of commercial real estate prices.
Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.
Notes: Beware of the "Real" in the title - this index is not inflation adjusted. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.
Click on graph for larger image in new window.
CRE prices only go back to December 2000.
The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).
Commercial real estate values are now down 25% over the last year, and down 42% from the peak in August 2007.
Mortgage Delinquencies by Period and by State
by Calculated Risk on 5/19/2010 04:01:00 PM
Much was made last quarter about the decline in the 30 day delinquency "bucket" (percent of loans between 30 and 60 days delinquent). Unfortunately the seasonally adjusted 30 day delinquency rate increased in Q1 2010.
Note: there are some questions about the seasonal adjustment, especially for the 90 day bucket since we've never seen numbers this high before, but the adjustment for the 30 and 60 day periods are probably reasonable.
Click on graph for larger image in new window.
Loans 30 days delinquent increased to 3.45%, about the same level as in Q4 2008.
Delinquent loans in the 60 day bucket increased too, and are also close to the Q4 2008 level. This suggests that the pipeline is still filling up at a high rate, but slightly below the rates of early 2009.
The 90+ day and 'in foreclosure' rates are at record levels. Obviously the lenders have been slow to start foreclosure proceedings - and the 90+ day delinquent bucket is very full. Also lenders have been slow to actually foreclose - and the 'in foreclosure' bucket is at record levels.
These seriously delinquent loans are the 4.3 million loans MBA Chief Economist Jay Brinkmann referred to as the "shadow inventory" on the conference call this morning. Not all are really "shadow inventory" since some of these loans will be modified, some will be cured (probably very few), and some are probably already listed as short sales. But it does suggest a significant number of distressed sales coming. 
The second graph shows the delinquency rate by state (red is seriously delinquent: 90+ days or in foreclosure, blue is delinquent less than 90 days).
This highlights a couple more points that Brinkmann made this morning: 1) the largest category of delinquent loans are fixed rate prime loans, and 2) this is not just a "sand state" problem. Brinkmann argued the foreclosure crisis is now being driven by economic problems as opposed to the bursting of the housing price bubble - and this is showing up in prime loans and all states. Although Florida and Nevada are very high, notice that the blue bar (new delinquencies) are higher in many other states.
Thirty four states and the District of Columbia have total delinquency rates over 10%. This is a widespread problem.
FOMC Minutes: On Greece and Housing
by Calculated Risk on 5/19/2010 02:00:00 PM
From the April 27-28, 2010 FOMC meeting.
On Greece:
[P]articipants saw the escalation of fiscal strains in Greece and spreading concerns about other peripheral European countries as weighing on financial conditions and confidence in the euro area. If other European countries responded by intensifying their fiscal consolidation efforts, the result would likely be slower growth in Europe and potentially a weaker global economic recovery. Some participants expressed concern that a crisis in Greece or in some other peripheral European countries could have an adverse effect on U.S. financial markets, which could also slow the recovery in this country.On Housing:
[T]he recovery in the housing market appeared to have stalled in recent months despite various forms of government support. Although residential real estate values seemed to be stabilizing and in some areas had reportedly moved higher, housing sales and starts had leveled off in recent months at depressed levels. Some participants saw the possibility of elevated foreclosures adding to the already very large inventory of vacant homes as posing a downside risk to home prices, thereby limiting the extent of the pickup in residential investment for a while.The FOMC is forecasting moderate growth however they expect the unemployment rate to remain elevated for some time:
In their discussion of the economic situation and outlook, meeting participants agreed that the incoming data and information received from business contacts indicated that economic activity continued to strengthen and the labor market was beginning to improve. Although some of the recent data on economic activity had been better than anticipated, most participants saw the incoming information as broadly in line with their earlier projections for moderate growth; accordingly, their views on the economic outlook had not changed appreciably. Participants expected the economic recovery to continue, but, consistent with experience following previous financial crises, most anticipated that the pickup in output would be rather slow relative to past recoveries from deep recessions. A moderate pace of expansion, in turn, would imply only a modest improvement in the labor market this year, with the unemployment rate declining gradually.
First American CoreLogic: House Prices Decline 0.3% in March
by Calculated Risk on 5/19/2010 12:31:00 PM
From LoanPerformance: CoreLogic Home Price Index Shows Second Consecutive Annual Increase
National home prices, including distressed sales, increased by 1.7 percent in March 2010 compared to March 2009, according to CoreLogic and its Home Price Index (HPI). This was an improvement over February’s year-over-year price increase of 0.8 percent.* Excluding distressed sales, year-over-year prices increased in March by 1.9 percent; an improvement over the February non-distressed HPI which fell by 0.2 percent year-over-year.
On a month-over-month basis, the national average home price index fell by 0.3 percent in March 2010 compared to February 2010, which was more moderate than the previous one month decline of 1.7 percent from January to February.
...
“March’s year-over-year increase in the HPI shows that the housing market is continuing to exhibit signs of stability,” said Mark Fleming, chief economist for CoreLogic. “The differences between trends, including and excluding distressed sales, indicate the strong influence of distressed activity remains, but the surge in home sales in March is giving the market a boost this spring. As the influence of the tail end of the tax credit and spring buying season fade, price growth will fade with it as we go into summer.”
Click on graph for larger image in new window. This graph shows the national LoanPerformance data since 1976. January 2000 = 100.
The index is up 1.7% over the last year, and off 30.5% from the peak.
House prices are off 4.8% from the recent peak in August 2009 (although some of the decline is seasonal). The index bottomed last March ... so the index is also up 1.7% from the recent low.
With all the distressed sales and government programs, it is hard to separate the seasonal factors from other distortions. However I expect that we will see lower prices on this index later this year.
Note: This is the house price index the Fed now uses for the Flow of Funds report.
