by Calculated Risk on 7/07/2010 08:20:00 PM

From David Levitt at Bloomberg: U.S. Commercial Property Sales Trail Six-Year Average (ht Mike in Long Island)

In top cities such as New York and Washington, owners who owe more than their properties are worth are instead finding new sources of equity and lenders are willing to restructure their loans, [Sam Chandan, Real Capital’s chief economist] said. In less attractive markets, banks have been extending loans, waiting for higher prices so they don’t record losses ...

From Carriick Mollenkamp and Lingling Wei at the WSJ: To Fix Sour Property Deals, Lenders 'Extend and Pretend'

A big push by banks in recent months to modify [commercial real-estate] loans—by stretching out maturities or allowing below-market interest rates—has slowed a spike in defaults. It also has helped preserve banks' capital, by keeping some dicey loans classified as "performing" and thus minimizing the amount of cash banks must set aside in reserves for future losses.

Restructurings of nonresidential loans stood at $23.9 billion at the end of the first quarter, more than three times the level a year earlier and seven times the level two years earlier

With office vacancy rates at a 17 year high, and mall vacancy rates at a 19 year high, there is going to be a long wait ...

by Calculated Risk on 7/07/2010 04:53:00 PM

From the Committee of European Banking Supervisors (CEBS) Key Features of the extended EU-wide Stress Test

The objective of the extended stress test exercise is to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks, and to assess the current dependence on public support measures.

The exercise is being conducted on a bank-by-bank basis using commonly agreed macro-economic scenarios (baseline and adverse) for 2010 and 2011, developed in close cooperation with the ECB and the European Commission.
...
On aggregate, the adverse scenario assumes a 3 percentage point deviation of GDP for the EU compared to the European Commission’s forecasts over the two-year time horizon. The sovereign risk shock in the EU represents a deterioration of market conditions as compared to the situation observed in early May 2010.
...
The results of the stress test will be disclosed, both on an aggregated and on a bank-by-bank basis, on 23 July 2010.

The document has a list of the 91 banks.

More from Bloomberg: EU Stress Tests Will Cover 91 Banks, Assume Bond Drop

by Calculated Risk on 7/07/2010 01:25:00 PM

I see "Priced Reduced" on many For Sale signs these days ...

From Thomas Grillo at the Boston Herald: Boston sellers cut prices (ht StickyDownside)

There’s a silver lining for would-be home buyers who missed the April 30 deadline for the $8,000 federal tax credit: Sellers are dropping prices.

The average price reduction for a single-family home or condominium in the Bay State last month was 8 percent, or $38,883 off the original asking price, according to real estate search engine Trulia.com.

In Suffolk County, which includes the cities of Boston, Chelsea, Revere and Winthrop, the price reduction was $43,288, or 7 percent off the listing price.

Also these price reductions are one of the key reasons why a number of deals didn't close by June 30th - the deals just wouldn't appraise at the agreed upon price because identical units are now being offered for less.

by Calculated Risk on 7/07/2010 09:50:00 AM

The Mortgage Bankers Association reported this morning that refinance activity increased again:

The Refinance Index increased 9.2 percent from the previous week and is the highest Refinance Index observed in the survey since the week ending May 15, 2009.
...
The refinance share of mortgage activity increased to 78.7 percent of total applications from 76.8 percent the previous week, which is the highest refinance share observed in the survey since April 2009.

Click on graph for larger image in new window.

This graph shows the monthly MBA refinance index (Blue) and mortgage rates from the Freddie Mac Primary Mortgage Market Survey - and the Fed Funds target rate since Jan 1990.

Even with the recent decline in mortgage rates, refinance activity is still well below the peak in 2009. The reason is the 30 year mortgage rate is only slightly below the rates of April and May 2010 (4.6% now compared to just over 4.8% in 2009), so for those who refinanced last year there isn't much incentive to refinance now (considering the cost to refinance).

Of course many homeowners can't refinance because they owe more than their homes are worth, or their incomes have declined and they can't qualify.

by Calculated Risk on 7/07/2010 07:21:00 AM

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

The Refinance Index increased 9.2 percent from the previous week and is the highest Refinance Index observed in the survey since the week ending May 15, 2009. The seasonally adjusted Purchase Index decreased 2.0 percent from one week earlier. The Purchase Index has decreased eight of the last nine weeks.
...
“Mortgage rates remained near record lows last week, as incoming data on the job and housing markets were weaker than anticipated. As more homeowners locked in to these low rates, the level of refinance applications increased to a new 13-month high,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “For the month of June, purchase applications declined almost 15 percent relative to the prior month, and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit.”
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.68 percent from 4.67 percent, with points decreasing to 0.86 from 0.96 (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.

There has been a mini-refi boom because of the low mortgage rates, but the purchase index has fallen sharply to the levels of 1996.