by Calculated Risk on 8/23/2011 10:00:00 AM

The Census Bureau reports New Home Sales in July were at a seasonally adjusted annual rate (SAAR) of 298 thousand. This was down from a revised 300 thousand in June (revised from 312 thousand).

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000 ... This is 0.7 percent (±12.9%)* below the revised June rate of 300,000, but is 6.8 percent (±13.5%)* above the July 2010 estimate of 279,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

Months of supply was unchanged at 6.6 in July. The all time record was 12.1 months of supply in January 2009. This is still higher than normal (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of July was 165,000. This represents a supply of 6.6 months at the current sales rate.

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was at 61,000 units in July. The combined total of completed and under construction is at the lowest level since this series started.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In July 2011 (red column), 27 thousand new homes were sold (NSA). The record low for July was 26 thousand in 2010 (following the expiration of the homebuyer tax credit). The high for July was 117 thousand in 2005.

This was below the consensus forecast of 313 thousand, and was just above the record low for the month of July - and new home sales have averaged only 300 thousand SAAR over the 15 months since the expiration of the tax credit ... moving sideways at a very low level.

by Calculated Risk on 8/23/2011 08:58:00 AM

By request, the following graphs show the percent of loans delinquent by loan type: Prime, Subprime, FHA and VA. First a table comparing the number of loans in Q2 2007 and Q2 2011 so readers can understand the shift in loan types.

Both the number of prime and subprime loans have declined over the last four years; the number of subprime loans is down by about one-third. Meanwhile the number of FHA loans has increased sharply.

MBA National Delinquency Survey Loan Count
	Q2 2007	Q2 2011	Change	Seriously Delinquent
Prime	33,916,830	31,888,314	-2,028,516	1,839,956
Subprime	6,204,535	4,126,408	-2,078,127	1,102,989
FHA	3,030,214	6,467,909	3,437,695	529,075
VA	1,096,450	1,402,208	305,758	64,502
Survey Total	44,248,029	43,729,247	-518,782	3,536,521

Note: There are about 50 million total first-lien loans - the MBA survey is about 88% of the total.

Click on graph for larger image in graph gallery.

The first graph is for all prime loans. This is the key category now ("We are all subprime!").

Since there are far more prime loans than any other category (see table above), over half the loans seriously delinquent now are prime loans - even though the overall delinquency rate is lower than other loan types.

The second graph is for subprime. This category gets all the attention - mostly because of all the terrible loans made through the Wall Street "originate-to-distribute" model and sold as Private Label Securities (PLS). Not all PLS was subprime, but the worst of the worst loans were packaged in PLS.

Although the delinquency rate is still very high, the number of subprime loans had declined sharply.

The third graph is for FHA loans. The delinquency rate increased in Q2 after declining for the last several quarters. Most of the FHA loans were made in the last couple of years.

Another reason for the previous improvement was eliminating Downpayment Assistance Programs (DAPs). These were programs that allowed the seller to give the buyer the downpayment through a 3rd party "charity" (for a fee of course). The buyer had no money in the house and the default rates were horrible.

The last graph is for VA loans.

All four categories saw a slight increase in Q2.

There are still quite a few subprime loans that are in distress, but the real keys going forward are prime loans and FHA loans.

Yesterday:
• MBA: Mortgage Delinquencies increased slightly in Q2
• MBA Delinquency Survey: Comments and State Data
• Mortgage Delinquencies by State: Range and Current

by Calculated Risk on 8/22/2011 10:05:00 PM

From Bloomberg: Commercial Property Prices Rose 0.9% in June, Moody’s Says

U.S. commercial property prices rose 0.9 percent in June, the second straight monthly gain ... The index, which measures broad price trends, is down 6.6 percent from a year earlier and 45 percent below the peak of October 2007.

The article mentions some of the events that have impacted commercial real estate since June, so July and August might be weaker:

Europe’s debt crisis, signs the U.S. will remain mired in sluggish growth through next year and the Standard & Poor’s downgrade of the nation’s credit rating roiled financial markets and triggered a selloff in securities linked to debt on commercial real estate. ...

Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. Beware of the "Real" in the title - this index is not inflation adjusted.

Click on graph for larger image in graph gallery.

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).

According to Moody's, CRE prices are down 6.6% from a year ago and down about 45% from the peak in 2007. Some of this is probably seasonal, although Moody's mentioned a price pickup "beyond trophy properties and major U.S. coastal cities". Note: There are few commercial real estate transactions compared to residential, so this index is very volatile.

Earlier:
• MBA: Mortgage Delinquencies increased slightly in Q2
• MBA Delinquency Survey: Comments and State Data
• Mortgage Delinquencies by State: Range and Current

by Calculated Risk on 8/22/2011 06:25:00 PM

Earlier I posted a graph on mortgage delinquencies by state. This raised a question of how the current delinquency rate compares to before the crisis - and also a comparison to the peak of the delinquency crisis in each state.

The following graph shows the range of percent seriously delinquent and in-foreclosure for each state (dashed blue line). The red diamond indicates the current serious delinquency rate (this includes 90+ days delinquent or in the foreclosure process).

Click on graph for larger image in graph gallery.

Some states have made progress: Arizona, Michigan, Nevada and California. Other states, like New Jersey and New York, have made little or no progress in reducing serious delinquencies.

Arizona, Michigan, Nevada and California are all non-judicial foreclosure states. States with little progress like New Jersey, New York, Illinois and Florida are all judicial states.

Note: This data is for 42 states only and D.C.

The second graph shows total delinquencies (including less than 90 days) and in-foreclosure.

Even though there has been some progress in a few states, there is a long way to go to get back to the Q1 2007 rates.

Earlier:
• MBA: Mortgage Delinquencies increased slightly in Q2
• MBA Delinquency Survey: Comments and State Data

by Calculated Risk on 8/22/2011 03:37:00 PM

From the San Francisco Fed: Boomer Retirement: Headwinds for U.S. Equity Markets?

This Economic Letter examines the extent to which the aging of the U.S. population creates headwinds for the stock market. We review statistical evidence concerning the historical relationship between U.S. demographics and equity values, and examine the implications of these demographic trends for the future path of equity values.
...
[E]vidence suggests that U.S. equity values are closely related to the age distribution of the population. Since demographic trends are largely predictable, we can forecast the path that the P/E ratio is likely to follow in the next few decades based on the predicted M/O ratio.
...
What does the model say about the future trajectory of the P/E ratio? ... To obtain this future P/E* path, we calculate the projected M/O ratio from 2011 to 2030 by feeding Census Bureau projected population data into the estimated model. Figure 2 shows that P/E* should decline persistently from about 15 in 2010 to about 8.4 in 2025, before recovering to 9.14 in 2030.

There are two diagrams in the economic letter. This is probably another reason many boomers will never retire ...

Earlier:
• MBA: Mortgage Delinquencies increased slightly in Q2
• MBA Delinquency Survey: Comments and State Data