by Calculated Risk on 11/17/2011 10:00:00 AM

The MBA reported that 12.42 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q3 2011 (delinquencies seasonally adjusted). This is down slightly from 12.87 percent in Q2 2011.

From the MBA: Delinquencies Decrease, Foreclosures Rise in Latest MBA Mortgage Delinquency Survey

The seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties fell to 7.99 percent in the third quarter of 2011, according to data from the Mortgage Bankers Association’s (MBA) National Delinquency Survey. This is the lowest level recorded since the fourth quarter of 2008.

The third quarter seasonally adjusted rate of 7.99 percent is a decrease of 45 basis points from the second quarter of 2011, and a decrease of 114 basis points from one year ago. ...

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. ... The percentage of loans on which foreclosure actions were started during the third quarter was 1.08 percent, up 12 basis points from last quarter and down 26 basis points from one year ago. The percentage of loans in the foreclosure process at the end of the third quarter was 4.43 percent, unchanged from the second quarter and four basis points higher than one year ago.

“While the delinquency picture changed for the better in the third quarter, the foreclosure data indicated that we are not out of the woods yet and that the issues continue to vary by geography. A closer look shows that there are different trends driving these results. The increase in the foreclosure starts rate this quarter was driven by large increases from just a few servicers, concentrated in certain ‘hardest hit’ states. For most servicers, the foreclosure starts rate was little changed over the quarter. In these ‘hardest hit’ states, the few large changes reflects the progression of delinquent loans through the foreclosure process. Outside of these states, improvement has continued, although at a slow pace due to the still-weak job market,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

Note: 7.99% (SA) and 4.43% equals 12.42%.

Click on graph for larger image in graph gallery.

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent decreased to 3.19% from 3.46% in Q2. This is the lowest level since early 2007.

Delinquent loans in the 60 day bucket decreased slightly to 1.30% from 1.37% last quarter. This is the lowest level since Q1 2008.

There was a decrease in the 90+ day delinquent bucket too. This decreased to 3.50% from 3.61% in Q2 2011. This is the lowest level since 2008. This decrease was probably due to the pickup in foreclosure actions.

The percent of loans in the foreclosure process was unchanged at 4.43%.

So the delinquency rate improved in each bucket (30+, 60+, 90+ days), but the percent of loans in the foreclosure process was unchanged. The key problem remains the very high level of seriously delinquent loans and loans in the foreclosure process. I'll have more later after the conference call this morning.

by Calculated Risk on 11/17/2011 08:50:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 628,000. This is 0.3 percent (±10 9%)* below the revised September estimate of 630,000, but is 16.5 percent (±10.7%) above the October 2010 rate of 539,000.

Single-family housing starts in October were at a rate of 430,000; this is 3.9 percent (±7.5%)* above the revised September figure of 414,000. The October rate for units in buildings with five units or more was 183,000.

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 653,000. This is 10.9 percent (±1.6%) above the revised September rate of 589,000 and is 17.7 percent (±3.4%) above the October 2010 estimate of 555,000.

Single-family authorizations in October were at a rate of 434,000; this is 5.1 percent (±1.6%) above the revised September figure of 413,000. Authorizations of units in buildings with five units or more were at a rate of 202,000 in October.

Click on graph for larger image.

Total housing starts were at 628 thousand (SAAR) in October, down 0.3% from the revised Septmeber rate of 630 thousand (SAAR). Most of the increase this year has been for multi-family starts.

Single-family starts increased 3.9% to 430 thousand in October.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that housing starts have been mostly moving sideways for about two years and a half years - with slight ups and downs due to the home buyer tax credit.

Multi-family starts are increasing in 2011 - although from a very low level. This was well above expectations of 605 thousand starts in October.

Single family starts are still "moving sideways".

by Calculated Risk on 11/17/2011 08:30:00 AM

The DOL reports:

In the week ending November 12, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 5,000 from the previous week's revised figure of 393,000. The 4-week moving average was 396,750, a decrease of 4,000 from the previous week's revised average of 400,750.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 396,750.

This is the lowest level for the 4 week average since early April - although this is still elevated.

And here is a long term graph of weekly claims:



All current Employment Graphs

by Calculated Risk on 11/16/2011 08:39:00 PM

Professors Amir Sufi and Atif Mian use county level data to show that household balance sheet problems are directly linked to the high level of unemployment. It is important for policy to understand the reasons unemployment has remained elevated.

From Bloomberg: How Household Debt Contributes to Unemployment: Mian and Sufi

The weakness in household balance sheets and the associated pullback in spending are directly responsible for the lion’s share of employment losses in the U.S. economy. This deficiency remains the most significant impediment to a robust recovery.

Our research suggests that 65 percent of the job losses from 2007 to 2009 came from the drop in household spending induced by the collapse in home prices and its effect on a highly levered household sector.
...
The declines in consumption are far too large to be explained by the drop in house prices alone. It was the combination of collapsing home values and high debt levels that proved disastrous. High-debt areas have been plagued with delinquencies, deleveraging, and the inability to refinance into lower rates -- all characteristics of overleveraged households.

Further, low levels of consumption in high-debt areas continue to be a major drag. For instance, in the second quarter of 2011, auto sales in U.S. counties with the most debt remained a whopping 40 percent below their 2006 levels. By contrast, in areas that had healthy balance sheets before the recession began, the declines in spending were short-lived and a robust recovery is under way.

A summary and two papers:

Household Balance Sheets and the Weak Recovery

What Explains High Unemployment? The Aggregate Demand Channel

A drop in aggregate demand driven by shocks to household balance sheets is responsible for a large fraction of the decline in U.S. employment from 2007 to 2009. The aggregate demand channel for unemployment predicts that employment losses in the non-tradable sector are higher in high leverage U.S. counties that were most severely impacted by the balance sheet shock, while losses in the tradable sector are distributed uniformly across all counties. We find exactly this pattern from 2007 to 2009. Alternative hypotheses for job losses based on uncertainty shocks or structural unemployment related to construction do not explain our results.

Household Balance Sheets, Consumption, and the Economic Slump

The large accumulation of household debt prior to the recession in combination with the decline in house prices has been the primary explanation for the onset, severity, and length of the subsequent consumption collapse. Using novel county level retail sales data, we show that the decline in consumption was much stronger in high leverage counties with large house price declines.

Earlier:
• Industrial Production increased 0.7% in October, Capacity Utilization increased
• Residential Remodeling Index at new high in September
• AIA: Architecture Billings Index increased in October
• Rate of increase slows for Key Measures of Inflation in October
• NAHB Builder Confidence index increases in November

by Calculated Risk on 11/16/2011 06:27:00 PM

Can't go a day without a post on Europe ...

Earlier today - during market hours - Fitch warned about possible contagion to U.S. banks from Europe. From Bloomberg: U.S. Banks Face Serious Risk From Europe Crisis, Fitch Says

“Fitch believes that unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said today in a statement.

And on the ECB from the WSJ: Pressure Rises on the ECB

Pressure mounted on the European Central Bank to take drastic action to stabilize euro-zone bond markets, as investors shrugged off the bank's limited bond buying and European politicians sparred over the ECB's role in fighting the debt crisis.

ECB purchases of Italian and other euro-zone government bonds on Wednesday largely failed to halt the sell-off of struggling euro nations' debt. Investors continued to dump everything but German bunds and it became increasingly difficult to find private buyers for bonds issued by large, economically struggling countries such as Italy and Spain.
...
But Germany's leaders continued to reject calls for the ECB to print money and buy bonds on a bigger scale, insisting that only economic reforms by national governments can solve the debt crisis.

The ECB, with support from Germany, has so far refused to act as euro governments' lender of last resort, and has steadfastly insisted that its bond-purchasing program is temporary and limited in scope.

It seems that policymakers will have to decide soon between more ECB buying or the breakup of the euro-zone.

Below is a table for several European bond yields (links to Bloomberg).

The Italian 10 year bond yield is down to 7.00%. The Italian 2 year yield is down to 6.41%.

The Spanish 10 year bond yield has increased to 6.41%. The Spanish 2 year yield is up to 5.40%.

The Irish 10 year yield is up to 8.21%. The Portuguese 10 year yield is up to 11.3%.

The French 10 year bond yield is up to 3.71%. The Belgium 10 year yield is down slightly to 4.87%.

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year