by Calculated Risk on 6/07/2012 03:45:00 PM

Below is a graph comparing mortgage rates from the Freddie Mac Primary Mortgage Market Survey® (PMMS®) and the refinance index from the Mortgage Bankers Association (MBA).

Freddie Mac reported earlier today that 30 year mortgage rates had fallen to a record low 3.67% in the PMMS®.

And the MBA reported yesterday that refinance activity increased another 2 percent last week.

Earlier from Freddie Mac: Record-Setting Low Fixed Mortgage Rates Persist

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates falling to new all-time record lows for the sixth consecutive week ...

30-year fixed-rate mortgage (FRM) averaged 3.67 percent with an average 0.7 point for the week ending June 7, 2012, down from last week when it averaged 3.75 percent. Last year at this time, the 30-year FRM averaged 4.49 percent.

Click on graph for larger image.

This graph shows the MBA's refinance index (monthly average) and the the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®.

The Freddie Mac survey started in 1971 and mortgage rates are currently at the record low for the last 40 years.

It usually takes around a 50 bps decline from the previous mortgage rate low to get a huge refinance boom - and rates are there! The 30 year conforming mortgage rates were at 4.23% in October 2010, so a 50 bps drop would be 3.73% - and rates hit 3.67% last week.

There has also been an increase in refinance activity from borrowers with negative equity and loans owned or guaranteed by Fannie or Freddie.

The second graph shows the 15 and 30 year fixed rates from the Freddie Mac survey. The Primary Mortgage Market Survey® started in 1971 (15 year in 1991). Both rates are at record lows for the Freddie Mac survey, and rates for 15 year fixed loans are now below 3%.

Note: The Ten Year treasury yield is just off the record low at 1.65% (the record low was last week at 1.44%).

by Calculated Risk on 6/07/2012 12:00:00 PM

The Federal Reserve released the Q1 2012 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth peaked at $67.5 trillion in Q3 2007, and then net worth fell to $51.3 trillion in Q1 2009 (a loss of $16.2 trillion). Household net worth was at $62.9 trillion in Q1 2012 (up $11.6 trillion from the trough, but still down $4.6 trillion from the peak).

The Fed estimated that the value of household real estate increased $372 billion to $16.05 trillion in Q1 2012. The value of household real estate has fallen $6.3 trillion from the peak.

Click on graph for larger image.

This is the Households and Nonprofit net worth as a percent of GDP.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

This ratio was relatively stable for almost 50 years, and then we saw the stock market and housing bubbles. The ratio has been increasing a little recently.

This graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q1 2012, household percent equity (of household real estate) was at 40.7% - up from Q4, and the highest since 2008. This was because of a small increase in house prices in Q1 (the Fed uses CoreLogic) and a reduction in mortgage debt..

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 52+ million households with mortgages have far less than 40.7% equity - and over 10 million have negative equity.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.

Mortgage debt declined by $85 billion in Q1. Mortgage debt has now declined by $885 billion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).

The value of real estate, as a percent of GDP, is near the lows of the last 30 years, however household mortgage debt, as a percent of GDP, is still historically very high, suggesting more deleveraging ahead for households.

by Calculated Risk on 6/07/2012 10:04:00 AM

Federal Reserve Chairman Ben Bernanke testimony "Economic Outlook and Policy" before the Joint Economic Committee, U.S. Senate:

Concerns about sovereign debt and the health of banks in a number of euro-area countries continue to create strains in global financial markets. The crisis in Europe has affected the U.S. economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring U.S. financial markets and institutions. European policymakers have taken a number of actions to address the crisis, but more will likely be needed to stabilize euro-area banks, calm market fears about sovereign finances, achieve a workable fiscal framework for the euro area, and lay the foundations for long-term economic growth. U.S. banks have greatly improved their financial strength in recent years, as I noted earlier. Nevertheless, the situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.

Here is the CNBC feed.

Here is the C-Span Link

by Calculated Risk on 6/07/2012 08:30:00 AM

The DOL reports:

In the week ending June 2, the advance figure for seasonally adjusted initial claims was 377,000, a decrease of 12,000 from the previous week's revised figure of 389,000. The 4-week moving average was 377,750, an increase of 1,750 from the previous week's revised average of 376,000.

The previous week was revised up from 383,000 to 389,000.

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 increased to 377,750.

The average has been between 363,000 and 384,000 all year, and this is the highest level since early May.

And here is a long term graph of weekly claims:

Initial weekly claims remain elevated.

This was close to the consensus forecast of 379,000.

All current Employment Graphs

by Calculated Risk on 6/06/2012 09:53:00 PM

The focus on Thursday will be on the comments from Fed Chairman Ben Bernanke during his Senate testimony. Here is the schedule:

• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decline to 379 thousand from 383 thousand last week.

• At 10:00 AM, Fed Chairman Ben Bernanke will testify before the Joint Economic Committee, U.S. Senate, "Economic Outlook and Policy"

• At noon, the Fed will release the Q1 Flow of Funds report.

• And at 3:00 PM, the Fed will release Consumer Credit for April. The consensus is for a $12.0 billion increase in consumer credit.