by Calculated Risk on 9/12/2012 09:31:00 AM

From CoreLogic: CORELOGIC® Reports Number of Residential Properties in Negative Equity Decreases Again in Second Quarter of 2012

CoreLogic ... today released new analysis showing that 10.8 million, or 22.3 percent, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2012. This is down from 11.4 million properties, or 23.7 percent, at the end of the first quarter of 2012. An additional 2.3 million borrowers possessed less than 5 percent equity in their home, referred to as near-negative equity, at the end of the second quarter. Approximately 600,000 borrowers reached a state of positive equity at the end of the second quarter of 2012, adding to the more than 700,000 borrowers that moved into positive equity in the first quarter of this year.

Together, negative equity and near-negative equity mortgages accounted for 27.0 percent of all residential properties with a mortgage nationwide in the second quarter, down from 28.5 percent at the end of the first quarter in 2012. Nationally, negative equity decreased from $691 billion at the end of the first quarter in 2012 to $689 billion at the end of the second quarter, a decrease of $2 billion driven in large part by an improvement in house price levels.

“The level of negative equity continues to improve with more than 1.3 million housholds regaining a positive equity position since the beginning of the year,” said Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity.”

Click on graph for larger image.

This graph shows the break down of negative equity by state. Note: Data not available for some states. From CoreLogic:

"Nevada had the highest percentage of mortgaged properties in negative equity at 59 percent, followed by Florida (43 percent), Arizona (40 percent), Georgia (36 percent) and Michigan (33 percent). These top five states combined account for 34.1 percent of the total amount of negative equity in the U.S."

The second graph shows the distribution of home equity. Close to 10% of residential properties have 25% or more negative equity - it will be long time before those borrowers have positive equity. But some borrowers are close.

More from CoreLogic: "As of Q2 2012, there were 1.8 million borrowers who were only 5 percent underwater. If home prices continue increasing over the next year, these borrowers could move out of a negative equity position."

This is some improvement, but there are still 10.8 million residential properties with negative equity.

by Calculated Risk on 9/12/2012 07:01:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

The adjusted Refinance Index increased 12 percent from the previous week. The seasonally adjusted Purchase Index increased 8 percent from one week earlier.

The holiday adjusted numbers may overstate the level of refinance applications because some lenders who rely primarily on the internet/consumer direct channel for originations saw little if any decline in applications for Labor Day as compared with the drops for lenders relying on retail offices, perhaps because borrowers had additional time over the Labor Day weekend to complete online refinance applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.75 percent from 3.78 percent, with points increasing to 0.44 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

The purchase index has been mostly moving sideways over the last two years.

by Calculated Risk on 9/12/2012 12:01:00 AM

On QE3 from Binyman Appelbaum at the NY Times: Economic Stimulus as the Election Nears? It’s Been Done Before

In September 1992, the Federal Reserve culminated a long-running effort to stimulate the sluggish economy by cutting its benchmark interest rate to 3 percent, the lowest level it had reached in almost three decades.

The cut was avidly sought by the administration of President George H. W. Bush, but it was not enough to change the course of the presidential election. Years later, Mr. Bush told an interviewer that the Fed’s chairman, Alan Greenspan, had cost him a second term by failing to act more quickly and more forcefully.
...
Experts say Fed officials are sensitive to the danger of a political reaction. But Randall S. Kroszner, a Fed governor from 2006 to 2009, said the Fed’s current chairman, Ben S. Bernanke, has concluded that the best defense of the Fed’s independence is to demonstrate its value by reaching decisions on the economic merits, then offering clear explanations to politicians and the public. “Any decision the Fed will make will make someone unhappy, but what you want out of an independent agency is a careful deliberative process,” said Mr. Kroszner, a professor of economics at the University of Chicago Booth School of Business.

“Providing as much substantive economic explanation as possible for the actions that the Fed is taking, that’s the best way to maintain the Fed’s independence,” he added.

Monetary policy impacts the economy with a lag, and it is too late to have an impact before the election - so politics shouldn't be a consideration.

The iPhone 5 is almost an economic event, from the WSJ: Expectancy Builds Up For Apple's New iPhone

The next iPhone, which has been referred to internally by the code name N41, has been in the works for more than a year, a person familiar with the matter said. Apple is expected to tweak the smartphone's shape with a slightly larger screen and a different shell, and it will work with wireless carriers' fastest LTE networks and run new mobile software. That software, iOS 6, includes improvements to voice-activated assistant Siri, a new digital-coupon-and-passes service called Passbook, and new call-blocking features, among several others.

On Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 8:30 AM, Import and Export Prices for August will be released. The consensus is a for a 1.5% increase in import prices.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for July. The consensus is for a 0.4% increase in inventories.

by Calculated Risk on 9/11/2012 06:21:00 PM

I've been following the Sacramento market to look for changes in the mix of house sales in a distressed area over time (conventional, REOs, and short sales). The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

Recently there has been a dramatic shift from REO to short sales, and the percentage of distressed sales has been declining. This data would suggest some improvement although the percent of distressed sales is still very high.

In August 2012, 52.0% of all resales (single family homes and condos) were distressed sales. This was down from 54.4% last month, and down from 62.0% in August 2011. The percentage of REOs fell to 16.6%, the lowest since the Sacramento Realtors started tracking the data and the percentage of short sales increased to 35.4%, the highest percentage recorded.

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales. Usually there is a seasonal pattern for conventional sales (stronger in the spring and summer), and distressed sales happen all year - so the percentage of distressed sales decreases every summer and the increases in the fall and winter.

There has been an increase in conventional sales this year, and there were twice as many short sales as REO sales in August. The gap between short sales and REO sales is increasing.

Total sales were unchanged from August 2011 (same pace as last year even with fewer foreclosures).

Active Listing Inventory for single family homes declined 62.0% from last August, although listings were up 10.6% in August (from July).

Cash buyers accounted for 33.1% of all sales (frequently investors), and median prices were up 12.0% from last August.

This seems to be moving in the right direction, although the market is still in distress.

We are seeing a similar pattern in other distressed areas to more conventional sales, and a shift from REO to short sales,.

by Calculated Risk on 9/11/2012 04:04:00 PM

From housing economist Tom Lawler:

One of the big changes in the structure of the US Single Family (SF) housing market has been the sharp increase in the share of SF housing units that are occupied by renters. Obviously, one reason is the substantial increase in the share of SF home purchases by investor attracted by the steep drop in home prices relative to rents, and who plan to rent the purchased properties for “several” years. But ... where has the increase in the number of renters of SF homes come from?

Well, a decent % of the increased number of renters of SF homes has probably come from … yup, folks who “lost” their previously-owned SF home either to foreclosure or through a short sale.

In a Federal Reserve Staff Working Paper published last May entitled “The Post-Foreclosure Experience of U.S. Households,” Fed economists Raven Molloy and Hui Shan used data from the FRB of New York/Equifax “Consumer Credit Panel” dataset to try to identify where households experiencing foreclosure end up moving to, including the type of housing. While there are challenges with using the CCP dataset for this purpose (e.g., the dataset only identifies a foreclosure start, and not a completed foreclosure, and does not explicitly identify a mortgage as backing the borrower’s primary residence), the authors make certain assumptions (ya gotta read the paper) to attempt to identify where “owners” who experienced a foreclosure start and who moved two years later ended up living. They also compare the experience of these householders to a group of “similar” householders who did not experience a foreclosure but who also moved two years later.

While the dataset limitations make it difficult to make crystal-clear conclusions, the data seem to suggest that a fairly large (perhaps as high as 60%) percentage of householders experiencing a foreclosure from 2006 to 2008 subsequently ended up renting a SF home, though a non-trivial (perhaps as high as 23%) ending up renting a unit in a multifamily structure. Not surprisingly, very few of the householders in the dataset who experienced a foreclosure and subsequently moved had a mortgage on the property they had moved into.

When it comes to analyzing the portion of the so-called “shadow inventory” that is currently occupied by owners behind on their mortgages, where these householders may ultimately live is important in assessing the implications for the overall housing market. Some folks who write about the “shadow” inventory where they include properties backing mortgages likely to be foreclosed upon seem to assume that all of the folks living in these properties will either “disappear,” or move in with someone else. That just ain’t so!

Unfortunately, of course, there are to the best of my knowledge no good (or possibly no) data on the percentage of properties backing seriously-delinquent/in foreclosure mortgages that are vacant, occupied by renters, or occupied by owners. There also doesn't appear to be any data on the condition of these properties. I don’t rightly know why government officials haven’t asked the large servicers for such data, though it’s quite possible they don’t have a clue.

There are, of course, reasons to believe that the share of the “shadow” inventory that is either vacant or non-owner-occupied has fallen over the past few years. After all, the share of completed foreclosure sales that were non-owner-occupied has been significantly higher than the non-owner-occupied share of outstanding first-lien mortgages.