by Calculated Risk on 4/03/2013 07:00:00 AM

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

The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier.
...
“Total purchase applications increased last week, due to an almost 7 percent increase in purchase applications for government loans. This was likely driven by borrowers applying for loans prior to the scheduled increase in FHA premiums that took effect on April 1,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “On a year over year basis, purchase applications are up about 4 percent, in line with the trend we are seeing in home sales volumes.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.76 percent from 3.79 percent, with points decreasing to 0.43 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the refinance index.

There has been a sustained refinance boom for over a year.

Refinance activity will probably slow in 2013.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up (slowly) over the last year.

by Calculated Risk on 4/02/2013 09:18:00 PM

On Europe from the NY Times: Unemployment in Euro Zone Reaches a Record 12%

The euro zone jobless rate rose to 12.0 percent in the first two months of the year, the latest in a series of record highs tracing to late 2011, Eurostat, the statistical agency of the European Union, reported Tuesday.

The agency revised upward the January jobless rate for the euro zone from the previously reported 11.9 percent, itself a record. For the overall European Union, Eurostat said the February jobless rate rose to 10.9 percent from 10.8 percent in January, with more than 26 million people without work across the 27-nation bloc.

Both the jobless rates and the number of unemployed are the highest Eurostat has recorded in data that reach back to 1995, before the creation of the euro.
...
“Europe is pursuing a policy that is self-evidently failing.” [said Mark Cliffe, chief economist at ING Group].

In Europe, "self-evidently failing" apparently means more of the same.

Wednesday economic releases:
• 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• Early, Reis Q1 2013 Apartment survey of rents and vacancy rates will be released.

• At 8:15 AM, The ADP Employment Report for March. This report is for private payrolls only (no government). The consensus is for 205,000 payroll jobs added in March.

• At 10:00 AM, ISM non-Manufacturing Index for March. The consensus is for a reading of 56.0 unchanged from 56.0 in February. Note: Above 50 indicates expansion, below 50 contraction.

by Calculated Risk on 4/02/2013 03:55:00 PM

Based on an estimate from AutoData Corp, light vehicle sales were at a 15.27 million SAAR in March. That is up 8% from March 2012, and down slightly from the sales rate last month.

This was below the consensus forecast of 15.4 million SAAR (seasonally adjusted annual rate).

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for March (red, light vehicle sales of 15.27 million SAAR from AutoData).

Click on graph for larger image.

This is a solid start to the new year.    After three consecutive years of double digit auto sales growth, the growth rate will probably slow in 2013 - but this will still be another positive year for the auto industry.

Even if sales average the Q1 rate all year, Total sales would be up about 6% from 2012.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This shows the huge collapse in sales in the 2007 recession, and that sales have increased significantly from the bottom.

by Calculated Risk on 4/02/2013 01:18:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for February 2013. In the past month, the indexes increased in 45 states, decreased in three (Alabama, Illinois, and New Mexico), and remained stable in two (Hawaii and Wyoming), for a one-month diffusion index of 84. Over the past three months, the indexes increased in 46 states, decreased in two (Illinois and Wyoming), and remained stable in two (Alaska and Alabama), for a three-month diffusion index of 88.

Note: These are coincident indexes constructed from state employment data. From the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In February, 47 states had increasing activity, up from 45 in January (including minor increases). This measure has been and up down over the last few years since the recovery has been sluggish.


Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession.

The map is mostly green again and suggests that the recovery is geographically widespread.

by Calculated Risk on 4/02/2013 11:01:00 AM

From Fannie Mae: Fannie Mae Reports Largest Net Income in Company History; $17.2 Billion for 2012 and $7.6 Billion for Fourth Quarter 2012

Fannie Mae today reported annual net income of $17.2 billion for 2012 and quarterly net income of $7.6 billion for the fourth quarter of 2012, compared with a net loss of $16.9 billion for 2011. The improvement in the company’s full-year and quarterly net income was due primarily to improved credit results driven by a decline in serious delinquency rates, an increase in home prices, higher sales prices on Fannie Mae-owned properties, and the company’s resolution agreements with Bank of America.

As a result of actions to strengthen its financial performance and continued improvement in the housing market, Fannie Mae’s financial results improved significantly in 2012 and the company expects to remain profitable for the foreseeable future. Based on analysis of all relevant factors, Fannie Mae determined that the valuation allowance on the company’s deferred tax assets was still appropriate as of December 31, 2012. The valuation allowance as of December 31, 2012 was $58.9 billion.

Fannie had a one time gain from their agreement with BofA, but this didn't includes releasing any of the valuation allowance on its deferred tax assets:

In evaluating the recoverability of Fannie Mae’s deferred tax assets, as of December 31, 2012, the company again determined that the factors in favor of maintaining the allowance outweighed the factors in favor of releasing it. Therefore, Fannie Mae did not release any of its valuation allowance as of December 31, 2012. The valuation allowance as of December 31, 2012 was $58.9 billion.

If and when Fannie Mae does release the valuation allowance on its deferred tax assets, it will be included as income in that period and will result in a corresponding increase in the company’s net worth as of the end of that period. Accordingly, Fannie Mae expects to pay Treasury a significant dividend in the quarter following a release of the valuation allowance on the company’s deferred tax assets. Although Fannie Mae has not completed its analysis, the company believes that, after considering all relevant factors, it may release the valuation allowance on its deferred tax assets as early as the first quarter of 2013.

Tom Lawler reported on this last month: "Given negative earnings and prospects for negative earnings, in 2008 Fannie felt that ... a large portion of its deferred tax asset would never be realized, and as a result it created a "valuation allowance" for its net deferred asset, which hit earnings and net worth."

Now Fannie expects to release a portion of the valuation allowance on its deferred tax assets in 2013, so expect a large reported profit, probably in Q1.

And on house prices (from the Fannie SEC filing):

Specifically, the profile of our single-family guaranty book improved due to:

• A 4.7% increase in home prices in 2012 compared with a home price decline of 3.7% in 2011. Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on loans that do default.

• An increase in sales prices of our REO properties. We received net proceeds from our REO sales equal to 59% of the loans’ unpaid principal balance in 2012, compared with 54% in 2011. Sales prices on dispositions of our REO properties improved in 2012 as a result of increased demand compared with 2011 as well as our efforts to improve the sales execution of our REO properties. The increase in sales proceeds reduces the amount of credit loss at foreclosure and, accordingly, results in a lower provision for credit losses.

• A continued reduction in the number of delinquent loans in our single-family guaranty book of business. Our serious delinquency rate declined from 3.91% as of December 31, 2011 to 3.29% as of December 31, 2012 and our “early stage” delinquencies (loans that are 30 to 89 days past due) declined from 2.91% as of December 31, 2011 to 2.62% as of December 31, 2012. The reduction in the delinquency rates is due, in part, to our efforts since 2009 to improve our underwriting standards and the credit quality of our single-family guaranty book of business, which has resulted in a decrease in the number of loans becoming delinquent. A decline in the number of loans becoming delinquent or seriously delinquent reduces our total loss reserves and provision for credit losses.