by Calculated Risk on 5/07/2014 02:49:00 PM

This was released in late April by DataQuick: California Foreclosure Starts Hover Near 8-Year Low

Lenders and their servicers recorded 19,215 Notices of Default (NoDs) on California house and condo owners during this year's first quarter, which runs January through March. That was up 6.0 percent from 18,120 NoDs in the prior quarter, which had the lowest NoD tally since fourth-quarter 2005, and was up 3.5 percent from 18,568 NoDs in first-quarter last year, according to San Diego-based DataQuick.

The trough for DataQuick's NoD statistics, which begin in 1992, was 12,417 in third-quarter 2004, while the peak was 135,431 in first-quarter 2009. Each NoD represents a "foreclosure start" because the filing of the Notice of Default begins the formal foreclosure process.

"It may well be that the foreclosure starts in recent quarters don't reflect the ebb and flow of financial distress as much as they reflect a steady state of workload capacity on the part of the servicers. They may well be just working their way through a backlog, stacks of paper piled high on desks," said John Karevoll, DataQuick analyst.

The past three quarters, along with the first quarter of 2013, have seen the lowest NoD totals since late 2005 and early 2006.

Although this year's first quarter was the first to log a year-over-year increase in default filings since fourth quarter 2009, that gain can be attributed to an anomaly early in first-quarter 2013: There was a short-lived plunge in NoD filings in January and February last year as new state laws - known as the "Homeowner Bill of Rights" - took effect, causing lenders and services to pause and adjust. On a year-over-year basis, NoD filings have only increased in January this year, rising 63.9 percent, while February and March NoD levels fell 2.8 percent and 22.5 percent, respectively, from a year earlier.
emphasis added

Click on graph for larger image.

This graph shows the number of Notices of Default (NoD) filed in California each year.   2014 is in red (Q1 times 4).

Last year was the lowest year for foreclosure starts since 2005, and 2013 was also below the levels in 1997 through 2000 when prices were rising following the much smaller late '80s housing bubble / early '90s bust in California.

Overall foreclosure starts are close to a normal level in California (foreclosure starts were over 50,000 in 2004 and 2005 when prices were rising quickly).

Note: Foreclosures are still higher than normal in states with a judicial foreclosure process.

by Calculated Risk on 5/07/2014 11:17:00 AM

This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in April were down 12% year-over-year and at the lowest level since April 2008.

2) Cash Sales (frequently investors) were down 33%, so investor buying appears to be declining. Non-cash sales were up year-over-year.

3) Active inventory is now increasing rapidly and is up 49% year-over-year - and at the highest level since 2011.

Inventory has clearly bottomed in Phoenix (A major theme for housing last year).   And more inventory (a theme this year) - and less investor buying - suggests price increases should slow sharply in 2014.

According to Case-Shiller, Phoenix house prices bottomed in August 2011 (mostly flat for all of 2011), and then increased 23% in 2012, and another 15% in 2013.  Those large increases were probably due to investor buying, low inventory and some bounce back from the steep price declines in 2007 through 2010.  Now, with more inventory, price increases should flatten out in 2014.

We only have Case-Shiller through February, but the Zillow index shows Phoenix prices down slightly in March (most recent data), and down 1.2% in Q1.

April Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	Cash	Percent Cash	Inventory	YoY Change
Apr-08	4,8751	986	20.2%	55,7261	---
Apr-09	8,564	3,464	40.4%	44,165	-20.7%
Apr-10	9,261	3,641	39.3%	41,756	-5.5%
Apr-11	9,328	4,489	48.1%	34,515	-17.3%
Apr-12	8,438	4,013	47.6%	21,125	-38.8%
Apr-13	8,744	3,670	42.0%	20,083	-4.9%
Apr-14	7,656	2,469	32.2%	29,889	48.8%
1 April 2008 does not include manufactured homes, ~100 more

by Calculated Risk on 5/07/2014 10:05:00 AM

Testimony by Chair Yellen on the economic outlook. A couple of excerpts:

Looking ahead, I expect that economic activity will expand at a somewhat faster pace this year than it did last year, that the unemployment rate will continue to decline gradually, and that inflation will begin to move up toward 2 percent. A faster rate of economic growth this year should be supported by reduced restraint from changes in fiscal policy, gains in household net worth from increases in home prices and equity values, a firming in foreign economic growth, and further improvements in household and business confidence as the economy continues to strengthen. Moreover, U.S. financial conditions remain supportive of growth in economic activity and employment.
emphasis added

And on monetary policy:

As always, our policy will continue to be guided by the evolving economic and financial situation, and we will adjust the stance of policy appropriately to take account of changes in the economic outlook. In light of the considerable degree of slack that remains in labor markets and the continuation of inflation below the Committee's 2 percent objective, a high degree of monetary accommodation remains warranted.

by Calculated Risk on 5/07/2014 07:00:00 AM

For the first time since 2009 there were more purchase mortgage applications than refinance applications last week!

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

Mortgage applications increased 5.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 2, 2014. ...

The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 9 percent from one week earlier to the highest level since January 2014. ...
...
The refinance share of mortgage activity decreased to 49 percent of total applications from 50 percent the previous week.

"It is official: we are in a majority purchase market for the first time since 2009,” said Mike Fratantoni, MBA’s Chief Economist. “A sizeable increase in purchase applications last week likely reflected the impact of somewhat lower mortgage rates as well as continued growth in the job market, as confirmed by Friday’s employment report from the BLS. Despite the strong increase in the purchase market last week, volume continues to run 16 percent behind last year's pace."
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.43 percent, the lowest rates since November 2013, from 4.49 percent, with points decreasing to 0.21 from 0.38 (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.

The refinance index is down 75% from the levels in May 2013 (one year ago).

As expected, with the mortgage rate increases, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 18% from a year ago.

The purchase index is probably understating purchase activity because small lenders tend to focus on purchases, and those small lenders are underrepresented in the purchase index.

by Calculated Risk on 5/06/2014 08:44:00 PM

From Business Insider, here are some housing graphs: Here's Jeff Gundlach's Big Presentation On Why Homeownership Is Overrated And Why He's Short The Homebuilders. Gundlach is arguing the homebuilders are overvalued (I have no comment), and I'm not sure if he made any macro predictions.

This is a weird time because housing is improving, but most housing statistics are ugly. As an example, if I hadn't been paying attention - and someone told me the level of mortgage delinquencies and foreclosures - I'd guess the US was in a deep recession. But the trend for delinquencies tells a very different story.

If Gundlach made some macro predictions, please send them along and maybe I'll comment  ...

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

• At 10:00 AM, Testimony by Fed Chair Janet Yellen, The Economic Outlook, Before the Joint Economic Committee, U.S. Congress

• At 3:00 PM, Consumer Credit for March from the Federal Reserve. The consensus is for credit to increase $15.1 billion.