by Calculated Risk on 9/14/2006 10:04:00 PM

From the USA Today: More fall behind on mortgages

More homeowners with shaky credit are falling behind on their mortgage payments, especially in such states as Ohio, Alabama, Tennessee, Michigan and West Virginia, where job losses have struck the local economies, the Mortgage Bankers Association said Wednesday.

The problem is the worst for those with subprime credit who pay higher-than-usual interest rates and who have adjustable loans that have been resetting to higher rates. About 12.2% of such borrowers were late paying their loans in April through June, the highest level since the end of 2003.

About 25% of all mortgages carry adjustable rates, and more than half of those loans are to subprime borrowers. As a result, delinquencies are expected to rise through next year as more adjustable-rate mortgages reset to higher rates, sending ripples through family finances and housing markets.

Calls to the Homeownership Preservation Foundation, which provides free credit counseling, hit a record 2,464 in August, a 25% jump over July. More than half of the distressed callers had ARM loans.

See the article for a state by state chart of delinquency rate.

Here is the MBA report: Some Delinquency Measures Tick Upwards

“Going forward we expect some further slowing in the economy and the housing market. As a result, we will see modest increases in delinquency and foreclosure rates in the quarters ahead,” said [Doug Duncan, MBA’s chief economist and senior vice president of research and business development].

by Calculated Risk on 9/14/2006 12:47:00 PM

For insomniacs, paper_money has posted a video of the "Housing Bubble" Senate hearing.

by Calculated Risk on 9/14/2006 01:33:00 AM

On September 20th at 10:00AM EST the Senate will hold a hearing:

Calculated Risk: Assessing Non-Traditional Mortgage Products

Don't blame me!

by Calculated Risk on 9/13/2006 07:36:00 PM

Reuters reports: CFOs see 33 pct chance of US recession in 12 months-survey

Chief financial officers of U.S. corporations are increasingly pessimistic about their business and the overall economy, and put the chance of a recession within the next year at 33 percent, a quarterly survey reported on Wednesday.

The level of pessimism about the U.S. economy is the highest in five years, the survey by Duke University and CFO Magazine found. Fewer finance chiefs expect to increase capital spending, their forecasts for earnings growth are lower, and expectations for hiring are down, the survey found.

CFOs are a key survey group to gauge future business investment and hiring. As the article notes:

The 10-year old survey has been a strong leading indicator of corporate results and behavior, said survey director John Graham.

"I would expect earnings, capital spending and hiring to go down," Graham said, adding his forecast covered the next 12 months.

"I'm not predicting they'll go negative, but I'm predicting they'll slow," he said.

Since most soft landing scenarios are strongly dependent on increases in business investment, this survey is very negative. Here are their concerns:

Sliding consumer demand tops their list of worries. Other major concerns include the rising costs of labor and of energy ...

Of course there has been some good news recently on energy prices; since the mini-spike last month due to the Alaska BP pipeline shutdown announcement, spot oil prices have fallen almost $13 per barrel to under $65 per bbl today. And gasoline prices have fallen too, and, as Dr. Hamilton notes: Gasoline prices will fall even more.

So perhaps falling energy prices will cushion the blow from the housing bust. But, even with the recent drop in energy prices, spot oil prices are still up 10% from the beginning of the year.

by Calculated Risk on 9/13/2006 06:03:00 PM

The LA Times reports: SoCal Home Sale Figures Eroding

Southern California's housing market continued to contract last month as Los Angeles County's home price appreciation shrunk to its lowest level in six years while San Diego County's retreated deeper into negative territory, data released today showed.

Fewer buyers entered the market in August, eroding sales to levels not seen in nearly a decade. In Los Angeles County, the number of homes sold last month — 9,193 — was the fewest since August 1997 and represented a 21% drop from year-ago volumes, according to La Jolla-based research firm DataQuick Information Systems. August was the ninth straight month of plunging year-over-year sales rates.
...
In Southern California, the trend points to continuing softness. In August, the median home price in Los Angeles County rose 4.7% over the same month last year to $517,000. That was the slowest rate of appreciation since the housing boom began six years ago and was below the county's historical average growth rate of 7%, according to DataQuick.

What's more, prices seem to have ceased rising on a month-to-month basis. August's median of $517,000 was virtually flat with June's and July's.

San Diego County, considered a bellwether for the rest of Southern California, saw its year-over-year median price fall 2.2% to $482,000, which was the lowest since March 2005, when the median was $484,000. It was the biggest percentage decline since December 1995.

"It's pretty clear that a price correction is underway in San Diego," said DataQuick analyst Andrew LePage. "Given the trend, it's possible that Los Angeles County could be at zero appreciation — or a little above or a little below — by the end of the year or maybe sooner."

by Calculated Risk on 9/13/2006 02:46:00 PM

Here are the statements from Panel 1:

Mr. Patrick Lawler statement, Chief Economist, Office of Federal Housing Enterprise Oversight

Mr. Richard Brown statement, Chief Economist, Federal Deposit Insurance Corporation

Mr. Dave Seiders statement, Chief Economist, National Association of Homebuilders

Mr. Tom Stevens statement, President, National Association of Realtors

In the previous post I excerpted some of Lawler's statement. Brown reviewed an FDIC study from last year on Booms and Busts (that I excerpted on this blog before).

Nothing new here ...

by Calculated Risk on 9/13/2006 12:19:00 AM

The Mortgage Bankers Association (MBA) reports: Home Purchase Applications Rise during Holiday-shortened Week

Caution: there was a similar bump last year in the MBA index during the week of the Labor Day holiday.

Click on graph for larger image.

The Market Composite Index, a measure of mortgage loan application volume, was 584.2, an increase of 3.2 percent on a seasonally adjusted basis from 566.3 one week earlier. On an unadjusted basis, the Index decreased 8.3 percent compared with the previous week and was down 22.8 percent compared with the same week one year earlier.

The seasonally-adjusted Purchase Index increased by 5.3 percent to 410.2 from 389.7 the previous week and the Refinance Index increased by 0.1 percent to 1597 from 1594.7 one week earlier.

Mortgage rates increased slightly:

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.32 percent from 6.31 percent ...

The average contract interest rate for one-year ARMs increased to 5.96 percent from 5.91 percent ...

Update: I missed the Dow Jones data this week.

Purchase activity is off 22.8% from the comparable week last year.

This graph shows the Purchase Index and the 4 and 12 week moving averages.
Note: Scale does not start at zero to better show changes.

Average year-to-date purchase activity is 13.4% below 2005, and has been running more than 20% below 2005 for the last couple of months.

by Calculated Risk on 9/12/2006 05:48:00 PM

UPDATE: Here is the Senate site: The Housing Bubble and Its Implications for the Economy. If it isn't on C-Span, they may have a link for live broadcast on the net.

Reuters reports: Lawmakers to probe housing "bubble," mortgages

U.S. lawmakers will question some leading government and industry economists about the perils of a possible 'housing bubble' in a Wednesday hearing.

Lawmakers wanted the session "because we've heard a great deal about the possibility of a housing bubble for several years now," said Sen. Wayne Allard, a Republican from Colorado.

The hearing, "The Housing Bubble and its Implications for the Economy," will be held in an open session of the Senate Banking Committee at 10 a.m..

Next week, the same committee will hold a hearing on the growth of innovative mortgage products that have mushroomed along with the housing sector.
...
The lawmakers will hear from several chief economists like Richard Brown of the Federal Deposit Insurance Corporation, Patrick Lawler of the Office of Federal Housing Enterprise Oversight, Dave Seiders of the National Association of Homebuilders and Tom Stevens of the National Association of Realtors.

The witness list has not been confirmed for the hearing on non-traditional mortgages tentatively scheduled to be held next Wednesday, September 20.

Thanks to paper-money who urges everyone to call c-span:

I have just called C-Span to request that this hearing be broadcast. Currently, it’s not certain that this hearing will be covered in tomorrow’s lineup.

I STRONGLY encourage anyone to either call or send an email to C-Span requesting that they cover these hearings.

C-Span by Phone: Dial (202)-737-3220 and tell the operator that you want to request programming of a congressional hearing. He will put you through to a menu that leads to the program director that covers congress.

C-Span by Email: events@c-span.org

by Calculated Risk on 9/12/2006 02:33:00 PM

From MarketWatch: D.R. Horton CEO says 2007 will be worse than 2006

Don Tomnitz, chief executive of D.R. Horton Inc., Tuesday said the company is preparing itself for a tougher housing market in 2007 compared to 2006, with prices finally stabilizing in 2008. "We have never seen housing prices and demand slow as quickly as they have during this downcycle," said the CEO of the nation's largest home builder when measured by 2005 deliveries. "Demand has evaporated to the extent of about 20% to 30% for the industry, and in a tighter timeframe than we've seen before." The use of incentives ... will continue for the next three to four quarters, Tomnitz estimated ...

by Calculated Risk on 9/12/2006 10:36:00 AM

Update: Dr. Setser on trade deficit: Not quite so bright after all

The trade deficit (ex-oil) was thought to be on a downward trajectory.

But after today’s data, that argument may need to be reconsidered.
...
My bottom line: reducing the trade deficit is going to be – barring a big fall in the price of oil – something of a slog. Import growth has to slow. And I suspect that global growth won’t be quite as strong as it has been, making it hard to sustain the very strong export growth the US has enjoyed recently.

Original Post:

The Census Bureau announced the U.S. trade deficit for July was $68.0 Billion. From MarketWatch: Oil imports lead to record trade gap in July

Higher prices for imported oil pushed the U.S. trade gap of goods and services to a new record in July, a government report showed Tuesday.

The nation's trade deficit widened by 5% in July to $68 billion, the Commerce Department said. This beats the previous record of $66.6 billion set last October. Read full government report.

The U.S. imported $20.8 billion worth of crude oil in July, the highest amount on record. The import average price per barrel of crude oil was a record $64.84 in the month.

Click on graph for larger image.

It appears the trade deficit, excluding petroleum, might have stabilized (red). This might indicate a slowing U.S. economy and is consistent with a slowdown in the U.S. housing market.

The increase in petroleum prices was expected for July. However the decrease in exports was unexpected:

Meanwhile, exports of goods alone fell 1.5% in July to $73.4 billion. The drop was led by capital goods.

Still July is the second best month of goods exports ever, and exports of goods are up 14% YTD through July compared to 2005. As the U.S. economy slows, foreign demand for U.S. goods is important for global rebalancing.