by Calculated Risk on 1/29/2008 09:17:00 AM

Correction (hat tip Whiskey): the composite 10 is down 8.4% (ten cities), the composite 20 is down only 7.7%.

Here is the S&P/Case-Shiller data.

Here is the year over year change in both October and November for 20 large U.S. metropolitan areas (not the entire U.S.). Prices are falling in every city in the index (even the three cities with rising year-over-year prices are seeing falling prices on a monthly basis).

City	YoY Price Change, October	YoY Price Change November
Charlotte - NC	4.3%	2.9%
Seattle - WA	3.3%	1.8%
Portland - OR	1.9%	1.3%
Dallas - TX	-0.1%	-1.2%
Atlanta - GA	-0.7%	-2.0%
Denver	-1.8%	-3.1%
Chicago	-3.2%	-3.9%
Boston	-3.6%	-3.0%
New York	-4.1%	-4.8%
Cleveland - OH	-4.5%	-5.8%
Minneapolis- MN	-5.5%	-6.6%
San Francisco	-6.2%	-8.6%
Washington	-7.0%	-7.8%
Los Angeles	-8.8%	-11.9%
Phoenix - AZ	-10.6%	-12.9%
Las Vegas	-10.7%	-13.2%
San Diego	-11.1%	-13.4%
Detroit - MI	-11.2%	-13.0%
Tampa - FL	-11.8%	-12.6%
Miami	-12.4%	-15.1%
Composite-20	-6.1%	-7.7%

by Calculated Risk on 1/29/2008 08:34:00 AM

From Reuters: Countrywide--1 in 3 subprime mortgages delinquent

Countrywide said borrowers were delinquent on 33.64 percent of subprime loans it serviced as of Dec. 31, up from 29.08 percent in September.

From the WSJ: Countrywide Swings to Loss

Countrywide ... lost $422 million...

Countrywide set aside $924 million for credit losses during the fourth quarter, compared with reserves of $73 million during the final quarter in 2006.

More to come, Countrywide is still in the Confessional.

by Calculated Risk on 1/28/2008 08:50:00 PM

Countrywide sent out a letter on Jan 18th with their new Soft Market policies (hat tip ck).

... 2008 is forecasted to be a challenging year for the mortgage industry, characterized by a declining Housing Price Index in a wide variety of metropolitan markets. In the context of the prominent threat to our industry of collateral values falling below outstanding loan balances, mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay.

Note that last phrase: "borrowers do not take on loans that they do not have the economic interest to repay". Countrywide is clearly concerned about the new trend of buyers "walking away" from their mortgages.

The policy basically reduced the maximum LTV for various loans based on the county risk level. Countrywide's ranking of risk, by county, is available online Countrywide Soft Market County Index.

by Calculated Risk on 1/28/2008 04:38:00 PM

From American Express:

"... we saw clear signs of a weakening economy and business environment in December,”
Kenneth I. Chenault, chairman and CEO.

And from CNBC:

The company also set aside $440 million in the quarter to cover loans that it expects won't be repaid.

Consumers are cutting back on their spending because of many factors that include higher energy and food prices, in addition to weakness in the credit and housing markets.

by Calculated Risk on 1/28/2008 03:22:00 PM

From the WSJ: New York Hires Perella To Advise on Bond Insurers

The New York State Insurance Department has hired the Wall Street firm Perella Weinberg Partners for advice on the financial health of bond insurers.
...
The Perella Weinberg assignment focuses on protecting policy holders who are customers of so-called monoline insurers, which include Ambac Financial Group Inc. and MBIA Inc., according to people familiar with the assignment.

A line of credit or capital infusion from the insured to the insurer is not an answer. I'm not sure how you can protect the policy holders if the insurer can't pay.

by Calculated Risk on 1/28/2008 11:22:00 AM

Click on graph for larger image.

This graph shows New Home Sales vs. recessions for the last 45 years. New Home sales were falling prior to every recession, with the exception of the business investment led recession of 2001.

Note that the escalation of the Vietnam War in the '60s kept the economy out of recession, even though New Home sales were falling.

This is what we call Cliff Diving!

And this shows why so many economists are concerned about a possible consumer led recession - possibly starting in December (as shown on graph).

by Calculated Risk on 1/28/2008 10:00:00 AM

According to the Census Bureau report, New Home Sales in December were at a seasonally adjusted annual rate of 604 thousand. Sales for November were revised down to 634 thousand, from 647 thousand, and numbers for October were revised up slightly.

	Click on Graph for larger image. Sales of new one-family houses in December 2007 were at a seasonally adjusted annual rate of 604,000 ... This is 4.7 percent below the revised November rate of 634,000 and is 40.7 percent below the December 2006 estimate of 1,019,000.
	The Not Seasonally Adjusted monthly rate was 42,000 New Homes sold. There were 71,000 New Homes sold in December 2006. December '07 sales were the lowest December since 1994 (40,000).
	The median and average sales prices are generally declining. Caution should be used when analyzing monthly price changes since prices are heavily revised and do not include builder incentives. The median sales price of new houses sold in December 2007 was $219,200; the average sales price was $267,300.
	The seasonally adjusted estimate of new houses for sale at the end of December was 495,000. The 495,000 units of inventory is slightly below the levels of the last year. Inventory numbers from the Census Bureau do not include cancellations - and cancellations are once again at record levels. Actual New Home inventories are probably much higher than reported - my estimate is about 100K higher.
	This represents a supply of 9.6 months at the current sales rate.

This is another VERY weak report for New Home sales. Most revisions continue to be down. This is the fifth report after the start of the credit turmoil, and, as expected, the sales numbers are very poor.

I expect these numbers to be revised down too. More later today on New Home Sales.

by Calculated Risk on 1/28/2008 09:29:00 AM

From the WSJ: ADS Says Blackstone Deal Unlikely

Alliance Data Systems Corp. ... Blackstone ... likely won't go through with its $6.4 billion acquisition ...

... Blackstone told the data processor and marketing firm in a letter late Friday it doesn't expect the deal to get the necessary approvals from OCC and that the regulator is demanding "extraordinary measures" which "represent operational and financial burdens ... that cannot be reasonably assumed."

"Extraordinary measures" are usually doable during better times. This seems like another way to leave your lover (from Paul Simon):

You just slip out the back, Jack
Make a new plan, Stan
You don't need to be coy, Roy
Just get yourself free

by Calculated Risk on 1/27/2008 08:36:00 PM

House of Cards (video): "Steve Kroft reports on how the U.S. sub-prime mortgage meltdown, in which risky loans drove a housing boom that went bust, is now roiling capital markets worldwide."

Here is the foreclosure site mentioned in the story. I live in a neighborhood that is "immune" to the housing bust. Oh yeah, that site shows a number of REOs and preforeclosure homes in my neighborhood.

by Calculated Risk on 1/27/2008 12:23:00 PM

From CBS: New Trend In Sacramento: 'Intentional Foreclosure' (hat tip Shawn)

Linda Caoli helps lots of families on the verge of losing their homes, including a single mom working two jobs to pay her mortgage.

"She says Linda the house across the street, same model, with more upgrades sold in foreclosure for $315,000!" explains Linda.

Her client isn't the only one thinking about ditching her house to buy the better deal across the street. A number of realtors CBS13 talked to say it's already happening.

This is similar to Peter Viles' story in the LA Times: A tipping point? "Foreclose me ... I'll save money".

Wachovia is seeing this too (from their Jan 22nd conference call):

“... people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they've lost equity ...”

And from BofA CEO Kenneth Lewis in December:

"There's been a change in social attitudes toward default. We're seeing people who are current on their credit cards but are defaulting on their mortgages. I'm astonished that people would walk away from their homes."

This change in social attitudes could lead to a flood of foreclosures. The following is from my post last December: Homeowners With Negative Equity

The following graph shows the number of homeowners with no or negative equity, using the most recent First American data, with several different price declines.

At the end of 2006, there were approximately 3.5 million U.S. homeowners with no or negative equity. (approximately 7% of the 51 million household with mortgages).

By the end of 2007, the number will have risen to about 5.6 million.

If prices decline an additional 10% in 2008, the number of homeowners with no equity will rise to 10.7 million.

The last two categories are based on a 20%, and 30%, peak to trough declines. The 20% decline was suggested by MarketWatch chief economist Irwin Kellner (See How low must housing prices go?) and 30% was suggested by Paul Krugman (see What it takes).

Intentional foreclosure. Jingle Mail. Negative Equity. All terms that could be common in 2008.