by Calculated Risk on 3/31/2010 10:40:00 PM

First: the buyer should find out if it is a HAFA short sale (starts April 5th). If so, the "negotiator fee" must be disclosed and be part of the agent's fee (total agent fee not to exceed 6%). From HAFA:

The amount of the real estate commission that may be paid, not to exceed 6% of the contract sales price, and notification if any portion of the commission must be paid to a contractor of the servicer that has been retained to assist the listing broker with the transaction.

As an aside, if the homeowner or buyer is an agent, they are not eligible for any commission.

Any commission that would otherwise be paid to you or the buyer must be reduced from the commission due on sale.

Second: as part of a HAFA short sale, the lender(s) must agree not to pursue a deficiency. If the lender balks on a short sale - I'd ask them about HAFA.

Third: Where are the regulators? Jim the Realtor is talking about rampant fraud in San Diego. Hello? Is anybody listening?

"There is rampant fraud and deceit being imposed by Realtors throughout the county. It's embarrassing."

by Calculated Risk on 3/31/2010 06:55:00 PM

From David Baker at the San Francisco Chronicle: State gas usage falls for 4th straight year

Driven lower by high prices and the recession, gasoline sales in California fell for the fourth year in a row during 2009, state officials reported Tuesday.
...
Annual gas sales in California peaked at 15.9 billion gallons in 2005 and have tumbled 7 percent since then.

Click on graph for larger image in new window.

This graph shows the percent change of taxable gallons of gasoline compared to the same quarter of the prior year.

In addition to gasoline usage being down for four straight years, driven by higher prices and then the recession, usage turned down again in Q4 2009 - probably because prices are up over $3 per gallon again.

by Calculated Risk on 3/31/2010 02:54:00 PM

Here is the monthly Fannie Mae hockey stick graph for January ...

Click on graph for larger image in new window.

Fannie Mae reported today that the rate of serious delinquencies - at least 90 days behind - for conventional loans in its single-family guarantee business increased to 5.52% in January, up from 5.38% in December - and up from 2.77% in January 2009.

"Includes seriously delinquent conventional single-family loans as a percent of the total number of conventional single-family loans."

by Calculated Risk on 3/31/2010 01:06:00 PM

I'd like to highlight a few key points from Atlanta Fed President Dennis Lockhart's speech today: Prospects for Sustained Recovery and Employment Gains

The normal state of affairs in the country's labor market is a dynamic mix of separations from employment and new job creation. There are two causes of separations—layoffs and voluntarily quitting a job, or so-called quits. The BLS began collecting data on these factors in 2000.

In 2008 and 2009, layoffs surged. Fortunately, the number of layoffs per month has recently returned to prerecession levels.

In addition, quits are at a decade-low level likely in part because of the uncertainty of job availability.

Today's slow pace of employment gains is due more to the slow pace of job creation, not the high rate of layoffs. Job gains, as conventionally understood, require two things: a vacancy and a worker able to fill that vacancy. For most of 2009, vacancies were relatively flat while unemployment continued to rise. This condition suggests the existence of what labor economists call "match inefficiencies."

There are two key types of match inefficiency. One is geographic mismatch. In 2008, the percentage of individuals living in a county or state different than the previous year was the lowest recorded in more than 50 years of data. People may be reluctant to relocate for a new job if the value of their house has declined. In addition, many who would like to move are under water in their mortgage or can't sell their homes.

The second inefficiency is skills mismatch. In simple terms, the skills people have don't match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs. Skill mismatches require new training, and there is evidence that adult education institutions have responded to this need. For instance, officials at Miami-Dade College in Florida, which is the largest college in the country and a grantor of associate and vocational degrees, told us they have recently seen a strong increase in enrollment, especially of men in their 20s.

This evidence of retooling is encouraging, but, to be realistic, structural adjustment takes time.

Lockhart discusses two key mismatches, and the housing bubble was a direct cause of both. The first - lower geographical mobility because of the inability to sell a home - is like atherosclerosis for the economy. Usually people can move freely in the U.S. to pursue employment, but many people are tied to an anchor (an underwater mortgage) and solutions like a mortgage modification that requires them to stay in the home for 5 years doesn't help with worker mobility.

The second - skills mismatch - is partly because so many people went into the construction industry because it was the highest paying job. These workers may be highly skilled in their trade, but their skills are probably not transferable to the new jobs being created. I wouldn't be surprised to read of job shortages in some fields, while the unemployment rate remains very high because of the skills mismatch.

And more from Lockhart:

Looking forward, the consensus forecast for March is that the economy will add 200,000 new jobs. That number includes a boost from temporary government hiring for the census.

However, according to an Atlanta Fed estimate, we need to add about that number to payrolls each month for the next year to bring unemployment down a full percentage point. This estimate assumes that the growth in the labor force stays in line with the growth in the population.

This is another key point: Zero payroll jobs is not a magic number. It takes about 125+ thousand payroll jobs added per month to keep the unemployment rate steady over time, and probably close to 200 thousand jobs per month to reduce the unemployment rate by 1% over the next year.

by Calculated Risk on 3/31/2010 10:56:00 AM

This is one of several industry specific indexes I track each month.

Click on graph for larger image in new window.

The current situation for restaurants is still weak, but the index improved because of the outlook for sales growth, capital spending plans, and staffing levels.

Unfortunately the data for this index only goes back to 2002.

Note: Any reading below 100 shows contraction for this index.

From the National Restaurant Association (NRA): Positive Outlook Pushes Restaurant Performance Index To Highest Level in More Than Two Years

[T]the National Restaurant Association’s Restaurant Performance Index (RPI) rose to ... 99.0, up 0.7 percent from January and its strongest level since November 2007.

“The RPI’s strong gain in February was the result of broad-based improvements among the forward-looking indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Restaurant operators’ optimism for sales growth stood at its strongest level in 29 months, with capital spending plans also rising to a two-year high.”

“In addition, restaurant operators reported a positive outlook for staffing gains for the first time in more than two years,” Riehle added. “This bodes well for replacing the more than 280,000 eating and drinking place jobs lost during the recession.”
...
Restaurant operators reported negative same-store sales for the 21st consecutive month in February, with the overall results similar to the January performance.
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Customer traffic also remained soft in February, as restaurant operators reported net negative traffic for the 30th consecutive month.
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Along with continued soft sales and traffic performances, capital spending activity continued to drop off.
emphasis added

by Calculated Risk on 3/31/2010 08:55:00 AM

The MBA reports: Mortgage Refinance Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 1.3 percent on a seasonally adjusted basis from one week earlier. ...

“Purchase applications have increased over the past month, and are now at their highest level since last October when many homebuyers were rushing to get loans closed before the expected expiration of the homebuyer tax credit,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “We may be seeing a similar pattern now, as the extended version of the tax credit ends next month.”

The Refinance Index decreased 1.3 percent from the previous week and the seasonally adjusted Purchase Index increased 6.8 percent from one week earlier. This is the highest Purchase Index since the week ending October 30, 2009. ...

The refinance share of mortgage activity decreased to 63.2 percent of total applications from 65.0 percent the previous week. This is the lowest refinance share recorded in the survey since the week ending October 23, 2009. ...

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.04 percent from 5.01 percent, with points increasing to 1.07 from 0.76 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The recent uptick in purchase applications is probably related to buyers trying to beat the expiration of the tax credit.

I've heard from some real estate agents that activity seems to have picked up, more than the normal seasonal increase, and the MBA data would seem to suggest this is happening. However I expect any increase in activity this year to be less than the increase last year.

by Calculated Risk on 3/31/2010 08:15:00 AM

ADP reports:

Nonfarm private employment decreased 23,000 from February to March on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from January 2010 to February 2010 was revised down slightly, from a decline of 20,000 to a decline of 24,000.

The March employment decline was the smallest since employment began falling in February of 2008. Yet, the lack of improvement in employment from February to March is consistent with the pause in the decline of initial unemployment claims that occurred during the winter.

Since employment as measured by the ADP Report was not restrained in February by the effects of inclement weather, today’s figure does not incorporate a weather-related rebound that could be present in this month’s BLS data. In addition, today’s figure does not include any federal hiring in March for the 2010 Census. For both these reasons, it is reasonable to expect that Friday’s employment figure from the BLS will be stronger than today’s estimate in the ADP National Employment Report.

Note: ADP is private nonfarm employment only (no government jobs).

This is far below the consensus forecast of an increase of 40,000 private sector jobs in March.

The BLS reports on Friday, and the consensus is for an increase of 200,000 payroll jobs in March, on a seasonally adjusted (SA) basis, because of Census 2010 hiring and a bounce back from the snow storms. The underlying trend will be much lower ...

by Calculated Risk on 3/30/2010 11:58:00 PM

The BLS will host a live chat on Friday starting at 9:30 AM ET.

You can submit questions in advance here or submit questions during the event. I'm planning on posting the event on the blog (I'm not involved), so you can (hopefully) read the Q&A and ask questions from the blog on Friday morning.

I sent an advance question asking how we should adjust the seasonally adjusted headline payroll number for the NSA 2010 Census hiring data to try to determine the underlying trend (not counting the snow storms!).

Friday, April 2, 2010 from 9:30 to 10:30 a.m. EDT. From the BLS: "BLS subject matter experts will take your questions on national employment and unemployment data, with a particular focus on the figures for March that will be released that morning at 8:30 a.m. EDT."

by Calculated Risk on 3/30/2010 08:51:00 PM

Building gated communities for young families in exurbia was a great idea ...

From Alana Semuels at the LA Times: From bucolic bliss to 'gated ghetto'

The 427-home Willowalk tract, built by developer D.R. Horton, featured eight distinct "villages" within its block walls. Along with spacious homes, Willowalk boasted four lakes, a community pool and clubhouse. Fanciful street names such as Pink Savory Way and Bee Balm Road added to the bucolic image.
...
Home foreclosures have devastated neighborhoods throughout the country, but the transformation from suburban paradise to blighted community has been especially stark in places like Willowalk -- isolated developments on the far fringes of metropolitan areas that found ready buyers when home prices were soaring but then saw an exodus as values crashed.

Vacant homes are sprinkled throughout Willowalk, betrayed by foot-high grass. Others are rented, including some to families that use government Section 8 vouchers to live in homes with granite countertops and vaulted ceilings.
...
The contrast between occupied and empty houses is evident on one block, where high grass in weedy clumps gives way to a neatly mowed lawn with handwritten signs pleading "Please do not let your dog poop on our yard."

by Calculated Risk on 3/30/2010 06:03:00 PM

One of the key questions is: Will house prices fall as the government support for housing eases? From CNBC: Housing Prices May Be Heading for a Double Dip

Anyone thinking housing prices have reached a bottom had better do some recalculating. Despite Tuesday's Case Schiller report showing smaller declines in January, housing prices may already be in another free fall.

Newly revised numbers are pointing to the decline.

The Federal Housing Finance Agency's (FHFA) adjusted figures show a housing price decline of 2 percent in December and 0.6 percent decline in January—reversing some regional price increases in 2009.

And more pricing dips are predicted.

Few people use the FHFA index anymore, but I do think prices will fall further in many areas. And I think the key housing price indexes, Case-Shiller and First American CoreLogic, have not bottomed yet - although it is possible.

Right now the Case-Shiller composite 10 index is 4.4% above the bottom of May 2009 (seasonally adjusted), and CoreLogic's index is 3.5% above the bottom of March 2009 (NSA), so it will not take much of a decline to see new post-bubble lows.

Last year I listed some of the temporary Government housing support programs (as opposed to permanent programs like tax breaks). This included:

Housing Tax Credit: Buyer must sign a contract by April 30th and close by June 30, 2010 to qualify. Real estate agents in SoCal are telling me there has been a pickup in activity lately - more than seasonal - of buyers trying to beat the deadline for the tax credit. But it is nothing like the buying spurt last November. Most economists opposed the tax credit as misdirected, expensive and ineffective at reducing the supply. Luckily the supporters have promised no extension, from the LA Times: No more extensions of tax credit for first-time home buyers

Federal Reserve MBS Purchase Program: The Federal Reserve is has purchased $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. This is scheduled to end tomorrow, March 31, 2010. It seems very unlike there will be a huge surge in rates as some feared, but I do expect the spread to Treasury yields to increase slightly.

Treasury MBS Purchase Program: This program ended Dec 31, 2009. The Treasury purchased approximately $220 billion of securities.

HAMP Trial Programs Extended: Although the most recent extension ended Jan 31, 2010, the Treasury has added more hoops and hurdles before the lenders can foreclosure, effectively extending the timeframe once again. Now borrowers might be eligible for a temporary unemployment reduction, principal reduction, or participate in the HAFA short sale program.

Support for Fannie and Freddie: This is ongoing.

FHA to tighten Lending Standards: In January the FHA announced slightly tighter standards, but the standards are still pretty loose.

Various Holiday Foreclosure Moratoria: Although this ended back in January, some lenders like Marshall & Ilsley have extended their foreclosure moratoriums:

Marshall & Ilsley Corporation (M&I) today announced it has extended its foreclosure moratorium an additional 90 days – through June 30, 2010. The initial moratorium was announced on December 18, 2008, as part of M&I's Homeowner Assistance Program. The moratorium is on all owner-occupied residential loans for customers who agree to work in good faith to reach a successful repayment agreement. The moratorium applies to applicable loans in all M&I markets.

And other lenders are clearly not been aggresive in foreclosing.

So although some key programs are ending (MBS purchase program and housing tax credit), there are still a number of temporary programs providing support for the housing market.