by Calculated Risk on 10/29/2014 11:35:00 AM

Freddie Mac reported that the Single-Family serious delinquency rate declined in September to 1.96% from 1.98% in August. Freddie's rate is down from 2.58% in September 2013, and this is the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Note: Fannie Mae is expected to report their Single-Family Serious Delinquency rate for September on Friday.

Click on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen 0.62 percentage points over the last year - and the rate of improvement has slowed recently.  However, at that rate of improvement, the serious delinquency rate will not be below 1% until some time in 2016.

Note: Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications. 

So even though distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales for perhaps 2 more years (mostly in judicial foreclosure states).

by Calculated Risk on 10/29/2014 09:25:00 AM

The Case-Shiller house price indexes for August were released yesterday. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close. Note: Hopefully Zillow will start estimating the National Index.

From Zillow: Find Out Next Month’s Case-Shiller Numbers Today

The August S&P/Case-Shiller (SPCS) data out [yesterday] showed more slowing in the housing market with the annual change in the 20-city index falling 1.1 percentage points to 5.6 percent. The national index was up 5.1 percent on an annual basis in August. Our current forecast for SPCS next month indicates further slowing with the annual increase in the 20-City Composite Home Price Index falling to 4.7 percent in September. The last time the SPCS 20-City index grew less than 5 percent annually was in October 2012, when the index grew 4.3 percent year-over-year.

The non-seasonally adjusted (NSA) monthly increase in August for the 20-City index was 0.2 percent, and we expect it to fall 0.2 percent in September. We expect a monthly decline for the 10-City Composite Index, which is projected to drop 0.3 percent from August to September.

All forecasts are shown in the table below. These forecasts are based on the August SPCS data release this morning and the September 2014 Zillow Home Value Index (ZHVI), released October 22. Officially, the SPCS Composite Home Price Indices for August will not be released until Tuesday, November 25.

So the Case-Shiller index will probably show a lower year-over-year gain in September than in August (5.6% year-over-year for the Composite 20 in August, 5.1% year-over-year for the National Index).

Zillow September 2014 Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	September 2013	179.97	176.28	165.60	162.23
Case-Shiller (last month)	August 2014	188.58	184.12	173.66	169.43
Zillow Forecast	YoY	4.5%	4.5%	4.7%	47%
	MoM	-0.3%	0.0%	-0.2%	0.1%
Zillow Forecasts1		188.0	184.2	173.3	169.7
Current Post Bubble Low		146.45	149.88	134.07	137.06
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		28.4%	22.9%	29.3%	23.8%
Bubble Peak		226.29	226.87	206.52	206.61
Date of Bubble Peak		Jun-06	Apr-06	Jul-06	Apr-06
Below Bubble Peak		16.9%	18.8%	16.1%	17.9%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 10/29/2014 07:01:00 AM

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

Mortgage applications decreased 6.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 24, 2014. ...

The Refinance Index decreased 7 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. ... The seasonally adjusted purchase index and conventional purchase index were the lowest since February 2014, while the government purchase index was the lowest since August 2007.
...
“Borrowers with jumbo loans tend to be most sensitive to changes in rates, and that sensitivity has been clearly apparent in the past few weeks with double and even triple digit percentage changes in refinance application volume for jumbo loans,” said Mike Fratantoni, MBA’s Chief Economist. “The average loan size for refinance applications decreased to $263,600 in the most recent week from a survey high of $306,400 the previous week. The decrease was driven by a 41 percent drop in refinance applications for loans greater than $729,000, which had surged almost 130 percent the week before.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.13 percent from 4.10 percent, with points remaining unchanged at 0.21 (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 68% from the levels in May 2013.

Even with the recent increase in activity - as people who purchased in the last year or so refinance - refinance activity is very low this year and 2014 will be the lowest since year 2000.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 15% from a year ago.

by Calculated Risk on 10/28/2014 07:15:00 PM

From Tim Duy: FOMC Meeting

Regarding the statement, here is what I anticipate:

1. The general description of the economy will remain essentially unchanged, expanding at a "moderate pace." ...

2. That said, they will mention they remain watchful of foreign growth.

3. They will acknowledge the further decline in unemployment rates yet retain the view that labor market indicators still suggest underutilization of resources. I would not be surprised by specific mention of low wage growth as evidence of underutilization.

4. I expect the Fed will acknowledge the decline in market-based measures of inflation expectations, but ultimately dismiss those measures for now in favor of stable of survey based measures. ...

5. I expect the risks to growth and employment will remain balanced, and the risk of persistently low inflation will continue to be "somewhat diminished."

6. They will announce the end of the asset purchase program, but emphasize continued reinvestment of principle and that the sizable asset holdings will continue to provide support for the recovery.

7. They will note that despite the end of asset purchases, such purchases remain in the monetary toolbox and could be revived if conditions warranted.

8. The "considerable time" language will remain. ...

9. I expect at least one dissent.

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

• At 2:00 PM, the FOMC Meeting Statement. The FOMC is expected to announce the end of QE3 asset purchases at this meeting.

by Calculated Risk on 10/28/2014 02:16:00 PM

From the National Multi Housing Council (NMHC): Apartment Markets Expand Further in October NMHC Quarterly Survey

For the third quarter in a row, apartment markets expanded across all four areas of the National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. Market tightness (52), sales volume (58), equity financing (54) and debt financing (71) indexes all remained above 50 – indicating growth from the previous quarter.

“The apartment markets are still firing on all cylinders,” said Mark Obrinsky, NMHC’s SVP of Research and Chief Economist. “Demand for apartment residences is still strong enough to offset the gradually rising level of new apartment deliveries. Even with occupancy rates at high levels, markets got just a bit tighter in the last three months."

The survey also asked about apartment demand from demographics beyond the core mid-to-late twenties set. One in five (22 percent) reported a significant increase in the number of Baby Boomers among their residents. A similar share (21 percent) indicated a significant increase in “forty-somethings” in their properties. A smaller share of respondents reported increases among single parents (13 percent) and married couples with children (4 percent).

“Young people still make up a disproportionate share of apartment renters. But now we’re starting to see growing segment of baby boomers attracted to apartment living,” said Obrinsky.
...
The Market Tightness Index fell from 68 to 52. Slightly more than half (52 percent) of respondents reported unchanged conditions. Approximately one-quarter (26 percent) saw conditions as tighter than three months ago, a decrease from July’s survey, where half saw conditions as tighter than three months ago. Looser conditions were reported by 22 percent of respondents, a slight uptick from July’s 15 percent.
emphasis added

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. This indicates slightly tighter market conditions in Q3.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.  The apartment market is still solid.