This Slowdown We Can Handle
by Lawrence Yun, NAR Chief Economist
The economy is slowing. In the fourth quarter, GDP growth will have shrunk for the first time since the 2001 recession. The projected decline is only 0.4 percent, but it is nonetheless a decline. Because of the lag time in data collection, economic shrinkage will be reported in late January. At that point there will be shouts of RECESSION, RECESSION, and RECESSION. Beware of DoomsdayersNo worries though. Technically an economic recession comprises two consecutive quarters of contraction. (It is measured that way because only a sustained economic contraction leads to sustained net job cuts.) The projected fourth quarter decline is due to cutbacks in residential construction activity and from a statistical “quirk” in business inventory investment. The business inventory components generally regain quickly. The inventory-to-sales ratio is touching record lows (i.e., companies are operating with thin inventory) and some build-up in business inventory is inevitable going into 2008. The cutbacks in residential construction are continuing but most of the major declines have already occurred. Subsequent construction declines in 2008 will have less of an impact. Housing starts have fallen from their 1.5 million unit pace in the early part of 2007 to 1.2 million in the latter part of 2007. For 2008, housing starts are projected to be 1.15 million units – weak activity but still a rather mild decline from the final quarter of 2007.The other components of GDP will hold on. Consumer spending will continue to expand, albeit at a slower pace. It is difficult to foresee a consumer spending contraction given the fundamental improvement in household balance sheets. Compared to two years ago, salary payments to workers have increased by $700 billion, four million additional net new jobs have been added, and household net worth has risen by $8 trillion – principally from a rising stock market. Wealth in homes has declined by $200 billion in the past year due to the lower home prices (on average). On a net average though, if you add up the above figures, households are in better financial condition. Consumer spending will not contract.Business profit appears to have topped out in the past two quarters. However, business spending will advance at a respectable pace because aggregate corporate profits are considerably higher now compared to just two years ago. Government spending nearly always rises. Net exports also look favorable given the weakness in the U.S. dollar. Foreign purchases of U.S. products will remain strong because U.S. products are competitively priced.Eye on the FedAll in all, we will easily escape recession – despite the anticipated screaming headlines of impending doom. The GDP reading for each of the successive quarters in 2008 will be positive: 2.2 percent in the first quarter, 2.6 percent in the second quarter, 3.0 percent in the third quarter, and 3.1 percent in the fourth. Job gains also will continue into 2008.But even a temporary contraction in GDP has some benefits. Despite a relatively high inflation reading in November (0.8%), weaker GDP growth will hold back inflationary pressure in 2008. It is likely we’ll see another rate cut by the Federal Reserve. The Fed Funds rate will fall by another quarter point to 4.0 percent in January. Mortgage rates will hover near 6 percent – nearly comparable to the 45-year low rates we encountered in 2004 and 2005 during the housing boom years. Note, however, that is forconforming mortgages and not jumbo rates. But once the economy gathers momentum, mortgage rates will tick modestly higher.Foreclosures and FraudUnfortunately, foreclosure rates will continue to rise in 2008. That is a given due to the weak underwriting standards of past loan originations. Subprime mortgage loss write-downs will also continue. (Write-downs are based on assumed anticipated losses and not actual losses.) Because of inactive trading of subprime debts, the market value of these “toxic” loans is unknowable. It is possible that the actual losses – after tallying the figures for the next several years – could be measurably lower. In my view, a considerable share of the recent spikes in default rates is due to investors walking away from their loan obligations. Fraud is also a factor. However, homeowners will fight hard to keep their homes, so the assumed rise in default rates based on a simple extrapolation of recent figures may not be accurate. Investors/speculators and fraudulent loans will have defaulted quickly, thereby leaving fewer in the potential default pool at a later stage.Recent mortgage originations are much less problematic. We are back to the basics of sound underwriting. Nonetheless, past weak lending standards will mean higher foreclosures well into 2008. Therefore, it is critical for homebuilders to sharply cut back production so as to not add to the already high inventory. As always, we go back to our mantra: All real estate is local. There are wide variations with no one neighborhood trend looking like another. Some areas will see housing activity and prices moving up and some moving down. Local real estate professionals are critical in properly ascertaining local market conditions. In the aggregate, the national home sales and home prices will be very similar in 2008 as in 2007.
Wednesday, January 02, 2008
Where are mortgage rates headed?
Commentary: Jobs report to shed light on economy, inflation
Monday, December 31, 2007By Lou BarnesInman News
An inflation-inspired popup in rates is reversing on news of a weakening economy. Mortgages are still above 6 percent (they touched 6.25 percent at Christmas Eve worst), and markets will now hold until the release of all-powerful payroll numbers on Friday, Jan. 4.
The inflation news before Christmas was disturbing: The indicator was a technical one ("core personal consumption expenditure deflator"), but a Fed favorite jumping the 2 percent top-of-target range. Not by much, 2.2 percent year-over-year, but 2.9 percent in the last three quarters. "Headline" overall CPI is north of 4 percent, felt by everyone.
New claims for unemployment insurance are in an unmistakable uptrend, at 350,000 weekly within 20,000 of the level at onset of the last two recessions.
November data is old, but indicative: Orders for durable goods crept to a 0.1 percent gain versus 2.2 percent forecast, and personal spending soared by 1.1 percent, personal savings going negative by 0.5 percent -- hardly a sustainable party. Markets reacted to Friday's report of a 9 percent collapse in new-home sales as bad news; it is not -- we need these "incentive" discounters to take a couple of years off.
New Year predictions? Don't be silly. Not for 2008.
Instead, herewith a "bracketing" forecast, the probability borders of happy and poor outcomes set by today's mid-range optimists and pessimists. Outliers -- the wacky fringe -- need not apply (which excludes at least half of the commentariat).
First, on recessions in general: They are rare. Since the worst in modern times, the double-bottom '79-'82 affair, we've had only two, both short and shallow affairs, 1991 and 2001.
If you watch nothing else, watch the job market. Sensible optimists call for job "stability," meaning marginal gains and a gradually rising unemployment rate, the consumer staying in the game. Heard everywhere: "Historically, it's a bad idea to bet against the consumer." Reluctant pessimists counter that the job market is a lagging component of the economy, breaking after the start of recession.
Inflation. So long as oil, commodity and food prices behave as they have, it will be hard to find an optimist. In this case, bracketing goes to the world economy, and is three-sided. Economic optimists, many believing that a go-go world has "de-coupled" from the United States, are the inflation worrywarts; the slowdowners think that inflation is another lagging component and will fall back. The third bracket, pushing in from the cutesy sideline, says "stagflation." (I'll be judgmental, here: Stagflation was coined in the '70s during very high inflation and unemployment, both insignificant today by comparison. The stagflationists just can't make up their minds.)
Credit crunch. The hopeful see markets digesting trillions in bad assets "in a couple of quarters" -- Goldman Sachs. The non-apocalyptic skeptics see an impaired system short of credit suppressing growth for years -- Goldman Sachs (different guy).
Housing. Given an absence of optimists, I'll speak for the missing: Foreclosures will rise until 2011, but damage to the overall economy from housing alone (as opposed to the wreck in the financial system) will be less than forecast, as will be credit losses. Prices will stabilize in most Bubble Zones in 2008. Pick your own pessimist.
The Fed. Bernanke's solution to failure as a communicator is to stop trying. Hence, all is guesswork. Truly expert monetary mechanics are in a fierce argument, unable to tell if the Fed is fire-hosing cash to float the economy (and failing), or syringing just enough into banks to keep them alive. The range of serious opinion includes: Bernanke is a courageous, modern-day Volcker who will let the economy slide as far as he can to squelch inflation; or, now at the limit of the Fed's traditional power, is a passive Chairman. Quite incredible that we cannot tell which.
The World. Biggest forecast gap of all. Globalists expect strength to pull all through the credit wreck; old-timers look for Europe then Asia to follow the U.S. into the tank, then the U.S. to pull everybody out in 2009. I have increasing fondness for old guys.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
Commentary: Jobs report to shed light on economy, inflation
Monday, December 31, 2007By Lou BarnesInman News
An inflation-inspired popup in rates is reversing on news of a weakening economy. Mortgages are still above 6 percent (they touched 6.25 percent at Christmas Eve worst), and markets will now hold until the release of all-powerful payroll numbers on Friday, Jan. 4.
The inflation news before Christmas was disturbing: The indicator was a technical one ("core personal consumption expenditure deflator"), but a Fed favorite jumping the 2 percent top-of-target range. Not by much, 2.2 percent year-over-year, but 2.9 percent in the last three quarters. "Headline" overall CPI is north of 4 percent, felt by everyone.
New claims for unemployment insurance are in an unmistakable uptrend, at 350,000 weekly within 20,000 of the level at onset of the last two recessions.
November data is old, but indicative: Orders for durable goods crept to a 0.1 percent gain versus 2.2 percent forecast, and personal spending soared by 1.1 percent, personal savings going negative by 0.5 percent -- hardly a sustainable party. Markets reacted to Friday's report of a 9 percent collapse in new-home sales as bad news; it is not -- we need these "incentive" discounters to take a couple of years off.
New Year predictions? Don't be silly. Not for 2008.
Instead, herewith a "bracketing" forecast, the probability borders of happy and poor outcomes set by today's mid-range optimists and pessimists. Outliers -- the wacky fringe -- need not apply (which excludes at least half of the commentariat).
First, on recessions in general: They are rare. Since the worst in modern times, the double-bottom '79-'82 affair, we've had only two, both short and shallow affairs, 1991 and 2001.
If you watch nothing else, watch the job market. Sensible optimists call for job "stability," meaning marginal gains and a gradually rising unemployment rate, the consumer staying in the game. Heard everywhere: "Historically, it's a bad idea to bet against the consumer." Reluctant pessimists counter that the job market is a lagging component of the economy, breaking after the start of recession.
Inflation. So long as oil, commodity and food prices behave as they have, it will be hard to find an optimist. In this case, bracketing goes to the world economy, and is three-sided. Economic optimists, many believing that a go-go world has "de-coupled" from the United States, are the inflation worrywarts; the slowdowners think that inflation is another lagging component and will fall back. The third bracket, pushing in from the cutesy sideline, says "stagflation." (I'll be judgmental, here: Stagflation was coined in the '70s during very high inflation and unemployment, both insignificant today by comparison. The stagflationists just can't make up their minds.)
Credit crunch. The hopeful see markets digesting trillions in bad assets "in a couple of quarters" -- Goldman Sachs. The non-apocalyptic skeptics see an impaired system short of credit suppressing growth for years -- Goldman Sachs (different guy).
Housing. Given an absence of optimists, I'll speak for the missing: Foreclosures will rise until 2011, but damage to the overall economy from housing alone (as opposed to the wreck in the financial system) will be less than forecast, as will be credit losses. Prices will stabilize in most Bubble Zones in 2008. Pick your own pessimist.
The Fed. Bernanke's solution to failure as a communicator is to stop trying. Hence, all is guesswork. Truly expert monetary mechanics are in a fierce argument, unable to tell if the Fed is fire-hosing cash to float the economy (and failing), or syringing just enough into banks to keep them alive. The range of serious opinion includes: Bernanke is a courageous, modern-day Volcker who will let the economy slide as far as he can to squelch inflation; or, now at the limit of the Fed's traditional power, is a passive Chairman. Quite incredible that we cannot tell which.
The World. Biggest forecast gap of all. Globalists expect strength to pull all through the credit wreck; old-timers look for Europe then Asia to follow the U.S. into the tank, then the U.S. to pull everybody out in 2009. I have increasing fondness for old guys.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
Sunday, December 30, 2007
Sales of New Homes Worse Than Expected
WASHINGTON, Sat Dec 29, 07:28 PM
The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years.
The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.
New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the worst sales pace since April 1995.
"It was ugly," declared Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.
The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000.
By region, sales fell in all parts of the country, except for the West.
In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and fell 6.4 percent in the South. In the West, however, sales rose 4 percent.
Over the last 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.
think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."
The median sales price of a new home dipped to $239,100 in November. That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.
On Wall Street, the Dow Jones industrials, after an erratic session, managed to squeeze out a small gain even as the grim home sales report added to some investors' angst. The Dow closed up 6.26 points at 13,365.87.
Would-be home buyers have found it more difficult to secure financing, especially for "jumbo" mortgages — those exceeding $417,000. The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.
"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.
The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.
Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.
Problems in housing are expected to persist well into 2008 — a major election year.
The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. And, the situation has given Democrat and Republican politicians— including those who want to be the next president — plenty of opportunities to spread blame around.
The economy's growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year. Former Federal Reserve Chairman Alan Greenspan recently warned that the economy is "getting close to stall speed." The big worry is that the housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.
To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year. Its latest rate cut, on Dec. 11, dropped the Fed's key rate to 4.25 percent, a two-year low. Many economists are predicting the Fed will lower rates again when they meet in late January.
"The risks are as high as they've ever been during this expansion that started in late 2001 that the economy will fall into a recession," said Bethune. "The odds are now nudging up close to the 50 percent mark."
WASHINGTON, Sat Dec 29, 07:28 PM
The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years.
The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.
New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the worst sales pace since April 1995.
"It was ugly," declared Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.
The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000.
By region, sales fell in all parts of the country, except for the West.
In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and fell 6.4 percent in the South. In the West, however, sales rose 4 percent.
Over the last 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.
think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."
The median sales price of a new home dipped to $239,100 in November. That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.
On Wall Street, the Dow Jones industrials, after an erratic session, managed to squeeze out a small gain even as the grim home sales report added to some investors' angst. The Dow closed up 6.26 points at 13,365.87.
Would-be home buyers have found it more difficult to secure financing, especially for "jumbo" mortgages — those exceeding $417,000. The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.
"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.
The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.
Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.
Problems in housing are expected to persist well into 2008 — a major election year.
The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. And, the situation has given Democrat and Republican politicians— including those who want to be the next president — plenty of opportunities to spread blame around.
The economy's growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year. Former Federal Reserve Chairman Alan Greenspan recently warned that the economy is "getting close to stall speed." The big worry is that the housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.
To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year. Its latest rate cut, on Dec. 11, dropped the Fed's key rate to 4.25 percent, a two-year low. Many economists are predicting the Fed will lower rates again when they meet in late January.
"The risks are as high as they've ever been during this expansion that started in late 2001 that the economy will fall into a recession," said Bethune. "The odds are now nudging up close to the 50 percent mark."
Saturday, December 22, 2007
38,000 might qualify, but pilot program would fund 500 mortgages
Friday, December 21, 2007Inman News
Five banks have committed $125 million to help New England homeowners with good payment histories refinance out of high-cost loans or avoid interest rate resets on adjustable-rate mortgages.
At least 38,000 borrowers in six New England states may be eligible for help under the program, but the initial funding pledged by Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America would only fund about 500 mortgages.
The Federal Reserve Bank of Boston, which organized the Mortgage Relief Fund, is hoping it will be expanded to include more banks and more funding.
"If the demand proves to be greater than the initial $125 million commitment, we will try to go further -- especially if the mortgages can be securitized," participants in the program said in a press release.
Backers said outreach is a key part of the initiative, and the banks have created a Web site, www.MortgageReliefFund.com, providing more information for borrowers and information on contacting the banks.
"It is particularly important to find and locate the borrowers who may be eligible for a better rate and a healthier relationship with their lender," said Boston Fed president Eric Rosengren in a statement.
Rosengren said participating banks will tap state programs and Federal Housing Administration loan guarantees, which include flexible underwriting and eligibility guidelines. Those programs will help banks offer troubled borrowers lower interest rates, similar to those paid by prime borrowers.
The Boston Fed estimates that 38,000 subprime borrowers in New England may qualify for the program, because they had 10 percent equity in their homes when they took out a loan, had credit scores over 620, and took out fully documented loans on owner-occupied houses.
Those criteria provide a "conservative estimate" of the number of subprime borrowers who might qualify for the program, Rosengren said, including more than 15,000 households in Massachusetts, 10,000 in Connecticut, 3,800 in New Hampshire and Rhode Island, 3,400 in Maine and nearly 1,000 in Vermont.
The program is "not designed for borrowers who are seriously delinquent on their mortgage payments or facing imminent foreclosure," although those borrowers may be eligible for refinancing under the new FHASecure loan guarantee program.
***
Friday, December 21, 2007Inman News
Five banks have committed $125 million to help New England homeowners with good payment histories refinance out of high-cost loans or avoid interest rate resets on adjustable-rate mortgages.
At least 38,000 borrowers in six New England states may be eligible for help under the program, but the initial funding pledged by Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America would only fund about 500 mortgages.
The Federal Reserve Bank of Boston, which organized the Mortgage Relief Fund, is hoping it will be expanded to include more banks and more funding.
"If the demand proves to be greater than the initial $125 million commitment, we will try to go further -- especially if the mortgages can be securitized," participants in the program said in a press release.
Backers said outreach is a key part of the initiative, and the banks have created a Web site, www.MortgageReliefFund.com, providing more information for borrowers and information on contacting the banks.
"It is particularly important to find and locate the borrowers who may be eligible for a better rate and a healthier relationship with their lender," said Boston Fed president Eric Rosengren in a statement.
Rosengren said participating banks will tap state programs and Federal Housing Administration loan guarantees, which include flexible underwriting and eligibility guidelines. Those programs will help banks offer troubled borrowers lower interest rates, similar to those paid by prime borrowers.
The Boston Fed estimates that 38,000 subprime borrowers in New England may qualify for the program, because they had 10 percent equity in their homes when they took out a loan, had credit scores over 620, and took out fully documented loans on owner-occupied houses.
Those criteria provide a "conservative estimate" of the number of subprime borrowers who might qualify for the program, Rosengren said, including more than 15,000 households in Massachusetts, 10,000 in Connecticut, 3,800 in New Hampshire and Rhode Island, 3,400 in Maine and nearly 1,000 in Vermont.
The program is "not designed for borrowers who are seriously delinquent on their mortgage payments or facing imminent foreclosure," although those borrowers may be eligible for refinancing under the new FHASecure loan guarantee program.
***
Friday, December 21, 2007
Bush signs tax bill to aid ailing homeowners
Forgiven debt, renegotiated terms will no longer be classified at income
WASHINGTON - President Bush on Thursday signed a measure to provide financial relief for financially strapped homeowners facing foreclosure or in bankruptcy.
The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently such debt forgiveness is taxable income.
"When you're worried about making your payments, higher taxes are the last thing you need to worry about," Bush said in a bill-signing ceremony. He stood along side members of his Cabinet and lawmakers who pushed the measure.
While the measure is anticipated to reduce taxes of some strapped homeowners by $650 million, the cost to the government would be offset in part by limiting a tax break available on the sale of second homes.
The bill was in response to a mortgage crisis touched off this spring by a blowup in high-priced home loans for risky borrowers, throwing a pall over the economy. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.
"This is going to make a happy holiday for many homeowners," Bush said of the bill moments before signing it into law.
An estimated 2 million to 2.5 million adjustable-rate mortgages _ worth some $600 billion _ will jump from low initial "teaser" rates to higher rates this year and next. Steep prepayment penalties have made it difficult for some to get out of their mortgages, and some overstretched homeowners can't afford to refinance or sell their homes.
Forgiven debt, renegotiated terms will no longer be classified at income
WASHINGTON - President Bush on Thursday signed a measure to provide financial relief for financially strapped homeowners facing foreclosure or in bankruptcy.
The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently such debt forgiveness is taxable income.
"When you're worried about making your payments, higher taxes are the last thing you need to worry about," Bush said in a bill-signing ceremony. He stood along side members of his Cabinet and lawmakers who pushed the measure.
While the measure is anticipated to reduce taxes of some strapped homeowners by $650 million, the cost to the government would be offset in part by limiting a tax break available on the sale of second homes.
The bill was in response to a mortgage crisis touched off this spring by a blowup in high-priced home loans for risky borrowers, throwing a pall over the economy. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.
"This is going to make a happy holiday for many homeowners," Bush said of the bill moments before signing it into law.
An estimated 2 million to 2.5 million adjustable-rate mortgages _ worth some $600 billion _ will jump from low initial "teaser" rates to higher rates this year and next. Steep prepayment penalties have made it difficult for some to get out of their mortgages, and some overstretched homeowners can't afford to refinance or sell their homes.
Thursday, December 20, 2007
Number of filings up 68% year-over-year in November
Wednesday, December 19, 2007Inman News
Nevada continued to lead the nation for its rate of foreclosure filings per household in November -- a position it has held for the past 11 months, foreclosure data company RealtyTrac reported today.
The company reported a 67.8 percent nationwide gain in the volume of foreclosure filings in November 2007 compared to the same month last year, though filings declined 10 percent compared to October 2007.
The national rate of foreclosure filings in November was 1 for every 617 households -- Nevada had a rate of 1 filing for every 152 households during that month.
Next on the list was Florida, with a rate of 1 filing for every 282 households; followed by Ohio, 1-in-307; Colorado, 1-in-320; California, 1-in-325; Michigan, 1-in-391; Georgia, 1-in-421; Arizona, 1-in-441; Indiana, 1-in-484; and Illinois, 1-in-624.
"The 10 percent drop in November is the first double-digit monthly decrease we've seen since April 2006," said James J. Saccacio, RealtyTrac, in a statement.
Saccacio also stated that the company anticipates "a seasonal surge in foreclosure filings and another possible wave of resetting mortgages" next year that "could place further pressure on the housing market."
Five of the 10 metro areas with the highest foreclosure rates in the nation in November are in California, RealtyTrac reported. Stockton, Calif., led the nation with a metro area foreclosure rate of one filing for every 99 households. Modesto, Calif., ranked second, with one foreclosure filing for every 104 households.
Merced, Calif., took third, with a rate of one foreclosure filing for every 106 households, followed by Las Vegas, Detroit, Vallejo, Calif.; Greeley, Colo.; Cape Coral-Fort Myers, Fla.; Riverside-San Bernardino, Calif.; and Miami.
California led the nation for its total number of foreclosure filings in November, with 39,992; followed by Florida with 29,238; Ohio with 16,308; Texas with 11,599; Michigan with 11,464; Georgia with 8.968; Illinois with 8,238; Nevada with 6,694; Colorado with 6,425; and New York with 5,794.
Wednesday, December 19, 2007Inman News
Nevada continued to lead the nation for its rate of foreclosure filings per household in November -- a position it has held for the past 11 months, foreclosure data company RealtyTrac reported today.
The company reported a 67.8 percent nationwide gain in the volume of foreclosure filings in November 2007 compared to the same month last year, though filings declined 10 percent compared to October 2007.
The national rate of foreclosure filings in November was 1 for every 617 households -- Nevada had a rate of 1 filing for every 152 households during that month.
Next on the list was Florida, with a rate of 1 filing for every 282 households; followed by Ohio, 1-in-307; Colorado, 1-in-320; California, 1-in-325; Michigan, 1-in-391; Georgia, 1-in-421; Arizona, 1-in-441; Indiana, 1-in-484; and Illinois, 1-in-624.
"The 10 percent drop in November is the first double-digit monthly decrease we've seen since April 2006," said James J. Saccacio, RealtyTrac, in a statement.
Saccacio also stated that the company anticipates "a seasonal surge in foreclosure filings and another possible wave of resetting mortgages" next year that "could place further pressure on the housing market."
Five of the 10 metro areas with the highest foreclosure rates in the nation in November are in California, RealtyTrac reported. Stockton, Calif., led the nation with a metro area foreclosure rate of one filing for every 99 households. Modesto, Calif., ranked second, with one foreclosure filing for every 104 households.
Merced, Calif., took third, with a rate of one foreclosure filing for every 106 households, followed by Las Vegas, Detroit, Vallejo, Calif.; Greeley, Colo.; Cape Coral-Fort Myers, Fla.; Riverside-San Bernardino, Calif.; and Miami.
California led the nation for its total number of foreclosure filings in November, with 39,992; followed by Florida with 29,238; Ohio with 16,308; Texas with 11,599; Michigan with 11,464; Georgia with 8.968; Illinois with 8,238; Nevada with 6,694; Colorado with 6,425; and New York with 5,794.
Wednesday, December 19, 2007
Home foreclosures fall second time in 3 months
Defaults remain at elevated levels as rising payments pressure borrowers
NEW YORK - Home foreclosure filings fell in November from October, though they may remain at elevated levels as rising payments on adjustable loans pressure borrowers, a real estate data company reported on Wednesday.
The hardest-hit states were Nevada and Florida, where price gains were among the strongest during the housing boom.
Lenders filed 201,950 foreclosure filings last month, down 10 percent from October, for a foreclosure rate of one in 617 households, according to RealtyTrac. Total filings were up almost 68 percent from November 2006, said the firm, which markets foreclosed houses.
Soaring foreclosures have set regulators and lawmakers scrambling to curb the trend, which many economists say could tip the U.S. economy into recession. Plans that make it easier to get a government-insured loan or would freeze interest rates for some subprime borrowers will slow foreclosures, analysts say. But many homeowners remain vulnerable to default.
The decline in November follows a 2 percent increase in filings in October and an 8 percent fall in September.
"This could indicate that foreclosure activity has topped out for the year, but the true test of whether this ceiling will hold will come at the beginning of next year" when a seasonal increase tends to occur and rates on more mortgages are to rise, James Saccacio, chief executive officer of Irvine, California-based RealtyTrac, said in a statement.
About $500 billion in adjustable-rate mortgages are due to reset at higher levels in 2008, according to JPMorgan.
States with strong price gains during the boom are seen leading a drop of as much as 15 percent in national home prices by 2009, according to UBS economists.
In Nevada and Florida, annual price gains approached 20 percent and 30 percent, respectively, at the height of the housing boom in 2005. Nevada topped the list of foreclosure rates for the 11th month, with one filing for every 152 households, RealtyTrac said. The rate, based on a 1 percent rise from October, is more than four times the national average.
In Florida, filings declined 3 percent, but the Sunshine State still had one filing for every 282 households, the data showed.
Ohio, beset with a shaky economy, had the third-worst rate of foreclosures in November, with one filing for every 307 households. However, total foreclosures in Ohio declined 6 percent from October.
Among cities, Stockton, California, posted the worst foreclosure rate, with one in every 99 homes, the report showed. The top 10 cities included four others in California, as well as Las Vegas, Nevada.
Defaults remain at elevated levels as rising payments pressure borrowers
NEW YORK - Home foreclosure filings fell in November from October, though they may remain at elevated levels as rising payments on adjustable loans pressure borrowers, a real estate data company reported on Wednesday.
The hardest-hit states were Nevada and Florida, where price gains were among the strongest during the housing boom.
Lenders filed 201,950 foreclosure filings last month, down 10 percent from October, for a foreclosure rate of one in 617 households, according to RealtyTrac. Total filings were up almost 68 percent from November 2006, said the firm, which markets foreclosed houses.
Soaring foreclosures have set regulators and lawmakers scrambling to curb the trend, which many economists say could tip the U.S. economy into recession. Plans that make it easier to get a government-insured loan or would freeze interest rates for some subprime borrowers will slow foreclosures, analysts say. But many homeowners remain vulnerable to default.
The decline in November follows a 2 percent increase in filings in October and an 8 percent fall in September.
"This could indicate that foreclosure activity has topped out for the year, but the true test of whether this ceiling will hold will come at the beginning of next year" when a seasonal increase tends to occur and rates on more mortgages are to rise, James Saccacio, chief executive officer of Irvine, California-based RealtyTrac, said in a statement.
About $500 billion in adjustable-rate mortgages are due to reset at higher levels in 2008, according to JPMorgan.
States with strong price gains during the boom are seen leading a drop of as much as 15 percent in national home prices by 2009, according to UBS economists.
In Nevada and Florida, annual price gains approached 20 percent and 30 percent, respectively, at the height of the housing boom in 2005. Nevada topped the list of foreclosure rates for the 11th month, with one filing for every 152 households, RealtyTrac said. The rate, based on a 1 percent rise from October, is more than four times the national average.
In Florida, filings declined 3 percent, but the Sunshine State still had one filing for every 282 households, the data showed.
Ohio, beset with a shaky economy, had the third-worst rate of foreclosures in November, with one filing for every 307 households. However, total foreclosures in Ohio declined 6 percent from October.
Among cities, Stockton, California, posted the worst foreclosure rate, with one in every 99 homes, the report showed. The top 10 cities included four others in California, as well as Las Vegas, Nevada.
Real estate rates fall overnight
30-year fixed rate down to 5.84%; 10-year Treasury yield at 4.12%
Wednesday, December 19, 2007Inman News
Long-term mortgage interest rates were lower Tuesday, and the benchmark 10-year Treasury bond yield dropped to 4.12 percent.
The 30-year fixed-rate average sank to 5.84 percent, and the 15-year fixed rate dipped to 5.4 percent. The 1-year adjustable rate held at 5.59 percent.
The 30-year Treasury bond yield edged down to 4.54 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average rose 65.27 points, or 0.5 percent, finishing at 13,232.47. The Nasdaq gained 21.57 points, or 0.84 percent, closing at 2,596.03.
Stock figures are current as of 7:30 p.m. Eastern Standard Time.
30-year fixed rate down to 5.84%; 10-year Treasury yield at 4.12%
Wednesday, December 19, 2007Inman News
Long-term mortgage interest rates were lower Tuesday, and the benchmark 10-year Treasury bond yield dropped to 4.12 percent.
The 30-year fixed-rate average sank to 5.84 percent, and the 15-year fixed rate dipped to 5.4 percent. The 1-year adjustable rate held at 5.59 percent.
The 30-year Treasury bond yield edged down to 4.54 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average rose 65.27 points, or 0.5 percent, finishing at 13,232.47. The Nasdaq gained 21.57 points, or 0.84 percent, closing at 2,596.03.
Stock figures are current as of 7:30 p.m. Eastern Standard Time.
Home loan apps plunge 19%
MBA index posts largest decline in years
Wednesday, December 19, 2007Inman News
Mortgage application volume last week posted the sharpest drop in recent years as interest rates continued higher, the Mortgage Bankers Association reported today.
The group's market composite index, a measure of home loan application volume, tumbled 19.5 percent on a seasonally adjusted basis from the first week of December. The last double-digit losses for the index were seen in December 2006 (down 14.3 percent) and June 2005 (down 11.3 percent.)
MBA reported that the index that tracks refinancings tumbled 27.3 percent last week from just one week earlier, while the purchase-loan index fell 10.6 percent.
As a result, the refinance share of applications fell to 53.2 percent last week from 57.6 percent one week earlier, while the adjustable-rate mortgage (ARM) share actually rose during the period from 9.4 percent to 9.9 percent.
Borrowing costs were up considerably for the second straight week, as the average contract interest rate for 30-year fixed-rate mortgages gained from 6.07 percent to 6.18 percent, the average 15-year fixed climbed from 5.72 percent to 5.78 percent, and the average one-year ARM rate was up to 6.48 percent from 6.31 percent in the previous week.
Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.12 on the 30-year loans, 1.1 on the 15-year, and 0.95 on one-year ARMs -- compared with 1.17, 1.01 and 0.97, respectively, in the previous week. These points include the origination fee and are based on loan-to-value ratios of 80 percent.
The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
MBA index posts largest decline in years
Wednesday, December 19, 2007Inman News
Mortgage application volume last week posted the sharpest drop in recent years as interest rates continued higher, the Mortgage Bankers Association reported today.
The group's market composite index, a measure of home loan application volume, tumbled 19.5 percent on a seasonally adjusted basis from the first week of December. The last double-digit losses for the index were seen in December 2006 (down 14.3 percent) and June 2005 (down 11.3 percent.)
MBA reported that the index that tracks refinancings tumbled 27.3 percent last week from just one week earlier, while the purchase-loan index fell 10.6 percent.
As a result, the refinance share of applications fell to 53.2 percent last week from 57.6 percent one week earlier, while the adjustable-rate mortgage (ARM) share actually rose during the period from 9.4 percent to 9.9 percent.
Borrowing costs were up considerably for the second straight week, as the average contract interest rate for 30-year fixed-rate mortgages gained from 6.07 percent to 6.18 percent, the average 15-year fixed climbed from 5.72 percent to 5.78 percent, and the average one-year ARM rate was up to 6.48 percent from 6.31 percent in the previous week.
Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.12 on the 30-year loans, 1.1 on the 15-year, and 0.95 on one-year ARMs -- compared with 1.17, 1.01 and 0.97, respectively, in the previous week. These points include the origination fee and are based on loan-to-value ratios of 80 percent.
The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
Tuesday, November 20, 2007
Market Trends
Turning the Bad Press around by listening to the professionals!
“Economy in Focus”. Lawrence Yun, NAR VP interviewed by Robert Freedman of Realtor Magazine, November 2007.
• Prediction of existing home sales down 7% for 2007. BUT, after a 5 year high, leveling to normal figures of
2002 is happening (and that was a “very good year”).
• Analysts use county records and mortgage data from the secondary market, lagging in information. Real Estate
professionals use the MLS data which is “timely and more representative of market” (3rd quarter of 2007 is
showing “positive price growth”).
• Foreclosures may rise in 2008 because of “teaser rates”, but that market is “less than 1% of the market”. (New
Mexico foreclosure rate has decreased 9%).
• The challenge is the psychology beyond the headlines: inventories are flush, prices are moderating, interest
rates remain historically low. It is a very good time to buy.
• Loans? If you are a good risk, credit will be there. Can’t qualify for prime loans, options still are available. FHA
reforms are being backed by NAR.
“The Market’s (stock) Mixed Message”. US News & World Report, 11/12/07.
“The economy did turn in its best back-to-back quarters in four years, booming 3.9% in the July – September
quarter.” …”better than expected report from the Labor Dept that the economy added 166,000 new jobs in
October, twice as many as predicted”. “Growth to dip to +2% this quarter before rebounding to around
+3% next year as the housing market becomes less of a drag”.
Turning the Bad Press around by listening to the professionals!
“Economy in Focus”. Lawrence Yun, NAR VP interviewed by Robert Freedman of Realtor Magazine, November 2007.
• Prediction of existing home sales down 7% for 2007. BUT, after a 5 year high, leveling to normal figures of
2002 is happening (and that was a “very good year”).
• Analysts use county records and mortgage data from the secondary market, lagging in information. Real Estate
professionals use the MLS data which is “timely and more representative of market” (3rd quarter of 2007 is
showing “positive price growth”).
• Foreclosures may rise in 2008 because of “teaser rates”, but that market is “less than 1% of the market”. (New
Mexico foreclosure rate has decreased 9%).
• The challenge is the psychology beyond the headlines: inventories are flush, prices are moderating, interest
rates remain historically low. It is a very good time to buy.
• Loans? If you are a good risk, credit will be there. Can’t qualify for prime loans, options still are available. FHA
reforms are being backed by NAR.
“The Market’s (stock) Mixed Message”. US News & World Report, 11/12/07.
“The economy did turn in its best back-to-back quarters in four years, booming 3.9% in the July – September
quarter.” …”better than expected report from the Labor Dept that the economy added 166,000 new jobs in
October, twice as many as predicted”. “Growth to dip to +2% this quarter before rebounding to around
+3% next year as the housing market becomes less of a drag”.
Commentary: Spread between Treasurys, mortgages raises concern
Friday, November 16, 2007
By Lou Barnes Inman News
In one of life's larger mixed blessings, a return of financial panic is pushing mortgage rates lower. The approach to 6 percent is taking longer than I thought, but the week's events make crossover to the fives more likely than ever.
Signs of slowdown are accumulating: Retail sales in October rose a meager 0.2 percent; new claims for unemployment insurance are now rising (slowly, but rising), and October industrial production slipped by 0.5 percent.
Half of the commentariat still insists that inflation is the real trouble, the economy is fine, and the credit markets will soon self-correct. Two Fed governors also made these points today (Poole and Kroszner). This flight to quality -- 10-year Treasurys down to 4.14 percent this morning -- has nothing to do with expectations of an easy Fed. At this point, the queasy sensation of a Fed out of touch with reality adds to the panic.
The stock and bond markets this week were overwhelmed by blown deals, probable bankruptcies, more write-downs pending, and cash running to safety. Even "safe" positions in commodities began to fail, gold in free-fall: this Crunch is deflationary.
Instead of a recitation of institutions and their woes, here is an example, a story to describe the peculiar nature of this Crunch and its consequences: the oddly wide spread between the 10-year T-note and mortgages.
Under normal historical circumstances, the 10-year should lead retail mortgage rates on a leash no longer than 1.5 percent to 1.75 percent. We've taught a generation of borrowers that wherever the 10-year goes, mortgages are sure to follow.
Since the onset of the Crunch in August, frightened money has gone to the 10-year, but mortgage rates have been sticky. For the last couple of weeks, the 10-year has been at 4.25 percent, and the retail rate for the lowest-fee 30-year mortgages has been stuck at 6.375 percent. A spread wider than 2 percent! Why?
Mortgages are toxic, but given Fannie's and Freddie's federal "Agency" credit and too-big-to-fail status, who should care? Almost all the Treasury/mortgage spread is compensation for the risk that you'll refinance -- nothing new there. And, if credit were the issue, Ginnies' yield would be falling versus F&F; Ginnies are by statute "full faith and credit," the same credit as Treasurys. The Ginnie/F&F spread is stable.
I posed the question to a kid running a trading desk (in his 20s, already a Master of the Universe). "There's too much production for demand." Son, don't fib to an oldster: The production of mortgage-backed securities has crashed by two-thirds since August. "So? I said there was too much production for demand."
By what mechanism in the midst of a flight to quality would investor demand fall faster than collapsing production? In all recent recessions, consumer demand evaporated and the Fed restored it by injecting liquidity. This predicament is unique (since the 1930s ... heh-heh...): Capital is evaporating, and the capital is leveraged. Lose 10 percent of a stock market mutual fund and you've lost 10 percent of your money; if a bank loses 10 percent of its assets, it has lost everything -- all of its capital.
The Fed can't create capital. Only earnings over time, or sale of new stock, or raising subordinated debt can do that. If you're losing money, new capital doesn't want to join your busted party. To raise $2 billion in capital from BofA, Countrywide had to give an option on 17 percent ownership and pay 7.5 percent interest. Even on rich terms, capital injection is risky: BofA's option is at $17, but Countrywide stock hit $12 this week.
If you are a bank or dealer with impaired capital, you can't make new investments and may have to shed some that you have. Giant banks and dealers alone wrote off $50 billion in capital in the third quarter, and face a like amount in the fourth, more following. At 12:1 leverage, conservative for guaranteed-credit assets, that's enough capital to have supported $1.2 trillion in Agency mortgage-backed securities.
That's where demand went, and is still going. Fast. Nevertheless, panic is pulling Treasurys down enough that even at a wide spread, mortgages are going lower.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
Friday, November 16, 2007
By Lou Barnes Inman News
In one of life's larger mixed blessings, a return of financial panic is pushing mortgage rates lower. The approach to 6 percent is taking longer than I thought, but the week's events make crossover to the fives more likely than ever.
Signs of slowdown are accumulating: Retail sales in October rose a meager 0.2 percent; new claims for unemployment insurance are now rising (slowly, but rising), and October industrial production slipped by 0.5 percent.
Half of the commentariat still insists that inflation is the real trouble, the economy is fine, and the credit markets will soon self-correct. Two Fed governors also made these points today (Poole and Kroszner). This flight to quality -- 10-year Treasurys down to 4.14 percent this morning -- has nothing to do with expectations of an easy Fed. At this point, the queasy sensation of a Fed out of touch with reality adds to the panic.
The stock and bond markets this week were overwhelmed by blown deals, probable bankruptcies, more write-downs pending, and cash running to safety. Even "safe" positions in commodities began to fail, gold in free-fall: this Crunch is deflationary.
Instead of a recitation of institutions and their woes, here is an example, a story to describe the peculiar nature of this Crunch and its consequences: the oddly wide spread between the 10-year T-note and mortgages.
Under normal historical circumstances, the 10-year should lead retail mortgage rates on a leash no longer than 1.5 percent to 1.75 percent. We've taught a generation of borrowers that wherever the 10-year goes, mortgages are sure to follow.
Since the onset of the Crunch in August, frightened money has gone to the 10-year, but mortgage rates have been sticky. For the last couple of weeks, the 10-year has been at 4.25 percent, and the retail rate for the lowest-fee 30-year mortgages has been stuck at 6.375 percent. A spread wider than 2 percent! Why?
Mortgages are toxic, but given Fannie's and Freddie's federal "Agency" credit and too-big-to-fail status, who should care? Almost all the Treasury/mortgage spread is compensation for the risk that you'll refinance -- nothing new there. And, if credit were the issue, Ginnies' yield would be falling versus F&F; Ginnies are by statute "full faith and credit," the same credit as Treasurys. The Ginnie/F&F spread is stable.
I posed the question to a kid running a trading desk (in his 20s, already a Master of the Universe). "There's too much production for demand." Son, don't fib to an oldster: The production of mortgage-backed securities has crashed by two-thirds since August. "So? I said there was too much production for demand."
By what mechanism in the midst of a flight to quality would investor demand fall faster than collapsing production? In all recent recessions, consumer demand evaporated and the Fed restored it by injecting liquidity. This predicament is unique (since the 1930s ... heh-heh...): Capital is evaporating, and the capital is leveraged. Lose 10 percent of a stock market mutual fund and you've lost 10 percent of your money; if a bank loses 10 percent of its assets, it has lost everything -- all of its capital.
The Fed can't create capital. Only earnings over time, or sale of new stock, or raising subordinated debt can do that. If you're losing money, new capital doesn't want to join your busted party. To raise $2 billion in capital from BofA, Countrywide had to give an option on 17 percent ownership and pay 7.5 percent interest. Even on rich terms, capital injection is risky: BofA's option is at $17, but Countrywide stock hit $12 this week.
If you are a bank or dealer with impaired capital, you can't make new investments and may have to shed some that you have. Giant banks and dealers alone wrote off $50 billion in capital in the third quarter, and face a like amount in the fourth, more following. At 12:1 leverage, conservative for guaranteed-credit assets, that's enough capital to have supported $1.2 trillion in Agency mortgage-backed securities.
That's where demand went, and is still going. Fast. Nevertheless, panic is pulling Treasurys down enough that even at a wide spread, mortgages are going lower.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
Wednesday, November 07, 2007
Overnight real estate rates rise again
30-year fixed rate at 5.96%; 10-year Treasury yield at 4.37%
Inman News
Long-term mortgage interest rates continued higher Tuesday, and the benchmark 10-year Treasury bond yield rose to 4.37 percent.
The 30-year fixed-rate average inched up to 5.96 percent, and the 15-year fixed rate gained to 5.57 percent. The 1-year adjustable, however, slipped to 5.63 percent.
The 30-year Treasury bond yield gained to 4.67 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average climbed 117.54 points, or 0.87 percent, finishing at 13,660.94. The Nasdaq jumped 30 points, or 1.07 percent, closing at 2,825.18.
Stock figures are current as of 7:30 p.m. Eastern Standard Time.
30-year fixed rate at 5.96%; 10-year Treasury yield at 4.37%
Inman News
Long-term mortgage interest rates continued higher Tuesday, and the benchmark 10-year Treasury bond yield rose to 4.37 percent.
The 30-year fixed-rate average inched up to 5.96 percent, and the 15-year fixed rate gained to 5.57 percent. The 1-year adjustable, however, slipped to 5.63 percent.
The 30-year Treasury bond yield gained to 4.67 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average climbed 117.54 points, or 0.87 percent, finishing at 13,660.94. The Nasdaq jumped 30 points, or 1.07 percent, closing at 2,825.18.
Stock figures are current as of 7:30 p.m. Eastern Standard Time.
-------------------------------------------------------------------------------
Investment group calls for removal of CEO
Inman News
Embattled builder Beazer Homes USA Inc., which is facing a series of investigations and lawsuits over business practices and plans to restate earnings dating back to the 2004 fiscal year, announced that it cut a quarter of its workforce, or 650 positions, in October.
Also, an investment group affiliated with a coalition of unions is calling for the removal of Beazer Homes CEO Ian McCarthy.
CtW Investment Group charges in a scathing letter to the chairman of Beazer's nominating and corporate governance committee, "Taken together, the combination of improper practices, compliance failures and poor corporate governance … constitute a stinging indictment of Beazer's leadership in general and of Mr. McCarthy in particular. By swiftly replacing Mr. McCarthy with a qualified CEO and naming an independent director to assume Mr. Beazer's role as chairman, the board can begin to restore the credibility Beazer desperately needs."
The letter also states, "Rather than create sustainable, long-term value for shareholders, Mr. McCarthy has garnered egregious compensation while allowing his management team to violate federal law, improperly account for land development costs and sale-leaseback transactions, and provide undisclosed loans to executives."
A Beazer spokesperson was not immediately available for comment about this letter, issued today. CtW Investment group works with pension funds sponsored by affiliates of a coalition of unions that represents about 6 million members. CtW has also called for the resignation of Countrywide Chairman and CEO Angelo Mozilo.
Beazer in October announced plans to restate earnings, and said an internal investigation revealed that employees of the company's mortgage corporation "violated certain U.S. Department of Housing and Urban Development regulations."
The U.S. Securities and Exchange Commission and U.S. Attorney's Office are investigating Beazer's business practices, and several lawsuits have been filed by shareholders.
The company announced today that it is not able to report its earnings results for the fourth quarter of the fiscal year and the full year because of the pending restatements of past financial results.
The company expects results for the fourth quarter to include noncash pretax charges to abandon land option contracts, recognize inventory impairments, and to record impairments and land option abandonments in joint ventures of about $230 million.
"The company is working expeditiously to complete the restatements and report audited financial results for the quarter and year ended September 30, 2007 as soon as possible," according to the announcement.
The company's net new-home orders totaled 973 for the quarter ended Sept. 30, a 53 percent decline compared to the same quarter last year, "driven largely by an unusually high cancellation rate" of 68 percent, which he company attributes, in part, "to the pronounced tightening in the mortgage markets in August and September."
"The housing industry continues to face the most difficult business conditions in over a decade," McCarthy said in a statement.
"We must continue to adapt to the realities of the current market by remaining disciplined in our operating approach and continuing to focus on initiatives aimed at responding to what we believe will continue to be a challenging environment in the near term. These initiatives include reductions in direct costs, overhead expenses and land spending, and an intense focus on sales and marketing efforts to reduce unsold home inventories, all with the aim of generating cash."
The company announced that its workforce reached a peak level in March 2006, and since then the overall company headcount has dropped by about 50 percent "through reductions in force and attrition."
"The company expects these most recent headcount reductions to result in annualized cost savings of at least $30 million. In addition, the company has reorganized accounting and back-office functions and is centralizing a number of marketing initiatives to achieve additional efficiencies," according to the announcement.
"With recent industry data suggesting that market conditions may deteriorate further before a recovery is under way, we need to adapt and further align our cost structure and investment levels to expected lower volumes. While these decisions are not taken lightly, they are necessary in order to maintain our sound financial position," McCarthy said in a statement.
The company's board of directors voted to suspend a quarterly dividend of 10 cents per share, concluding that the action would allow the company to conserve an estimated $16 million of cash on an annual basis and "is prudent in light of the continued deterioration in the housing market," according to the announcement.
Beazer, headquartered in Atlanta, has operations in Arizona, California, Colorado, Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia, and also provides mortgage origination and title services to home buyers.
***
Send tips or a Letter to the Editor to glenn@inman.com, or call (510) 658-9252, ext. 137.
Copyright 2007 Inman News
Top
Investment group calls for removal of CEO
Inman News
Embattled builder Beazer Homes USA Inc., which is facing a series of investigations and lawsuits over business practices and plans to restate earnings dating back to the 2004 fiscal year, announced that it cut a quarter of its workforce, or 650 positions, in October.
Also, an investment group affiliated with a coalition of unions is calling for the removal of Beazer Homes CEO Ian McCarthy.
CtW Investment Group charges in a scathing letter to the chairman of Beazer's nominating and corporate governance committee, "Taken together, the combination of improper practices, compliance failures and poor corporate governance … constitute a stinging indictment of Beazer's leadership in general and of Mr. McCarthy in particular. By swiftly replacing Mr. McCarthy with a qualified CEO and naming an independent director to assume Mr. Beazer's role as chairman, the board can begin to restore the credibility Beazer desperately needs."
The letter also states, "Rather than create sustainable, long-term value for shareholders, Mr. McCarthy has garnered egregious compensation while allowing his management team to violate federal law, improperly account for land development costs and sale-leaseback transactions, and provide undisclosed loans to executives."
A Beazer spokesperson was not immediately available for comment about this letter, issued today. CtW Investment group works with pension funds sponsored by affiliates of a coalition of unions that represents about 6 million members. CtW has also called for the resignation of Countrywide Chairman and CEO Angelo Mozilo.
Beazer in October announced plans to restate earnings, and said an internal investigation revealed that employees of the company's mortgage corporation "violated certain U.S. Department of Housing and Urban Development regulations."
The U.S. Securities and Exchange Commission and U.S. Attorney's Office are investigating Beazer's business practices, and several lawsuits have been filed by shareholders.
The company announced today that it is not able to report its earnings results for the fourth quarter of the fiscal year and the full year because of the pending restatements of past financial results.
The company expects results for the fourth quarter to include noncash pretax charges to abandon land option contracts, recognize inventory impairments, and to record impairments and land option abandonments in joint ventures of about $230 million.
"The company is working expeditiously to complete the restatements and report audited financial results for the quarter and year ended September 30, 2007 as soon as possible," according to the announcement.
The company's net new-home orders totaled 973 for the quarter ended Sept. 30, a 53 percent decline compared to the same quarter last year, "driven largely by an unusually high cancellation rate" of 68 percent, which he company attributes, in part, "to the pronounced tightening in the mortgage markets in August and September."
"The housing industry continues to face the most difficult business conditions in over a decade," McCarthy said in a statement.
"We must continue to adapt to the realities of the current market by remaining disciplined in our operating approach and continuing to focus on initiatives aimed at responding to what we believe will continue to be a challenging environment in the near term. These initiatives include reductions in direct costs, overhead expenses and land spending, and an intense focus on sales and marketing efforts to reduce unsold home inventories, all with the aim of generating cash."
The company announced that its workforce reached a peak level in March 2006, and since then the overall company headcount has dropped by about 50 percent "through reductions in force and attrition."
"The company expects these most recent headcount reductions to result in annualized cost savings of at least $30 million. In addition, the company has reorganized accounting and back-office functions and is centralizing a number of marketing initiatives to achieve additional efficiencies," according to the announcement.
"With recent industry data suggesting that market conditions may deteriorate further before a recovery is under way, we need to adapt and further align our cost structure and investment levels to expected lower volumes. While these decisions are not taken lightly, they are necessary in order to maintain our sound financial position," McCarthy said in a statement.
The company's board of directors voted to suspend a quarterly dividend of 10 cents per share, concluding that the action would allow the company to conserve an estimated $16 million of cash on an annual basis and "is prudent in light of the continued deterioration in the housing market," according to the announcement.
Beazer, headquartered in Atlanta, has operations in Arizona, California, Colorado, Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia, and also provides mortgage origination and title services to home buyers.
***
Send tips or a Letter to the Editor to glenn@inman.com, or call (510) 658-9252, ext. 137.
Copyright 2007 Inman News
Top
Florida's condo craze
Florida's condo market, where investors and speculators were active during the boom, illustrates how condos and condo conversions may affect rental markets.
According to Marcus & Millichap, the five markets that saw the greatest percentage of apartment units converted from apartments to condos during the housing boom are all in Florida.
Nearly one in three apartments in Ft. Lauderdale -- an estimated 28,800 units -- were converted to condos. The pace of condo conversions was also impressive in Orlando (24.2 percent of apartments converted); Palm Beach (23.7 percent); Miami (20.7 percent); and Tampa (15.6 percent).
Other cities on Marcus & Millichap's list of top 10 condo conversion markets include Charleston, S.C. (15.3 percent converted); Jacksonville, Fla. (11.6 percent); Las Vegas (11.6 percent); Phoenix (9.6 percent); and San Diego (7.8 percent).
While apartment vacancy rates fell precipitously in the top 10 condo conversion markets from 2003 to 2006, the trend has since reversed itself in each of those markets.
If a 5 percent vacancy rate represents a balance of the needs of property owners and renters, the apartment vacancy rate in mid-2006 favored renters in just two of the top 10 condo conversion markets -- Charleston and Phoenix.
By the end of the second quarter of 2007, vacancy rates exceeded 5 percent in six out of 10 of those markets, putting renters in the driver's seat in Orlando, Palm Beach, Tampa and Jacksonville. In just 12 months, Marcus & Millichap reports, the vacancy rate in Palm Beach shot up from 4.2 percent to 7 percent.
Ron Witten, a consultant who advises developers, investors and lenders on major U.S. apartment markets, said rents are generally tied to the housing inventories. In some markets, for-sale homes may be so abundant -- and attractively priced -- that they attract buyers who might otherwise have been renters.
"The number one factor (on rents) is how overbuilt the overall housing market is in each of these metro areas," Witten said.
In markets like Austin, Texas and Raleigh, N.C. -- where there's no evidence of an oversupply of single-family homes or condos -- the subprime fallout will turn many families into renters, Witten said. While other apartment owners will move up to home ownership, "there's no dilution of demand. It's a swap -- some move from A to B, while others move from B to A."
But in areas where developers built lots of new homes and condos during the boom, oversupply has the potential to depress rents, Witten said. Compounding the problem, many areas that saw a boom in construction were also popular with speculators who bought properties that are now or soon will be back on the for-sale or rental markets.
According to the Mortgage Bankers Association, 32 percent of home loans in default in the state of Nevada at the end of June were to borrowers who didn't occupy the property in question (see Inman News story). In other words, they were second homes or properties bought to flip. The non-occupied share of loans in default was also much higher than the national average of 13 percent in Arizona (26 percent), Florida (25 percent), and California (21 percent).
Trosien said those areas -- and also places like Chicago and Washington, D.C. -- are examples of ghost markets, where owners of rental properties are "competing against not only professionally managed developments, but people who went in and bought to flip."
The latest Census Bureau numbers show rental vacancy rates are highest in the South (12.1 percent) and Midwest (11.6 percent), and lowest in the West (6.8 percent) and Northeast (7.1 percent).
Marcus & Millichap and Economy.com estimate that so far this year, condo sales have plummeted 55.5 percent in the Washington, D.C., area, 40.2 percent in Las Vegas and 25.6 percent in Phoenix. Condo sales have also slowed in the Florida cities that led the nation in condo conversions, including Tampa-St. Petersburg (down 34 percent); Jacksonville (down 28.6 percent); and Miami (down 28 percent).
Although most of RealFacts' clients own, manage or develop multifamily housing projects, Latham said the firm has been retained to do studies for developers who have San Francisco Bay Area condominium projects in the works. Developers are anxious about whether there will be buyers, and if so whether the buyers will be able to get loans.
"People have been coming to us and saying, 'What would we get if we turned this into a rental project?' " Latham said.
Like Latham, Witten expects to see existing buildings subjected to condo conversion coming back as rentals, and new projects originally conceived as condos marketed as apartments instead.
"It's much easier to speculate in condos than it is in the single-family market. I can put a deposit down on a new condo, and if it's a presale I don't have to worry for 18 months if I have to close," Witten said. "I think we ended up getting a lot of condo construction supported by those speculators that, in hindsight, was in excess of what was needed. As the market goes soft, those presale agreements are dropped, deposits are forfeited, and lawsuits are filed."
Despite that worrisome trend, Witten estimates that nationwide, there are about 10 excess single-family homes for every condo.
"I would say its on the magnitude of just under 1 million more empty single-families on the ground today than the nation would normally have, and it's 100,000 to 150,000 units for condos," Witten said.
We need a big place
One factor that could cushion the influx of homes and condos onto rental markets is that construction of multifamily rental housing declined in many areas during the housing boom. Witten said 2007 could mark a 14-year low in new apartment starts nationwide.
Another bit of good news for some accidental landlords in markets hit hard by foreclosures is that when families lose their homes, they're not looking for a studio apartment, Latham said. Many will want to move to a three-bedroom apartment, home or condo.
"We are just starting to see if those are the units in greatest demand, and where units are going up the most," Latham said.
According to the latest Census Bureau data on housing vacancies and home ownership, single-unit buildings such as homes and condos had a lower vacancy rate -- 9.4 percent at the end of September -- than buildings with multiple units. Buildings with five to nine units had the highest vacancy rate, 10.9 percent, compared with a 10.2 vacancy rate for buildings with 10 or more units.
The Census Bureau reports that the more rooms a rental had, the more likely it was to be occupied during the third quarter. Units with one or two rooms had the highest vacancy rates -- 20.5 percent -- and those with six or more rooms the lowest, 7.6 percent.
Rent per square foot has been "of special interest" to people thinking about renting out condos, Latham said, because condos tend to be larger than most rentals.
"Let's say a one-bedroom unit in a rental building might be 650 square feet, but a condo might be 1,000 square feet," Latham said. Condo owners want to know, "How much more can we get because it's a bigger unit with additional amenities?"
ApartmentRating.com founder Jeremy Bencken said a survey of the site's users found "the vast majority of renters -- people who are ostensibly apartment hunting -- are interested in (renting) houses and condos."
Witten, however, questions whether condos and single-family homes are more desirable to renters than apartments.
"The reality is that professionally managed apartments have lots of amenities, and if something goes wrong, you know where to go to get it fixed," Witten said. "That's an advantage to the rental sector."
Another difficulty of marketing a condo or home that the owner intends to put up for sale when market conditions improve is that many renters are looking for long-term accommodations.
A final consideration in setting rent is the time of year a home goes on the market. Don't get discouraged -- or assume you've set the rent too high -- if you put a property up for rent at the end of the year and there are no takers.
October and November are "the worst time of the year" to market rental properties, said Robert Massey Jr., founder of RentalHouses.com and vice president of industry development at Primedia's Rentals.com.
When Massey was a full-time property manager, prospective clients would approach him around that time about renting out a property they were having trouble selling.
"I'd often be contacted late in the year, because it's a slow market for sales," Massey said. "Well, guess what? The rental market follows the same pattern. The reality is, the house will sit vacant longer than if it comes to me in April."
Up next: Part three of a three-part series on "accidental landlords" provides an overview of software and Web sites for marketing and managing rental properties.
***
Thursday, September 27, 2007
Fixed-Rate Mortgages Remain Strong, Affordable
RISMEDIA, Sept. 27, 2007-Traditional home loans, such as the 30-year fixed-rate mortgage, have survived the so-called “mortgage meltdown” and home buyers are seeking them out in large numbers, according to Dr. Susan M. Wachter, Professor of Real Estate and Finance at the University of Pennsylvania’s Wharton School.
With support by Genworth Financial, Dr. Wachter released her third quarter 2007 U.S.
Mortgage Payment Index, reminding buyers that safe home financing options still exist despite widespread fluctuation in the mortgage market.
“It’s encouraging to see that consumers have not been scared off by the ‘credit crunch’ and ‘mortgage meltdown’ talk, and are returning to secure, tried-and-true home financing,” Wachter said. “This trend emerged in the first half of 2007, and I expect it to continue as home buyers become more informed about their mortgage options and lenders reign in risky products.”
Dr. Wachter’s Index shows that both borrowers and lenders steered clear of risk and opted for safer mortgages in the first half of 2007. Adjustable-rate mortgage applications dropped 46.9% from September 2006 to September 2007, while applications for fixed-rate loans climbed 30.2% in the same period. Borrowers who put down less than 20% on a home are flocking to insured, single mortgages rather than risky piggyback loans. The number of borrowers using private mortgage insurance jumped 36% in the second quarter, and is up 69% since the outset of 2006.
“There is particularly good news for first-time and low down payment home buyers in the second half of 2007,” said Wachter. “Long-term, fixed-rate mortgages are still widely available and affordable, even in today’s market. My advice to these borrowers is to stick with a traditional fixed-rate loan with mortgage insurance. That way, they will be sure to keep their payments stable and affordable over time.”
Published quarterly by Dr. Wachter, and in association with Genworth Financial Inc., the U.S. Mortgage Payment Index evaluates which mortgage products offer borrowers the best value, comparing payments for various mortgage options. Wachter’s third quarter analysis finds that monthly payments on long-term, fixed-rate loans with mortgage insurance remain steady over five years — with one product dropping by 9.3%. Since combination, or piggyback, loans are subject to rate resets, payments can jump as much as 148% in five years.
“By locking in an affordable rate now with a fixed-rate mortgage, new buyers and refinancing borrowers can avoid the payment shock that is imminent for an estimated 2 million American homeowners, as their adjustable-rate loans reset in the coming months,” Wachter said.
The following mortgages are featured in the new Index for September. The first amount reflects the payment in month one, the second amount reflects the payment in month 61:
– 30-year Fixed with monthly mortgage insurance: $1,400 / $1,270 (drops
9.3%)
– 30-year Fixed with Single Financed Premium mortgage insurance: $1,306 /
$1,306 (no change)
– Combo: 30-year Fixed and HELOC: $1,321 / $1,428 (rises 8.1%)
– Combo: 30-year Fixed and Closed-End Second: $1,327 / $1,327 (no change)
– Combo: 10/1 Interest-Only ARM and HELOC: $1,196 / $1,303 (rises 8.9%)
– Combo: Pay Option ARM and HELOC: $714 / $1,771 (rises 148%)
For more information, visit http://www.genworth.com/mortgageinfo
RISMEDIA, Sept. 27, 2007-Traditional home loans, such as the 30-year fixed-rate mortgage, have survived the so-called “mortgage meltdown” and home buyers are seeking them out in large numbers, according to Dr. Susan M. Wachter, Professor of Real Estate and Finance at the University of Pennsylvania’s Wharton School.
With support by Genworth Financial, Dr. Wachter released her third quarter 2007 U.S.
Mortgage Payment Index, reminding buyers that safe home financing options still exist despite widespread fluctuation in the mortgage market.
“It’s encouraging to see that consumers have not been scared off by the ‘credit crunch’ and ‘mortgage meltdown’ talk, and are returning to secure, tried-and-true home financing,” Wachter said. “This trend emerged in the first half of 2007, and I expect it to continue as home buyers become more informed about their mortgage options and lenders reign in risky products.”
Dr. Wachter’s Index shows that both borrowers and lenders steered clear of risk and opted for safer mortgages in the first half of 2007. Adjustable-rate mortgage applications dropped 46.9% from September 2006 to September 2007, while applications for fixed-rate loans climbed 30.2% in the same period. Borrowers who put down less than 20% on a home are flocking to insured, single mortgages rather than risky piggyback loans. The number of borrowers using private mortgage insurance jumped 36% in the second quarter, and is up 69% since the outset of 2006.
“There is particularly good news for first-time and low down payment home buyers in the second half of 2007,” said Wachter. “Long-term, fixed-rate mortgages are still widely available and affordable, even in today’s market. My advice to these borrowers is to stick with a traditional fixed-rate loan with mortgage insurance. That way, they will be sure to keep their payments stable and affordable over time.”
Published quarterly by Dr. Wachter, and in association with Genworth Financial Inc., the U.S. Mortgage Payment Index evaluates which mortgage products offer borrowers the best value, comparing payments for various mortgage options. Wachter’s third quarter analysis finds that monthly payments on long-term, fixed-rate loans with mortgage insurance remain steady over five years — with one product dropping by 9.3%. Since combination, or piggyback, loans are subject to rate resets, payments can jump as much as 148% in five years.
“By locking in an affordable rate now with a fixed-rate mortgage, new buyers and refinancing borrowers can avoid the payment shock that is imminent for an estimated 2 million American homeowners, as their adjustable-rate loans reset in the coming months,” Wachter said.
The following mortgages are featured in the new Index for September. The first amount reflects the payment in month one, the second amount reflects the payment in month 61:
– 30-year Fixed with monthly mortgage insurance: $1,400 / $1,270 (drops
9.3%)
– 30-year Fixed with Single Financed Premium mortgage insurance: $1,306 /
$1,306 (no change)
– Combo: 30-year Fixed and HELOC: $1,321 / $1,428 (rises 8.1%)
– Combo: 30-year Fixed and Closed-End Second: $1,327 / $1,327 (no change)
– Combo: 10/1 Interest-Only ARM and HELOC: $1,196 / $1,303 (rises 8.9%)
– Combo: Pay Option ARM and HELOC: $714 / $1,771 (rises 148%)
For more information, visit http://www.genworth.com/mortgageinfo
Tuesday, September 18, 2007
Sensationalism and the Housing Bubble
by Rich Levin
This makes me mad every time I see it. Either the National Association of Business Economists is full of people with no real business experience or fools.
This is a headline from a major online Real Estate publication,
"Economists See Credit Problems as Bigger Threat than Terrorism."
I know they were all alive just seven years ago when terrorism cost the lives of three thousand American citizens. That headline goes beyond sensationalism. It is rude and insensitive.
The article goes on to say that one in three members of the NABE, "...Said the housing boom can be described as a 'serious National bubble." Then later in the article three in four said they would "buy a house today if they intended to use it as their primary residence."
Would someone please tell these academic fools that housing is local in nature? While many major markets suffered and are suffering from the over-zealousness of investors followed by the over-zealousness of foolish sub prime lenders; there are many markets that are healthy and many more that are suffering a softening but nothing close to a collapse.
These gloom and doom headlines supported by a minority of questionable economist opinions feed the problem they are describing. While the facts support the opposite conclusion. Even the economists own research supports the opposite conclusion.
In the same article, "Asked to look five years into the future, 42 percent expected US home prices to remain flat, 41 percent said prices would rise." How did 34 percent of the same group call this a bubble that is fed by a threat bigger than terrorism.
Let's give credit where it is due. "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there's no bubble at all and that the market is functioning correctly."
Hooray for those groups. They got it right. There are some local bubbles where there were hundreds and thousands of development parcels and homes developed and built in anticipation of future sales and the sales that were feeding that demand was investor speculation (Boise and Sarasota to name two).
In late 2005 and through 2006 the investors realized that the boom was being fed by their own demand so withdrew. This left a tremendous inventory in some cities or areas of cities.
Unfortunately, in 2006, the secondary market lenders realizing that they had allowed a foolish combination of underwriting standards for the previous five years or so immediately followed this. They were buying loans that allowed buyers to have both, little or no down payment and marginal credit. How this happened (and who should be prosecuted for it) is a mystery that will likely to remain such.
The result was that in some communities around the country, particularly where there were high priced homes and with less sophisticated buyers; many of these mortgages were used to purchase homes. That created additional pockets of excess inventory which stalled prices in those areas.
Now in the fall of 2007 the majority of lenders loaning jumbo loans, over $417,000 have stopped funding these high-end loans for some period. This will further increase inventory and dampen prices in some areas.
Notice the language, dampen prices in some areas. Most of the country is experiencing a normal buyer's market that normally follows a long healthy seller's market.
The latter group of economists put it perfectly. The market is functioning correctly. In 1986 after two to three years of a soft buyer's market not unlike what we are experiencing now (Although it was driven by different causes.) there was a long strong period of a healthy seller's market with steady appreciation.
There was a momentary softer buyer's market around the Gulf War in 1991 (although not caused by it) followed by over a decade of a healthy buyers market that lasted until 2006. If we learn from history strong seller's markets last longer than softer buyer's markets.
So again, the economists got this right. The same article said 58% of the economists predicted a 'meaningful' recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009.
This is completely consistent with history. This two or three years of soft buyer's market with slightly flattening prices will likely be followed by five or more years of a healthy seller's market with equally healthy price appreciation.
REALTORS® all learned in their first Real Estate class that the market is driven by supply and demand. As long as there is an increasing population of people with reasonable or better incomes, the demand will keep the market healthy.
Add to that the fact that the Federal government repeatedly states that they realize that the Real Estate market is critical to the health of the economy and they will do whatever is necessary to keep mortgage money available.
It all adds up to a principle residence continuing to be the safest and smartest investment for a person living in this fabulous nation. (Just be careful of areas that have experienced rapid appreciation for more than twenty-four months. There could be a windfall or just a fall looming.)
If you are associated with Real Estate, please separate the sensationalism from the truth. If you are in most communities in this country, everything is pretty normal. Prices are appreciating a little slower but still appreciating. Houses are on the market longer. Buyers are fussier. Yes, it is tougher to sell Real Estate. But you still have one of the best jobs in the world with more personal freedom and opportunity for success than any other business person or professional on earth.
If you are in one of those tougher markets, my heart is with you. You do have an uphill battle for another twelve to twenty four months. You have my strongest wish that you can survive and succeed through this. If not, come back to the business in a couple of years. I feel comfortable promising you that the good times will roll again in the not too distant future.
I love this business for what it provides to our society, the people in it, and the strong bright professionals that make me proud to be a part of it.
by Rich Levin
This makes me mad every time I see it. Either the National Association of Business Economists is full of people with no real business experience or fools.
This is a headline from a major online Real Estate publication,
"Economists See Credit Problems as Bigger Threat than Terrorism."
I know they were all alive just seven years ago when terrorism cost the lives of three thousand American citizens. That headline goes beyond sensationalism. It is rude and insensitive.
The article goes on to say that one in three members of the NABE, "...Said the housing boom can be described as a 'serious National bubble." Then later in the article three in four said they would "buy a house today if they intended to use it as their primary residence."
Would someone please tell these academic fools that housing is local in nature? While many major markets suffered and are suffering from the over-zealousness of investors followed by the over-zealousness of foolish sub prime lenders; there are many markets that are healthy and many more that are suffering a softening but nothing close to a collapse.
These gloom and doom headlines supported by a minority of questionable economist opinions feed the problem they are describing. While the facts support the opposite conclusion. Even the economists own research supports the opposite conclusion.
In the same article, "Asked to look five years into the future, 42 percent expected US home prices to remain flat, 41 percent said prices would rise." How did 34 percent of the same group call this a bubble that is fed by a threat bigger than terrorism.
Let's give credit where it is due. "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there's no bubble at all and that the market is functioning correctly."
Hooray for those groups. They got it right. There are some local bubbles where there were hundreds and thousands of development parcels and homes developed and built in anticipation of future sales and the sales that were feeding that demand was investor speculation (Boise and Sarasota to name two).
In late 2005 and through 2006 the investors realized that the boom was being fed by their own demand so withdrew. This left a tremendous inventory in some cities or areas of cities.
Unfortunately, in 2006, the secondary market lenders realizing that they had allowed a foolish combination of underwriting standards for the previous five years or so immediately followed this. They were buying loans that allowed buyers to have both, little or no down payment and marginal credit. How this happened (and who should be prosecuted for it) is a mystery that will likely to remain such.
The result was that in some communities around the country, particularly where there were high priced homes and with less sophisticated buyers; many of these mortgages were used to purchase homes. That created additional pockets of excess inventory which stalled prices in those areas.
Now in the fall of 2007 the majority of lenders loaning jumbo loans, over $417,000 have stopped funding these high-end loans for some period. This will further increase inventory and dampen prices in some areas.
Notice the language, dampen prices in some areas. Most of the country is experiencing a normal buyer's market that normally follows a long healthy seller's market.
The latter group of economists put it perfectly. The market is functioning correctly. In 1986 after two to three years of a soft buyer's market not unlike what we are experiencing now (Although it was driven by different causes.) there was a long strong period of a healthy seller's market with steady appreciation.
There was a momentary softer buyer's market around the Gulf War in 1991 (although not caused by it) followed by over a decade of a healthy buyers market that lasted until 2006. If we learn from history strong seller's markets last longer than softer buyer's markets.
So again, the economists got this right. The same article said 58% of the economists predicted a 'meaningful' recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009.
This is completely consistent with history. This two or three years of soft buyer's market with slightly flattening prices will likely be followed by five or more years of a healthy seller's market with equally healthy price appreciation.
REALTORS® all learned in their first Real Estate class that the market is driven by supply and demand. As long as there is an increasing population of people with reasonable or better incomes, the demand will keep the market healthy.
Add to that the fact that the Federal government repeatedly states that they realize that the Real Estate market is critical to the health of the economy and they will do whatever is necessary to keep mortgage money available.
It all adds up to a principle residence continuing to be the safest and smartest investment for a person living in this fabulous nation. (Just be careful of areas that have experienced rapid appreciation for more than twenty-four months. There could be a windfall or just a fall looming.)
If you are associated with Real Estate, please separate the sensationalism from the truth. If you are in most communities in this country, everything is pretty normal. Prices are appreciating a little slower but still appreciating. Houses are on the market longer. Buyers are fussier. Yes, it is tougher to sell Real Estate. But you still have one of the best jobs in the world with more personal freedom and opportunity for success than any other business person or professional on earth.
If you are in one of those tougher markets, my heart is with you. You do have an uphill battle for another twelve to twenty four months. You have my strongest wish that you can survive and succeed through this. If not, come back to the business in a couple of years. I feel comfortable promising you that the good times will roll again in the not too distant future.
I love this business for what it provides to our society, the people in it, and the strong bright professionals that make me proud to be a part of it.
Monday, September 17, 2007
The Hamptons' Split Housing Personality
By DAN DORFMANSeptember 7, 2007
Call it a $5 million housing blunder in the Hamptons, New York's premier summer playground for the rich and famous.
Last month, when the stock market was repeatedly bombed with triple-digit losses in the Dow, a city hedge fund trader bemoaned the fact he had committed himself to the purchase of an $18.7 million home in the Hamptons. The trader was so worried, in fact, that in early August, when the market continued to languish, he walked away from the transaction and lost the $150,000 good-faith deposit he had put down.
It was a dumb decision. Despite the national housing slump, that same home just sold for nearly $24 million.
But while large Hampton estates such as this continue to see prices rise, for smaller homes, for sale signs are rife.
"I've never seen so many Hamptons homes on the block," says Marcia Wolf, who, along with her husband, Norman, president of the women's sportswear producer Carole Wrenn Corp., have owned a house in Westhampton since 1979. "We see an awful lot of homes for sale and they're sitting for longer and longer periods."
By DAN DORFMANSeptember 7, 2007
Call it a $5 million housing blunder in the Hamptons, New York's premier summer playground for the rich and famous.
Last month, when the stock market was repeatedly bombed with triple-digit losses in the Dow, a city hedge fund trader bemoaned the fact he had committed himself to the purchase of an $18.7 million home in the Hamptons. The trader was so worried, in fact, that in early August, when the market continued to languish, he walked away from the transaction and lost the $150,000 good-faith deposit he had put down.
It was a dumb decision. Despite the national housing slump, that same home just sold for nearly $24 million.
But while large Hampton estates such as this continue to see prices rise, for smaller homes, for sale signs are rife.
"I've never seen so many Hamptons homes on the block," says Marcia Wolf, who, along with her husband, Norman, president of the women's sportswear producer Carole Wrenn Corp., have owned a house in Westhampton since 1979. "We see an awful lot of homes for sale and they're sitting for longer and longer periods."
Most of these homes, Mr. Wolf says, are in the $1 million to $3 million range.
Why the disparity? "Because you now have a split real estate personality in the Hamptons," Denise Lefrak Calicchio, tells me. "The high end of the market [$15 million and up] is off the charts, while you can't give away homes in the $2 million range."
It's a buyer's market in the low and medium ranges and a seller's market at the high end, she says. Mrs. Calicchio, daughter of the late real estate mogul Samuel Lefrak and the author of "High Rise Low Down," a colorful look at New York City residences of the rich and powerful, cites one conspicuous example: The owner of a luxury beach home in Southampton put the property on the market for $70 million. Within a week, the seller received a $65 million offer but refused to budge. It may be, Mrs. Calicchio speculates, that if the seller is patient, she could get more than she's asking for.
One of the drivers of all the high-end real estate sales is buyers from abroad. In fact, Mrs. Calicchio sees the Hamptons increasingly evolving into an international summer paradise, as foreign buyers take advantage of the rising value in the euro against the weak dollar.
There are a lot more global buyers, a leading Hamptons real estate appraiser, John Watson, tells me. He points in particular to potential buyers from such countries as Spain, Britain, Ireland, France, and Russia.
Not everyone thinks the low end of the Hamptons real estate market is slumbering. While August and September are traditionally a sleepy period for Hamptons home sales, this year is different, Mr. Watson says. He currently has 102 pending contracts, ranging from small condos at $250,000 to homes at around $18 million.
Why the disparity? "Because you now have a split real estate personality in the Hamptons," Denise Lefrak Calicchio, tells me. "The high end of the market [$15 million and up] is off the charts, while you can't give away homes in the $2 million range."
It's a buyer's market in the low and medium ranges and a seller's market at the high end, she says. Mrs. Calicchio, daughter of the late real estate mogul Samuel Lefrak and the author of "High Rise Low Down," a colorful look at New York City residences of the rich and powerful, cites one conspicuous example: The owner of a luxury beach home in Southampton put the property on the market for $70 million. Within a week, the seller received a $65 million offer but refused to budge. It may be, Mrs. Calicchio speculates, that if the seller is patient, she could get more than she's asking for.
One of the drivers of all the high-end real estate sales is buyers from abroad. In fact, Mrs. Calicchio sees the Hamptons increasingly evolving into an international summer paradise, as foreign buyers take advantage of the rising value in the euro against the weak dollar.
There are a lot more global buyers, a leading Hamptons real estate appraiser, John Watson, tells me. He points in particular to potential buyers from such countries as Spain, Britain, Ireland, France, and Russia.
Not everyone thinks the low end of the Hamptons real estate market is slumbering. While August and September are traditionally a sleepy period for Hamptons home sales, this year is different, Mr. Watson says. He currently has 102 pending contracts, ranging from small condos at $250,000 to homes at around $18 million.
Business is not as frenetic as it was a few years ago, but it's healthy and moving along, he says. He rates inventories — which he notes were never that big to begin with — about on par with a year ago. As for prices, he says the median value is up a bit from last year.
Mr. Watson credits the ongoing solid housing Hamptons demand to low mortgage rates and the fact that people are still making a lot of money. He notes, too, that while this year's Wall Street bonuses, normally a major catalyst for sales, may be down from last year, they should still be substantial. In addition, he says, the Hamptons, like fine art or a yacht, remains a strong status symbol.
One of the Hamptons' most successful real estate brokers is Sotheby's Harold Grant, who over the past 12 months has sold homes valued at about $200 million. It makes no sense he says, to equate a credit crunch in middle America with the Hamptons high-end luxury market, where there is such a lack of supply.
Likewise, he points out, the middle market has graduated from the $2 million to $4 million range to the $4 million to $8 million range. The low end, he notes, now runs from $500,000 to $2 million. The Hamptons sales story, as he sees it, remains a strong story because demand continues to outstrip supply.
The Corcoran Group's leading Hamptons broker, senior vice president Susan Breitenbach, characterizes the high end (above $10 million) as "crazy busy." If you're in the market for such a home and love to paint, she thinks she has just the property for you: Christie Brinkley's $30 million Bridgehampton estate, 20 acres all told, replete with the usual swimming pool, tennis court, and guest house, plus a large artist's studio.
Too steep? Ms. Breitenbach will be happy to show you one of her cheapest offerings, a 6-acre parcel of land in Water Mill for $2.1 million. If you want to live there, figure another $1.6 million for, say, a 4,000-square-foot house.
Mr. Watson credits the ongoing solid housing Hamptons demand to low mortgage rates and the fact that people are still making a lot of money. He notes, too, that while this year's Wall Street bonuses, normally a major catalyst for sales, may be down from last year, they should still be substantial. In addition, he says, the Hamptons, like fine art or a yacht, remains a strong status symbol.
One of the Hamptons' most successful real estate brokers is Sotheby's Harold Grant, who over the past 12 months has sold homes valued at about $200 million. It makes no sense he says, to equate a credit crunch in middle America with the Hamptons high-end luxury market, where there is such a lack of supply.
Likewise, he points out, the middle market has graduated from the $2 million to $4 million range to the $4 million to $8 million range. The low end, he notes, now runs from $500,000 to $2 million. The Hamptons sales story, as he sees it, remains a strong story because demand continues to outstrip supply.
The Corcoran Group's leading Hamptons broker, senior vice president Susan Breitenbach, characterizes the high end (above $10 million) as "crazy busy." If you're in the market for such a home and love to paint, she thinks she has just the property for you: Christie Brinkley's $30 million Bridgehampton estate, 20 acres all told, replete with the usual swimming pool, tennis court, and guest house, plus a large artist's studio.
Too steep? Ms. Breitenbach will be happy to show you one of her cheapest offerings, a 6-acre parcel of land in Water Mill for $2.1 million. If you want to live there, figure another $1.6 million for, say, a 4,000-square-foot house.
Thursday, September 13, 2007
Mortgage rates drop swiftly this week
Borrowers facing resetting rates hope lull will offer refi opportunity
Thursday, September 13, 2007Inman News
Long-term mortgage rates dropped considerably this week following the release of August's dismal employment report, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac's survey, the rate on 30-year fixed-rate mortgages fell to an average 6.31 percent from 6.46 percent last week, and the 15-year fixed rate declined to 5.97 percent from 6.15 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 and 0.4, respectively, on the 30- and 15-year loans.
Adjustable-rate mortgages (ARMs) also saw a drop in rates, as the five-year Treasury-indexed hybrid ARM was down at an average 6.17 percent from 6.32 percent a week ago and the rate on one-year Treasury-indexed ARMs sank to 5.66 percent from 5.74 percent. Points on the five-year and one-year loans averaged 0.6 and 0.8, respectively.
"Interest rates on prime conforming loans fell across the board in the past week, with rates on 30-year fixed mortgages averaging 0.15 percentage points below the previous week's level," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. "The drop in mortgage rates may give some relief to borrowers who are looking to refinance or purchase a home."
In Bankrate.com's survey, fixed mortgage rates plunged this week to four-month lows, with the average conforming 30-year fixed mortgage rate falling to 6.28 percent. Discount and origination points on these loans averaged 0.43.
The average 15-year fixed-rate mortgage popular for refinancing dropped by the same amount to 5.96 percent, according to Bankrate.com. Adjustable mortgage rates were lower as well, with the average one-year ARM inching lower to 6.2 percent and the average 5/1 ARM retreating to 6.3 percent.
Mortgage rates plunged following last Friday's lackluster employment report, Bankrate.com reported. Poor job growth figures raised concerns about economic health and helped push mortgage rates to the lowest point since May 2. Nervousness about the economy often drives investors toward the safe haven of Treasury securities, pushing both bond yields and mortgage rates lower. Rates for jumbo mortgages -- those above $417,000 -- declined by a similar amount, settling at 7.2 percent. While the spread between jumbo and conforming mortgage rates remains uncharacteristically wide, this spread has stabilized in the past two weeks.
Amid the turbulence in mortgage markets, fixed mortgage rates are still an attractive option for borrowers. Just two months ago, the average 30-year fixed mortgage rate was 6.82 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,307. Now that the average conforming 30-year fixed rate is 6.28 percent, the same $200,000 loan carries a monthly payment of $1,235.
The following is a sampling of Bankrate.com's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:
New York - 6.31 percent with 0.28 point
Los Angeles - 6.41 percent with 0.66 point
Chicago - 6.31 percent with 0.13 point
San Francisco - 6.25 percent with 0.7 point
Philadelphia - 6.31 percent with 0.36 point
Detroit - 6.28 percent with 0.09 point
Boston - 6.38 percent with 0.22 point
Houston - 6.17 percent with 0.7 point
Dallas - 6.18 percent with 0.54 point
Washington, D.C. - 6.25 percent with 0.62 point
Borrowers facing resetting rates hope lull will offer refi opportunity
Thursday, September 13, 2007Inman News
Long-term mortgage rates dropped considerably this week following the release of August's dismal employment report, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac's survey, the rate on 30-year fixed-rate mortgages fell to an average 6.31 percent from 6.46 percent last week, and the 15-year fixed rate declined to 5.97 percent from 6.15 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 and 0.4, respectively, on the 30- and 15-year loans.
Adjustable-rate mortgages (ARMs) also saw a drop in rates, as the five-year Treasury-indexed hybrid ARM was down at an average 6.17 percent from 6.32 percent a week ago and the rate on one-year Treasury-indexed ARMs sank to 5.66 percent from 5.74 percent. Points on the five-year and one-year loans averaged 0.6 and 0.8, respectively.
"Interest rates on prime conforming loans fell across the board in the past week, with rates on 30-year fixed mortgages averaging 0.15 percentage points below the previous week's level," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. "The drop in mortgage rates may give some relief to borrowers who are looking to refinance or purchase a home."
In Bankrate.com's survey, fixed mortgage rates plunged this week to four-month lows, with the average conforming 30-year fixed mortgage rate falling to 6.28 percent. Discount and origination points on these loans averaged 0.43.
The average 15-year fixed-rate mortgage popular for refinancing dropped by the same amount to 5.96 percent, according to Bankrate.com. Adjustable mortgage rates were lower as well, with the average one-year ARM inching lower to 6.2 percent and the average 5/1 ARM retreating to 6.3 percent.
Mortgage rates plunged following last Friday's lackluster employment report, Bankrate.com reported. Poor job growth figures raised concerns about economic health and helped push mortgage rates to the lowest point since May 2. Nervousness about the economy often drives investors toward the safe haven of Treasury securities, pushing both bond yields and mortgage rates lower. Rates for jumbo mortgages -- those above $417,000 -- declined by a similar amount, settling at 7.2 percent. While the spread between jumbo and conforming mortgage rates remains uncharacteristically wide, this spread has stabilized in the past two weeks.
Amid the turbulence in mortgage markets, fixed mortgage rates are still an attractive option for borrowers. Just two months ago, the average 30-year fixed mortgage rate was 6.82 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,307. Now that the average conforming 30-year fixed rate is 6.28 percent, the same $200,000 loan carries a monthly payment of $1,235.
The following is a sampling of Bankrate.com's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:
New York - 6.31 percent with 0.28 point
Los Angeles - 6.41 percent with 0.66 point
Chicago - 6.31 percent with 0.13 point
San Francisco - 6.25 percent with 0.7 point
Philadelphia - 6.31 percent with 0.36 point
Detroit - 6.28 percent with 0.09 point
Boston - 6.38 percent with 0.22 point
Houston - 6.17 percent with 0.7 point
Dallas - 6.18 percent with 0.54 point
Washington, D.C. - 6.25 percent with 0.62 point
Real Estate Articles from Inman News
Countrywide lines up $12 billion in financing
August loan production falls 17% year-over-year
Thursday, September 13, 2007Inman News
Countrywide Financial Corp. said Thursday it had secured $12 billion in additional financing, even as loan fundings in August fell by 17 percent from a year ago and the company moves forward with plans to lay off up to 12,000 workers.
Countrywide, which received a $2 billion cash infusion from Bank of America in August after drawing down an $11.5 billion line of credit from 40 banks, said that since then it has arranged for $12 billion in additional secured borrowing capacity "through new or existing credit facilities."
The Calabasas, Calif.-based lender's stock was up nearly 8 percent shortly after noon on the news.
But the announcement came as Countrywide reported August loan fundings fell 17 percent from a year ago, to $34.3 billion, down from a recent peak of $45.3 billion in June. The 192,211 residential mortgage loans funded in August represented a 13 percent decline from July but surpassed a recent low hit in February, when 177,806 loans were funded.
In a Sept. 7 announcement of plans to lay off up to 20 percent of the company's workers, Countrywide said it expected loan volume to decline by 25 percent in 2008.
Average daily mortgage loan applications in August were $2.3 billion, down 12 percent from July and August 2006. The mortgage loan pipeline was $52 billion at the end of August, compared with $64 billion at the same time last year.
Countrywide said it grew its mortgage loan servicing portfolio by 18 percent in the last 12 months, to $1.5 trillion.
The latest numbers show foreclosures pending as a percentage of unpaid principal balance continued to climb, hitting 1.2 percent at the end of August. That's a 16-basis-point increase from July and more than double the 0.48 percent pending foreclosure rate of a year ago. Delinquencies as a percentage of unpaid principal balance were essentially flat at 4.9 percent compared to the previous month, but up from 3.65 percent a year ago.
As secondary market investors continue to shy away from securities backed by most nonprime mortgage loans, Countrywide said it was accelerating plans to migrate the funding of its mortgage originations to Countrywide Bank. The company said it has tightened product and underwriting guidelines so that all of the loans it originates are eligible for Fannie Mae, Freddie Mac or Ginnie Mae securitization programs, or meet Countrywide Bank's investment criteria.
At $8.69 billion, August fundings of adjustable-rate mortgages were down from $11 billion in July and $19.3 billion a year ago. Subprime loan fundings totaled $1.27 billion, compared with $1.8 billion in July and $3.7 billion a year ago. At $2.2 billion, government fundings were down slightly from June and July, but nearly twice as great as the $1.61 billion tallied in August 2006.
Countrywide's announcement of a possible 20 percent reduction in its workforce was preceded by smaller cuts, which showed up in the company's August numbers.
Countrywide employed 33,658 workers in loan originations at the end of August, down 688 from a peak of 34,326 in July but up from 32,310 a year ago. Employment in loan servicing increased slightly, to 8,182, up 123 from the previous month, while the 1,984 workers employed in loan closing services represented a reduction of 45 positions from July. The company's total workforce headcount stood at 60,867, down 719 from the previous month but up from 55,909 a year ago.
Countrywide lines up $12 billion in financing
August loan production falls 17% year-over-year
Thursday, September 13, 2007Inman News
Countrywide Financial Corp. said Thursday it had secured $12 billion in additional financing, even as loan fundings in August fell by 17 percent from a year ago and the company moves forward with plans to lay off up to 12,000 workers.
Countrywide, which received a $2 billion cash infusion from Bank of America in August after drawing down an $11.5 billion line of credit from 40 banks, said that since then it has arranged for $12 billion in additional secured borrowing capacity "through new or existing credit facilities."
The Calabasas, Calif.-based lender's stock was up nearly 8 percent shortly after noon on the news.
But the announcement came as Countrywide reported August loan fundings fell 17 percent from a year ago, to $34.3 billion, down from a recent peak of $45.3 billion in June. The 192,211 residential mortgage loans funded in August represented a 13 percent decline from July but surpassed a recent low hit in February, when 177,806 loans were funded.
In a Sept. 7 announcement of plans to lay off up to 20 percent of the company's workers, Countrywide said it expected loan volume to decline by 25 percent in 2008.
Average daily mortgage loan applications in August were $2.3 billion, down 12 percent from July and August 2006. The mortgage loan pipeline was $52 billion at the end of August, compared with $64 billion at the same time last year.
Countrywide said it grew its mortgage loan servicing portfolio by 18 percent in the last 12 months, to $1.5 trillion.
The latest numbers show foreclosures pending as a percentage of unpaid principal balance continued to climb, hitting 1.2 percent at the end of August. That's a 16-basis-point increase from July and more than double the 0.48 percent pending foreclosure rate of a year ago. Delinquencies as a percentage of unpaid principal balance were essentially flat at 4.9 percent compared to the previous month, but up from 3.65 percent a year ago.
As secondary market investors continue to shy away from securities backed by most nonprime mortgage loans, Countrywide said it was accelerating plans to migrate the funding of its mortgage originations to Countrywide Bank. The company said it has tightened product and underwriting guidelines so that all of the loans it originates are eligible for Fannie Mae, Freddie Mac or Ginnie Mae securitization programs, or meet Countrywide Bank's investment criteria.
At $8.69 billion, August fundings of adjustable-rate mortgages were down from $11 billion in July and $19.3 billion a year ago. Subprime loan fundings totaled $1.27 billion, compared with $1.8 billion in July and $3.7 billion a year ago. At $2.2 billion, government fundings were down slightly from June and July, but nearly twice as great as the $1.61 billion tallied in August 2006.
Countrywide's announcement of a possible 20 percent reduction in its workforce was preceded by smaller cuts, which showed up in the company's August numbers.
Countrywide employed 33,658 workers in loan originations at the end of August, down 688 from a peak of 34,326 in July but up from 32,310 a year ago. Employment in loan servicing increased slightly, to 8,182, up 123 from the previous month, while the 1,984 workers employed in loan closing services represented a reduction of 45 positions from July. The company's total workforce headcount stood at 60,867, down 719 from the previous month but up from 55,909 a year ago.
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