by Calculated Risk on 4/06/2007 08:56:00 PM

Foreclosure Radar reports: California Foreclosure Sales Near $2B in March

Of the $2B worth of properties sold in March, 4,796 [of 5,316] went back to the lender after receiving no bids, representing $1.82B.

I'm pretty sure that all 5,316 properties, even the 4,796 that are now bank REO (real estate owned), are included as existing home sales in March by the NAR. If someone knows for sure, please let me know.

"Foreclosures sold at auction now account for 15% of all home sales in California and continue to rise," said Sean O'Toole, CEO and Founder of Foreclosure Radar. "This isn't just a story about failing subprime lenders and their customers. At the current pace, foreclosures will be a significant part of the real estate economy. A fact which bears close scrutiny even in areas that are not yet affected."

by Calculated Risk on 4/06/2007 08:34:00 PM

After some offline discussions, I've decided to reenable Haloscan for comments.

For those that can't use Haloscan because of Norton IS 2006, Haloscan works fine if you upgrade to NIS 2007. The upgrade is "free" unless you include your time.

by Tanta on 4/06/2007 06:00:00 PM

Reader RK (thanks!) dredged up this ComedyGold® from the past (2002) from Freddie Mac, which I present for your Friday afternoon entertainment. Please, before you comment on this, try to remember how many mortgage loans were purchased by Freddie Mac while you were waiting for "preview" to display.

I eagerly await future reports from Freddie comparing the speed of recovering a loss with LoanForecloser® during 2007 to, say, recovering from a night spent with your head in the punchbowl.

by Calculated Risk on 4/06/2007 01:11:00 PM

From MarketWatch: American Home Mortgage slashes forecast (hat tip: Bill)

"During March, conditions in the secondary mortgage and mortgage securities markets changed sharply," said Michael Strauss, chairman and chief executive, in a statement. Strauss said the "changes had a significant, adverse impact on our company's first quarter results, reducing our gain on sale revenue and causing mark-to-market losses in our portfolio. While the market may recover, and while we will attempt to restore our gain on sale margins by raising interest rates charged to consumers, our working assumption must be that current market conditions will persist and that our gain on sale margins will not recover through the balance of the year."

by Calculated Risk on 4/06/2007 08:41:00 AM

The BLS reports: U.S. nonfarm payrolls rose by 180,000 in March, after a revised 113,000 gain in February. The unemployment rate declined slightly to 4.4% in March.

Click on graph for larger image.

Here is the cumulative nonfarm job growth for Bush's 2nd term. The gray area represents the expected job growth (from 6 million to 10 million jobs over the four year term). Job growth has been solid for the last two years and is near the top of the expected range.

The following two graphs are the areas I've been watching closely: residential construction and retail employment.


Residential construction employment increased by 9,800 jobs in March and is down 125.3 thousand, or about 3.7%, from the peak in March 2006. This is probably just the beginning of the loss of hundreds of thousands of residential construction jobs over the next year or so.

Note the scale doesn't start from zero: this is to better show the change in employment.


Retail employment gained 35,900 jobs in March. As the graph shows, retail employment has turned positive in recent months. YoY retail employment has also turned positive.

Overall this is a solid report. With the revisions to prior months, the economy has added 152K net jobs per month for the last three months. The expected job losses in residential construction employment still haven't happened, and any spillover to retail isn't apparent yet. With housing starts off over 30%, and residential construction employment off less than 4%, I expect the rate of residential construction job losses to increase over the next few months.

by Tanta on 4/05/2007 09:33:00 PM

From AP:

UBS Real Estate Securities Inc. sued New Century Financial Corp. on Thursday, claiming the subprime lender misappropriated millions of dollars from mortgage payments made on loans owned by the investment firm.

In the 14-page filing with the U.S. Bankruptcy Court for the District of Delaware, UBS claims New Century breached the terms of a contract that called for the subprime lender to buy back home loans sold to UBS under certain conditions, such as when borrowers default soon after taking on the loans.

UBS claims New Century and its subsidiaries had agreed to collect borrowers' mortgage payments and deposit them into a third-party account, pending New Century complying with its obligation to buy back some of its loans.

But New Century failed to deposit more than $3.8 million in mortgage payments that the company received from borrowers on loans purchased and owned by UBS, according to the complaint.

UBS also claims New Century has failed to account for missing escrow payments made by borrowers.

Interesting. The dog ate the escrow payments, and UBS is telling it to the bankruptcy judge. And these loans are owned outright by UBS? It does make you wonder what's going on with the loans backing the securities, doesn't it? I guess we're officially past "this isn't going to end well" and well into "this isn't going to end." (Hat tip HVH!)

by Calculated Risk on 4/05/2007 12:47:00 PM

From Roger Vincent at the LA Times: Offices go up in earnest as long space glut ends

... office developers are beginning to build again in earnest. More than a dozen major office towers and complexes in the region are being built or are to start construction shortly.

To old-timers, however, the burst of construction activity in recent months raises the nagging question of whether the office market will once again overheat and tumble.

"Will it be a repeat of 1990 to '92? Absolutely not," said John Cushman, chairman of giant real estate brokerage Cushman & Wakefield.

Earlier this week, the WSJ reported: Office Space Demand "Sluggish"

by Tanta on 4/05/2007 07:04:00 AM

LoanPerformance’s December 2006 issue of its newsletter, “The Market Pulse,” is now available online. (You must subscribe (free) in order to download a copy.) It features an article by UBS’s David Liu and Shumin Li which you might not want to read if you are both 1) an owner of certain Alt-A mortgage-backed bond tranches and 2) eating.

I recommend the entire newsletter, which is full of charts and maps and things for those of you who are graphically minded. The Liu and Li article, however, is a must-read for bond geeks. The conclusion:

If [prepayment] speeds slow 20-25% as we predicted . . . [Alt-A] cumulative losses could rise an additional 25-30%, which will be ~200 bps under the weak HPA [less than 5%] scenario.

By comparison, BBB- bonds backed by Alt-A hybrids are generally designed to have credit enhancement of ~200 bps. . . On average, credit support of BBB- bonds will be erased over the life of the deal, although the losses will not hit the BBB- bonds. The bonds will most likely be downgraded due to the serious erosion of credit support. . . .

If the housing market remains flat or turns negative for a prolonged period of time (e.g., [less than] 1% annual HPA for the next 3-5 years), then we expect cumulative losses on these deals to rise another 20% (based on the limited data we have observed in the subprime ARM sector), which will wipe out the credit support of BBB bonds on these deals even without considering the distribution of losses. . . .

In summary--we project baseline prepayment speeds of low 20 CPR (for 5/1s), and therefore cumulative default rates of 12-13%, applying a loss severity of 15% on all defaulted loans - - would result in a cumulative loss of ~200 bps, which could potentially wipe out most of the credit support [of] BBB- rated bonds backed by Alt-A hybrids. And yet - we have not seen any spread movements that suggest investors are taking this into consideration. [emphasis in original]

by Calculated Risk on 4/05/2007 01:39:00 AM

From the WSJ: Housing Inventory Surges in March

Using data from ZipRealty, the WSJ reports that housing inventories in 18 major U.S. metropolitan areas increased 6.5% from the end of February to the end of March. The typical increase in inventory is 1.7% from the end of February to the end of March according to the article, citing Credit Suisse.

The National Association of Realtors previously reported inventories were 3.748 million nationwide at the end of February. This ZipRealty report suggests inventories will be close to 4 million units at the end of March.

In Housing: Supply Demand Imbalance, I estimated inventories might reach 4.5 million units this summer, or approximately 9.5 months of supply.

by Calculated Risk on 4/04/2007 04:11:00 PM

I'd like to focus on the content and the incredible comments - thank you all - however the blog layout needs some attention. Please bear with me.

Unfortunately my internet security software is blocking Haloscan right now, and the Blogger comments are apparently blocked by some corporate sites. Also, the Blogger comments allow very little configuration (my only choice is whether or not to use a pop-up).

So I guess this means I need to find another solution for comments. Right now I'm looking at Typepad and I'm open to suggestion. I've received several requests for a left sidebar, so I'll give that a try too.

Thank you all for your patience. Best Wishes, CR.