by Calculated Risk on 5/31/2012 04:15:00 PM

Note: U.S. District Court Judge Collyer approved the consent order for the mortgage servicer settlement on April 5th, and so far there hasn't been a significant impact from the agreement on delinquencies or foreclosure sales.

LPS released their Mortgage Monitor report for April today. According to LPS, 7.12% of mortgages were delinquent in April, up slightly from 7.09% in March, and down from 7.97% in April 2011.

LPS reports that 4.14% of mortgages were in the foreclosure process, unchanged from March, and also unchanged from April 2011.

This gives a total of 11.26% delinquent or in foreclosure. It breaks down as:

• 1,927,000 loans less than 90 days delinquent.
• 1,595,000 loans 90+ days delinquent.
• 2,048,000 loans in foreclosure process.

For a total of 5,570,000 loans delinquent or in foreclosure in April. This is down from 6,388,000 in April 2011.

This following graph shows the total delinquent and in-foreclosure rates since 1995.

Click on graph for larger image.

The total delinquency rate has fallen to 7.12% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is a long ways to go.

The in-foreclosure rate was at 4.14%, down from the record high in October 2011 of 4.29%. There are still a large number of loans in this category (about 2.05 million).

The second graph shows foreclosure starts by investor.

From LPS: "[O]verall foreclosure starts were down 2.6 percent in April, FHA foreclosure starts spiked significantly, jumping 73 percent during the month. The rise was driven primarily by defaults in 2008 and 2009 vintage loans, though all FHA vintages saw increases in foreclosure starts in April, despite that fact that the more recent vintages – from 2009 forward – have shown improved relative credit performance."

The third graph shows the FHA performance by vintage.

This graph shows the 90%+ delinquency rate by month since origination (number of payments).

The worst performing loans were in 2006, 2007 and 2008. The best performing loans were made in recent years.

However, as the last graph shows, the FHA made a huge number of loans in 2008, 2009 and 2010. According to the Case-Shiller national index, prices have fallen about about 18% since mid-2008, putting most of those FHA borrowers "underwater" on their mortgages. The price declines since mid-2009 and mid-2010 are much less.

From LPS: “In 2008, when the loan origination market virtually dried up, the FHA stepped in to fill the void,” explained Herb Blecher, senior vice president for LPS Applied Analytics. “FHA originations tripled that year, and increased to five times historical averages in 2009. High volumes like that, even with low default rates, can produce larger numbers of foreclosure starts. That represents a lot of loans to work through – the 2008 vintage alone represents some $14 billion of unpaid balances in foreclosure, and the overall FHA foreclosure inventory continues torise.”

There is much more in the Mortgage Monitor report.

by Calculated Risk on 5/31/2012 02:36:00 PM

Tomorrow the BLS will release the May Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 150,000 payroll jobs in May, and for the unemployment rate to remain unchanged at 8.1%.

• More weather "payback"? The weather was mild in January and February, and Goldman Sachs analysts think there will be some more payback in the May report, they wrote last month: "[O]ur current best guess is that weather has boosted the level of payrolls by around 100,000 as of February, and may have shaved about 20,000 from the March report ... 50,000 in April and the remaining 30,000 in May." Goldman's forecast is that "nonfarm payroll employment increased by 125,000 in May".

Here is a summary of recent data:

• The ADP employment report showed an increase of 133,000 private sector payroll jobs in May. This would seem to suggest that the consensus for the increase in total payroll employment is too high - especially since public employment probably declined again - although the ADP report hasn't been very useful in predicting the BLS report for any one month. However ADP report has frequently been weaker than the BLS report for the month of May (although this is based on only 11 years of data).

• We don't have the May ISM manufacturing and service indexes to look at for employment, since the employment report is being released earlier than usual this month (on June 1st), so the ISM indexes will be released after the employment report.

• Initial weekly unemployment claims averaged about 375,000 in May, down slightly from the 377,000 average in April. Claims have been at about this level all year.

For the BLS reference week (includes the 12th of the month), initial claims were at 372,000; down from 389,000 for the reference week in April.

• The final May Reuters / University of Michigan consumer sentiment index increased to 79.3, up from the April reading of 76.4 This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This suggests a weak but slightly improving labor market.

• The small business index from Intuit showed 40,000 payroll jobs added, down from 60,000 in April.

• And on the unemployment rate from Gallup: U.S. Unemployment Edges Down in Mid-May

U.S. unemployment, as measured by Gallup without seasonal adjustment, declined slightly to 8.2% in mid-May from 8.3% in April. Gallup's seasonally adjusted unemployment rate is 8.5% in mid-May, down slightly from 8.6% last month. ... Incorporating the upward seasonal adjustment of 0.3 percentage points that the BLS applied last May yields a seasonally adjusted rate for mid-May of 8.5%.

Note: Gallup only recently has been providing a seasonally adjusted estimate for the unemployment rate, so use with caution (Gallup provides some caveats).

• Conclusion: The overall feeling is that the economy weakened a little in May, and that might mean the employment report will disappoint tomorrow. Also there could be a little more "payback" from extra hiring during the mild winter. However the combined ISM reports suggest the consensus is close. On the positive side, weekly claims improved slightly compared to April, and consumer sentiment improved - but that might be because of lower gasoline prices.

There always seems to be some randomness to the employment report, but once again I'll take the under this month (under 150,000 payroll jobs).

For the economic contest in June:

by Calculated Risk on 5/31/2012 11:27:00 AM

From the NY Fed: New York Fed Quarterly Report Shows Student Loan Debt Continues to Grow

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York today announced that student loan debt reported on consumer credit reports reached $904 billion in the first quarter of 2012, a $30 billion increase from the previous quarter. In addition, consumer deleveraging continued to advance as overall indebtedness declined to $11.44 trillion, about $100 billion (0.9 percent) less than in the fourth quarter of 2011. Since the peak in household debt in the third quarter of 2008, student loan debt has increased by $293 billion, while other forms of debt fell a combined $1.53 trillion.

Here is the Q1 report: Quarterly Report on Household Debt and Credit

Mortgage balances shown on consumer credit reports fell again ($81 billion or 1.0%) during the quarter; home equity lines of credit (HELOC) balances fell by $15 billion (2.4%). Household mortgage and HELOC indebtedness are now 11.9% and 14.3%, respectively, below their peaks. Consumer indebtedness excluding mortgage and HELOC balances stood at $2.64 trillion at the close of the quarter. Student loan indebtedness, the largest component of household debt other than mortgages, rose 3.4% in the quarter, to $904 billion.
...
About 291,000 individuals had a foreclosure notation added to their credit reports between December 31 and March 31, about the same as in 2011Q4, but 20.8% below the 2011Q1 level.

Total household delinquency rates continued their downward trend in 2012Q1. As of March 31, 9.3% of outstanding debt was in some stage of delinquency, compared to 9.8% on December 31, 2011.

Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased slightly in Q1. This was mostly due to a decline in mortgage debt.

However student debt is still increasing. From the NY Fed:

Over the one year period ending March 31, 2012, student loan balances rose $64 billion. Over the same period, all other forms of household debt (mortgages, HELOCs, auto loans and credit card balances) fell a combined $383 billion.

Since the peak in household debt in 2008Q3, student loan debt has increased by $293 billion, while other forms of debt fell a combined $1.53 trillion.

The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red). The percent of seriously delinquent loans will probably decline quicker now that the mortgage servicer settlement has been reached.

From the NY Fed:

About $1.06 trillion of consumer debt is currently delinquent, with $796 billion seriously delinquent (at least 90 days late or “severely derogatory”).

There are a number of credit graphs at the NY Fed site.

by Calculated Risk on 5/31/2012 09:55:00 AM

Chicago PMI: The overall index declined to 52.7 in May, down from 56.2 in April. This was below consensus expectations of 56.1 and indicates slower growth in May. Note: any number above 50 shows expansion. From the Chicago ISM:

The Chicago Purchasing Managers reported the May Chicago Business Barometer decreased for a third consecutive month to its lowest level since September 2009. The short term trend of the Chicago Business Barometer, and all seven Business Activity indexes, declined in May. Among the Business Activity measures, only the Supplier Delivery index expanded faster while Order Backlogs and Inventories contracted.
...
• PRODUCTION and NEW ORDERS lowest since September 2009;
• PRICES PAID lowest since September 2010;
• EMPLOYMENT rate of growth slowed

New orders declined to 52.7 from 57.4, and employment decreased to 57.0 from 58.7.

This is another weak reading, and suggests a decline in the ISM PMI to be released tomorrow.

by Calculated Risk on 5/31/2012 08:38:00 AM

Note: The BEA reported that the second estimate of Q1 real GDP growth was 1.9%, lower than the advance estimate of 2.2% and at the consesnus expectation. Real Gross Domestic Income (GDI) was reported at 2.7% annual rate.

The DOL reports:

In the week ending May 26, the advance figure for seasonally adjusted initial claims was 383,000, an increase of 10,000 from the previous week's revised figure of 373,000. The 4-week moving average was 374,500, an increase of 3,750 from the previous week's revised average of 370,750.

The previous week was revised up from 370,000 to 373,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 374,500.

The average has been between 363,000 and 384,000 all year.

And here is a long term graph of weekly claims:


This was above the consensus forecast of 370,000.


All current Employment Graphs

by Calculated Risk on 5/31/2012 08:11:00 AM

ADP reports:

Employment in the U.S. nonfarm private business sector increased by 133,000 from April to May on a seasonally adjusted basis. The estimated gain from March to April was revised down modestly, from the initial estimate of 119,000 to a revised estimate of 113,000.

Employment in the private, service-providing sector increased 132,000 in May, after rising a revised 119,000 in April. Employment in the private, goods-producing sector increased 1,000 in May. Manufacturing employment dropped 2,000 jobs, the second consecutive monthly decline.

This was below the consensus forecast of an increase of 154,000 private sector jobs in May. The BLS reports on Friday, and the consensus is for an increase of 150,000 payroll jobs in May, on a seasonally adjusted (SA) basis.

Note: ADP hasn't been very useful in predicting the BLS report, but this suggests a somewhat weaker than consensus report.

by Calculated Risk on 5/30/2012 09:16:00 PM

There are a number of US economic indicators to be released over the next two days, and that may take some of the focus off of Europe (probably not). For Thursday:

• At 8:15 AM ET, the ADP employment report is scheduled for release. This report is for private payrolls only (no government). The consensus is for 154,000 payroll jobs added in May, up from the 119,000 reported last month.

• At 8:30 AM ET, the second estimate of Q1 GDP will be released by the BEA. The consensus is that real GDP increased 1.9% annualized in Q1, slower than the advance estimate of 2.2%. The BEA will also release Q1 Gross Domestice Income (GDI).

• Also at 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to be unchanged at 370 thousand.

• At 9:45 AM, the Chicago Purchasing Managers Index for May will be released. The consensus is for a decrease to 56.1, down slightly from 56.2 in April.


• At 11:00 AM, the New York Fed will release the Q1 2012 Report on Household Debt and Credit (filled with data!)

For the monthly economic question contest (one more questions for May):

by Calculated Risk on 5/30/2012 05:25:00 PM

CR Note: Earlier this month I posted some distressed sales data for Sacramento. I'm following the Sacramento market to see the change in mix over time (short sales, foreclosure, conventional). Economist Tom Lawler has been digging up similar data, and he sent me the updated table below for several more distressed areas. For all of these areas, with the exception of Rhode Island, the share of distressed sales is down from April 2011 - and for the areas that break out short sales, the share of short sales has increased and the share of foreclosure sales are down - and down significantly in some areas.

In five of the seven cities that break out short sales, there are now more short sales than foreclosure sales!

Lawler noted "all of the below shares are based on MLS data save for California [that uses] Dataquick estimates based on property records."

And Lawler on Pending Home Sales:

Click on graph for larger image.

"The National Association of Realtors reported that its Pending Home Sales Index declined by 5.5% on a seasonally adjusted basis in April, after jumping by 3.8% (downwardly revised) in March. April’s PHSI was up 14.4% (SA) from last April. By region, April’s PHSI increased by 0.9% in the Northeast, fell by 0.3% in the Midwest, dropped by 6.8% in the South, and plunged by 12.0% in the West (after jumping by 8.5% in March).

The jump in contracts signed in March, and decline in April, could well have been related to the FHA’s announcement in late February that it was increasing its up-front and annual mortgage insurance premiums effective for FHA case numbers assigned in early April or later."

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-Apr	11-Apr	12-Apr	11-Apr	12-Apr	11-Apr
Las Vegas	29.9%	23.8%	36.9%	46.3%	66.8%	70.1%
Reno	32.0%	31.0%	26.0%	38.0%	58.0%	69.0%
Phoenix	25.2%	19.7%	18.8%	44.5%	44.0%	64.2%
Sacramento	30.4%	22.2%	30.3%	44.6%	60.7%	66.8%
Minneapolis	10.9%	10.0%	32.0%	43.3%	42.9%	53.3%
Mid-Atlantic (MRIS)	12.2%	11.8%	11.0%	20.9%	23.2%	32.7%
Orlando	29.4%	25.4%	25.5%	40.2%	54.9%	65.6%
Northeast Florida					38.1%	50.3%
Hampton Roads					31.0%	35.0%
Rhode Island					32.6%	31.3%
California	18.3%	16.9%	30.3%	36.4%	48.6%	53.3%
Miami-Dade					47.0%	59.0%
Broward					38.0%	50.0%

by Calculated Risk on 5/30/2012 03:11:00 PM

A post by CR on Yahoo: House Prices: The Turning Point

Edit: I meant "turning" instead of "inflection"

Some data and articles mentioned in the post:

• Real House prices and price-to-rent ratio

• S&P Case-Shiller: Pace of Decline in Home Prices Moderates as the First Quarter of 2012 Ends

• Zillow: Home Values Continue to Climb in April

• CoreLogic: House Price Index increases in March, Down 0.6% Year-over-year

• Trulia: Strong Housing Demand and Tightening Inventories Spark Nearly 2 Percent Rise in Asking Prices over Previous Quarter

• April Existing Home Sales and Inventory

• LPS: “First Look” Mortgage Report

by Calculated Risk on 5/30/2012 12:26:00 PM

From CoreLogic: CoreLogic® Reports 66,000 Completed Foreclosures Nationally in April

CoreLogic ... today released its National Foreclosure Report for April, which provides monthly data on completed foreclosures and the overall foreclosure inventory. According to the report, there were 66,000 completed foreclosures in the U.S. in April 2012 compared to 78,000 in April 2011 and 66,000* in March 2012. Since the start of the financial crisis in September 2008, there have been approximately 3.6 million completed foreclosures across the country. Completed foreclosures are an indication of the total number of homes actually lost to foreclosure.

Approximately 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the national foreclosure inventory as of April 2012 compared to 1.5 million, or 3.5 percent, in April 2011 and 1.4 million, or 3.4 percent, in March 2012.

“There were more than 830,000 completed foreclosures over the past year or, in other words, one completed foreclosure for every 622 mortgaged homes,” said Mark Fleming, chief economist for CoreLogic. “Non-judicial foreclosure markets, like Nevada, Arizona and California, completed two and a half times as many foreclosures over the past year as judicial foreclosure states.”
...
“The inventory of homes in foreclosure in judicial foreclosure states is growing, but this increase is being more than offset by declining inventories in non-judicial states where the processing timelines to clear a foreclosure are shorter,” said Anand Nallathambi, chief executive officer of CoreLogic.

This is a new monthly report and might help track the number of completed foreclosures, and to see if the lenders are starting to clear the foreclosure inventory backlog following the mortgage settlement.

So far we haven't seen a surge in completed foreclosures - or a large increase in REO (lender Real Estate Owned) coming on the market. Note: The foreclosure inventory reported by CoreLogic is lower than either reported by LPS of 4.14% of mortgages or 2 million in foreclosure, and the Mortgage Bankers Association’s (MBA) Q1 report showing 4.39% of loans in the foreclosure process.

My guess is the "surge" in foreclosures will be less than many people expect (see from April: Some thoughts on housing and foreclosures).