by Calculated Risk on 4/10/2012 07:29:00 PM

Here is a very good overview (and fairly short) of US mortgage and foreclosure law by Zachary Kimball and Paul Willen at The New Palgrave Dictionary of Economics.

This article discusses title and liens, the differences between judicial states and non-judicial states, judgments and recourse, the Mortgage Electronic Registration System (MERS) and much more.

Here is an excerpt:

Two types of foreclosure by sale emerged in US law. The first is foreclosure by judicial sale, in which the lender petitions the court and the court orders a foreclosure auction. Judicial sale is available in every jurisdiction. The alternative approach is that, when the mortgage is originated, the borrower gives the lender the right to carry out a foreclosure auction in the event of default, a right known as the ‘power of sale’ (Osborne, 1951, p. 992). Although rare in the early 19th century, power-of-sale foreclosure became more common in the USA over time (Osborne, 1951, p. 993).

Power-of-sale foreclosure is available in a majority of states. In general, states in the south and west of the country offer power of sale and states in the north and east are judicial; whether power-of-sale or judicial foreclosure is the preferred method aligns almost exactly with whether the state follows title or lien theory, respectively. Of the states with the most severe foreclosure problems in the current crisis, Arizona, California and Nevada all allow power-of-sale foreclosure, while Florida only allows judicial foreclosure. Other notable judicial states include Illinois, New York and New Jersey. For fuller discussion of judicial and power-of-sale foreclosure, see Gerardi et al. (2011) and National Consumer Law Center (2010).

by Calculated Risk on 4/10/2012 04:45:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities. Prices, as of the January report, were off 61.8% from the peak according to Case-Shiller, and off 9.1% over the last year.

Sales in 2011 were at record levels - even more than during the bubble - and it looks like 2012 will be an even stronger year, even with some new rules that slow the foreclosure process.

From the LVGAR: GLVAR reports local home prices, sales rising as inventory shrinks

According to GLVAR, the total number of local homes, condominiums and townhomes sold in March was 4,388. That’s up from 3,794 in February, and up from 4,316 total sales in March 2011.
...
Compared to one year ago, home sales were up 4.4 percent, while condo and townhome sales were down 8.4 percent.
...
The total number of homes listed for sale on GLVAR’s Multiple Listing Service again decreased from February to March, with a total of 18,200 single-family homes listed for sale at the end of the month. That’s down 3.6 percent from 18,870 single-family homes listed for sale at the end of February and down 18.0 percent from one year ago.
...
By the end of March, GLVAR reported 4,901 single-family homes listed without any sort of offer. That’s down 25.1 percent from 6,543 such homes listed in February and down 56.8 percent from one year ago.
...
“Our inventory is really dropping,” said GLVAR President Kolleen Kelley, a longtime local REALTOR®. “Based on current demand, we’re looking at a six-week supply of homes on the market. This is making new homes more attractive and creating a window of opportunity for home builders.”

Economist Tom Lawler sent me the following table for several distressed areas that have reported so far for March.

CR Note: This could be very useful data over the next several months (and years) as we try to track the impact of the mortgage servicer settlement and to see if the markets are improving. For all of the areas, the distressed share of sales is down from March 2011, the share of short sales has increased and the share of foreclosure sales are down - and down significantly in some areas.

Look at Phoenix: Short sales have increased from 19.1% to 25.7%, and foreclosures have declined from 46.2% to 21.1%.

Note: The table is a percentage of total sales.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-Mar	11-Mar	12-Mar	11-Mar	12-Mar	11-Mar
Las Vegas	26.6%	23.6%	40.7%	47.6%	67.3%	71.2%
Reno	34.0%	30.0%	32.0%	41.0%	66.0%	71.0%
Phoenix	25.7%	19.1%	21.1%	46.2%	46.7%	65.3%
Mid-Atlantic (MRIS)	13.2%	13.1%	14.7%	26.3%	27.9%	39.5%

by Calculated Risk on 4/10/2012 02:43:00 PM

From Andrew Ross at the San Francisco Chronicle: Hot 'spec' deal 1st in S.F. since recession began

It's not every day that a parking lot goes for $41 million. In cash.
...
Late last week, New York's Tishman Speyer Properties closed escrow on the space, which, by the end of next year will be transformed into a 10-story, 286,000-square-foot office building ...

Two distinguishing aspects of the deal: It's the first "spec development" (i.e. built from the ground up with no signed tenants) in the city since the onset of the recession in 2007, and no debt financing is involved. The land, architectural plans and construction costs - the latter estimated between $180 million and $185 million - is "funded with all equity," said [Allen Palmer, managing director at Tishman Speyer's San Francisco office].

Last week Reis reported that the office vacancy rate (major markets) declined slightly to 17.2% in Q1 from 17.3% in Q4 2011. Reis noted:

Weak supply growth remains a tailwind for improvement in the office sector. During the first quarter of 2012 only 1.917 million square feet of office space were completed [in the markets Reis tracks]. This represents the lowest quarterly level on record since Reis began tracking quarterly market data in 1999.

There has been some new construction here and there (like the PIMCO tower in Newport Beach), but very little spec building. And this building in San Francisco is being built with no financing.

by Calculated Risk on 4/10/2012 10:20:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings in February was 3.5 million, little changed from January. Although the number of job openings remained below the 4.3 million openings when the recession began in December 2007, the number of job openings has increased 46 percent since the end of the recession in June 2009.
...
In February, the hires rate was essentially unchanged at 3.3 percent
for total nonfarm. ... The quits rate can serve as a measure of workers’ willingness or ability to change jobs. In February, the quits rate was little changed for total nonfarm, total private, and government. The
number of quits rose to 2.1 million in February from 1.8 million at the end of the recession in June 2009, although it remained below the 2.9 million recorded when the recession began in December 2007.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for February, the most recent employment report was for March.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased slightly in February, and the number of job openings (yellow) has generally been trending up, and are up about 16% year-over-year compared to February 2011.

Quits increased in February, and quits are now up about 9% year-over-year and quits are now at the highest level since 2008. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").
All current employment graphs

by Calculated Risk on 4/10/2012 09:33:00 AM

UPDATE: Here are DeMarco's Remarks as Prepared for Delivery (with table and figures)
Some key comments on "strategic modifiers":

As I have noted the NPV results alone are not the sole basis for the decision on whether the Enterprises should pursue principal forgiveness. One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?

This is a particular concern for the Enterprises because unlike other mortgage market participants that can pick and choose where principal forgiveness makes sense, the Enterprises must develop the program to be implemented by more than one thousand seller/servicers. In addition, the Enterprises will have to publicly announce this program and borrower awareness of the possibility of receiving a principal reduction modification will be heightened among Enterprise borrowers. So as opposed to more targeted individual efforts, or the current opacity of the HAMP process, there is a greater possibility that borrower incentive effects would take place on an Enterprise-wide principal forgiveness program.

It is difficult to model these borrower incentive effects with any precision. What we can do is give a sense of how many current borrowers would have to become “strategic modifiers” for the NPV economic benefit provided by the HAMP triple PRA incentives to be eliminated. In this context, a “strategic modifier” would be a borrower that either claims a financial hardship or misses two consecutive mortgage payments in order to attempt to qualify for HAMP and a principal forgiveness modification.

Here is the webcast for the Speech by FHFA acting director Edward DeMarco: "Addressing the Weak Housing Market: Is Principal Reduction the Answer?" at the The Brookings Institution, 1775 Massachusetts Ave., NW Washington, DC.

Following the speech, there will be a discussion including
Moderator: Ted Gayer, Brookings Co-Director, Economic Studies

Mark Fleming, Chief Economist, CoreLogic

Paul Nikodem, Executive Director, Head of Mortgage Credit Research, Nomura Securities International

Anthony B. Sanders, Professor, George Mason University

Andrew Jakabovics, Senior Director, Policy Development and Research, Enterprise Community Partners, Inc.