Calculated Risk
Calculated Risk
Misc: Pending Home Sales increase, Greek Parliament Votes for Austerity MBA: Mortgage Purchase Application activity decreases BofA Settlement HousingTracker: Homes For Sale inventory down 8.5% Year-over-year in June Richmond Fed: Manufacturing Activity Stabilized in June Misc: Pending Home Sales increase, Greek Parliament Votes for Austerity Posted: 29 Jun 2011 07:03 AM PDT
• From the NAR: Pending Home Sales Turn Around in May The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April [from 81.9] and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
...
This is the first time since April 2010 that contract activity was above year-ago levels ...This was very close to Tom Lawler's forecast.
• From the WSJ: Greece Secures Austerity VoteGreece's Parliament has passed a ... five-year austerity plan ... additional €28.4 billion ($40.81 billion) in spending cuts and new taxes [that] was set as a condition for another international bailout to keep Greece from defaulting on its debt.
...
Greece faces another critical test Thursday, when parliament is set to hold an article-by-article vote on the legislation implementing the austerity plan and a promised €50 billion privatization program.Another vote tomorrow ...
MBA: Mortgage Purchase Application activity decreases Posted: 29 Jun 2011 04:37 AM PDT
The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly SurveyThe Refinance Index decreased 2.6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46 percent from 4.57 percent, with points increasing to 1.19 from 0.91 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year rate recorded in the survey since the middle of November 2010. The following graph shows the MBA Purchase Index and four week moving average since 1990.
Click on graph for larger image in graph gallery.
The four week average of purchase activity is at about 1997 levels - and mostly moving sideways. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through the next month or two.
BofA Settlement Posted: 28 Jun 2011 07:19 PM PDT
Two stories on the proposed BofA settlement with MBS investors:
• From the WSJ: BofA Nears Huge Settlement Bank of America Corp. is close to an agreement to pay $8.5 billion ... with a group of 22 investors who hold mortgage-backed securities originally valued at $105 billion, including the giant money manager BlackRock Inc., the insurer MetLife• From the NY Times: $8.5 Billion Deal Near in Suit on Bank Mortgage DebtThe settlement goes beyond the securities owned by these investors, however. It covers nearly all of Countrywide’s first-lien mortgages, which total $424 billion worth of original, unpaid principal balances. As a result, investors beyond those that are concluding the settlement stand to benefit.This potential settlement started with repurchase requests from private investors based on Reps and Warranties for the mortgages included in the MBS. This was a complicated negotiation because these loans had significant risk layering (stated income, option ARMs, high LTV, and high debt-to-income ratios etc.) and these risk factors were disclosed to the investors. However, even with the disclosures, many of the loans were clearly defective; the underwriting didn't even meet the disclosed loose standards. I guess they should have disclosed that the underwriting standard was "fog a mirror, get a loan"!
Earlier on Case-Shiller:
• Case Shiller: Home Prices increase in April
• Update: Real House Prices and Price-to-Rent
HousingTracker: Homes For Sale inventory down 8.5% Year-over-year in June Posted: 28 Jun 2011 02:14 PM PDT
A couple of key points on existing home inventory:
1) Changes in inventory usually lead prices.
2) The NAR method for estimating inventory has probably led to inventory being overstated for the last few years (along with sales). It appears this discrepancy started in 2007 (or earlier), and the error has probably increased since then.
Keeping those two points in mind, here is a repeat of a graph I posted last week.
Click on graph for larger image in graph gallery.
This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change.
According to the NAR, inventory decreased 4.4% year-over-year in May from May 2010. This was the fourth consecutive month with a YoY decrease in inventory. So even though inventory (and months-of-supply) is still very high, it appears that inventory is now decreasing.
However it appears the NAR is understating the decline in inventory.
A few weeks ago, Tom Lawler posted on how the NAR estimates existing home inventory. The NAR does NOT aggregate data from the local boards (see Tom's post for how the NAR estimates inventory). Sometime this summer, I expect the NAR to revise down their estimates of inventory and sales for the last few years. Also the NAR methodology for estimating sales and inventory will likely (hopefully) be changed.
While we wait for the NAR, I think the HousingTracker data that Tom mentioned might be a better estimate of changes in inventory (and always more timely). Ben at HousingTracker.net is tracking the aggregate monthly inventory for 54 metro areas.
This graph shows the NAR estimate of existing home inventory through May (left axis) and the HousingTracker data for the 54 metro areas through June. The HousingTracker data shows a steeper decline (as mentioned above, the NAR will probably revise down their inventory estimates this summer).
The third graph shows the year-over-year change in inventory for both the NAR and HousingTracker.
HousingTracker reported that the weekly average for June listings - for the 54 metro areas - declined 8.5% from last June.
Although inventory is still high, the decline in inventory will put less downward pressure on house prices and is something to watch carefully this year.
Earlier ...
• Case Shiller: Home Prices increase in April
• Update: Real House Prices and Price-to-Rent
Richmond Fed: Manufacturing Activity Stabilized in June Posted: 28 Jun 2011 11:06 AM PDT
Earlier today from the Richmond Fed: Manufacturing Activity Stabilized in June; Expectations Edge HigherIn June, the seasonally adjusted composite index of manufacturing activity — our broadest measure of the sector — picked up nine points to 3 from May's reading of −6. Among the index's components, shipments added twelve points to −1, new orders rose sixteen points to finish at 1, while the jobs index slipped two points to 12.
...
Hiring activity at District plants was also mixed in June. The manufacturing employment index eased two points to 12 and the average workweek measure turned negative, losing five points to −5. However, wage growth edged higher, gaining three points to finish at 9.This is the second regional survey to show expansion in June and was slightly stronger than expected (the Dallas Fed showed slower expansion in June).
Earlier this month, the Philly and Empire State surveys indicated contraction. So far these regional surveys suggest the ISM index will be in the low 50s in June (or possibly even below 50). I'll post a graph of the regional surveys vs. the ISM index on Thursday. The ISM index will be released Friday.
Earlier ...
• Case Shiller: Home Prices increase in April
• Update: Real House Prices and Price-to-Rent
Thanks!
Curtis D. Harris, BS, CGREA, REB
Bachelor of Science in Real Estate, CSULA
State Certified General Appraiser
Real Estate Broker
ASTM E-2018 Commercial Real Estate Inspector
HUD 203k Consultant
HUD/FHA Real Estate Appraiser/Reviewer
FannieMae REO ConsultantCTAC LEED Certification
The Harris Company, Forensic Appraisers and Real Estate Consultants
*PIRS/Harris Company and the Science of Real Estate-Partners*1910 East Mariposa Avenue, Suite 115
El Segundo, CA. 90245
310-337-1973 Office
310-251-3959 CellWebSite: http://www.harriscompanyrec.com Resume: http://www.harriscompanyrec.com/rESUME2011.pdfCommercial Appraiser Blog: http://harriscompanyrec.com/blog/IT'S THE LAW-Designation Discrimination is Illegal [FIRREA, Sec. 564.6]: Professional Association Membership http://www.orea.ca.gov/html/fed_regs.shtml#Statement7 Membership in an appraisal organization: A State Certified General Appraiser may not be excluded from consideration for an assignment for a federally related transaction by virtue of membership or lack of membership in any particular appraisal organization, including the appraisal institute.CONFIDENTIALITY/PRIVILEGE NOTICE: This transmission and any attachments are intended solely for the addressee. The information contained in this transmission is confidential in nature and protected from further use or disclosure under U.S. Pub. L. 106-102, 113 U.S. Stat. 1338 (1999), and may be subject to consultant/appraiser-client or other legal privilege. Your use or disclosure of this information for any purpose other than that intended by its transmittal is strictly prohibited and may subject you to fines and/or penalties under federal and state law. If you are not the intended recipient of this transmission, please destroy all copies received and confirm destruction to the sender via return transmittal From: [email protected] [mailto:[email protected]] On Behalf Of Calculated Risk
Sent: Wednesday, June 29, 2011 9:12 AM
To: [email protected]
Subject: Calculated RiskEmail delivery powered by GoogleGoogle Inc., 20 West Kinzie, Chicago IL USA 60610
Calculated Risk
Misc: Pending Home Sales increase, Greek Parliament Votes for Austerity MBA: Mortgage Purchase Application activity decreases BofA Settlement HousingTracker: Homes For Sale inventory down 8.5% Year-over-year in June Richmond Fed: Manufacturing Activity Stabilized in June Misc: Pending Home Sales increase, Greek Parliament Votes for Austerity Posted: 29 Jun 2011 07:03 AM PDT
• From the NAR: Pending Home Sales Turn Around in May The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April [from 81.9] and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
...
This is the first time since April 2010 that contract activity was above year-ago levels ...This was very close to Tom Lawler's forecast.
• From the WSJ: Greece Secures Austerity VoteGreece's Parliament has passed a ... five-year austerity plan ... additional €28.4 billion ($40.81 billion) in spending cuts and new taxes [that] was set as a condition for another international bailout to keep Greece from defaulting on its debt.
...
Greece faces another critical test Thursday, when parliament is set to hold an article-by-article vote on the legislation implementing the austerity plan and a promised €50 billion privatization program.Another vote tomorrow ...
MBA: Mortgage Purchase Application activity decreases Posted: 29 Jun 2011 04:37 AM PDT
The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly SurveyThe Refinance Index decreased 2.6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46 percent from 4.57 percent, with points increasing to 1.19 from 0.91 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year rate recorded in the survey since the middle of November 2010. The following graph shows the MBA Purchase Index and four week moving average since 1990.
Click on graph for larger image in graph gallery.The four week average of purchase activity is at about 1997 levels - and mostly moving sideways. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through the next month or two.
BofA Settlement Posted: 28 Jun 2011 07:19 PM PDT
Two stories on the proposed BofA settlement with MBS investors:
• From the WSJ: BofA Nears Huge Settlement Bank of America Corp. is close to an agreement to pay $8.5 billion ... with a group of 22 investors who hold mortgage-backed securities originally valued at $105 billion, including the giant money manager BlackRock Inc., the insurer MetLife• From the NY Times: $8.5 Billion Deal Near in Suit on Bank Mortgage DebtThe settlement goes beyond the securities owned by these investors, however. It covers nearly all of Countrywide’s first-lien mortgages, which total $424 billion worth of original, unpaid principal balances. As a result, investors beyond those that are concluding the settlement stand to benefit.This potential settlement started with repurchase requests from private investors based on Reps and Warranties for the mortgages included in the MBS. This was a complicated negotiation because these loans had significant risk layering (stated income, option ARMs, high LTV, and high debt-to-income ratios etc.) and these risk factors were disclosed to the investors. However, even with the disclosures, many of the loans were clearly defective; the underwriting didn't even meet the disclosed loose standards. I guess they should have disclosed that the underwriting standard was "fog a mirror, get a loan"!
Earlier on Case-Shiller:
• Case Shiller: Home Prices increase in April
• Update: Real House Prices and Price-to-Rent
HousingTracker: Homes For Sale inventory down 8.5% Year-over-year in June Posted: 28 Jun 2011 02:14 PM PDT
A couple of key points on existing home inventory:
1) Changes in inventory usually lead prices.
2) The NAR method for estimating inventory has probably led to inventory being overstated for the last few years (along with sales). It appears this discrepancy started in 2007 (or earlier), and the error has probably increased since then.
Keeping those two points in mind, here is a repeat of a graph I posted last week.
Click on graph for larger image in graph gallery.This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change.
According to the NAR, inventory decreased 4.4% year-over-year in May from May 2010. This was the fourth consecutive month with a YoY decrease in inventory. So even though inventory (and months-of-supply) is still very high, it appears that inventory is now decreasing.
However it appears the NAR is understating the decline in inventory.
A few weeks ago, Tom Lawler posted on how the NAR estimates existing home inventory. The NAR does NOT aggregate data from the local boards (see Tom's post for how the NAR estimates inventory). Sometime this summer, I expect the NAR to revise down their estimates of inventory and sales for the last few years. Also the NAR methodology for estimating sales and inventory will likely (hopefully) be changed.
While we wait for the NAR, I think the HousingTracker data that Tom mentioned might be a better estimate of changes in inventory (and always more timely). Ben at HousingTracker.net is tracking the aggregate monthly inventory for 54 metro areas.This graph shows the NAR estimate of existing home inventory through May (left axis) and the HousingTracker data for the 54 metro areas through June. The HousingTracker data shows a steeper decline (as mentioned above, the NAR will probably revise down their inventory estimates this summer).
The third graph shows the year-over-year change in inventory for both the NAR and HousingTracker.HousingTracker reported that the weekly average for June listings - for the 54 metro areas - declined 8.5% from last June.
Although inventory is still high, the decline in inventory will put less downward pressure on house prices and is something to watch carefully this year.
Earlier ...
• Case Shiller: Home Prices increase in April
• Update: Real House Prices and Price-to-Rent
Richmond Fed: Manufacturing Activity Stabilized in June Posted: 28 Jun 2011 11:06 AM PDT
Earlier today from the Richmond Fed: Manufacturing Activity Stabilized in June; Expectations Edge HigherIn June, the seasonally adjusted composite index of manufacturing activity — our broadest measure of the sector — picked up nine points to 3 from May's reading of −6. Among the index's components, shipments added twelve points to −1, new orders rose sixteen points to finish at 1, while the jobs index slipped two points to 12.
...
Hiring activity at District plants was also mixed in June. The manufacturing employment index eased two points to 12 and the average workweek measure turned negative, losing five points to −5. However, wage growth edged higher, gaining three points to finish at 9.This is the second regional survey to show expansion in June and was slightly stronger than expected (the Dallas Fed showed slower expansion in June).
Earlier this month, the Philly and Empire State surveys indicated contraction. So far these regional surveys suggest the ISM index will be in the low 50s in June (or possibly even below 50). I'll post a graph of the regional surveys vs. the ISM index on Thursday. The ISM index will be released Friday.
Earlier ...
• Case Shiller: Home Prices increase in April
• Update: Real House Prices and Price-to-Rent
Thanks!
Curtis D. Harris, BS, CGREA, REB
Bachelor of Science in Real Estate, CSULA
State Certified General Appraiser
Real Estate Broker
ASTM E-2018 Commercial Real Estate Inspector
HUD 203k Consultant
HUD/FHA Real Estate Appraiser/Reviewer
FannieMae REO ConsultantCTAC LEED Certification
*PIRS/Harris Company and the Science of Real Estate-Partners*1910 East Mariposa Avenue, Suite 115
El Segundo, CA. 90245
310-337-1973 Office
310-251-3959 CellWebSite: http://www.harriscompanyrec.com Resume: http://www.harriscompanyrec.com/rESUME2011.pdfCommercial Appraiser Blog: http://harriscompanyrec.com/blog/IT'S THE LAW-Designation Discrimination is Illegal [FIRREA, Sec. 564.6]: Professional Association Membership http://www.orea.ca.gov/html/fed_regs.shtml#Statement7 Membership in an appraisal organization: A State Certified General Appraiser may not be excluded from consideration for an assignment for a federally related transaction by virtue of membership or lack of membership in any particular appraisal organization, including the appraisal institute.CONFIDENTIALITY/PRIVILEGE NOTICE: This transmission and any attachments are intended solely for the addressee. The information contained in this transmission is confidential in nature and protected from further use or disclosure under U.S. Pub. L. 106-102, 113 U.S. Stat. 1338 (1999), and may be subject to consultant/appraiser-client or other legal privilege. Your use or disclosure of this information for any purpose other than that intended by its transmittal is strictly prohibited and may subject you to fines and/or penalties under federal and state law. If you are not the intended recipient of this transmission, please destroy all copies received and confirm destruction to the sender via return transmittal From: [email protected] [mailto:[email protected]] On Behalf Of Calculated Risk
Sent: Wednesday, June 29, 2011 9:12 AM
To: [email protected]
Subject: Calculated RiskEmail delivery powered by GoogleGoogle Inc., 20 West Kinzie, Chicago IL USA 60610
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