Posted By: There have been a lot of accusations on the blogs and on the air that banks are holding on to REO (bank-owned) foreclosed properties because they don't want to put them on the market and push home prices ever lower. In digging into this, I got a few interesting answers. Topics: | | Sectors: | MEDIA:

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Here is a collection of real estate and economic graphs for data released in August ... Note: Click on graphs for larger image in new window. For more info, click on link below graph to original post. New Home Sales in July (NSA) The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted). Note the Red columns for 2009. This is the 3rd lowest sales for July since the Census Bureau started tracking sales in 1963. In July 2009, 39 thousand new homes were sold (NSA); the record low was 31 thousand in July 1982; the record high for July was 117 thousand in 2005. From: New Home Sales in July This graph shows shows New Home Sales vs. recessions for the last 45 years. "Sales of new one-family houses in July 2009 were at a seasonally adjusted annual rate of 433,000 ... This is 9.6 percent (±13.4%) above the revised June rate of 395,000, but is 13.4 percent (±12.9%) below the July 2008 estimate of 500,000." From: New Home Months of Supply in July There were 7.5 months of supply in July - significantly below the all time record of 12.4 months of supply set in January. "The seasonally adjusted estimate of new houses for sale at the end of July was 271,000. This represents a supply of 7.5 months at the current sales rate." From: Existing Home Sales in July This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in July 2009 (5.24 million SAAR) were 7.2% higher than last month, and were 5.0% lower than July 2008 (4.99 million SAAR). From: Existing Home Inventory July This graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 4.09 million in July. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted. Also, many REOs (bank owned properties) are included in the inventory because they are listed - but not all. Recently there have been stories about a substantial number of unlisted REOs and other shadow inventory...

LONDON (Reuters) - The Federal Reserve has made $14 billion in profits on loans made in the last two years, The Financial Times reported on Monday, citing officials close to the matter.

Press Release

submits: The current southern California wildfires are all too predictable. A combination of arid landscapes, hot weather and some source of ignition – usually people – and once again we have massive fires looming on the outskirts of Los Angeles.

You have heard me use the phrase “” to describe the increase in the price of riskier assets due to monetary stimulus. The Bloomberg News video clip below points to an increase in lending for buyers of riskier loans like high yield and mortgage bonds. Click for The blurb below from at Bloomberg’s website makes a more complete picture. Afterward, I have a few comments. Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007. Credit Suisse Group AG and Scotia Capital, a unit of Canada’s third-largest bank, said they’re offering credit to investors who want to purchase loans. SunTrust Banks Inc., which left the business last year, is “reaching out to clients” to provide financing, said Michael McCoy, a spokesman for the Atlanta-based bank. JPMorgan Chase & Co. and Citigroup Inc. are doing the same for loans and mortgage-backed securities, said people familiar with the situation. “I am surprised by how quickly the market has become receptive to leverage again,” said Bob Franz, the co-head of syndicated loans in New York at Credit Suisse. The Swiss bank has seen increasing investor demand for financing to buy loans in the past two months, he said. Federal Reserve data show the 18 primary dealers required to bid at Treasury auctions held $27.6 billion of securities as collateral for financings lasting more than one day as of Aug. 12, up 75 percent from May 6. The increase suggests money is being used for riskier home- loan, corporate and asset-backed securities because it excludes Treasuries, agency debt and mortgage bonds guaranteed by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia or Ginnie Mae in Washington. Broader data on loans for investments isn’t available. How could investors return to shades of irrational exuberance so quickly? Liquidity. James Montier, now at Jeremy Grantham’s GMO, wrote a research paper at the beginning of June when he...

From the Chicago Tribune: More apartments are available in Chicago, and at prices that have slipped since the beginning of the year, creating a renter's market and allowing some consumers to trade up to better housing. ... according to a study scheduled to be released Monday by DePaul University's Institute for Housing Studies. ... "If anything, I think [DePaul] is reporting less than what I see," said Jack Markowski, president of Community Investment Corp., a non-profit mortgage lender to multifamily buildings that started seeing increases in multifamily mortgage delinquencies 18 months ago. Multifamily buildings, he said, "are vulnerable right now." ... Landlords, seeking to cover their costs, are lowering rents to attract tenants, and the study found that rents declined in all sizes of buildings and in all city neighborhoods except for the North Side. ... The level of multifamily mortgages foreclosed on in Chicago during the year's second quarter, at 0.8 percent of the total supply, was twice as high as it was in the comparable year-ago period, said James Shilling, a DePaul professor and director of the institute. "It only gets worse," Shilling said of the predicament the rental market finds itself in. "There's downward pressure on rents and upward pressure on vacancy rates. I think for the rest of 2009 and 2010 we'll see more defaults."

The Walt Disney says it is acquiring Marvel Entertainment for $4 billion in cash and stock, bringing characters like Iron Man and Spider-Man into the Disney family.

Every Friday, in just about every bank failure press release, the FDIC mentions a loss share agreement with the acquiring bank. As an example, in the regarding Mutual Bank of Harvey, Illinois on July 31st: As of July 16, 2009, Mutual Bank had total assets of $1.6 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, United Central Bank agreed to purchase essentially all of the assets. The FDIC and United Central Bank entered into a loss-share transaction on approximately $1.3 billion of Mutual Bank's assets. emphasis added For those interested in every detail, the Single Family Loss Share Agreement (page 54) and Commercial Loss Share Agreement {page 89) between the FDIC and United Central Bank (the acquirer). From the WSJ: [T]he Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. ... So far, the FDIC has paid out $300 million to a handful of banks under the loss-share agreements. ... The agency estimates the loss-share deals cut will cost it $11 billion less than if the agency seized the assets and sold them at fair-market value. ... In most cases, the FDIC agrees to cover 80% of future losses on a big portion of the assets, and 95% on the rest. The FDIC says it doesn't anticipate facing the 95% loss-coverage scenario on any deal. ... Many of the loss-share deals will be in place for up to 10 years. These agreements definitely make the deals more attractive to potential buyers because the limit the downside. The article notes that the FDIC "had just $10.4 billion in its deposit-insurance fund at the end of June", but that includes reserves for future losses. And since the FDIC expects losses of $14 billion from these loss share agreements, they should have already reserved for those losses. Still many of these agreements will...

Fed and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy as it struggles to recover.

Bloomberg reports that Wall Street is back to its free-wheeling, high-levered ways. This is a classic example of moral hazard in action. Why worry about blowing up the bank when you know the taxpayer will bail you out? From (hat tip DoctoRx): Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007. Credit Suisse Group AG and Scotia Capital, a unit of Canada’s third-largest bank, said they’re offering credit to investors who want to purchase loans. SunTrust Banks Inc., which left the business last year, is “reaching out to clients” to provide financing, said Michael McCoy, a spokesman for the Atlanta-based bank. JPMorgan Chase & Co. and Citigroup Inc. are doing the same for loans and mortgage-backed securities, said people familiar with the situation. “I am surprised by how quickly the market has become receptive to leverage again,” said Bob Franz, the co-head of syndicated loans in New York at Credit Suisse. The Swiss bank has seen increasing investor demand for financing to buy loans in the past two months, he said. Federal Reserve data show the 18 primary dealers required to bid at Treasury auctions held $27.6 billion of securities as collateral for financings lasting more than one day as of Aug. 12, up 75 percent from May 6. The increase suggests money is being used for riskier home- loan, corporate and asset-backed securities because it excludes Treasuries, agency debt and mortgage bonds guaranteed by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia or Ginnie Mae in Washington. Broader data on loans for investments isn’t available. Yves here. That is a big increase in repo lending. Greenspan used to look at repos as a proxy for hedge fund leverage. And when repo lending contracts, as it did in the crisis, it tends to do so across a wide range of collateral as banks increase haircuts, leading to synchronized downturns. And we get these tidbits...

Here is a graph of bankruptcy filings vs. mortgage delinquencies (including homes in foreclosure process) by state for Q2 2009. Click on graph for larger image in new window. The bankruptcy filings data is from the . The mortgage delinquency data is from the . No surprise - there is a clear correlation, although each state has different bankruptcy laws that can impact the relationship (see Florida). Here is a sortable table to find the data for each state (use scroll bar to see all data).

Andy Kroll at Mother Jones discusses problems with the Home Affordable Modification Program (HAMP): Industry experts are now questioning how many of the program’s estimated 235,000 modifications will actually benefit homeowners in the long term, and say that homeowners clamoring to participate in HAMP have created an industrywide logjam for mortgage servicers, resulting in substantial delays and backed-up customer service support. The Treasury’s first servicer performance report (), covering March to July 2009, found that servicers had offered modifications to just 15 percent of eligible delinquent homeowners, and initiated them for just 9 percent of that group. I've heard from servicers who've said they are just overwhelmed and are staffing up to meet the demand. And it appears the administration is trying to make improvements: Despite its flaws, HAMP is a good-faith effort by the government to address the foreclosure crisis, and there are signs of improvement. In June, HAMP officials began conducting much more rigorous reviews of servicers, and have started a "second look" program, in which servicers’ decisions to approve or deny HAMP modifications are scrutinized. Compliance officials are also analyzing samples of HAMP-modified loans to track error rates with servicers. And government officials have on several occasions tried to light a fire under HAMP servicers to speed up the modification process. Some believe HAMP will fall far short of the goals: The Treasury has set a target of modifying 4 million mortgages by 2012, but Moody's estimates HAMP will in fact modify only 1.5 to 2 million. The Treasury : More than 400,000 modification offers have been extended and more than 230,000 trial modifications have begun. This pace of modifications puts the program on track to offer assistance to up to 3 to 4 million homeowners over the next three years, our target on February 18. Actually the stated the program " will help up to 3 to 4 million at...

submits: Ratings firm sees no signs of a slowdown in the pace of performance deterioration in the EMEA commercial real estate loan universe in the second quarter. Excerpted from

From in the by and : In late 2008, the world's financial system seized up. Billions of dollars worth of financial assets were frozen in place, the value of securities uncertain, and hence the solvency of seemingly rock solid financial institutions in question. By the end of the year, growth rates in the industrial world had gone negative, and even developing country growth had declined sharply. This economic crisis has forced a re-evaluation of deeply held convictions regarding the proper method of managing economies, including the role of regulation and the ideal degree of openness to foreign trade and capital. It has also forced a re-assessment of economic orthodoxy that touts the self-regulating nature of free market economies. The precise origin of this breathtaking series of events is difficult to identify. Because the crisis is such an all-encompassing and wide-ranging phenomenon, and observers tend to focus on what they know, most accounts center on one or two factors. Some reductionist arguments identify "greed" as the cause, while others obsess about the 1990s era amendments to the 1977 U.S. Community Reinvestment Act that was designed to encourage banks and other financial institutions to meet the needs of the entire market, including those of people living in poor neighborhoods. They also point to the political power of government-sponsored entities such as Fannie Mae and Freddie Mac, agencies designed to smooth the flow of credit to housing markets. In our view, such simple, if not simplistic, arguments are wrong. Rather, we view the current episode as a replay of past debt crises, driven by profligate fiscal policies, but made much more virulent by a combination of high leverage, financial innovation, and regulatory disarmament. In this environment, speculation and outright criminal activities thrived; but those are exacerbating, rather than causal, factors. Figure 2: Current account to GDP ratio (blue, left axis) and end-year net international...

It is clear in retrospect that in parts of the Sun Belt, the economic dependence on construction reached unhealthy levels in recent years. - File that sentence under “stating the obvious.”. The reporter seems to have overlooked the fact that some people found it obvious — not in retrospect, mind you, but in real time. One only needed to have looked at the data and then compared it to historical metrics to reach the obvious conclusion that housing was way off kilter. What was taking place was a . Here’s an excerpt from the Times: “In a little more than three years, the Phoenix area has gone from the hottest of Sun Belt hot spots to one of the nation’s economic disaster areas. It is not alone in its rapid fall. After riding high during the boom, the Las Vegas area, parts of southern Florida, and Southern California’s inland counties have also been brought low by plunging payrolls, billions lost in housing wealth, a continuing epidemic of foreclosures, record government budget deficits and stagnating populations. These areas share one thing besides their warm climates. To a degree unmatched in the rest of the country, their recent prosperity was built not on manufacturing, technology or natural resources, but on construction and real estate — growth for its own sake. As other areas tasted the excesses of the housing boom, they gorged on it. From 2002 to 2006, about 20 percent of private industry growth in the United States was tied to real estate and construction. In the Phoenix area, almost 36 percent of growth in the private economy during that period — more than $34 billion worth — came from real estate and construction.” The entire piece — the print version was buried behind a weird headline in the Business section — is well worth a read. Previously : (May 27th, 2005) http://www.ritholtz.com/blog/2005/05/half-of-new-jobs-are-real-estate-related/ (December 29, 2006) http://www.2000wave.com/article.asp?id=mwo122906 (August 24, 2007) http://www.investorsinsight.com/blogs...

The second quarter 2009 has some interesting charts and facts that inquiring minds will be interested in. Insured Institution Performance Higher Loss Provisions Lead to a $3.7 Billion Net Loss More Than One in Four Institutions Are Unprofitable Charge-Offs and Noncurrent Loans Continue to Rise Net Interest Margins Show Modest Improvement Industry Assets Decline by $238 Billion The Industry Posts a Net Loss for the Quarter The Industry Posts a Net Loss for the Quarter Burdened by costs associated with rising levels of troubled loans and falling asset values, FDIC-insured commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009. Increased expenses for bad loans were chiefly responsible for the industry’s loss. Insured institutions added $66.9 billion in loan-loss provisions to their reserves during the quarter, an increase of $16.5 billion (32.8 percent) compared to the second quarter of 2008. Quarterly earnings were also adversely affected by writedowns of asset-backed commercial paper, and by higher assessments for deposit insurance. Almost two out of every three institutions (64.4 percent) reported lower quarterly earnings than a year ago, and more than one in four (28.3 percent) reported a net loss for the quarter. A year ago, the industry reported a quarterly profit of $4.7 billion, and fewer than one in five institutions (18 percent) were unprofitable. The average return on assets (ROA) was -0.11 percent, compared to 0.14 percent in the second quarter of 2008. Net Charge-Off Rate Sets a Quarterly Record Net charge-offs continued to rise, propelling the quarterly net charge-off rate to a record high. Insured institutions charged-off $48.9 billion in the second quarter, compared to $26.4 billion a year earlier. The annualized net charge-off rate in the second quarter was 2.55 percent, eclipsing the previous quarterly record of 1.95 percent reached in the fourth quarter of 2008. The $22.5 billion (85.3 percent...

When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Banks 'Too Big to Fail' Have Grown Even Bigger

Brad DeLong explains why presidents are willing to reappoint Fed chairs that are members of opposing political parties: William McChesney Martin, a Democrat, was twice reappointed chairman of the ... Federal Reserve by Republican President Dwight D. Eisenhower. Paul Volcker, a Democrat, was reappointed once by the Reagan administration (but not twice: there are persistent rumors that Reagan's treasury secretary, James Baker, thought Volcker too invested in monetary stability and not in producing strong economies to elect Republicans). Alan Greenspan, a Republican, was reappointed twice by Bill Clinton. And now Barack Obama has announced his intention to renominate Republican appointee Ben Bernanke... The reason American presidents are so willing to reappoint Fed chairmen from the opposite party is closely linked to ... confidence of financial markets that the Fed will pursue non-inflationary policies. If financial markets lose that confidence - if they conclude that the Fed is too much under the president's thumb to wage the good fight against inflation, or if they conclude that the chairman does not wish to control inflation - then the economic news is almost certain to be bad. Capital flight, interest-rate spikes, declining private investment, and a collapse in the value of the dollar - all of these are likely should financial markets lose confidence in a Fed chairman. And if they occur, the chances of success for a president seeking re-election - or for a vice president seeking to succeed him - are very low. By reappointing a Fed chairman chosen by someone else, a president can appear to guarantee to financial markets that the Fed is not too much under his thumb. ... It may or may not be true, especially these days, that what is good for General Motors is good for America and vice versa, but certainly what is good economically for America is good politically for the president. It is here that Obama has lucked out. Ben Bernanke is a very good choice for Fed...