10/12/09
10/11/09
Foreclosures Grow in Housing Market's Top Tiers
New data suggest that foreclosures are rising in more expensive housing markets.
About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.
The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.
The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade.
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Foreclosures are rising in more expensive markets as home values in those areas fall, leaving more homeowners with mortgages that exceed the value of their properties. Prime loans accounted for 58% of foreclosure starts in the second quarter, up from 44% last year, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosure starts, down from one-half last year.
The prime category includes so-called exotic mortgages that were increasingly used to buy more expensive homes, including interest-only mortgages that allowed borrowers to defer principal payments during an initial period. Borrowers often aren't able to refinance out of these products because the drop in home values has left them with little equity in their homes.
Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to make minimum payments that may not cover the interest due. Monthly payments can increase to sharply higher levels after five years or when the outstanding balance reaches a certain level. A study by Fitch Ratings found that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments.
Zillow estimated that nearly one in four homes with mortgages was worth less than the value of the property at the end of June. Mr. Humphries said he didn't expect to see foreclosure volumes level off until later in 2010.
- Via WSJ
About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.
The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.
The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade.
The prime category includes so-called exotic mortgages that were increasingly used to buy more expensive homes, including interest-only mortgages that allowed borrowers to defer principal payments during an initial period. Borrowers often aren't able to refinance out of these products because the drop in home values has left them with little equity in their homes.
Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to make minimum payments that may not cover the interest due. Monthly payments can increase to sharply higher levels after five years or when the outstanding balance reaches a certain level. A study by Fitch Ratings found that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments.
Zillow estimated that nearly one in four homes with mortgages was worth less than the value of the property at the end of June. Mr. Humphries said he didn't expect to see foreclosure volumes level off until later in 2010.
- Via WSJ
Retail Sales Probably Fell in September: U.S. Economy Preview
Retail sales in the U.S. probably fell in September as auto showrooms sat empty after the “cash for clunkers” program expired, economists said before a report this week.
Purchases dropped 2.1 percent, the biggest decrease this year, after rising 2.7 percent in August, according to the median forecast of 56 economists surveyed by Bloomberg News ahead of Commerce Department figures due Oct. 14. Other reports may show inflation and factory production cooled last month.
Plunging auto sales in September are a sign household spending may not be sustained without government incentives as long as unemployment keeps climbing. The financial health of consumers, whose purchases make up the biggest part of the economy, will go a long way in determining when Federal Reserve policy makers raise interest rates again.
“We’re not necessarily going to get huge growth from the consumer,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Income growth is going to be restrained, and that’s going to translate into modest gains in spending.”
Excluding automobiles, sales probably rose 0.2 percent after a 1.1 percent increase the prior month, according to the Bloomberg survey. The government’s program allowing consumers to trade in older models for new, more fuel-efficient ones ended in late August, translating into a 35 percent drop in auto sales last month. Industry data showed declines at General Motors Co., Toyota Motor Corp. and Ford Motor Co.
Bernanke Pledge
A broad-based increase in sales of other goods would indicate consumers are becoming more confident that the economy is rebounding. A decline would show households are relying on stimulus measures to justify spending.
Fed Chairman Ben S. Bernanke on Oct. 8 said the central bank will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”
“As economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road,” Bernanke said in a speech in Washington.
Minutes of the Fed Open Market Committee’s September meeting, scheduled to be released on Oct. 14, may shed more light on policy makers’ assessment of the economy at the time. The Fed last month reiterated its pledge to keep the benchmark lending rate low “for an extended period.”
The Standard & Poor’s 500 Index rallied 4.5 percent last week, its best weekly performance since July, as investors grew more optimistic about the economic recovery. Stocks also rose because Alcoa Inc., the biggest U.S. aluminum producer, kicked off third-quarter earnings season with an unexpected profit.
Retail Earnings
Retailers’ results last week showed sales at chains open at least a year climbed 1.1 percent in September from the same month in 2008, the first year-over-year increase in 13 months, said Swampscott, Massachusetts-based Retail Metrics Inc.
Menomonee Falls, Wisconsin-based Kohl’s Corp., the fourth- largest U.S. department-store chain, raised its profit forecast for the third quarter after comparable sales rose, defying projections of a decrease.
Industrial production expanded by 0.1 percent in September after increasing 0.8 percent the month before, reflecting the end of the clunkers program, according to the survey. The proportion of plant capacity in use, meanwhile, was probably little changed. These figures are due from the Fed on Oct. 16.
Fed Reports
A day earlier, a pair of regional Fed reports may show New York area manufacturing slowed this month after growing in September at the fastest pace in almost two years, while a factory gauge for the Philadelphia region likely dropped from the highest reading since June 2007, economists said.
On Oct. 16, a report may show the Reuters/University of Michigan preliminary index of consumer confidence for October dipped from the highest level since January 2008. The index may slip further: economists surveyed by Bloomberg from Oct. 1 to Oct. 8 projected unemployment would exceed 10 percent in the first quarter of next year.
Levi Strauss & Co., the San Francisco-based closely held maker of blue jeans and Dockers pants, said mounting joblessness cut third-quarter profit and may crimp holiday sales.
“While there’s a general feeling that we’re in a better market today than we were six or nine months ago, there’s still just a huge overhang from unemployment,” Chief Financial Officer Blake Jorgensen said by telephone on Oct. 8. “It’s going to be a slow recovery in 2010.”
The Labor Department on Oct. 15 may report the cost of living in September rose 0.2 percent, half the pace of the prior month, according to the Bloomberg survey.
Economists estimate that prices of goods imported into the U.S., due a day earlier, climbed 0.1 percent last month after a 2 percent gain, indicating inflation remains in check.
Purchases dropped 2.1 percent, the biggest decrease this year, after rising 2.7 percent in August, according to the median forecast of 56 economists surveyed by Bloomberg News ahead of Commerce Department figures due Oct. 14. Other reports may show inflation and factory production cooled last month.
Plunging auto sales in September are a sign household spending may not be sustained without government incentives as long as unemployment keeps climbing. The financial health of consumers, whose purchases make up the biggest part of the economy, will go a long way in determining when Federal Reserve policy makers raise interest rates again.
“We’re not necessarily going to get huge growth from the consumer,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Income growth is going to be restrained, and that’s going to translate into modest gains in spending.”
Excluding automobiles, sales probably rose 0.2 percent after a 1.1 percent increase the prior month, according to the Bloomberg survey. The government’s program allowing consumers to trade in older models for new, more fuel-efficient ones ended in late August, translating into a 35 percent drop in auto sales last month. Industry data showed declines at General Motors Co., Toyota Motor Corp. and Ford Motor Co.
Bernanke Pledge
A broad-based increase in sales of other goods would indicate consumers are becoming more confident that the economy is rebounding. A decline would show households are relying on stimulus measures to justify spending.
Fed Chairman Ben S. Bernanke on Oct. 8 said the central bank will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”
“As economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road,” Bernanke said in a speech in Washington.
Minutes of the Fed Open Market Committee’s September meeting, scheduled to be released on Oct. 14, may shed more light on policy makers’ assessment of the economy at the time. The Fed last month reiterated its pledge to keep the benchmark lending rate low “for an extended period.”
The Standard & Poor’s 500 Index rallied 4.5 percent last week, its best weekly performance since July, as investors grew more optimistic about the economic recovery. Stocks also rose because Alcoa Inc., the biggest U.S. aluminum producer, kicked off third-quarter earnings season with an unexpected profit.
Retail Earnings
Retailers’ results last week showed sales at chains open at least a year climbed 1.1 percent in September from the same month in 2008, the first year-over-year increase in 13 months, said Swampscott, Massachusetts-based Retail Metrics Inc.
Menomonee Falls, Wisconsin-based Kohl’s Corp., the fourth- largest U.S. department-store chain, raised its profit forecast for the third quarter after comparable sales rose, defying projections of a decrease.
Industrial production expanded by 0.1 percent in September after increasing 0.8 percent the month before, reflecting the end of the clunkers program, according to the survey. The proportion of plant capacity in use, meanwhile, was probably little changed. These figures are due from the Fed on Oct. 16.
Fed Reports
A day earlier, a pair of regional Fed reports may show New York area manufacturing slowed this month after growing in September at the fastest pace in almost two years, while a factory gauge for the Philadelphia region likely dropped from the highest reading since June 2007, economists said.
On Oct. 16, a report may show the Reuters/University of Michigan preliminary index of consumer confidence for October dipped from the highest level since January 2008. The index may slip further: economists surveyed by Bloomberg from Oct. 1 to Oct. 8 projected unemployment would exceed 10 percent in the first quarter of next year.
Levi Strauss & Co., the San Francisco-based closely held maker of blue jeans and Dockers pants, said mounting joblessness cut third-quarter profit and may crimp holiday sales.
“While there’s a general feeling that we’re in a better market today than we were six or nine months ago, there’s still just a huge overhang from unemployment,” Chief Financial Officer Blake Jorgensen said by telephone on Oct. 8. “It’s going to be a slow recovery in 2010.”
The Labor Department on Oct. 15 may report the cost of living in September rose 0.2 percent, half the pace of the prior month, according to the Bloomberg survey.
Economists estimate that prices of goods imported into the U.S., due a day earlier, climbed 0.1 percent last month after a 2 percent gain, indicating inflation remains in check.
Bloomberg Survey
===============================================================
Release Period Prior Median
Indicator Date Value Forecast
===============================================================
Retail Sales MOM% 10/14 Sept. 2.7% -2.1%
Retail ex-autos MOM% 10/14 Sept. 1.1% 0.2%
Import Prices MOM% 10/14 Sept. 2.0% 0.1%
Import Prices YOY% 10/14 Sept. -15.0% -11.4%
Business Inv. MOM% 10/14 Aug. -1.0% -0.9%
Federal Budget $ Blns 10/13 Sept. 45.7 -67.0
CPI MOM% 10/15 Sept. 0.4% 0.2%
Core CPI MOM% 10/15 Sept. 0.1% 0.1%
CPI YOY% 10/15 Sept. -1.5% -1.4%
Core CPI YOY% 10/15 Sept. 1.4% 1.4%
Initial Claims ,000’s 10/15 10-Oct 521 525
Cont. Claims ,000’s 10/15 3-Oct 6040 6025
Empire Manu. Index 10/15 Oct. 18.9 17.8
Philly Fed Index 10/15 Oct. 14.1 12.0
Net Long Term TICS $ Bl 10/16 Aug. 15.3 30.0
Total TICS $ Blns 10/16 Aug. -97.5 10.0
Ind. Prod. MOM% 10/16 Sept. 0.8% 0.1%
Cap. Util. % 10/16 Sept. 69.6% 69.7%
U of Mich Conf. Index 10/16 Oct. P 73.5 73.0
===============================================================- Via Bloomberg
Obama to end military gay policy
He said he would repeal the "don't ask, don't tell" policy that allows gay people to serve in the military if they do not reveal their sexual orientation. Mr Obama was speaking to America's largest gay group - the Human Rights Campaign - in Washington. He had been criticised by some in the gay community for the lack of action on gay marriage and the military issue.
A big gay rights protest march is planned in Washington for Sunday.
Disquiet
Mr Obama was addressing thousands of gay and lesbian people at a fundraising dinner in the US capital.
He said the US had made progress on gay rights and would make more.
On the military issue he said the US could not afford to lose those people who had much needed skills for fighting.
"We should not be punishing patriotic Americans who have stepped forward to serve the country," Mr Obama said.
"We should be celebrating their willingness to step forward and show such courage."
Mr Obama did not give a timetable for repeal of the policy, passed by Congress in 1993, under which thousands of service members have been discharged.
The US president has repeatedly pledged to tackle issues important to the gay community.
But he has faced criticism for what many in the gay community see as lack of action on his promises.
Mr Obama asked the audience to trust his administration.
"I appreciate that many of you don't believe progress has come fast enough. Do not doubt the direction we are heading and the destination we will reach," he said.
One issue causing disquiet among the US gay community is the issue of gay marriage, the BBC's Rajesh Mirchandani in Los Angeles says.
Mr Obama has been criticised for not delivering on his promise to repeal the Defense of Marriage Act, which limits how local and federal bodies can recognise gay partnerships and determine benefits.
In his speech, Mr Obama did call on Congress to repeal the act and he also called for a law that would extend benefits to domestic partners.
In many places in America, gay people enjoy a high profile, economic and political clout, our correspondent says.
- Via BBC
A big gay rights protest march is planned in Washington for Sunday.
Disquiet
Mr Obama was addressing thousands of gay and lesbian people at a fundraising dinner in the US capital.
 |  Do not doubt the direction we are heading and the destination we will reach  Barack Obama  |
On the military issue he said the US could not afford to lose those people who had much needed skills for fighting.
"We should not be punishing patriotic Americans who have stepped forward to serve the country," Mr Obama said.
"We should be celebrating their willingness to step forward and show such courage."
Mr Obama did not give a timetable for repeal of the policy, passed by Congress in 1993, under which thousands of service members have been discharged.
The US president has repeatedly pledged to tackle issues important to the gay community.
But he has faced criticism for what many in the gay community see as lack of action on his promises.
Mr Obama asked the audience to trust his administration.
"I appreciate that many of you don't believe progress has come fast enough. Do not doubt the direction we are heading and the destination we will reach," he said.
One issue causing disquiet among the US gay community is the issue of gay marriage, the BBC's Rajesh Mirchandani in Los Angeles says.
Mr Obama has been criticised for not delivering on his promise to repeal the Defense of Marriage Act, which limits how local and federal bodies can recognise gay partnerships and determine benefits.
In his speech, Mr Obama did call on Congress to repeal the act and he also called for a law that would extend benefits to domestic partners.
In many places in America, gay people enjoy a high profile, economic and political clout, our correspondent says.
- Via BBC
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