Foreclosure Activity Shows Signs of Ramping Up!
Foreclosure activity shows signs of ramping up in Q3 (CHARTS)
RealtyTrac: Default notices rise 14% from second quarter
By Inman News
Inman News™
In the third quarter, a downward trend in nationwide foreclosure activity showed signs of reversing, according to the latest report from foreclosure data site RealtyTrac. At the same time, foreclosure processing and sales timelines hit record highs, the report said.
After three straight quarters of declines, foreclosure activity in the third quarter remained essentially flat compared to the second quarter, rising a slight 0.35 percent to filings on 610,337 properties. That’s still a 34.4 percent decrease compared to third-quarter 2010.
One in every 213 housing units received a filing — a default notice, scheduled auction, or bank repossession — in the third quarter.
In September, the last month of the third quarter, 214,855 properties received a foreclosure filing, a decrease of 6 percent month to month and 38 percent year over year. September marks a full 12 months in which foreclosure filings have been dropping on a yearly basis, the report said.
“U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork,” said James Saccacio, RealtyTrac’s CEO, in a statement.
“While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up.”
Saccacio attributed the third quarter’s marginal increase in foreclosure activity to a jump in new default notices, “indicating that lenders are cautiously throwing more wood into the foreclosure fireplace after spending months … trying to clear the chimney of sloppily filed foreclosures,” he said.
Default notices in the third quarter rose 14 percent from the second quarter, to 195,878, but remained down 27 percent compared to third-quarter 2010. States to see especially big jumps in default notices quarter to quarter were Massachusetts (65 percent), New Jersey (29 percent), Florida (24 percent), Ohio (21 percent), and California (21 percent).
Foreclosure auctions fell 6 percent quarter to quarter and 41 percent year over year in the third quarter, to 217,929.
Bank repossessions (REOs) fell 4 percent quarter to quarter and 32 percent year over year, to 196,530. Nevertheless, some states did post high quarter-to-quarter jumps in REOs: Massachusetts (up 62 percent), Oregon (47 percent), Georgia (42 percent), and Illinois (27 percent).
Market Review
Mortgage bond prices fell last week, which pushed mortgage interest rates higher. The roller coaster ride of investor funds entering and exiting the stock and bond markets continues as economic uncertainty dominates trading. The losses continued as foreign demand for US debt instruments waned. Stocks were volatile but generally saw improvements on the week. Retail sales rose a stronger than expected 1.1%
Mortgage bonds ended the week worse by about 1/4 of a discount point.
The inflation data on the producer and consumer sides will be extremely important this week. There is also a 30Y TIPS auctions Thursday. The recent auctions have shown weak foreign demand, which generally does not bode well for lower rates so caution will be key.
LOOKING AHEAD
Economic
Indicator Release
Date and Time Consensus
Estimate Analysis
Industrial Production Monday,
Oct. 17,
9:15 am, et Up 0.3% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization Monday,
Oct. 17,
9:15 am, et 77.2% Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
Producer Price Index Tuesday,
Oct. 18,
8:30 am, et Unchanged,
Core up 0.1% Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Consumer Price Index Wednesday,
Oct. 19,
8:30 am, et Up 0.3%,
Core up 0.2% Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Housing Starts Wednesday,
Oct. 19,
8:30 am, et 565k Important. A measure of housing sector strength. Weakness may lead to lower rates.
Fed “Beige Book” Wednesday,
Oct. 19,
2:00 pm, et None Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Weekly Jobless Claims Thursday,
Oct. 20,
8:30 am, et 400k Important. An indication of employment. Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday,
Oct. 20,
10:00 am, et -10.4 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Leading Economic Indicators Thursday,
Oct. 20,
10:00 am, et Up 0.2% Important. An indication of future economic activity. A smaller increase may lead to lower rates.
SIGNIFICANT DATA
Recent economic reports have carried mixed weight in driving the financial markets in light of stock market swings. While stocks have set the tone for trading in mortgage-backed securities recently, an abundance of significant data this week may begin to weigh upon the market as well.
It is possible for mortgage interest rates to trend lower again. However, the potential for increases is also very real, as we have seen the past few weeks. Signs from the data this week that the economy is recovering could lead to stock strength.
Stocks are likely to continue to dictate trade. A weaker stock market may help to maintain current mortgage interest rate levels. However, signs of recovery in the stock market can pressure mortgage bond prices lower and rates higher.
Weekly Market Update
MARKET COMMENT
Mortgage bond prices fell last week, which pushed mortgage interest rates higher. There was a strong sell-off throughout the beginning of the week following the prior week’s run up in prices. European authorities efforts to construct a new rescue framework dominated the news and resulted in a reversal of the flight to quality buying of US debt instruments. Stocks were extremely volatile throughout the week but surged higher at times, which didn’t help mortgage bonds. The revised Q2 GDP data was slightly higher than expected. There was a rebound Thursday afternoon and Friday morning following the depressed prices, however mortgage bonds still ended the week worse 3/8’s in discount points.
Real Estate Market Update
Mortgage bond prices rose last week, which pushed mortgage interest rates considerably lower. Rates improved the first portion of the week as Greek debt default concerns dominated the news. The Fed kept rates unchanged Wednesday afternoon, extended the average maturity of their holdings, and indicated the goal of an exceptionally low fed funds rate through mid 2013. Stocks fell precipitously following the announcement and mortgage bond prices shot higher. The positive movement in mortgage bonds continued throughout Thursday. There was a sell off Friday following the run up in prices however mortgage bonds still ended the week better by over a full discount point.
The new home sales data Monday will set the tone for trading this week. The inflation data and Treasury auctions will also garner additional focus.
Economic Summary June 20-24 2011
Weekly Economic Summary –
June 30, 2011
Last week in review
(June 20 – 24, 2011)
________________________________________
The big news last week was the Federal Open Market Committee (FOMC) meeting and the release of the Fed’s Policy Statement. While there weren’t many surprises to come out of the meeting, the Fed did revise its forecast for the 2011 Gross Domestic Product (GDP) lower and acknowledged that the economic recovery is a little slower.
On unemployment, the Fed stated that the pace of job growth is “frustratingly slow” and that it believes the unemployment rate will average 8.6% to 8.9% in the 4th quarter of 2011, which is actually higher than earlier forecasts of 8.4% to 8.7%. The Fed also raised expectations for core inflation, which strips out volatile food and energy costs. This is important because if inflation picks up, bond prices will move lower – since yields have to move higher to attract buyers to compensate them for the pickup in inflation. And that means home loan rates may move higher as well.
The Misery Index, which takes into account both inflation and the unemployment rate, is currently, slightly below the level seen in December 2009, which is when the economy was still in the midst of the credit crisis. To put this in perspective, we haven’t seen the Misery Index this high since 1983. And what is a bit concerning is that the index has climbed higher each month during 2011. With inflation rising higher still and unemployment not ticking down, the upward trend may well continue in the near future.
The Fed also said the second round of Quantitative Easing (known as QE2) will end as scheduled at the end of June – but there was no mention of a third stimulus package (which would be known as QE3). Their silence on this point was fairly deafening. Many experts have wondered about the possibility of a third round of QE, but it doesn’t look to be in the cards at this point. It’s important to note that the stock market did not like that there was no mention of QE3, especially since stocks have only risen the past couple of years when the Fed has been buying – like during both QE1 and QE2. It will be very interesting to see how stocks behave once the QE2 support is removed.
Durable goods were reported better than expected last week. It wasn’t a blockbuster reading, but it was good news in light of concerns that the economic recovery is slowing. That said, there’s a catch to consider for people looking to refinance or purchase a home. The recent slowdown in the economic recovery has actually helped improve bonds and home loan rates. But if the slowdown proves to be just a minor bump in the road to recovery and if future reports show modest improvements, home loan rates could move higher rather quickly.
As you can see in the chart below, bonds and home loan rates benefited from the news last week. I’ll be watching closely to see if the slower economic recovery continues and how this week’s news impacts home loan rates.