Going to a local art festival with my girlfriend. She's the only person who can get me away from the markets.
Back sometime tomorrow.
Noted for May 25, 2013
24 minutes ago
Sales of previously owned homes in the U.S. unexpectedly rose in February at the fastest pace in three years, a sign the housing market is still recovering even as lending standards tighten.
Purchases increased 3.9 percent last month to an annual rate of 6.69 million, from 6.44 million in January, the National Association of Realtors said today in Washington. Sales were down 3.6 percent from a year earlier.
The report, together with a gain in February housing starts reported this week, bolsters the view that housing will gradually stop being a drag on economic growth. Falling prices and low borrowing costs are supporting demand, easing concern that defaults on subprime mortgages will worsen the glut of homes, economists said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in the last week, down from an average of 6.29 percent in February. The 30-year fixed was 6.22 percent in January, and 6.25 percent in February 2006.
The national median existing-home price2 for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700. The median is a typical market price where half of the homes sold for more and half sold for less.
Total housing inventory levels rose 5.9 percent at the end of February to 3.75 million existing homes available for sale, which represents a 6.7-month supply at the current sales pace compared with a 6.6-month supply in January. Raw inventories peaked last July at 3.86 million, and supplies topped at 7.4 months in October.
Far from being limited to the subprime market, the data show these risky loan features have become widespread. According to Credit Suisse, the number of no or low documentation loans -- so-called "liar loans" -- has increased to 49% last year from 18% of purchase loans in 2001, a nearly three-fold increase. The investment bank also found that borrowers put up less than a 5% down payment in 46% of all home purchases last year. Inside Mortgage Finance estimates that nontraditional mortgages -- mostly interest-only and pay-option ARMs that allow the borrower to defer paying back principal or even increase the loan balance each month -- which barely existed five years ago, grew to close to a third of all mortgages last year.
The Alt-A market, a middle ground between subprime and prime, has increased seven-fold since 2001 and accounted for 20% of home-purchase loans last year. Fully 81% of Alt-A loans last year were no or low documentation loans, according to First American Loan Performance. Why have borrowers employed this kind of risky financing? Because it was the only way many of them could afford a home in some of the hottest housing markets, where prices more than doubled in five years.
Near-month oil futures shot up on fuel supply fear a day after gov't data showed another big drop in gasoline and heating oil stockpiles. The Fed's near-neutral bias Wed. raised hopes for stronger U.S. growth and energy demand. April RBOB gasoline rose 2.26 cents to $1.9575 a gallon, near Tues.' 7-month high. High gas prices could hit ailing U.S. consumers.
Nationwide prices rose 1.8 cents last week to $2.577 a gallon. That's 7 cents higher than a year ago. U.S. gas prices have surged more than 36 cents in the past six weeks.
Demand was up while supplies of both gasoline and crude oil remained below year-ago levels.
Refineries are at capacity and gasoline imports are down. Gas futures are at their highest since August — suggesting retail prices have further to go.
"You put it all together and it's just very bullish for gasoline prices," said Phil Flynn, an energy analyst at Alaron Trading. "Don't expect these problems to go away."
Insiders at Countrywide, the nation's largest mortgage lender, have sold $314 million worth of shares in the company just since August. That's according to regulatory filings tracked by Interactive Data Corporation.
The sales include a staggering $94.5 million by chief executive Angelo Mozilo, and $17.5 million by mortgage division chief David Sambol.
"We believe that declining home prices and other factors ... may produce foreclosures numbers on 2006 originations approaching or exceeding those on loans originated in 2000," Samuels said in remarks.
Gasoline prices were up for the seventh consecutive week, increasing 1.8 cents to 257.7 cents per gallon as of March 19, 2007. Prices are now 7.3 cents per gallon higher than at this time last year. All regions reported price increases. East Coast prices were up 2.0 cents to 255.3 cents per gallon, while Midwest prices rose 0.3 cent to 249.0 cents per gallon. Prices for the Gulf Coast were up 1.6 cents to 241.8 cents per gallon. The largest regional increase was in the Rocky Mountains, where prices increased 9.0 cents to 250.2 cents per gallon. West Coast prices were up 2.6 cents to 294.6 cents per gallon, with the average price for regular grade in California up 1.0 cent to 307.8 cents per gallon, 44.3 cents per gallon above last year’s price.
"The Fed is caught right now. The inflation numbers are looking worse, but on the other hand, the economy is looking softer," said David Wyss, chief economist at Standard & Poor's in New York.
Wyss said he believed the Fed was using the statement to edge closer to cutting rates if necessary to bolster economic growth, but he said investors should not expect any change at the Fed's next meeting on May 9.
David Jones, chief economist at DMJ Advisors, a private consulting firm, said he believed the Fed would remain on hold probably until September.
"The Fed is facing a standoff. The economy is slowing and inflation is getting worse," Jones said. "They have got to let the dust settle on this very mixed picture before they do anything."
Wyss said the Fed could cut rates as many as three times although he said some of those reductions might not come until next year.
Jones said he believed the Fed might be content to just cut rates once in the second half of this year if the economy is showing signs of rebounding at that time.
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.
And "with the energy demand showing no signs of abating, there seems to be a growing concern that OPEC's decision to keep output unchanged might result in a supply shortfall, which could leave refineries unable to boost runs enough to replenish gasoline supplies, setting the stage for a sharp upward price spiral," he said in an e-mailed note to clients.
Francisco Blanch, an analyst at Merrill Lynch, said in a research note Tuesday that oil demand is "expanding strongly relative to last year in sectors such as transportation, petrochemicals and power generation." And in emerging markets, oil demand is "looking very strong with China, India and other countries taking in substantially more fuel for transport and petchem use than last year," he said.
Homeowners such as the Rhode Island couple are finding their mortgage companies eager to accept a sale price that falls short of a property's loan balance -- a so-called mortgage short sale. The number of U.S. loans entering foreclosure reached an all-time high in the fourth quarter, according to the Washington-based Mortgage Bankers Association. That's spawning a cottage industry of real estate investors who profit as lenders try to avoid adding properties to their portfolios.
The short sales may mitigate the impact of the housing slump as the properties avoid being tallied as foreclosures. At the same time, they will help push the U.S. median home price to a third consecutive quarterly decline in 2007's first three months, Berson said.
......Countrywide Financial Corp., the biggest U.S. mortgage provider, last week stopped taking applications for no- money-down loans from risky borrowers without proof of income.
The new constraints on lending may be real-world evidence of the ``lags'' in monetary policy that policy makers flagged when they ended two years of rate increases in August. The central bank will keep its benchmark rate at 5.25 percent, economists predict, counting on slower growth and past rate boosts to bring inflation within their tolerance zone.
``The market is definitely tightening standards, and to the degree the market controls the flow of capital, the Fed does not have to,'' said Carl Tannenbaum, chief economist at ABN Amro Holding NV's LaSalle Bank in Chicago. Officials have kept their tightening bias at the past five meetings, meaning any policy shift is likely to be a rate increase.
.....Wells Fargo & Co., the largest U.S. subprime lender, said in a March 7 statement to Bloomberg News that it changed standards effective Feb. 16 for some risky customers.
Housing starts rebounded in February from a nine-year low, easing concern that the U.S. real-estate slump will worsen and threaten the economic expansion.
Builders broke ground on new homes at an annual rate of 1.525 million last month, up 9 percent from the prior month and more than economists forecast, the Commerce Department said today in Washington. Building permits fell 2.5 percent.
The numbers eased speculation that climbing defaults on subprime mortgages would put additional homes on the market, leading builders to halt more projects and fire workers. At the same time, swings in the monthly figures don't convey the stability desired by Federal Reserve policy makers, who meet today and tomorrow to set interest rates.
The big subprime mortgage lender said 4 more states have issued cease-and-desist orders, joining N.Y. and Mass. Deutsche Bank (DB) asked New Century Fin'l (NEWC) to quickly buy back $900 mil of its loans. New Century fell 7% to 2.17. Accredited Home Lenders, (LEND) which rallied in pre-market on financing talks, fell 18%. Fremont Gen'l, (FMT) which wants to sell its subprime unit, fell 9%.
Stocks rallied Monday, but sharply lighter volume took the juice out of the session's gains.
The Nasdaq picked up 0.9%. The S&P 500 climbed 1.1%, the Dow industrials 1%. The small-cap S&P 600 also tacked on 1%. But volume receded 19% on the Nasdaq and nearly 30% on the NYSE.
Two factors weighed on Monday's volume. The lack of option-fueled trading certainly played a part. Big investors also were reluctant to trade heavily ahead of the two-day Federal Open Market Committee meeting that begins Tuesday.
Still, Monday's trading level came in below Thursday's tally, and was the second-lowest total since the last week of 2006, when traders stayed home for the holidays.
Bank of Japan board members Tuesday voted unanimously to leave monetary policy steady, in line with indications from the central bank that it wouldn't immediately follow a rate rise in February with a further policy tightening.
Analysts expect the BOJ to raise interest rates further but not until economic data show domestic demand is picking up and price pressures increase after moderating due to a recent fall in global oil prices.
U.S. homebuilders turned more pessimistic this month on concern that buyers will find it harder to obtain loans after a wave of defaults in the subprime mortgage market.
The National Association of Home Builders/Wells Fargo index of sentiment fell to 36 this month from February's revised 39, the first decline since September, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor.
Homebuilders, struggling to recover after more than a year of slumping sales, now face the possibility that a surge in defaults on subprime mortgages will make other types of home loans harder to get. That may provide a greater drag on construction as builders hold off starting work on more houses until completed ones are sold.
"This is a strong signal that housing will remain a drag on the economy through spring and probably summer as well," wrote Patrick McPherron, an economist for Moody's Economy.com. He concluded that, after seasonally adjusting the numbers, optimism about prospective buyers was an all-time low.
Federal Reserve officials may cling this week to their bias for tighter credit, setting themselves up for bigger interest-rate cuts later in the year if the economy continues to lose momentum.
``The Fed is often a little behind the curve when you get to these turning points,'' says J. Alfred Broaddus Jr., president of the Richmond Fed from 1993 to 2004. ``The reluctance to move toward ease once you have an inflation bias in place may be just a fact of life if you are concerned about credibility.''
A look at the losers and bigger losers since the stock market began its bumpy ride late last month offers hints about what it will take for the market to rebound in the weeks ahead.
Analysts are keeping an especially close eye on financial stocks, which, beset by woes in the business of selling mortgages to risky subprime borrowers, have been the hardest hit. The sector is something of a bellwether for the market because of its size and because it reflects big-picture economic issues such as inflation.
The financial sector of the Dow Jones Wilshire 5000 index is off 5.5% since the market's one-day plunge on Feb. 27, compared with a 4.4% drop for the whole index. The utilities sector, an investor haven because consumers need to keep the lights on and the water running no matter how shaky the economy, is down just 2.9% in the same period, the second-best performance of the index's 10 sectors.
"Investors have clearly been trying to get more defensive in their portfolios the last few weeks, which is understandable," says strategist Mark Keller of A.G. Edwards & Sons in St. Louis. "They're still in a mode of shedding risk, and things should stay that way awhile longer."
Core year-over-year CPI price growth, at 2.7%, is above the Fed's preferred 2% soft target for this measure that is roughly consistent with the 1%-2% comfort zone for the core chain price index for personal consumption. And the headline year-over-year gain moved upward to 2.4% from 2.1%. The core year-over-year rate may drift down toward the 2.5% area through mid-year due to easier comparisons, but this may not suit a Fed that would probably like to see the figures "comfortably" and sustainably within the preferred range, and not just dancing at the upper end.