Household wealth rises and foreclosure rate hits a record–what kind of recovery is this?

Put these two headlines together from Bloomberg today and you’ve got a good snapshot of the U.S. economic “recovery” to date.

“U.S. Foreclosures to Reach 3.9 Million in Second Record Year.”

“Household Net Worth in U.S. Increases by $2.67 Trillion.”

Let’s look at the bad new first, okay? Read more

Mortgage deliquency rate projected to inch–and I mean inch–downward in 2010

Reassuring news on the home mortgage front: the tide of mortgage delinquencies will start to recede in 2010—unless you live in Arizona, California, Florida, New York or Virginia. Those states will see delinquencies continue to climb next year.

That’s the forecast from TransUnion, the big credit rating company, based on an analysis of credit trends over the last few months.

TransUnion isn’t talking about a big turnaround in the national trend in 2010. Just that mortgage delinquencies will peak in 2010 and then decline slightly. Read more

The mortgage crisis shifts to the FHA and Congress wants to make the problem permanent

Another of the “emergency” measures enacted to stop of the financial crisis from plunging the economy into a depression looks like it’s on the road to becoming “permanent.”

And this one could really blow up on us taxpayers—again—not so far down the road.

I’m talking about the “emergency” change in the rules for Federal Housing Administration (FHA) qualified loans that let the agency insure housing loans for as much as $729,000. The temporary change went into effect in two stages in March 2008 and in February 2009. Up until then, the FHA could not insure loans of more than $362,790. That lower limit was in line with the agency’s original mission of helping low-income families who couldn’t make the traditional 20% down payment required by private lenders get a mortgage.

The logic of the higher “temporary” limit was that the FHA would now be able to insure loans in the hard-hit, high-priced housing markets of states like California. The higher limits would enable buyers in these markets to get loans to buy houses that would otherwise sit unsold. The loans would thus support housing prices and the home building industry in high-priced real estate markets.

The FHA has certainly insured lots of loans in these markets. So far in 2009, the agency has insured 107,000 loans in California alone. Read more

Jobless numbers tomorrow–and on them hangs the trend in this market

The U.S. Bureau of Labor Statistics releases the July payroll and unemployment numbers tomorrow before the stock market opens. It’s a chance to give some badly needed new life to the “We can see the turn in the economy coming” optimism that has fueled the rally in stocks off the March 9 bottom. Or to push the market a little deeper into what is a developing case of the blahs.

The consensus among economists is that we’ll see a big improvement in unemployment in the July numbers. Or to be more precise, a big slowdown in the number of people who lost jobs in July. Nobody is calling for job growth, mind you. But the consensus projection is that payroll numbers will show a decline of just 328,000 jobs in July. I say “just” because in June job losses ran to 467,000.

Even a smaller drop than last month will still keep the official unemployment rate headed up. If the consensus is right, July’s jobs loss will push the unemployment rate to 9.6% from 9.5% in June. In other words, we’re still on our way to the 10% plus unemployment rate that the Federal Reserve is predicting before any recovery begins.

Wall Street will be watching these numbers especially closely. Read more

Default isn’t just for subprime mortgages anymore

The rate of default among home owners with prime mortgages is soaring. These are supposed to be the safest mortgages, the ones that went only to borrowers with the best credit scores, remember.

And that’s a huge problem for a banking system that was almost brought to its knees when subprime mortgages, those that went to borrowers with the worst credit, defaulted by the truck load.

The dollar volume of prime mortgages in delinquency or default rose 13.8% from March to June, according to a new study by Standard & Poor’s.  The study only covered mortgages originated by banks, bundled into securities, and then sold to investors. It omitted what are called “conforming” mortgages, backed by federal-government-backed Fannie Mae (FNM) or Freddie Mac (FRE).

The study comes as some Wall Street analysts have started to question recent numbers suggesting that the housing market has either bottomed or moved into recovery. The widely followed S&P/Case-Shiller index of housing prices showed a gain in prices in May from April. That was the first month-to-month increase since 2006.  On an annual basis prices declined a seasonally adjusted 2%, leading investors to argue that the housing market was near a bottom.

The problem, though, is that pesky phrase “seasonally adjusted.” Efforts to revise the raw data to reflect normal seasonal swings in home buying activity–most home buying takes place in the spring and summer–led to over-stating the price recovery, analysts at Barclays Capital and Bank of America have argued. A more accurate estimate, Barclays calculated, would be that housing prices declined at an annual 10% to 15% rate.

In other words, this market hasn’t seen bottom yet. Read more