a href=”http://2.bp.blogspot.com/_hAd8QJ-Q4SY/SpyIibCKsWI/AAAAAAAAAQ0/wuk-l4pvEnQ/s1600-h/1082.JPG”img id=”BLOGGER_PHOTO_ID_5376322180127306082″ style=”FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 150px” alt=”" src=”http://2.bp.blogspot.com/_hAd8QJ-Q4SY/SpyIibCKsWI/AAAAAAAAAQ0/wuk-l4pvEnQ/s200/1082.JPG” border=”0″ //abr /It’s a chilly late summer evening, and during my run tonight I feel Fall in the air. It’s a bittersweet feeling, knowing one of the best seasons I’ve had in years – my magical summer of wonder (MSOW) –is coming to a close. I wish I could take the MSOW, ball the whole thing up and keep it in my pocket for the winters ahead. The memories I’ve made and experiences I’ve had this summer are sure to be nourishment for the long, tough journeys I’ll one day face. But for now, I’m free to revel in the delight of fleeting golden evenings, enjoy the last days of flip-flopped toes and spend cool nights with windows wide open. span class=”fullpost”br /br /MSOW was expensive, true, but it was also a celebration of who I’ve become and what I’ve accomplished during the past 10. As you know, I ran a triathlon, quit my job and found a new one and celebrated my 30th birthday with 50 of my closest friends in my parents’ backyard. I also traveled to Michigan, Wisconsin, Nevada and Colorado, kayaked a whitewater river, biked down a mountain, dressed like a banana, saw my favorite band live, bought a computer and a new microwave, invested in a new wardrobe and spent tons of time with my family… and I did it all without collecting any debt.br /br /Times are tough, yes, but what I thought would be a summer filled with uncertainty due to the economy turned into one of joy. (Two weeks off and a dream job will do that for you.) It was unexpected. It was delightful. And here I am now, watching that fabulous MSOW pack up and drive away as I stand on the curb waving wistfully.br /So what will I take from this MSOW? What lessons have I learned?br /br /br /1. Be open to new experiences. If there is one theme to this summer, it’s to be unafraid. Even if your body is shaking and your limbs are paralyzed at the starting line of a race. Even if you feel glued to your office chair, the same one you’ve sat in for 10 years. Even if you think there’s no way you can do it. Just try. Step out of your comfort zone. You’ll never know what will happen unless you take the first step. Open yourself to the possibilities.br /br /diva href=”http://photos-h.ak.fbcdn.net/hphotos-ak-snc1/hs133.snc1/5692_600559761868_60702672_34850815_7400735_n.jpg”img style=”FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 276px; CURSOR: hand; HEIGHT: 191px” alt=”" src=”http://photos-h.ak.fbcdn.net/hphotos-ak-snc1/hs133.snc1/5692_600559761868_60702672_34850815_7400735_n.jpg” border=”0″ //a2. Celebrate the small things. Turning 30? Throw a party. Turning 31? Get your friends together. Life is too short to wait for something huge to happen, so take advantage of the time you have together and celebrate each other. I know that this year of 30th birthday parties for me and all my girlfriends was a gift, and that one day we may be gathering for not-so-happy times. So while things are happy, get together, turn on the music, drink some wine and dress like fruit (or whatever makes you happy). The memories will last a lifetime.br /br /3. Make the tough choices. I still don’t have a house. But that was the right decision for me. If I would have spent money on a downpayment when my lease was up, I would have no savings at all (we’re talking zero) if I would have lost my job. And at an agency, even at the one I was with for eight years, business is always cyclical. Translation: Losing everything was a possibility. So I held off on buying. It wasn’t an easy decision, but by the time my lease is up in April, I’ll be in a much more secure position: I’ll have a stable job and more savings.br /br /4. Spend thoughtfully when you have to. We needed lots of new appliances this summer - computer, router, microwave, house fan. Our old ones were on their last legs, all working about ten percent of the time and the rest just causing headaches. So we had to spend some. But we bought on sale, and we bought with a card that gave us points and we paid off in the same month we bought. That’s how to spend smart. /span/divbr /br /divspan class=”fullpost”br /Did you have an MSOW? What lessons did you learn this summer? Anything you’d like to share?br //div/spandiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/9379743-4058024419305685754?l=budgetingbabe.blogspot.com’//div

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A little history from Paul Kasriel, Chief Economist at Northern Trust: a href=”http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0908/document/dd082709.pdf”The Rhyming of History – Bloomberg and the RFC?/a blockquoteOn November 7, 2008, Bloomberg LP sued the Federal Reserve Board under terms of the Freedom of Information Act to obtain the names of borrowers of funds from the Federal Reserve as well as lists of the collateral posted by the borrowers. On August 25, 2009, a U.S. District judge ruled in favor of Bloomberg, ordering the Federal Reserve Board to turn over to Bloomberg the requested information within five days. At this writing, the Fed has yet to comply and has yet made a decision to appeal the ruling. /blockquote CR Notes, from a href=”http://www.bloomberg.com/apps/news?pid=20601087sid=aAOhgVw78e3U”Bloomberg/a: The Fed has asked the Judge to stay the order until the U.S. Court of Appeals in New York can hear the case. blockquoteThe Fed has been reluctant to reveal the names of its borrowers allegedly out of a concern that such a revelation could have an adverse competitive impact on the borrowers. br /br /The reason I bring this up is that it is similar to a situation that arose in 1932 with the Reconstruction Finance Corporation (RFC). The RFC was established by an act of Congress on January 22, 1932, for the purpose of making loans to financial institutions, railroads and to extend credit for crop loans. The Treasury provided some capital to the RFC and the RFC was permitted to borrow from the Treasury. Initially, the RFC granted credit primarily to banks. These loans coincided with a reduction in bank failures and currency held outside the banks declined.br /br /On July 21, 1932, the RFC was authorized to make loans for self-liquidating public works projects, and to states to provide relief and work relief to needy and unemployed people. emThis legislation also required that the RFC report to Congress, on a monthly basis, the identity of all new borrowers of RFC funds./em On orders from the Speaker of the House of Representatives, commencing in August 1932, the names of banks borrowing from the RFC became public information. This publication of the names of banks borrowing from the RFC discouraged current borrowers from continuing their borrowing and prospective borrowers from commencing borrowings out of a fear that depositors would judge this borrowing as a sign of financial weakness. By November 1932, the outstanding amount of RFC loans to banks had decreased.br /br /In mid February of 1933, a Detroit bank began having difficulties. The RFC was willing to lend to this bank, but because of a dispute between one of the Michigan senators and Henry Ford, a large depositor in the bank, the RFC loan was not allowed to be made. A bank panic started in Michigan as a result. This Michigan bank panic served as a catalyst for a nationwide bank panic.br /br /The failure of the Detroit bank was emnot/em because the bank was reluctant to borrow from the RFC. But one can only speculate as to whether other banks in Michigan and nationwide were reluctant to borrow from the RFC because their names would have been published. And one can only speculate that if these other banks had willing to borrow from the RFC if a nationwide bank could have been averted.br /br /Today, we have federal deposit insurance. Therefore, the probabilities and magnitude of depositor runs on banks are much reduced compared with 1933. Yet, we can see “runs” by stockholders and other creditors of banks if there is a suspicion of financial problems. If the Fed is required to publish the names of financial institutions to which it has extended credit and this publication induces financial institutions to refrain from borrowing from the Fed, one can only speculate if this would be the tinder for another liquidity conflagration in the coming months./blockquote Would we see another liquidity crisis because of concerns about the level of borrowing by certain banks from the Fed? I don’t think so - but this is the concern. Doesn’t everyone already suspect that Citi and BofA will be near the top of the list?br /br /I suppose some second tier bank might have a problem if the data is disclosed.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-1181246959067293680?l=www.calculatedriskblog.com’//div

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From Bloomberg: a href=”http://www.bloomberg.com/apps/news?pid=20601087sid=aZtR_UtI3ngI”FDIC Sets Standards for Private-Equity Firms to Buy Shut Banks/a (ht Anthony) blockquoteThe Federal Deposit Insurance Corp. approved guidelines for private-equity firms to buy failed banks … agreeing to lower to 10 percent from the proposed 15 percent the Tier 1 capital ratio private-equity investors must maintain after buying a bank. /blockquote From the FDIC: Attachment: a href=”http://www.fdic.gov/news/board/Aug26no2.pdf”Final Statement of Policy of Qualifications for Failed Bank Acquisitions /abr /br /As a reminder, the deadline for Corus Bank bids is reported to be next week. So this is just in time.br /br /Also, the Q2 FDIC a href=”http://www2.fdic.gov/QBP/qbpSelect.asp?menuItem=QBP”Quarterly Banking Profile/a will probably be released tomorrow AM (including stats on the Deposit Insurance Fund and the number of problem banks at the end of Q2).div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-2758296637551654915?l=www.calculatedriskblog.com’//div

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From Atlanta Fed President Dennis Lockhart: a href=”http://www.frbatlanta.org/invoke.cfm?objectid=572D828F-5056-9F12-12AD9734C17D1C6Amethod=display”The U.S. Economy and the Employment Challenge/a br /br /On the economic outlook: blockquoteWith respect to growth, my forecast envisions a return to positive but subdued gross domestic product (GDP) growth over the medium term weighed down by significant adjustments to our economy. Some of these adjustments are transitional in the sense that they impede the usual forces of recovery. Among these are the rewiring of the financial sector and the need for households to save more to repair their balance sheets.br /br /Some of these adjustments, however, are more “structural” in nature. By this, I mean that the economy that emerges from this recession may not fully resemble the prerecession economy. In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing. In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen—even if not permanent. …br /br /My forecast for a slow recovery implies a protracted period of high unemployment. And labor market weakness is a concern I hear about often as I travel around the Southeast. /blockquote And on Commercial real estate: blockquoteI’m concerned that commercial real estate weakness poses a serious potential risk to the economic recovery and to the banking system. Commercial real estate loan exposure is heavily concentrated in banks and commercial mortgage-backed securities. Commercial real estate values—that is, collateral values for loans—are being revised down materially by the potent combination of increased vacancy, rent reductions, and appropriately higher capitalization rates. Further, there is a clear link between employment trends (positive and negative) and commercial real estate trends./blockquote On that note, here is a graph from a post in July:br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1160,height=820,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://2.bp.blogspot.com/_pMscxxELHEg/SlOO2YQrM-I/AAAAAAAAFxI/jt2nSTBnSdE/s1600-h/OfficeVacancyUnemploymentQ2.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Office Vacancy vs. Unemployment” src=”http://2.bp.blogspot.com/_pMscxxELHEg/SlOO2YQrM-I/AAAAAAAAFxI/jt2nSTBnSdE/s320/OfficeVacancyUnemploymentQ2.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span/b/ibr /br /This graph shows the office vacancy rate vs. the quarterly unemployment rate and recessions.br /br /As Lockhart noted: em”[T]here is a clear link between employment trends (positive and negative) and commercial real estate trends.”/embr /br /As the unemployment rate continues to rise over the next year, the office vacancy rate will probably rise too. Reis’ forecast is for the office vacancy rate to peak at 18.2 percent in 2010, and for rents to continue to decline through 2011.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-2735194236388318007?l=www.calculatedriskblog.com’//div

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I’ve seen a href=”http://www.nytimes.com/2009/08/26/business/economy/26econ.html”story/a after a href=”http://blogs.wsj.com/economics/2009/08/25/economists-react-breadth-of-gains-was-impressive/”story/a today suggesting the bottom is in for house prices.br /br /This isn’t like 2005 when it was almost certain that prices would fall, and fall sharply. Now we are much closer to the bottom than to the top in prices (for some metrics, see a href=”http://www.calculatedriskblog.com/2009/08/house-prices-real-prices-price-to-rent.html”House Prices: Real Prices, Price-to-Rent, and Price-to-Income/a)br /br /In some areas prices have probably already hit bottom - like some non-bubble areas, and some bubble areas with significant foreclosure activity.br /br /But I think many areas, especially the mid-to-high priced bubble areas, there will be further price declines. I’m strongnot as certain/strong as I was in 2005, but I think these price declines will drag down the Case-Shiller indexes - and I don’t think the price bottom is in.br /br /I do not have a crystal ball, but …br /br /It seems there are many more foreclosures coming. Some of this depends on the success of the modification programs, but the a href=”http://www.calculatedriskblog.com/2009/08/mba-forecasts-foreclosures-to-peak-at.html”Q2 MBA delinquency report/a shows a growing number of homeowners in the problem pipeline. br /br /And the a href=”http://www.calculatedriskblog.com/2009/08/fitch-dramatic-decrease-in-cure-rates.html”Fitch report/a yesterday suggests few of these delinquent homeowners will cure.br /br /That seems to mean rising foreclosures, and more distressed inventory. The MBA Chief Economist Jay Brinkmann thinks foreclosures will peak at the end of 2010.br /br /Historically prices bottom about the same time as foreclosure activity peaks. Maybe it will be different this time - maybe the modification programs will significantly reduce foreclosures - maybe prices will bottom before foreclosures peak … but I’ll go with the normal pattern.br /br /And on the demand side, there has been a surge in first-time homebuyer activity. There was significant pent up demand from potential first-time buyers who were priced out of the market in 2004-2006, and then were afraid to buy as prices fell. But demand from these buyers will probably wane later this year, even if another tax credit is enacted. br /br /Just like the “cash-for-clunkers” demand declined after the initial burst.br /br /For mid-to-high priced homes, there are few move-up buyers (or so it would seem since so many low end homes were distress sales). Right now the months-of-supply in many of these areas is well into double figures, suggesting further price declines. br /br /And on unemployment: most forecasts are for unemployment to rise into next year some time. Historically house prices do not bottom until after unemployment peaks. That seems especially likely now since so many a href=”http://www.calculatedriskblog.com/2009/08/american-corelogic-more-than-152.html”homeowners are underwater/a. Once again I’ll go with the normal pattern.br /br /Also looking back at previous housing busts (like I did earlier today looking at the early ’90s) there are usually some months during the bust with increasing prices. So no one should expect every month to be negative during the bust … especially are prices get closer to the bottom. br /br /I could be wrong - this isn’t as certain as in 2005 - but I don’t think house prices have bottomed. If I’m proven wrong, I’ll be the first to admit it.br /br /Best to all.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-2841400951010961542?l=www.calculatedriskblog.com’//div

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Some people knew this was coming …br /br /From Reuters: a href=”http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLO53347820090824″Deutsche Bank plans Tier 1 issue, reopens market/a blockquoteDeutsche Bank AG plans to raise new Tier 1 debt … as banks seek to rebuild balance sheets in the wake of the financial crisis.br /br /The German bank confirmed it planned to issue euro fixed-rate perpetual notes, with annual call dates beginning from March 2015, and said it was managing the issue. … the strongfirst of an expected series of new Tier 1 notes to hit the market in coming months/strong from banks … The deal would be smaller than 1 billion euros as the bank was seeking to test the market’s appetite … /blockquoteAnd SunTrust hints at raising new capital, from Bloomberg: a href=”http://www.bloomberg.com/apps/news?pid=20601103sid=agGd7z2DbqW8″U.S. Banks Face More Loan Losses, SunTrust Chief Says/a blockquote“The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Chief Executive Officer James Wells III said today in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.” br /…br /“The industry has moved from a potentially cataclysmic scenario to one that is merely very difficult,” Wells said. “The industry is back from the brink of a potential global financial-system meltdown.” … “strongEven if the economy begins to improve modestly, commercial real estate conditions will probably deteriorate until 2010/strong.” br /…br /Wells said SunTrust may repurchase $4.9 billion in preferred shares sold through the U.S. Troubled Asset Relief Program “as soon as possible,” without being more specific./blockquote Ahhh … just prudent balance sheet management!div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-2299258873760071715?l=www.calculatedriskblog.com’//div

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From the Chicago Fed: a href=”http://www.chicagofed.org/economic_research_and_data/files/cfnai_august2009.pdf”Index shows economic activity improved in April/a blockquoteThe Chicago Fed National Activity Index was –0.74 in July, up from –1.82 in June. All four broad categories of indicators improved in July, while three of the four continued to make negative contributions to the index. Production-related indicators made a positive contribution to the index for the first time since October 2008 and for only the second time since December 2007. /blockquotea onclick=”window.open(this.href, ‘_blank’, ‘width=1170,height=760,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/SpKnQ7swRaI/AAAAAAAAGMA/90JmrDHlG5s/s1600-h/ChicagoFedJuly2009.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Chicago Fed National Activity Index” src=”http://4.bp.blogspot.com/_pMscxxELHEg/SpKnQ7swRaI/AAAAAAAAGMA/90JmrDHlG5s/s320/ChicagoFedJuly2009.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on table for larger image in new window./span/b/ibr /br /This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. a href=”http://www.chicagofed.org/economic_research_and_data/files/cfnai_background.pdf”According/a to the Chicago Fed: br /br /”[T]he Chicago Fed National Activity Index (CFNAI), is a weighted average of 85 existing, monthly indicators of national economic activity. The CFNAI provides a single, summary measure of a common factor in these national economic data …br /br /[T]he CFNAI-MA3 appears to be a useful guide for identifying whether the economy has slipped into and out of a recession. This is useful because the definitive recognition of business cycle turning points usually occurs many months after the event. For example, even though the 1990-91 recession ended in March 1991, the NBER business cycle dating committee did not officially announce the recession’s end until 21 months later in December 1992. …br /br /When the economy is coming out of a recession, the CFNAI-MA3 moves significantly into positive territory a few months after the official NBER date of the trough. Specifically, after the onset of a recession, when the index first crosses +0.20, the recession has ended according to the NBER business cycle measures.”br /br /Note: this is based on only a few recessions, but this is one of the indicators to watch to determine when the recession ends. This suggests the economy was still in recession in July. br /br /Of course this says nothing about a href=”http://krugman.blogs.nytimes.com/2009/08/23/turns-of-phrase/”economic purgatory/a …div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-1009324177948429384?l=www.calculatedriskblog.com’//div

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From Felix Salmon at Reuters: a href=”http://www.reuters.com/article/ousiv/idUSTRE57K5LL20090822″Fed official: rates to be kept low past upturn/a (ht Anthony) blockquoteFinancial markets have not fully understood that the U.S. Federal Reserve’s pledge to keep interest rates exceptionally low for an extended period means they will stay low beyond when officials normally would raise them, a top Fed official said on Friday.br /br /”I don’t think markets have really digested what that means,” St Louis Fed President James Bullard said in an interview.br /br /The Fed’s strategy is aimed at promoting a future rise in inflation, which should provide an immediate boost in activity in anticipation of a future boom, but that hasn’t happened, Bullard said./blockquote Bullard is repeating the FOMC statement: blockquoteThe Committee … continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period./blockquote Bullard thinks the markets haven’t “digested what that means” - rates will be low for a long time - maybe through much or all of 2010. br /br /a href=”http://stlouisfed.org/newsroom/multimedia/video/20090821-foxvideo.cfm”Here is an interview /awith Bullard on a few other subjects, expects slow growth, discusses unwinding current policy.div class=”blogger-post-footer”a href=”http://www.cr4re.com/tipjar.html”img src=”http://beacheconomist.com/CalculatedRisk-TipJar2.gif” //a bBy request/b the Feed is Full length and Free of ads. bAnd also by request/b, once a month, here is a tip jar - a href=”http://www.cr4re.com/tipjar.html”click here/a to leave a tip. Thanks! CRimg width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-5992952994022240241?l=www.calculatedriskblog.com’//div

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From DataQuick: a href=”http://www.dqnews.com/Articles/2009/News/California/Bay-Area/RRBay090821.aspx”Bay Area home sales hit 4-year high; median price up again/a blockquoteBay Area home sales rose last month to the highest level for a July in four years as deals above $500,000 continued to accelerate. …br /br /The median’s $43,000 gain between June and July was mainly the result of a shift toward a greater portion of sales occurring in higher-priced neighborhoods. The trend has been fueled this summer by several factors, including: strongMore distress in high-end areas, leading to more motivated sellers/strong; more buyers sensing a bottom could be near; and strongincreased availability of larger home loans/strong, which had become more expensive and far more difficult to obtain after the credit crunch hit two years ago.br /…br /strongAs high-end sales have taken off in recent months, sales of foreclosures in less-expensive inland areas have tapered off/strong. Last month 34.2 percent of the Bay Area homes that resold were foreclosure resales – homes resold in July that had been foreclosed on in the prior 12 months. strongLast month’s foreclosure resale level was the lowest since it was 33.3 percent in July 2008./strong Foreclosure resales peaked at 52 percent of all Bay Area resales in February this year.br /…br /“Evidence is mounting that in some areas we’ve approached at least a soft bottom for home prices,” [John Walsh, MDA DataQuick president] said. “But we continue to view that possibility with an abundance of caution, given all of the uncertainty over future foreclosure inventories and ongoing job cuts. The market remains vulnerable.”br /br /A total of 8,771 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 1.5 percent from 8,664 in June and up 15.6 percent from 7,586 in July 2008.br /br /Although last month’s sales were the highest for the month of July in four years, and the highest for any month since August 2006, they were still 7.8 percent lower than the average of 9,512 homes sold during the month of July going back to 1988, when DataQuick’s statistics begin. July sales have varied between a low of 6,666 sales in 1995 and a peak of 14,258 in 2004.br /br /… Foreclosure activity is off its recent peak but remains high by historical standards …br /span style=”font-size:78%;”emphasis added/span/blockquote As always, be very careful with the median home price. DataQuick does a good job of explaining how it is being distorted by the mix of homes sold.br /br /Last year financing for higher priced homes was very difficult, so it is no surprise that with a combination of increasing distressed sales in the mid-to-high end areas, and more financing, sales have picked up some.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-369298700372066176?l=www.calculatedriskblog.com’//div

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On the MBA conference call concerning the “Q2 2009 National Delinquency Survey”, MBA Chief Economist Jay Brinkmann said this morning:br /br /li The problem is moving to prime loans, and fixed rate prime loans. Although the delinquency rate is lower for prime fixed rate than for other loans, these loans make up 65.5% of all loans - so the increase matters.br /br /li Brinkmann expects delinquencies to peak in mid-2010.br /br /li Brinkmann expects foreclosures to peak at the end of 2010.br /br /Note: The MBA data shows about 5.8 million loans delinquent or in the foreclosure process nationwide. I believe the MBA surveys covers close to 90% of the mortgage market. Many of these loans will cure, but the foreclosure pipeline is still building.br /br /A few graphs …br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1120,height=760,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://3.bp.blogspot.com/_pMscxxELHEg/So1s8LiD3YI/AAAAAAAAGJg/XIpavd1RghU/s1600-h/MBAQ220091.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”MBA Prime Delinquency and Foreclosure Rate” src=”http://3.bp.blogspot.com/_pMscxxELHEg/So1s8LiD3YI/AAAAAAAAGJg/XIpavd1RghU/s320/MBAQ220091.jpg” //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span/b/ibr /br /The first graph shows the delinquency and in foreclosure rates for all prime loans.br /br /Prime loans account for all 78% of all loans. br /br /strongem”We’re all subprime now!”/em/strong NOTE: Tanta first wrote this saying in 2007 in response to the ‘contained to subprime’ statements. br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1120,height=760,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://3.bp.blogspot.com/_pMscxxELHEg/So1s71DMcbI/AAAAAAAAGJY/vsWJ-qPPoAg/s1600-h/MBAQ220092.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”MBA Prime Fixed Rate Delinquency and Foreclosure Rate” src=”http://3.bp.blogspot.com/_pMscxxELHEg/So1s71DMcbI/AAAAAAAAGJY/vsWJ-qPPoAg/s320/MBAQ220092.jpg” //a The second graph shows just fixed rate prime loans (about 65.5% of all loans).br /br /Prime ARMs have a higher delinquency rate than Prime FRMs, but the foreclosure crisis has now spread to Prime fixed rate loans.br /br /Note that even in the best of times (with rapidly rising home prices in 2005), just over 2% of prime FRMs were delinquent or in foreclosure. However the cure rate was much higher back then since a delinquent homeowner could just sell their home.br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1205,height=770,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://1.bp.blogspot.com/_pMscxxELHEg/So11IycOqyI/AAAAAAAAGJo/4AIu75Fqyus/s1600-h/MBAQ220094.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”MBA Suprime Delinquency and Foreclosure Rates” src=”http://1.bp.blogspot.com/_pMscxxELHEg/So11IycOqyI/AAAAAAAAGJo/4AIu75Fqyus/s320/MBAQ220094.jpg” //a The third graph shows the delinquency and in foreclosure process rates for subprime loans. br /br /Although the increases have slowed, about 40% of subprime loans are delinquent or in foreclosure. br /br /The fourth graph shows the delinquency and foreclosure rates by state (add: and D.C. and Puerto Rico!).br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1205,height=770,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://2.bp.blogspot.com/_pMscxxELHEg/So1s7Wj1imI/AAAAAAAAGJQ/6Bn_lA3akSk/s1600-h/MBAQ220093.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”MBA Delinquency and Foreclosure Rates by State” src=”http://2.bp.blogspot.com/_pMscxxELHEg/So1s7Wj1imI/AAAAAAAAGJQ/6Bn_lA3akSk/s320/MBAQ220093.jpg” //a The ‘in foreclosure’ rate can vary widely by state, because the process is fairly quick in some states, and very slow in other states (like Florida).br /br /Although most of the delinquencies are in a few states - because of a combination of high delinquency rates and large populations - the crisis is widespread.br /br /And a final comment: historically house prices do not bottom until after foreclosure activity peaks in a certain area. Since the subprime crisis delinquency rates might be peaking, it would not be surprising if prices are near a bottom in the low end areas. But in general I’d expect further declines in house prices - especially in mid-to-high end areas.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-2805472191879375012?l=www.calculatedriskblog.com’//div

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