Aug
27
BOSTON (MarketWatch) — The Federal Deposit Insurance Corp. said Thursday that more lenders ran into financial trouble during the second quarter as the recession continued to saddle banks with soured loans.
More lenders ran into financial trouble during the second quarter with recession saddling banks with soured loans, according to the report.
The FDIC said that the number of troubled banks rose to 416 at the end of June from 305 at the end of March. This is the largest number of banks on its “problem list” since June 30, 1994, when 434 banks were on the list, which isn’t disclosed by the FDIC.
Assets at troubled banks totaled $299.8 billion, the highest level since Dec. 31, 1993, the agency said.
Banks insured by the FDIC swung to a total quarterly loss of $3.7 billion from last year when they reported a total profit of $4.8 billion.
Total reserves of the Deposit Insurance Fund stood at $42 billion, with the contingent loss reserve falling to $10.4 billion from $13 billion over the second quarter. Some analysts have been warning that growing bank failures could put pressure on the FDIC fund.
“While challenges remain, evidence is building that the U.S. economy is starting to grow again,” said FDIC Chairman Sheila Bair in a press release.
“The banking industry, too, can look forward to better times ahead,” she added. “But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line.”
Bair said the FDIC has “ample resources” to protect depositors. “No insured depositor has ever lost a penny of insured deposits … and no one ever will,” she asserted.
More than 28% of all insured institutions reported a net loss in the second quarter, compared with 18% in the year-ago quarter.
“Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses,” Bair said.
The quarterly report “makes clear that banks are neither at the beginning or the end of the problems presented by a difficult economy,” said James Chessen, chief economist at the American Bankers Association. “They are in the middle and significant challenges still remain.”
The FDIC’s insurance fund balance has dropped from over $50 billion to around $10.4 billion over the past year, according to Mark Calabria, director of financial regulation studies at the Cato Institute. “With further losses in the construction lending and commercial loan sector, it is almost certain that the remaining insurance fund balance will be depleted,” he said.
Aug
26
July New US Home Sales Up 9.6 Percent
Filed Under Housing News | Leave a Comment
WASHINGTON – New U.S. home sales surged 9.6 percent in July, rising for the fourth straight month and beating expectations as the housing market marches steadily back from its historic downturn.
The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. Sales are now up more than 30 percent from the bottom in January, but are still off nearly percent from the frenzied peak four years ago.
The median sales price of $210,100, however, was off 11.5 percent from year-ago levels and down slightly from $221,400 in June.
Last month’s sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units.
In a kind of Cash for Clunkers effect, homebuyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify.
Builders and real estate agents are pressing Congress for that credit to be extended. If it isn’t, sales could reverse their upward trend.
As sales rise, that’s likely to make builders more confident about getting going on new projects, and that’s likely to lead to more jobs ins the construction industry. “These are crucial elements of a sustainable recovery,” David Resler, chief economist at Nomura Securities, wrote in a research note.
Each new home built creates, on average, the equivalent of three jobs lasting one year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.
There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current sales pace, that represents 7.5 months of supply — the lowest since April 2007. The decline means builders have scaled back construction to the point where supply and demand are coming into balance.
Aug
25
NEW YORK (Reuters) – Prices of U.S. single-family homes rose for the second consecutive month in June, exceeding expectations and adding to evidence that the three-year housing slump is easing, Standard & Poor’s reported on Tuesday.
The S&P/Case-Shiller composite indexes of 10 and 20 metropolitan areas both rose 1.4 percent in June from May, almost three times the 0.5 percent increases of the month before. May’s increases were the first in nearly three years.
Optimism over a housing recovery blossomed last week after reports showed rising confidence among homebuilder and sales of existing homes rose in July for the fourth consecutive month. Economists expect the sector’s recovery could help the nation emerge from recession and further stabilize financial markets that have suffered their worst crisis since the 1930s.
The 10- and 20-city indexes have dropped 54.3 percent and 45.3 percent from their 2006 peaks, respectively.
“This is just another month that supports those that think we have bottomed, or are nearing a bottom,” said Jesse Litvak, a managing director in mortgage- and asset-backed securities at Jefferies & Co. in Stamford, Connecticut.
Economists in a Reuters poll expected the 20-city index increased by 0.2 percent in June.
S&P said its U.S. National Home Price Index recorded a 14.9 percent decline for the second quarter, compared with a 19.1 percent year-over-year drop in the first quarter. Versus the first quarter, prices rose by 2.9 percent in the first such increase in three years, S&P said.
Regionally, only Las Vegas and Detroit posted declines in June over May, of 2 percent and 0.8 percent, respectively. Cleveland home prices registered the greatest increases for the past two months, topping 4 percent each time.
Aug
24
NEW YORK (Reuters) – A prominent banking analyst said Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010.
Richard Bove of Rochdale Securities said this will likely force the FDIC, which insures deposits, to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system.
“The difficulty at the moment is finding enough healthy banks to buy the failing banks,” Bove wrote.
The FDIC is expected on August 26 to vote on relaxed guidelines for private equity firms to invest in failed banks, after critics said previously proposed rules were too harsh and would actually dissuade firms from making investments.
Bove said “perhaps another 150 to 200 banks will fail,” on top of 81 so far in 2009, adding stress to the FDIC’s deposit insurance fund.
Three large failures this year — BankUnited Financial Corp in May, and Colonial BancGroup Inc, Guaranty Financial Group Inc in August — collectively cost the fund roughly $10.7 billion.
The fund had $13 billion at the end of March.
Regulators closed Guaranty’s banking unit on Friday and sold assets of the Texas-based lender to Banco Bilbao Vizcaya Argentaria SA. The FDIC agreed to share in losses with the Spanish bank.
Bove said the FDIC will likely levy special assessments against banks in the fourth quarter of this year and second quarter of 2010.
He said these assessments could total $11 billion in 2010, on top of the same amount of regular assessments. “FDIC premiums could be 25 percent of the industry’s pretax income,” he wrote. (Reporting by Jonathan Stempel; editing by Gunna Dickson)
Aug
21
WASHINGTON (Reuters) – Sales of previously owned U.S. homes jumped 7.2 percent in July to mark the fastest sales pace in nearly two years, an industry survey showed on Friday, in a strong sign that housing is pulling out of a three-year slump.
Sales in July rose for the fourth straight month to hit an annual rate of 5.24 million units, the highest rate since August 2007, the National Association of Realtors said, beating market expectations for a 5 million unit pace. Sales in June had been at a 4.89 million pace.
July’s increase was the largest monthly gain since the series started in 1999. The last time sales rose for four consecutive months was in June 2004, the NAR said.
The Realtors group heralded the July sales as a turning point, while some observers offered a more cautious view.
“The housing market has decisively turned for the better. We are bouncing back,” NAR chief economist Lawrence Yun told reporters.
“Overall, these figures may suggest that the recovery in housing activity is gathering pace, but there is a long way to go yet,” said Paul Dales, U.S. economist at Capital Economics in Toronto.
U.S. stock indexes rallied on the data, with the Dow Jones industrial average up 1.5 percent in mid-morning, and home builders posted hefty gains. Pulte Homes Inc was up 3.5 percent, while D.R. Horton Inc gained 4.3 percent.
Luxury home builder Toll Brothers Inc was up 3.3 percent. A broader measure of home construction stocks was up 3.4 percent to 293.28 after the housing data.
Treasury debt prices fell as investors viewed the data as another indication that the recession that started in 2007 was close to an end, if not over.
U.S. Federal Reserve Chairman Ben Bernanke, speaking at a gathering of central bankers and top economists in Jackson Hole, Wyoming, said prospects for a resumption in global economic growth after a deep contraction looked good “in the near term.
MULTI-FAMILY DWELLINGS LEAD SALES GAINS
Compared to July last year, sales rose 5.0 percent. The improvement in sales in July was broad based with single-family home sales rising 6.5 percent to an annual rate of 4.61 million units and multi-family dwellings surging 12.5 percent to a 630,000 unit rate.
Still, high unemployment threatens the budding recovery as many homeowners continue to lose their properties, and some economists question the sustainability of the economic recovery many see taking root.
A report from the Mortgage Bankers Association on Thursday showed late home loan payments jumped to a record high in the second quarter, with almost one in eight homeowners delinquent or in the process of foreclosure.
The inventory of existing homes for sale in July rose 7.3 percent to 4.09 million units from the previous month, NAR said. At July’s sales pace, that represented a 9.4 months’ supply, the same as in June.
The national median home price was $178,400 in July, down 15.1 percent from the same period last year, weighed down by distressed sales as they typically sell for 15 to 20 percent less than traditional homes.
(Additional reporting by Nick Zieminski in New York; editing by Leslie Adler)
Aug
20
NEW YORK (Reuters) – U.S. mortgage applications rose last week, largely reflecting a jump in demand for home refinancing loans as interest rates slid to a five-week low, data from an industry group showed on Wednesday.
Applications for loans to buy a home, an early indicator of sales, rose for a third consecutive week. The trend bodes well for the hard-hit U.S. housing market, which has been showing nascent signs of stabilization.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended August 14 increased 5.6 percent to 527.0.
Brad Geisen, president and CEO of real estate website Foreclosure.com, said the level of interest rates on mortgages plays less of a role in home buying than it does in refinancing activity.
“Probably the biggest driving factor for home purchasing right now is price,” he said. “During the housing boom, a lot of first-time home buyers were squeezed out of the market, but now property values have come down enough where they can afford it.”
Low mortgage rates, high affordability and the government’s $8,000 tax credit for first-time home buyers — part of the stimulus bill — have helped pave the way for stabilization, he added.
“People now realize they can buy the home of their dreams at an affordable price,” he said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.15 percent, down 0.23 percentage point from the previous week.
It was the lowest since the week ended July 10, but above the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990.
Interest rates, however, were well below year-ago levels of 6.47 percent.
The MBA’s seasonally adjusted purchase index rose 3.9 percent to 277.7.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, dipped 0.1 percent.
The U.S. housing market has suffered the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy as well as the rest of the world.
But the housing market has been showing signs of stabilization in recent months, with sales rising and home price declines moderating in many regions of the country. In fact, home prices in some regions have risen.
Some analysts, however, say prices may fall again, with a wave of more foreclosures in the pipeline.
The Mortgage Bankers seasonally adjusted index of refinancing applications increased 6.9 percent to 1,982.5.
The refinance share of applications increased to 53.3 percent from 52.3 percent the previous week, but remained significantly lower than the peak of 85.3 percent in the week ended January 9. The adjustable-rate mortgage share of activity increased to 6.5 percent in the latest week, up from 5.8 percent the previous week.
Fixed 15-year mortgage rates averaged 4.52 percent, down from 4.71 percent the previous week. Rates on one-year ARMs decreased to 6.66 percent from 6.71 percent.
Aug
4
WASHINGTON – Pending U.S. home sales rose in June for the fifth straight month, another encouraging sign of life for the embattled U.S. housing market, the National Association of Realtors reported Tuesday.
For June, the Realtors group said its pending home sales index rose 3.6 percent to 94.6, from an upwardly revised reading of 91.3 in May. The last time there were five consecutive monthly gains was July 2003.
The results were far better than analysts expected. Economists surveyed by Thomson Reuters expected the index to come in at 91.2.
The report tracks signed contracts to purchase previously owned homes and is considered a barometer for future home sales. Typically there is a one- to two- month lag between a sales contract and a completed deal.
The jump in pending home sales coincides with other positive trends in the residential real estate market.
“The housing market is healing and the patient is getting healthier at an accelerating pace,” said economist Joel L. Naroff, president of Naroff Economic Advisors Inc.
For the first time in five years, home resales have risen for three months in a row, increasing almost 4 percent in June. Low prices, attractive mortgage rates and a first-time homebuyers tax credit of up to $8,000 have kick-started sales.
“Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales,” said Lawrence Yun, the Realtors group’s chief economist, in a statement.
Also Tuesday, homebuilder D.R. Horton Inc. said its fiscal third-quarter losses shrank from the year-ago period, as it took smaller charges against the falling values of its land and unsold homes.
D.R. Horton’s results followed similar numbers from Pulte Homes Inc. and Centex Corp., which reported quarterly earnings Monday that showed new-home orders picked up during the first half of the year.
Yun said he expects existing home sales to gradually rise over the balance of the year, with conditions varying around the country.
“It appears home sales are on a sounder footing and inventory is gradually being absorbed,” he said.
Regionally, the pending home sales index jumped 7.1 percent to 100.7 in the South and 2.9 percent to 100.4 in the West. The index inched up 0.4 percent to 81.2 in the Northeast, and up 0.8 percent to 89.9 in the Midwest.