Earlier today on Real Money’s columnist conversation, Tony Crescenzi noted earlier
that "It would be extraordinarily unusual for the combined figures on
new and existing home sales to continue falling in the face of
increases in mortgage applications."
I have to disagree.
Based on our interviews with our Real Estate clients (commercial
builders, RE brokers) and especially residential Mortgage Brokers,
there appears to be a dramatic rise in multiple applications for both
new purchases, refis, and home equity lines.
As many of the ARM resets come up over the next 18 months, I would
surmise these multiple mortgage apps will increase — especially
amongst the more desperate marginal homeowners.
Meanwhile, we see Defaults on ‘Alt A’ loans surpassing Subprime ones, according to Citibank:
"Defaults on some so-called Alt A
mortgages packaged into bonds last year are now outpacing those
from subprime loans, according to Citigroup Inc.
The three-month constant default rate for 2006 Alt A hybrid
adjustable-rate mortgages is 2.3 percent, compared with 2.2
percent for subprime ARMs, New York-based Citigroup analysts led
by Rahul Parulekar wrote in a July 20 report. . . "
More than $800 billion of subprime mortgage bonds and $700
billion of Alt A bonds are outstanding, with ARM bonds totaling
more than $600 billion and $450 billion, respectively, according
to a March report by Zurich-based Credit Suisse Group."
And, as we mentioned yesterday, its NOT just Alt A and Subprime, according to Countrywide CEO Angelo Mozila:
"Countrywide Financial, the nation’s largest mortgage lender, said yesterday that more borrowers with good credit were falling behind on their loans and that the housing market might not begin recovering until 2009 because of a decline in house prices that goes beyond anything experienced in decades."
Incidentally, I was on Kudlow with Mr. Mozila about a year ago. Nice guy, he gets credit in my book for being a bluntly candid speaker. As it turns out, he is also a canny seller of his own stock — a net of $380 million, according to Thomson Financial.
As I said at the time, it was smart they were diversifying away from Housing, but I wouldn’t touch Countrywide Financial (CFC) with a 10 foot pole — and that’s still true today.
UPDATE: July 25, 2007 12:34 pm
"Home resales in the U.S. fell for a fourth straight month in June, a sign housing remained mired in the worst slump in 16 years going into the second half.
Purchases last month declined 3.8 percent to an annual rate of 5.75 million, the slowest pace since November 2002, from a revised 5.98 million in May that was less than initially reported, the National Association of Realtors said today in Washington.
Rising borrowing costs are discouraging buyers, leaving a glut of unsold homes on the market and dimming prospects for a quick recovery in housing. Federal Reserve policy makers last week trimmed their economic growth forecast amid persistent weakness in home building."
When even the NAR start revising forecasts diownward, you know that we are nowhere near that elusive bottom . . .
Defaults on Some `Alt A’ Loans Surpass Subprime Ones
Bloomberg, July 24 2007
Top Lender Sees Mortgage Woes for ‘Good’ Risks
NYTimes, July 25, 2007
Home Resales in U.S. Fall 3.8% to 5.75 Million Rate
Bloomberg, July 25 2007