Archive for July, 2010
President Barack Obama is on the verge of creating as much as $300bn in credit for small businesses as bankers raise doubt about whether there’s demand for new loans and how much will be repaid.
The US Senate may vote this week on a bill to funnel $30bn of capital to community banks, whose business customers typically are small firms.
The latest figures on the multifamily sector are improving, according to Barclays Capital, but analysts are still waiting on the fundamentals before calling any recovery.
The multifamily net absorption rate, or the amount of space leased after deducting the amount of supply, increased by more than 46,000 units in Q210, the highest increase in 10 years, according to BarCap. The national vacancy rate on multifamily properties also decreased to 7.8% from 8% over the same time:
These improvements were not limited to a few regions, either. Occupancy increased in 67 of 92 markets monitored in Q210, and net absorption improved in 71 of 82 areas.
But the performance is split between older and new developments. Roughly 70% of the net absorption came from existing buildings leasing empty units. The percentage of units rented in newly constructed buildings remains low at about 50%, down from 65% in 2005 and 2006, according to BarCap.
Construction of new multifamily properties is up, though. Permits reached 145,00 at the end of Q210, up 57.6% from 92,000 counted at the beginning of the year. Over the same time, starts on multifamily projects reached 88,000, a 79% increase from 49,000.
BarCap analysts said that the positive data has only been seen over the past two quarters. A recovery depends on a continuing decline in homeownership rates and a growing supply of young adults moving out of their parents’ houses.
The homeownership rate in the US currently stands at 67.2%, down from the peak of 69% seen in 2005 and 2006. Young adults are renting more, too. Only 59% of those aged between 25 and 29 rented in 2005, down from 66% in 1994. Last year, though, that number increased to 62%.
Write to Jon Prior.
There is no other way to say this: we’re being lied to. Willfully. Anyone who managed to read headlines around the U.S. Treasury's latest HAMP report card last week would likely have thought the program a huge success –- with more than one media outlet trumpeting impossibly miniscule re-default rates among permanent HAMP mods.
Surprisingly, even a few trade publications –- media outlets that ought to know better – took the “low redefaults!” theme and made screaming headlines out of it last week.
At HW, we chose not to run with the HAMP redefault numbers except to note that Treasury officials had added them into the latest report card. And this choice was made with purpose: we knew these numbers were fake. Nobody gets a 1.7% redefault rate 6 months after modification –- not even Uncle Sam — and any media outlet reporting that number with a straight face quite simply doesn't understand the industry it's covering.
The only way to come up with a 1.7% redefault rate is to change how redefaults are calculated. And that, dear readers, is precisely what our government did.
In the report card, buried in a footnote, is the following disclaimer: “a HAMP permanent modification is canceled for non-payment if it is more than 90 days delinquent.” It’s also apparently removed from redefault calculations, which is a great way to smear a pig in a mountain of lipstick and hope nobody notices.
The researchers at Barclays Capital were among the few paying attention to this footnote, and took the unprecedented step of issuing a separate research alert on the HAMP numbers last week, highlighting what they called “misleading” reporting by Treasury on HAMP mod performance.
I prefer to call it lying. Because if it quacks like a duck and it walks like a duck, it’s a duck.
Redefault calculations aren't exactly a foreign thing, even for our government. A few years back, Uncle Sam began collecting mortgage servicing data for quarterly reporting via the Comptroller of the Currency –- so there is zero excuse to suddenly define a “new” way of calculating redefault rates.
I’ve written for months in this column about the need for the Treasury to begin reporting redefault rates on HAMP modifications, and this is what they finally give us? I’m incensed. Because it’s yet another attempt to fool the American public into believing that HAMP, an utterly failed program, is actually working. And because it’s a blatant lie.
The Barclays researchers still expect to see actual HAMP redefaults — you know, the kind that may never be reported — to reach somewhere around 60 percent over time. I concur.
Before the Treasury decided to offend my statistical sense of justice, I was going to spend today’s column writing about my expectations for second quarter GDP (which will be released Friday morning). So instead I’ll cut to the chase: if the BEA’s inputs for GDP calculation were actually capturing consumer demand (which they are not), the Q2 GDP report would be well off of current consensus estimates and reflecting contracting economic activity.
Here's the latest look at the state of consumer demand, via the Consumer Metrics Institute:
As it stands, who knows what we’ll actually get for GDP? If I had to guess, I’d take the under on current consensus estimates that are calling for real annualized GDP growth of 2.5% in Q2.
That said, I’d much rather be wrong on GDP and see the Treasury decide to start being honest with the American people regarding HAMP performance. Something tells me what I’ll get is the exact opposite of that, instead.
Paul Jackson is the publisher of HousingWire Magazine and HousingWire.com. Follow him on Twitter: @pjackson
