NEW YORK, Nov 19 (Reuters) - A record one in seven U.S. mortgages were in foreclosure or at least one payment past due in the third quarter, according to fresh data signaling the recovery in the housing market will be tepid at best.
U.S. mortgage delinquency rates and the percentage of loans that entered the foreclosure process also jumped to records from July to September, the Mortgage Bankers Association said on Thursday.
Rising job losses were behind the increasingly bleak portrait of the housing market in a trend that will continue into next year, the group said in data that adds to recent evidence of a still-struggling housing market.
Housing and related business account for about 20 percent of the economy and recovery is essential to bring unemployment down from a 26-1/2-year high and kick-start economic growth.
Yet record foreclosures will add to the growing supply of unsold homes, sapping the housing market as it attempts to recover from the worst slump since the Great Depression.
The MBA said the percentage of loans in foreclosure rose to 1.42 percent, from 1.36 percent in the second quarter and 1.07 percent in the third quarter of 2008.
"Foreclosures remain the biggest hurdle to the housing recovery," said Michelle Meyer, economist at Barclays Capital in New York.
"Foreclosures will be worse in the first part of 2010 and we do not see a peak in foreclosures until the middle of next year."
More conservative, prime fixed-rate loans often sold to homebuyers with the highest credit ratings continued to represent the largest share of foreclosures started and were the biggest driver of the increase in foreclosures, said MBA chief economist Jay Brinkmann.
The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of loans outstanding, up from 9.24 percent in the second quarter and 6.99 percent a year earlier, the MBA said.
The delinquency rate broke the record set last quarter, based on MBA data going back to 1972. The rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.
The latest splash of cold water follows a stunning 10.6 percent plunge in housing starts for October, reported on Wednesday. For details see [ID:nN1899353].
The combination of loans in foreclosure and at least one payment past due was 14.41 percent on a non-seasonally adjusted basis, the highest ever seen in the survey.
In fact, 33 percent of foreclosures started in the third quarter were on prime fixed-rate loans and those loans were 44 percent of the quarterly increase in foreclosures, Brinkmann said.
"The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due but not yet in foreclosure," he said.
The percentage of loans in the foreclosure process at the end of the third quarter was 4.47 percent, up from 4.30 percent in the second quarter and 2.97 percent a year earlier.
Florida, California, Arizona and Nevada have a disproportionate share of these problems, Brinkmann said.
They had 43 percent of all foreclosures started in the third quarter, down from 44 percent both last quarter and the third quarter last year. They had 37 percent of the nation's prime fixed-rate loan foreclosure starts and 67 percent of the prime adjustable-rate mortgage, or ARM, foreclosure starts.
At the end of September, 25 percent of mortgages in Florida were at least one payment past due or in foreclosure, he said.
OUTLOOK BLEAK
The outlook is for delinquency and foreclosure rates to continue to worsen before they improve, Brinkmann said.
"First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace," he said.
"Second, the number of loans 90 days or more past due or in foreclosure is now a little over 4 million as compared with 3.9 million new and previously occupied homes currently for sale, although there is likely some overlap between the two numbers," he said.
Therefore, the ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country, Brinkmann said.
Reuters
Showing posts with label unemployment rate. Show all posts
Showing posts with label unemployment rate. Show all posts
Monday, January 18, 2010
Monday, November 23, 2009
The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed
As experts debate the potential speed of the US recovery, one figure looms large but is often overlooked: nearly 1 in 5 Americans is either out of work or under-employed.
According to the government's broadest measure of unemployment, some 17.5 percent are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994.
The number dwarfs the statistic most people pay attention to—the U-3 rate—which most recently showed unemployment at 10.2 percent for October, the highest it has been since June 1983.
The difference is that what is traditionally referred to as the "unemployment rate" only measures those out of work who are still looking for jobs. Discouraged workers who have quit trying to find a job, as well as those working part-time but looking for full-time work or who are otherwise underemployed, count in the U-6 rate.
With such a large portion of Americans experiencing employment struggles, economists worry that an extended period of slow or flat growth lies ahead.
"To me there's no easy solution here," says Michael Pento, chief economist at Delta Global Advisors. "Unless you create another bubble in which the economy can create jobs, then you're not going to have growth. That's the sad truth."
Pento warns that forecasts of a double-dip ("W") or a straight up ("V") recovery both could be too optimistic given the jobs situation.
Instead, he believes the economy could flatline (or "L") for an extended period as small businesses struggle to grow and consequently rehire the workers that have been furloughed as the U-3 unemployment rate has doubled since March 2008.
As that trend has happened, the U-6 rate has expanded at an even more dramatic pace. Economists cite several reasons for the phenomenon.
For one, more workers are becoming discouraged as real estate—the focal point for the expansion in the earlier part of the decade—has collapsed and taken millions of directly related and ancillary jobs with it.
Many workers believe those jobs aren't coming back, and have thus quit looking and added themselves to the broader unemployment count.
"In the earlier part of this decade, 40 percent of all new jobs created were in real estate. Attorneys, mortgage brokers, agents, construction—they were all circled around housing," Pento says. "We've had a jobless recovery in the last two recessions. This is going to be the third jobless recovery in a row."
Another factor that may be leading people onto the rolls of those no longer looking for jobs is the government's accommodative extensions of jobless benefits.
"Workers are unemployed for a much longer span than we've seen historically," says David Resler, chief economist at Nomura Securities International in New York. "Part of that may be affected by the longer availability of benefits. It reduces the incentives for an urgent job search."
The U-6 rate debuted in January of 1994 at 11.8 percent, while the U-3 was at 6.6 percent. The measure hit a low of 6.9 percent in April 2000 while U-3 sat at 3.8 percent.
While the current methodology only dates back 15 years, a former U-6 gauge was in existence previously and peaked at 14.3 percent in 1982. Economists predict the current measure would fall just below that number using the same methodology.
"We're in the process of discovering how severe this recession and the long-run impact on certain industries will be and what that will do to overall employment," Resler says. The U-6 rate "portends a very slow, sluggish recovery."
If that holds and the US economy stays weak, that presents challenges for investors.
"People focus too much on that 10 percent number and not on the larger number," says Kevin Mahn, chief investment officer at Hennion & Walsh in Parsippany, N.J. "There's a humongous inventory of people out there looking for work and have been looking for work for a long time. Where are those jobs going to come from?"
High unemployment and the resulting pressure on consumers is driving many investors to look for opportunities overseas and in other assets.
Walsh says that trend is going to continue, with clients going to foreign markets, real estate investment trusts, certain bonds—anywhere that can offer profits above the slow-growth mire of US-based investments.
"If full employment is 4 percent, people are wondering how we're going to get from 10 (percent) to 4. Well, try getting from 17 to 4. We may not get back to full employment for a decade," Mahn says. "As an investor, that causes me to look for different places now. Maybe you can't just put money in US large caps and ride out this recovery."
According to the government's broadest measure of unemployment, some 17.5 percent are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994.
The number dwarfs the statistic most people pay attention to—the U-3 rate—which most recently showed unemployment at 10.2 percent for October, the highest it has been since June 1983.
The difference is that what is traditionally referred to as the "unemployment rate" only measures those out of work who are still looking for jobs. Discouraged workers who have quit trying to find a job, as well as those working part-time but looking for full-time work or who are otherwise underemployed, count in the U-6 rate.
With such a large portion of Americans experiencing employment struggles, economists worry that an extended period of slow or flat growth lies ahead.
"To me there's no easy solution here," says Michael Pento, chief economist at Delta Global Advisors. "Unless you create another bubble in which the economy can create jobs, then you're not going to have growth. That's the sad truth."
Pento warns that forecasts of a double-dip ("W") or a straight up ("V") recovery both could be too optimistic given the jobs situation.
Instead, he believes the economy could flatline (or "L") for an extended period as small businesses struggle to grow and consequently rehire the workers that have been furloughed as the U-3 unemployment rate has doubled since March 2008.
As that trend has happened, the U-6 rate has expanded at an even more dramatic pace. Economists cite several reasons for the phenomenon.
For one, more workers are becoming discouraged as real estate—the focal point for the expansion in the earlier part of the decade—has collapsed and taken millions of directly related and ancillary jobs with it.
Many workers believe those jobs aren't coming back, and have thus quit looking and added themselves to the broader unemployment count.
"In the earlier part of this decade, 40 percent of all new jobs created were in real estate. Attorneys, mortgage brokers, agents, construction—they were all circled around housing," Pento says. "We've had a jobless recovery in the last two recessions. This is going to be the third jobless recovery in a row."
Another factor that may be leading people onto the rolls of those no longer looking for jobs is the government's accommodative extensions of jobless benefits.
"Workers are unemployed for a much longer span than we've seen historically," says David Resler, chief economist at Nomura Securities International in New York. "Part of that may be affected by the longer availability of benefits. It reduces the incentives for an urgent job search."
The U-6 rate debuted in January of 1994 at 11.8 percent, while the U-3 was at 6.6 percent. The measure hit a low of 6.9 percent in April 2000 while U-3 sat at 3.8 percent.
While the current methodology only dates back 15 years, a former U-6 gauge was in existence previously and peaked at 14.3 percent in 1982. Economists predict the current measure would fall just below that number using the same methodology.
"We're in the process of discovering how severe this recession and the long-run impact on certain industries will be and what that will do to overall employment," Resler says. The U-6 rate "portends a very slow, sluggish recovery."
If that holds and the US economy stays weak, that presents challenges for investors.
"People focus too much on that 10 percent number and not on the larger number," says Kevin Mahn, chief investment officer at Hennion & Walsh in Parsippany, N.J. "There's a humongous inventory of people out there looking for work and have been looking for work for a long time. Where are those jobs going to come from?"
High unemployment and the resulting pressure on consumers is driving many investors to look for opportunities overseas and in other assets.
Walsh says that trend is going to continue, with clients going to foreign markets, real estate investment trusts, certain bonds—anywhere that can offer profits above the slow-growth mire of US-based investments.
"If full employment is 4 percent, people are wondering how we're going to get from 10 (percent) to 4. Well, try getting from 17 to 4. We may not get back to full employment for a decade," Mahn says. "As an investor, that causes me to look for different places now. Maybe you can't just put money in US large caps and ride out this recovery."
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