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Florida and California make up a disproportionate part of foreclosure starts in the U.S. and helped push the national number to new highs, the Mortgage Bankers Association said.

California and Florida together represent 21 percent of all loans outstanding, but accounted for 30 percent of foreclosure starts in the country, the report said. They also accounted for 39 percent of all prime adjustable-rate mortgages outstanding and 47 percent of prime ARM foreclosure starts.

Together, the make up 29 percent of all subprime ARMs and 36 percent of subprime ARM foreclosure starts.

In Florida, the percentage of loans on which a foreclosure was started during the quarter rose to 1.46 percent from 1.09 percent in the third quarter. The percentage of loans in the foreclosure process at the end of the quarter climbed to 3.22 percent from 2.19 percent.

The delinquency rate for mortgage loans on one- to four-unit residential properties, which does not include loans in the process of foreclosures, for the state was up to 7.47 percent, up from 6.47 percent in the third quarter.

The delinquency rate for prime loans increased to 4.57 percent from 3.9 percent. Subprime loans had a much higher delinquency rate, up to 19.76 percent from 17.2 percent.

Nationally, the delinquency rate was 5.82 percent, up from 5.79 percent in the third quarter.

The percentage of loans on which a foreclosure was started increased to .83 of a percent from .78 of a percent, and the percentage of loans in the foreclosure process at the end of the quarter was 2.04 percent, up from 1.69 percent.

http://www.bizjournals.com/southflorida/stories/2008/03/03/daily38.html

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By Courtney Schlisserman

Feb. 25 (Bloomberg) — Sales of existing homes in the U.S. fell in January to the lowest level since records began nine years ago and prices slid for the sixth time in seven months, posing a threat to consumer spending, the largest part of the economy.

Resales declined 0.4 percent, less than forecast, to an annual rate of 4.89 million from a revised 4.91 million in December that was higher than previously reported, the National Association of Realtors said today in Washington.

The figures indicate declines in home prices so far aren’t sufficient to entice more buyers. Former Federal Reserve Chairman Alan Greenspan said today that the deepening rout in housing is having a “broader effect” on spending, and that a recession this year may be deeper than previous downturns.

“The Federal Reserve’s efforts to restore the mortgage market so credit is available so people can buy houses has largely failed,” Peter Morici, an economics professor at the University of Maryland, said in a Bloomberg Radio interview. “There really isn’t a lot of hope that things are going to turn around soon.”

Economists had forecast home resales would fall 1.8 percent to an annual rate of 4.8 million, according to the median of 63 estimates in a Bloomberg News survey. Estimates ranged from 4.65 million to 5 million.

The Standard & Poor’s Supercomposite Homebuilding Index, which had fallen earlier in the day, rose following the report. The measure was up 2.2 percent to close at 347.38. Treasuries fell, with 10-year note yields rising to 3.90 percent at 4:18 p.m. in New York, from 3.81 percent on Feb. 22.

Unsold Properties

Mounting foreclosures are adding to a glut of unsold homes that is driving down property values. The number of homes for sale at the end of January rose 5.5 percent to 4.2 million. At the reported sales pace, that represents 10.3 months’ supply, compared with 9.7 months in December.

“The past five months’ sales activity has been very soft, but stable,” said Lawrence Yun, the real-estate agents group’s chief economist. A fiscal stimulus that included tax cuts and relaxed restrictions on so-called jumbo mortgage loans may lead to better sales late this year, he said.

Elevated inventories are driving down prices and causing some potential buyers to stay on the sideline to see if prices will go down further.

Prices Fall

The median sales price fell 4.6 percent to $201,100 from January 2007. The median cost of a single-family home decreased 5.1 percent to $198,700, while that of condominiums and co-ops fell 1 percent to $220,400.

“The general trend is down, especially in home sales,” Anirvan Banerji, director of research for the Economic Cycle Research Institute in New York, said in a Bloomberg Television interview. “There is quite a bit of overhang in inventory.”

“There is more adjustment that is required” in housing, Greenspan told a conference in Abu Dhabi, United Arab Emirates, today. “There is a broader effect on consumer expenditures.”

Resales fell in three of four regions, led by a 3.6 percent drop in the Northeast. They declined 2.1 percent in the West and 0.5 percent in the South. Sales were 3.4 percent higher in the Midwest.

Sales of single-family homes increased 0.5 percent to a 4.34 million pace from a 10-year low in December, according to today’s report. Sales of condos and co-ops fell 6.5 percent to an annual rate of 550,000.

Inventory Glut

Housing “is going to be subdued” until inventories are reduced, Federal Reserve Bank of Minneapolis President Gary Stern told reporters Feb. 19 after a speech in Golden Valley, Minnesota.

The effects of the worst housing recession in 25 years have spread into other areas of the economy. The Fed Bank of Philadelphia’s general economic index fell this month to minus 24, the weakest reading in seven years.

Economists surveyed by Bloomberg News earlier this month put the chance of the U.S. entering a recession at 50-50, up from 40 percent odds a month earlier.

The Fed last week said it lowered its growth forecast and now expects the economy to expand 1.3 percent to 2 percent in the fourth quarter from the same period of 2007, compared with the 1.8 percent to 2.5 percent it projected in October.

The Commerce Department is scheduled to release the January report on new home sales on Feb. 27. While economists forecast a decline, some measures indicate demand for new homes may be near the bottom.

Builder Confidence

For example, confidence among U.S. homebuilders rose for a second straight month in February and companies said there were more prospective buyers touring properties, the National Association of Homebuilders said on Feb. 19. In addition, the Reuters/University of Michigan index of consumer sentiment showed a record number of Americans said lower home prices made home buying conditions favorable.

“We’re seeing prices now that are basically back to ‘02, ‘03 levels,” Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said in a Bloomberg Television interview on Feb. 21. “That begins to get compelling for customers.”

Even so, the housing market “continues to be in a very difficult position right now,” and weaker sales are cutting into builders’ profits, Hovnanian said.

Lowe’s Cos., the world’s second-largest home-improvement retailer, forecast full-year earnings less than analysts’ projections after reporting a drop in sales and profits in the fourth quarter.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahBPbcXuxJMs&refer=home

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Investors found a sliver of hope to line the dark clouds of the housing slump on Monday.

Investors latched onto the National Association of Realtors’ upbeat tone Monday, sending the U.S. stock market higher in direct contrast to the stark data in the report, which said that sales of single-family homes and condominiums dropped by 0.4% in January to a seasonally-adjusted annual rate of 4.89 million units, the slowest pace on record since 1999. Despite this dire news investors seemed optimistic that the housing market may be bottoming out and that the increase in loan limits could lead to a rally in home sales toward the end of 2008.

The yield on the 10-year Treasury note jumped to 3.89% on Monday from 3.79% on Friday, as investors moved from the safety of bonds into equities, creating what has become a rarity in recent months–a boost in confidence in the equities market. The Dow Jones Industrial Average was also up to 12,486, a 106 point, or .85%, jump. The median price of a home sold in January slid to $201,100, a drop of 4.6% from a year ago, the fifth consecutive decline in home prices.

Existing-home sales in the Midwest rose 3.4%, but the median price of a home in the Midwest was $154,200, down 4.0% from a year ago. Existing-home sales in the Northeast fell 3.6%, although median home prices rose 3.1% from January 2007 to $270,800.

Investors found a knight in shining armor in Lawrence Yun, the NAR’s chief economist, who said there are still many potential buyers on the sidelines. “Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales,” he said.

Yun said he expects demand for homes to rebound later in the year as caps on the size of loans that can be backed by Fannie Mae (nyse: FNM - news - people ), Freddie Mac (nyse: FRE - news - people ), and the Federal Housing Administration are raised as part of the economic stimulus bill passed by Congress. But the problem of a housing glut still remains as inventories continue to build, putting downward pressure on prices. Total housing inventory rose 5.5% at the end of January to 4.2 million existing homes available for sale, representing a 10.3-month supply at the current sales pace, up from a 9.7-month supply in December.

But Global Insight U.S. economist Patrick Newport wasn’t so optimistic. “We think the credit crunch is hurting all corners of the mortgage market, and partly accounts for the 10% decline in sales in the past five months,” Newport said.

Newport said falling home prices may be the greatest hindrance to a recovery, but they are ultimately the solution as well. “In cities with falling home prices, homebuyers must weigh whether to buy an asset that is depreciating or rent instead,” he said. “We think that a growing share will choose to rent and wait things out. Over time, shifts in demand will cause rents to rise, house prices to drop, and home sales to turn around.”

But Newport thinks that turnaround is still months away.

Meanwhile, Lowe’s, the second biggest home retailer in the U.S., reported a 33.4% drop in profit, a result of the weakness in the U.S. housing market. But investors were expecting worse. As a result Lowe’s shares rose 4.1%, or 96 cents, to $24.55 at the close.

http://www.forbes.com/markets/2008/02/25/home-realtors-update-markets-bonds-cx_ra_0225markets31.html

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By Courtney Schlisserman and Bob Willis

Feb. 20 (Bloomberg) — The two-year housing slump pushing the U.S. economy toward a recession hasn’t alleviated inflation pressures, reports today showed.

Consumer prices rose 0.4 percent from December, with costs excluding food and energy climbing 0.3 percent, the most since June 2006, the Labor Department said. Builders started work on 1.012 million homes at an annual rate in January, close to a 16- year low, the Commerce Department reported in Washington.

The figures mean Federal Reserve Chairman Ben S. Bernanke will need to consider raising interest rates as soon as the economy stabilizes. Bernanke, who last week said the Fed is prepared to keep lowering interest rates, warned that faster inflation would “greatly complicate” the central bank’s job.

“What this means is that they don’t have as much comfort to play with rates,” Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said on Bloomberg Television, referring to Fed officials. “Once the U.S. economy looks like it’s started to stabilize, they’re going to have to jump right back in to that, raising rates back up to neutral.”

Treasury securities slumped after the consumer price report, while recouping most of the losses later. Ten-year note yields increased to 3.93 percent at 9:54 a.m. in New York from 3.90 percent late yesterday. The Standard & Poor’s 500 stock index lost 0.8 percent, to 1,337.97.

Lowest Since 1991

Building permits, an indication of future construction, fell 3 percent to a 1.048 million rate, the lowest level since November 1991, today’s Commerce report showed.

Housing starts were projected to rise to a 1.01 million pace from an originally reported 1.006 million rate in December, according to the median forecast in a Bloomberg survey of 72 economists. Permits were forecast to drop to a 1.05 million rate, from 1.068 million in December.

“We don’t think housing has hit bottom yet,” said Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto. “Until we get some stabilization in sales or even a mild improvement, it’s likely that construction will continue to weaken.”

A jump in food and energy costs, rents and clothing prices led the consumer-price index higher last month. Economists had forecast a 0.3 percent increase, with the so-called core rate gaining 0.2 percent, Bloomberg surveys showed.

Today’s price report “certainly showed a broad-based intensification of inflation pressures,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. While the Fed currently “is looking at growth,” inflation “will come back on the radar screen” when economic data improve, he said.

Food Costs

Food prices, which account for about one-seventh of the CPI, rose 0.7 percent, matching the biggest gain since May 2004, after a 0.1 percent increase in January. Energy prices last month increased 0.7 percent, after rising 1.7 percent the previous month.

“Even if energy prices remain flat, the continued rise in retail food prices will damp consumer spending growth,” JPMorgan Chase & Co. economists wrote in a note to clients last week.

Fuel costs were up 4.5 percent. Apparel prices rose 0.4 percent after a 0.1 percent increase in December.

The consumer price index is the government’s broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.

Bond Yields

Some bond investors are concerned that the Fed’s interest- rate cuts, totaling 2.25 percentage points since September, threaten to stoke inflation. The reductions came at a time of rising energy and commodity costs, and a falling U.S. dollar.

“The trend is showing elevated levels of inflation above where the Fed would like it to be,” said Don Alexander, director of fixed income in New York at Citigroup Global Wealth Management, which oversees about $1.3 trillion in assets. “You’re not rewarded for taking the risk of” investing in longer-dated Treasuries, he said.

A measure of price expectations derived from the gap in yields between 10-year notes and 10-year Treasuries linked to inflation rose as high as 2.39 percent today, the highest since November, from a low of 2.20 percent last month.

Still, Fed Chairman Ben S. Bernanke and other officials this month indicated that price expectations have yet to reach a level triggering their concern. The Fed chief told lawmakers Feb. 14 that “inflation expectations appear to have remained reasonably well anchored.”

Rate Cuts

Citing a worsening economic outlook, the central bank last month lowered its benchmark interest rate by 1.25 percentage point during two meetings, the fastest rate reduction since the federal funds rate became the main policy tool around 1990.

Compared with a year earlier, consumer prices rose 4.3 percent, after a 4.1 percent gain in December. The core rate was up 2.5 percent from January 2007, the biggest jump since March 2007, compared with a 2.4 percent increase the previous month.

Rents, which make up almost 40 percent of the core CPI, rose 0.3 percent.

Slower economic growth may help damp price pressures.

Economic growth slowed to a 0.6 percent pace in the fourth quarter and the economy lost jobs in January for the first time in more than four years, according to government figures.

Wal-Mart Discounts

Wal-Mart Stores Inc., the world’s largest retailer, said yesterday that fourth-quarter profit rose more than analysts had forecast after it stepped up U.S. holiday discounts and boosted sales in Asia and Latin America. Before the holiday season the company made price cuts on 20 percent more items. Last month, it marked down groceries, medicine, fitness equipment and electronics as much as 30 percent.

The government said Feb. 15 that prices of goods imported into the U.S. jumped 1.7 percent in January, pushed up by higher costs for energy and food. The producer price index is scheduled to be released Feb. 26.

PPI and CPI have some differences in timing that may cause discrepancies. In calculating wholesale prices, the government asks survey participants to report costs as of the Tuesday of the week that includes the 13th. Consumer prices are based on average costs over the entire month.

To contact the reporter on this story: Courtney Schlisserman in Washington cshlisserma@bloomberg.net

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