-Up 15,000 from previous week’s revised 366,000 (was 364k)

-4-week moving average was 375,000, down 5,750

-Weekly up but 4-week average still trending down

-Below 400k signals improving jobs picture

-Average claims since 2000 are 390k, so even with the weekly rise last week, the 1-week and 4-week numbers are still better than long-term trend. But how this decrease in jobless claims translates into jobs remains to be seen. There is imperfect correlation between jobless claims and jobs. If the 4-week average is 375,000, then 1,500,000 people lost jobs in the last 4 weeks. But this number doesn’t capture newly hired people so it’s difficult to draw conclusions on this dataset alone. Markets won’t make any meaningful trading moves until the December jobs report is released next Friday, January 6. Consensus estimates call for 150,000 non-farm jobs created.

Pending Home Sales (November 2011)
-Pending Home Sales Index was 100.1 (full report-with methodology at bottom)

-7.3% higher than October, highest in 19 months

-5.9% higher than November 2010

-April 2010 was last time index was higher (111.5) as buyers rushed in to get tax credit

-For existing single family homes entered into sales contracts expected to close in 60 days

-This is a good number but: 33% of realtors report cancelled deals on existing home sales

-Also this data comes from NAR which just said it had been publishing incorrect home sales data for the past 5 years, so let’s let this play out a few months.

Chicago PMI
The Business Barometer Index for the Chicago region was 62.5 for December. Any value above 50 indicates expansion. Keep in mind that this is the wholesale side. If the consumer does not increase purchasing then the wholesale index will diminish.

Bloomberg Consumer Comfort Index (week ended 12/25)
This is a survey index of consumer attitudes. The level fell from -45.0 to -47.5. This says more about consumer psyche than economics. For example, in this survey the consumer stated that he intended to buy less, his personal finances were worse, but that current state of the economy was better. Go figure.

by Dick Lepre & Julian Hebron

This is good because October was 4,250,000 even though it was previously reported at 4,970,000. In fact, NAR revised downward sales for 5 years meaning that the housing bust was much worse that NAR had been stating.

MBA Mortgage Applications
Purchase Index – Week/Week -4.9 %
Refinance Index – Week/Week -1.6 %
Composite Index – Week/Week -2.6 %

Yesterday’s Treasury Auctions
The results of Yesterday’s auction of 4-week Treasury bills is worth looking at. Treasury auctioned $30 billion in 4-week notes. The interest rate was 0.000%. The bid/cover ratio (bids received/bids accepted) of 9.07. The 5-year auction went out at 0.875% with a bid/cover of 2.86. Wealth holders are so concerned about the EU, some U.S. banks and recently bloated equity prices that the are willing to let Treasury hold it for nothing or next to nothing.

Reuters reported that the downward revision of the multi-year accumulation of sales information is the result of double counting and will indicate a much weaker housing market than previously thought. NAR said that a benchmarking exercise had revealed that some properties were listed more than once and some new home sales may have been included in existing home sales figures.

It seems that Realtors are aware that home sales have been over-counted for years – heck, one sale results in the seller’s agent and the buyer’s agent counting the transaction in many cases.

CoreLogic was onto this overstating of existing home sales a year ago. Read about it here (last paragraph), and below is a chart CoreLogic released early-2011.

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Reference:
-Reuters: Home Sales To Be Revised Down From 2007
-WSJ: Housing Bust To Look Worse With Sales Revised
-33% Of Existing Home Sales Not Closing. True From Where I Sit

-by Rob Chrisman & Julian Hebron

-Buyers usually spent 2-3 weeks searching before contacting an agent; for 35% of buyers, the very first step was looking at properties

-The typical home search took 12 weeks

-40% of buyers found the home they purchased online; as a result of online searching, 75% of buyers drove by and 63% of buyers walked through a home they had viewed on the Internet

-About half of buyers found their agent by referral from a someone they knew (or had worked with the agent before); 15% used an agent who was a friend or family member

-10% of buyers found their agent through a website; 7% at an open house

-42% of buyer had an oral buyer representation agreement with their agent; 18% had a written agreement

-65% of buyers interviewed only one real estate agent

-Single females make up about 20% of home-buyers, twice the percentage of single males

-Over 40% of buyers were first-time home-buyers

-46% of buyers expected to stay in their new home 8 or more years; 27% expected 16 or more years. (41% replied “don’t know”)

-45% of buyers thought buying a home was a better investment than buying stocks (9% thought not as good as stocks)

-52% of sellers used a different agent than the one who represented them on the buy side

-16% of sellers interviewed 2 agents; 18% interviewed 3 or more agents

Thanks again to Patrick Carlisle of Paragon Real Estate group for extracting these.
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Reference:
-2011 Home Buyer & Seller Stats (Part 1, Part 2)
-Paragon Real Estate Group: Market Dynamics

First time buyers, who made up 37% of the market, down from an historic 40% share, had a median age of 31 and income of $62,400, up from $59,900 in the 2010 study.

This buyer typically bought a 1,570 square foot home for $155,000, taking on a median monthly mortgage principal and interest payment of $794.

The typical repeat buyer was 53 years old, earned $96,600 (up from $87,000 reported last year) and purchased a 2,100 square foot home for $219,500 with a median payment of $1,006.

Most purchased a SFR (77%), 9% a condo, 8% a town or row house and 6% some other kind of housing.

The median down payment for all buyers was 11%, however for first-time buyers it was 5% and for repeat buyers 15%.

In both cases the median was a full percentage point higher than in 2010.

Fifty-four percent of first-time buyers financed with a low-down payment FHA mortgage, and 6% used the VA loan program which requires no down payment.

I started noticing it in September. Cold feet all over the place. This afternoon was no exception. One of my clients cancelled his contract to buy a condo for $600,000 even after his appraisal came in today at $634,000.

I didn’t bother telling him how rare it is for a purchase appraisal to come in so high above contract price. Value wasn’t his issue. He went cold because of a new HOA provision that will require owners to live in their condo for two years before they have an option to rent. This type of policy is actually good for long-term value. But it didn’t give him the flexibility he wanted.

This is one of several stories of buyers breaking contracts. I’ve had about two per month since September. All different reasons, most based on something they didn’t like after inspections or reviewing disclosures.

This trend for me, one single mortgage banker, is underscored by a stat I’ve been tracking in the National Association of Realtors’ Existing Home Sales Report. Today’s report for October said that 33% of of realtors are reporting cancellations of purchase contracts on existing homes, up sharply from 18% in September and August, and 8% in October 2010.

Thankfully my stats aren’t this high, but it does confirm shaky buyers are everywhere. The NAR says contracts are failing because of declined mortgages, low appraisals, property inspections (like I noted above as the main thing I’m seeing), and employment losses.

We’re fortunate enough not to have the appraisal issues as much here in San Francisco, not that every deal comes in almost 6% above contract price like the one above. But buyer jitters for the reasons NAR stated are certainly justified.

My buyers aren’t exiting the market, they’re just looking for the precisely correct deal for them. They simply won’t settle. Not settling on price has been a theme since 2007, and now we can add not settling on condition, location, and HOA quality (if a condo) to the list.

But they’re staying in the market. I’m still working with all but one of my buyers who have cancelled contracts since September. That one decided to rent.

NAR chief economist Lawrence Yun also said contract cancellations are because of lower loan limits for conventional mortgages, which I’ll file under “that’s just something Realtors say” because, as a lender in a jumbo market, I can verify that statement is untrue.

And as for the rest of the the stats in NAR’s existing home sales report, they’re of dubious credibility according to many.

In February, Core Logic said the NAR was overstating sales by 15-20% in 2010 (report excerpt | chart: NAR vs CoreLogic data), and today New York appraisal veteran Jonathan Miller explains why NAR’s existing home sales report is misleading for realtors and consumers alike. Miller’s piece is a must-read.

Any investor who owns pools of jumbo loans took careful note when Moody’s said, based on its analysis of mortgage-backed bond portfolios, homeowners with jumbos now constitute “greater strategic default risk” than any other type of borrowers, including subprime. “That’s because an exceptionally high number of jumbo owners – many in high-cost markets hit by real estate deflation over the past several years – are stuck with persistent negative equity. More than half of the jumbos analyzed by Moody’s where owners are still making payments have home market values lower than their outstanding loan balances.”

The October 20 vote was on an amendment to a larger spending bill that still must pass in the Senate, and if so, it would go to the GOP-controlled House, which may stop this effort by arguing that reducing loan limits helps shift mortgage market from government to private markets. CNBC reports that the whole bill “needs to be law by November 18″ so this debate will heat up.

I agree that private markets, aka Wall Street, won’t step in full force on buying mortgages from banks as long as loan limits are higher. And why would mortgage originators look to private markets when they have a more profitable government option to sell loans to?

But that said, it’s not as dire as politicians say. Consumers have great options for jumbo loans above $625,500.

I’m a mortgage lender here in the jumbo loan land of San Francisco, and I have very competitive jumbo products available to me and my clients. So do my competitors who are with other credible firms known on Wall Street for their quality of underwriting.

There’s always a market for mortgage securitization if the underlying loans—both borrowers and properties—have been scrutinized by origination teams who know what they’re doing.

The smart Wall Street money knows where to find quality originations to buy. And the quality originators have power to negotiate low pricing for consumers because they’re the source of that business for Wall Street.

Lots of powerful lobbies including the NAR are lobbying for higher limits. And if they get their way, I’m certainly not going to complain. Rates on jumbos are still higher than the super-conforming loans to $625,500.

But to make it out like it’s this macroeconomic catastrophe if we don’t again raise loan limits from $625,500 to $729,750 is just untrue. And silly actually. The market can—and does today—provide great opportunities for jumbo consumers.

IMPORTANT NOTE: Chatter in Washington over loan limits will create confusion, but the link below contains loan limits and rates available now with all U.S. lenders. End of story.
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Reference:
-2011 Conforming Loan Limits & Rates
-CNBC: Loan Limits A Constant Volley

MBA Mortgage Index
-Purchase Index, Week/Week Change -4.7%
-Refinance Index, Week/Week Change 2.2%
-Composite Index, Week/Week Change 0.6%
-Positive Existing Home Sales data mitigated this soft purchase index.
-The best solution for the housing sector would be to encourage the clearing of existing inventory and shadow inventory by providing more FNMA lending for rentals. The fact is that there are folks who are in homes they own and haven’t made payments on for months. The goal might be to have them stay but as renters.

FOMC
The FOMC meeting ends today. I don’t believe that the usual discussion about rates or money supply are paramount. The Fed must explain what its plans are for Eurozone dollar liquidity.