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I just got back to the office, and wanted to take a quick look at GDP data, which seems to be dominated by inventory build:

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.0 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, federal government spending, and exports that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

The small acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in
imports and accelerations in private inventory investment and in PCE that were partly offset by a
downturn in residential fixed investment and decelerations in nonresidential fixed investment and in exports.

Here are the breakdowns:

• The change in real private inventories added 1.44% percentage points to the third-quarter change in real GDP after adding 0.82% percentage point to the second-quarter change.

• Private businesses increased inventories $115.5 billion in the third quarter, following increases of $68.8 billion in the second quarter and $44.1 billion in the first.

• Real final sales of domestic product — GDP less change in private inventories — increased 0.6% in Q3 compared with an increase of 0.9 % in Q2.

• Motor vehicle output added 0.42% to Q3 (after subtracting 0.06% in Q2);
• The price index for gross domestic purchases (prices paid by U.S. residents) increased 0.8% in Q3;
• Excluding food and energy prices, the price index for gross domestic purchases increased 0.6% Q3, compared with an +0.8% in Q2;
• Real personal consumption expenditures increased 2.6% versus 2.2% in Q2;
•Durable goods increased 6.1% vs 6.8% Q2.
•Nondurable goods increased 1.3% vs 1.9%; Services gained 2.5% vs 1.6%
• Real nonresidential fixed investment increased 9.7%vs 17.2%
• Nonresidential structures increased 3.9% percent vs 0.5%
• Equipment and software increased 12% vs 24.8% in Q2
• Real residential fixed investment decreased 29.1% (vs an increase of 25.7% in Q2).
• Real exports of goods and services increased 5.0% Q3 (vs 9.1%)
• Real imports of goods and services increased 17.4 percent,
compared with an increase of 33.5 percent.
• Real federal government consumption expenditures and gross investment increased 8.8% Q3 vs 9.1%; National defense increased 8.5% vs +7.4%; Nondefense increased 9.6% vs 12.8%

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Annualized GDP

Chart via Calculated Risk

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Source:
National Income and Product Accounts
Gross Domestic Product, 3rd quarter 2010 (advance estimate)
BEA, 8:30 A.M. EDT, FRIDAY, OCTOBER 29, 2010

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Here is your unicorn chaser for the week: A compilation of awesome people doing incredible things.

Music: Mecha Love by Hadouken, out now on iTunes:

Here is a job listing that appears to be a job listing for more LPS

Foreclosure / Bankruptcy Doc Prep – Short Term

Full Job Listing after the jump

Read the rest of this entry »

Q3 Real GDP rose by 2%, right in line with expectations but Nominal GDP was better than expected, rising 4.3% vs the estimated gain of 3.8%, the difference being the inflation price deflator which rose 2.3%. Personal Spending, 70% of the figure, rose by 2.6%, .1% better than expected and the best gain since Q4 ’06. It added 1.8 % pts to GDP. Spending on equipment and software rose 12% after a 24.8% gain in Q2. Residential construction fell by 29.1%. Trade reduced GDP by 2 full % pts as imports rose by 17.4% while exports were up by just 5%. The inventory gain of $115.5b added 1.4% to GDP. Government spending was up 3.4% solely led by the Federal side. Real Final Sales, taking out the inventory influence, rose by .6%, the slowest since Q3 ’09. Bottom line, growth was ordinary in Q3 after an ordinary growth rate of 1.7% in Q2 and unfortunately is not expected to get much better in Q4. The economy is still growing but below its potential.

Keith Jurow , Ph.D., has been researching and writing about the housing market debacle around the U.S. with an eye for issues that are frequently overlooked or ignored by the media.  This article was originally published on www.realestatechannel.com where his in-depth stories have been regularly featured since March 2010.  Keith is a former senior economic writer for the Holt Investment Advisory of Westport, Connecticut, where he researched and wrote articles on a variety of key financial topics.”

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Much has been written about the so-called “shadow inventory” since the term was first coined a few years ago.  Some analysts and commentators have argued about whether it even exists.  Let’s take an in-depth look at this shadow inventory and see whether it really is a threat to housing markets around the country.

Shadow Inventory Defined

Rather than joining the dispute about what the term actually means, I will simply define it in this way:  The “Shadow Inventory” is comprised of all those distressed residential properties (other than MLS listings) which we know will almost certainly be coming onto the market in the not-to-distant future.

MLS Foreclosures – Only the Tip of the Iceberg

The starting point in discussing the shadow inventory has to be homes actually on MLS listings around the country.  With the plunge in home sales starting in July, the number of listings has risen substantially since the spring.  For example, California listings are up 25% since April.

The percentage of total listings that are bank-owned properties has declined over the last year, while the percentage which are short-sale listings has risen tremendously during the same period.  For example, short sales comprised 40% of all active listings in Sacramento County in August.  The following table from data supplied by ZipRealty shows this soaring number of short sale listings.

Because of the sharp climb in short-sale listings, roughly 30% of all July home sales in California, Arizona and Nevada were short sales according to Inside Mortgage Finance.  It also reported that nationwide, closed short sales have climbed from roughly 45,000 in January 2010 to nearly 100,000 in June.

With regard to shadow inventory, the key question is how many foreclosed and repossessed properties are now either in the inventory of banks or held on behalf of residential mortgage-backed securities (RMBS) investors whose loans they service.  Estimates start at about 500,000 and go up from there.  One highly reputable data provider with a huge database of first mortgage liens has been reporting an REO inventory in excess of one million since last summer.  Whatever the number is, it seems clear that the vast majority of these properties are not currently on the market.

Defaulted Properties Heading for the Resale Market

In addition to repossessed properties held off the market, the shadow inventory includes all the homes which have been placed into default – the first stage of foreclosure proceedings.  According to Lender Processing Services’ July Mortgage Monitor report, there are now 2.02 million properties in default.  This number has not declined in the past year in spite of more than one million trial mortgage modifications.

In many of the worst bubble metros, the number of homes in default has been climbing in the last year.  Take a look at the soaring number of defaults in the Las Vegas metro area in this graph from ForeclosureRadar.

In spite of the huge number of foreclosed homes that have been sold by the banks in the Las Vegas area, the volume of new foreclosure actions continues to rise.

While many of these defaulted properties throughout the nation will escape foreclosure by means of a short sale, the rest will move on to foreclosure proceedings and eventual trustee sale to a third party or repossession by the lender.

Overwhelmed by the number of defaulted properties, banks have stretched out the time between the beginning of mortgage delinquency and formal foreclosure to an incredible average of 469 days – more than 15 months.  Since these homeowners in default are living in their house without making mortgage payments, that is a way to build up a sizeable pile of cash.

Delinquent Homeowners – The Number Just Keeps Growing

You could argue that the shadow inventory is the total of repossessed homes not yet on the market and defaulted homes that will move into foreclosure.  However, there is also the matter of homes which are seriously delinquent in mortgage payments.  Why? you may ask.  The homeowner can cure the delinquency by paying the arrears before the home goes into default.

The problem is that the cure rate for these seriously delinquent mortgages is almost zero.  Let’s take a look at the following chart.

If this were early 2005, one could claim that 40% of homeowners who were delinquent 90 days or longer would eventually bring the mortgage current.  But the cure rate has plunged along with home prices.  As early as one year ago, the cure rate had dropped to almost zero.  A delinquency of 90+ days now means almost certain foreclosure or short sale.

How many homeowners are now seriously delinquent by 90 days or more?  To answer that, we turn to Lender Processing Services and its massive database of roughly 34 million first mortgages.  Their monthly Mortgage Monitor provides a detailed table of non-performing first liens. Here is what the July non-performing loan count looks like.

At the end of July, the number of residential first mortgages that were delinquent by 90 days or more stood at 2.47 million.  While the figure has declined from a record 3.06 million in January of this year, this is due almost entirely to the mortgages which were placed in trial modification by the banks.  While in modification, they are no longer considered delinquent.  We know from the cure rate chart shown earlier that nearly all of these seriously delinquent mortgages are headed for the resale market either through a short sale or foreclosure.

To these 90-day delinquencies we need to add first mortgages which are delinquent for at least 60 days.  The chart above reports 761,000 of these 60 day delinquencies.  The cure chart shows us that the vast majority of these delinquent properties will also end up on the resale market.

Finally, we must also include those mortgages which are newly delinquent for 30 days.    That number has been stuck at roughly 1.8 million for the last three months.  Now you may question the inclusion of these newly delinquent loans. Keep in mind, though, that the vast majority of those homeowners who become 30 days delinquent have been delinquent before according to Lender Processing Services figures.  The cure rate chart shows us that only 30% of those borrowers who go into arrears by at least 30 days will cure the loan without lapsing into delinquency again and eventually falling into default.

Concentration of the Shadow Inventory in 25 Major Metros

It is very important to understand that this enormous shadow inventory of distressed properties that will eventually be thrown onto the resale market is heavily concentrated in a limited number of metros.  According to data provided by Lender Processing Services, 52% of the nationwide 90 day delinquencies and 58% of the defaults are concentrated in 25 major metros.  The following table shows this concentration.

If you look carefully at the distressed property figures for the top four metros, you’ll see that the number of residences which will be pouring onto their housing markets in the next 1-2 years is enormous.  Anyone who thinks that prices have bottomed in the Miami, New York, Los Angeles or Chicago metro areas had better take a good, hard look at these statistics.

Tallying Up the Shadow Inventory

An incredible 14% of the nearly 54 million first liens in the country are now either delinquent or in default.  This chart from the Calculated Risk blog shows the steady growth since 2005.

To come up with a total for the shadow inventory, let’s first add the total number of loans in default to those delinquent 90 days or more since we know that these loans are headed for foreclosure or a short sale.  That comes to 4.5 million properties.  Based on the cure rate for loans delinquent at least 60 days, we will add 95% of those 60-day delinquencies.  That is an additional 723,000 residences.  For the same reason, we will add 70% of those delinquent for at least 30 days – 1.25 million properties.

And, of course, let’s not forget the REOs that have not yet been placed on MLS listings by the bank servicers.  We’ll be conservative and estimate them at 500,000.

Adding all of these together, we come up with a total of roughly 6.97 million residences which are almost certainly going to be thrown onto the resale market as distressed properties at some point in the not-too-distant future.  This massive number of homes will put enormous downward pressure on sale prices.  To believe that prices are firming now is to completely ignore this shadow inventory.  Ignore it at your own risk.

Yesterday morning, I had The Misinformation Hour on TV as I got dressed for work. One of the comments that was made –  “No one was wrongly thrown out of their home” — was repeated or ignored by hosts and guests alike.

This is patently demonstrably false, and yet no one challenged it.

The banks have gotten the Big Lie technique down to a science: State a lie so colossal that no one could believe anyone “has the impudence to distort the truth so infamously.” In practice, adding factually accurate, but irrelevant or misleading color, helps push the lie on unsusp0ecting rubes.

The banks and their many supplicants have been successful in doing just that in the robosigning issue. Any discussion about property rights, due process, or criminal investigations into perjury are thwarted; instead, the focus is on deadbeat homeowners. And note that I am the guy who in Q1 2010 wrote More Foreclosures, Please . . .)

The misdirection is successful, and the average reader/viewer/listener has no idea how badly they are being misinformed.

Beyond property rights and due process, the issue of this legal impossibility of being wrongly foreclosed upon (absent fraud), are the bailouts. Saving broken business models managed incompetently by bad management is a recipe for more errors and angst.

Fraudclosure is a perfect example of this. When you save broken companies from their own incompetence, this is what you get.

We have no record of how many people have been erroneously foreclosed — the banks themselves are the only centralized source of that data, and they ain’t talking — but we have lots of anecdotal evidence.

The plural of anecdote is not data; what is needed is a central collection of all the anecdotal errors of false or erroneous foreclosure — someone with a national office, say a US Attorney’s or Congressman’s office.

I will tag a few people today . . . but to get them started, here is what I have assembled from the media:

The Erroneous Foreclosure Central Data Repository:

• Lawsuit accuses Bank of America of seizing wrong house: Dr. Alan Schroit filed the lawsuit Monday in the 122nd State District Court in Galveston against the bank with which he has neither a relationship nor a mortgage. (The Galveston County Daily News)

• Christopher Hamby of Wheelwright, Ky., filed a lawsuit against Bank of America for repossessing his home by mistake and refusing to pay for damages other than replacing the locks. (Floyd County Times)

• Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.  (Sun Sentinel)

• A Hampton Pennsylvania woman is suing Bank of America, saying one of its contractors wrongly repossessed her home, padlocked the doors, shut off the utilities, damaged the furniture and confiscated a pet parrot, though her mortgage payments were on time. (Pittsburgh Post-Gazette)

• Charlie P. and Maria Cardoso of New Bedford claimed that their home in Florida was free of any mortgage. They filed a lawsuit for a wrong foreclosure, claiming that the Bank of America had foreclosed. Their lawyers argued that the Bank had already been notified about the wrong foreclosure, in July, despite which it got foreclosed (South Coast Today)

• A Las Vegas woman whose condo was mistakenly emptied in a bungled foreclosure action could be the first person to benefit from a new state law.  Nilly Mauck, left Las Vegas in mid-December for a snowboarding trip to Utah and returned to stay with a friend for a few days when she received a disturbing phone call. Something was amiss at the Coronado Palms condominium on Badura Avenue that she had owned for the past two years. (Las Vegas Sun)

• Ricky Rought paid cash to the Deutsche Bank National Trust Company for a four-room cabin in Michigan with the intention of fixing it up for his daughter. Instead, the bank tried to foreclose on the property and the locks were changed, court records show. (Dealbook)

• Sonya Robison is facing a foreclosure suit in Colorado after the company handling her mortgage encouraged her to skip a payment, she says, to square up for mistakenly changing the locks on her home, too. (Colorado Springs Business Journal)

• Thomas and Charlotte Sexton, of Kentucky, were successfully foreclosed upon by a mortgage trust that, according to court records, does not exist. (NYT)

• Ron and LaRhonda Wilson Sr. in a process that allows debtors to reorganize their finances. Lawyers representing Option One Mortgage Corp. alleged that Mr. Wilson was delinquent in mortgage payments and late charges, and asked to foreclose in March 2008, documents show. That foreclosure motion included a document now central to the case being pursued by the trustee: an affidavit submitted by Dory Goebel, an employee at a predecessor company to Lender Processing called Fidelity National Information Services Inc. In a notarized “affidavit of debt,” Ms. Goebel said the Wilsons were delinquent on monthly payments between November 2007 and February 2008, according to documents.  The Wilsons’ lawyer subsequently proved to the court that the Wilsons had made debt payments, according to court documents.  (WSJ)

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From Votesanity.org

Several of the candidates running for office next Tuesday are crazy. Most of them are running as Republicans. All of them are going to make Washington more dysfunctional than it is already. If they get into office, they will have a substantially larger platform from which to promote their terrible ideas. Ex. Sharon Angle opposing abortion for rape and incest victims as a former member of the Nevada legislator (and chairman of the Washoe County GOP precinct organization effort) is not nearly as awful as Hon. Sharon Angle, United State Senator doing the same thing.

You can see the website at www.votesanity.org and you can view “Welcome to Crazytown” by clicking the link..

These people have a very good chance to win and now is just not the time to hand the inmates the keys to the asylum.

So send your friends and family — heck, send everyone- to VOTESANITY.ORG. Once they visit we’re sure they’ll come out on November 2nd to vote for reasonable people and policies.

I hope we’ll see you there and remember — VOTE SANITY, because you might be mad, but they are CRAZY.

Tonite’s Open Thread:

You gots to admit it: These markets simply refuse to go down. Whether its POMO of the PPT o9r just natural buyers, there is a very firm bid underneath.

Look, I am not saying this as a rampaging bull. We are now down to 33% cash in our long short accounts. The more wood we deploy the more I expect a correction or other surprise.

But goddammit! This market is resilient.

Wednesday was a perfect example: Down 150, off nearly a 1% across all indices. If the bears had any mojo, they should have whacked that bitch down another few 100, for a down 300 point day. That would have been the start of something scary. But the markets reversed, and closed off marginally. Then on Thursday, after opening up strong, we reversed into the red. Once again, the Bears had a chance to press, and drive equities lower. They couldn’t.

What is the bid beneath? How long can this go on for? Willt he end of the Mutual fund year (October 31) end the window dressing? Will the election be the peak? Year end?

What say ye?

Gotta love Steve Perry leading a packed house @ AT&T Park, San Francisco in ‘Don’t Stop Believing’ during the 8th inning of Game 5 in the NLCS.
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Here’s Bob Lefsetz:

Some things just make you feel good.

I’m going through today’s e-mail and someone linked to this clip. Just another use of the national anthem, “Don’t Stop Believin’”. Hey, it’s great the Giants won the National League Championship and are celebrating, but there’s nothing new here.

And as I continue going through my messages, as the track plays in the background, I’ve heard enough so I go to close that window so I can check out another YouTube clip a few messages down. And when I go to click the close button, I’m confronted with something utterly surprising that does not compute, supposed recluse Steve Perry singing his own song.

Well, we can’t hear him. He’s got no mic. But he’s leading the charge, he’s got his hands in the air, they’ve got his visage on the big screen and I’m stunned how every rumor is untrue. He’s out and about, he’s not obese, he’s there with a smile on his face owning a song that’s been embraced by a younger generation that never experienced Journey and people like me who barely tolerated the band back then, admitting we liked “Lights” and maybe one other track on the local AOR outlet that we had to endure to get to our favorites, and those who never stopped believin’.

On paper, this might barely touch you. But when you watch this video, your heart will start to palpitate, you’ll get all tingly, you’ll enter a zone whose entry key is only music.

(Let the clip play, from the beginning until at least fifty seconds in, then you’ll get it.)

Source:
Banks May Face $97 Billion Loss From Mortgage Mess
Kate Kelly
CNBC, Wednesday, 27 Oct 2010 | 2:36 PM ET

http://www.cnbc.com/id/39870708