Finance
Mortgage Banking
Aug 07, 2009
By: Dees Stribling, Contributing Editor
Like a trailer for a monster movie, a new report by Deutsche Bank is promising scary things in the not-too-distant future. Assuming that housing prices continue a decline, the percentage of underwater mortgages might rise to 48 percent of the total, or roughly 25 million loans, by the first quarter of 2011. The bank is predicting that U.S. home prices will decline a further 14 percent from current prices by the first quarter of 2011.
As of the beginning of the second quarter of 2009, the bank estimated that 26 percent of all U.S. residential mortgages are underwater, with heavy concentrations in Southern Florida, Southern California and Las Vegas. If the report is correct about the continuing decline in housing prices, those places might have totals as high as 90 percent.
The problems won't be concentrated among subprime borrowers by then, though most of those loans--69 percent--will be underwater, according to Deutsche Bank, up from about half now. The real spike will be in prime conforming loans, only 16 percent of which are underwater now. If the bank is correct, 41 percent of such loans will be underwater a year and a half from now.
Monthly retail sales numbers are trickling in, and the overall message is that the industry's still in bad shape. According to Thomson Reuters data, same-store sales dropped 5.1 percent in July compared with the same month last year, the 11th month in a row that same-store sales posted a decline. Thompson Reuters surveys 30 major chain stores that produce monthly same-store reports, which doesn't include Wal-Mart anymore.
Dallas-based Zale Corp. has paid millions to close 118 of its stores in its most recent fiscal quarter (ended July 31) but also to settle with landlords of the liquidating Bailey Banks & Biddle chain. Zale sold Bailey to Finlay Enterprises Inc. in 2007, right at the top of the bubble. Normally, that might be considered good timing, but as part of the deal it guaranteed the chain's leases.
It probably seemed like a reasonable bet at the time, but earlier this month, Finlay went bankrupt, leaving Zale in the lurch. Zale has so far paid out $29 million to settle 34 of the 45 Bailey leases. Eleven more still need to be settled.
Is Cash for Clunkers going to hurt the retail business? That is, retailers other than car retailers? Richard Feinberg, a professor of retail management with the Purdue Retail Institute at Purdue University, posited that the $3 billion spent on the program to stimulate car sales will take $300 million a month away from other retailers for some time, as people use money to pay car notes that would have otherwise gone to less durable purchases than cars.
Wall Street had another lackluster day on Thursday, as if it has exhaustedly reached a plateau for a while. The Dow Jones Industrial Average dropped 24.71 points, or 0.27 percent. The S&P 500--now below 1000 again--lost 0.56 percent, and the Nasdaq lost 1 percent.
By: Dees Stribling, Contributing Editor
Like a trailer for a monster movie, a new report by Deutsche Bank is promising scary things in the not-too-distant future. Assuming that housing prices continue a decline, the percentage of underwater mortgages might rise to 48 percent of the total, or roughly 25 million loans, by the first quarter of 2011. The bank is predicting that U.S. home prices will decline a further 14 percent from current prices by the first quarter of 2011.
As of the beginning of the second quarter of 2009, the bank estimated that 26 percent of all U.S. residential mortgages are underwater, with heavy concentrations in Southern Florida, Southern California and Las Vegas. If the report is correct about the continuing decline in housing prices, those places might have totals as high as 90 percent.
The problems won't be concentrated among subprime borrowers by then, though most of those loans--69 percent--will be underwater, according to Deutsche Bank, up from about half now. The real spike will be in prime conforming loans, only 16 percent of which are underwater now. If the bank is correct, 41 percent of such loans will be underwater a year and a half from now.
Monthly retail sales numbers are trickling in, and the overall message is that the industry's still in bad shape. According to Thomson Reuters data, same-store sales dropped 5.1 percent in July compared with the same month last year, the 11th month in a row that same-store sales posted a decline. Thompson Reuters surveys 30 major chain stores that produce monthly same-store reports, which doesn't include Wal-Mart anymore.
Dallas-based Zale Corp. has paid millions to close 118 of its stores in its most recent fiscal quarter (ended July 31) but also to settle with landlords of the liquidating Bailey Banks & Biddle chain. Zale sold Bailey to Finlay Enterprises Inc. in 2007, right at the top of the bubble. Normally, that might be considered good timing, but as part of the deal it guaranteed the chain's leases.
It probably seemed like a reasonable bet at the time, but earlier this month, Finlay went bankrupt, leaving Zale in the lurch. Zale has so far paid out $29 million to settle 34 of the 45 Bailey leases. Eleven more still need to be settled.
Is Cash for Clunkers going to hurt the retail business? That is, retailers other than car retailers? Richard Feinberg, a professor of retail management with the Purdue Retail Institute at Purdue University, posited that the $3 billion spent on the program to stimulate car sales will take $300 million a month away from other retailers for some time, as people use money to pay car notes that would have otherwise gone to less durable purchases than cars.
Wall Street had another lackluster day on Thursday, as if it has exhaustedly reached a plateau for a while. The Dow Jones Industrial Average dropped 24.71 points, or 0.27 percent. The S&P 500--now below 1000 again--lost 0.56 percent, and the Nasdaq lost 1 percent.
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