June’s trade deficit, the 2nd quarter MBA delinquency survey, and the June Mortgage Monitor

the key economic release this week was on our international trade for June from the Commerce Dept, which appears will result in an upward revision to 2nd quarter GDP…the other monthly economic reports released this week were also on June data and included:

  • the Full Report on Manufacturers’ Shipments, Inventories, & Orders for June from the Census Bureau (pdf), which showed new orders for manufactured goods rose by $5.7 billion or 1.1% to a record high of $503.2 billion, factory shipments rose by $2.5 billion or 0.5% to a record $499.8 billion, factory inventories rose by $1.8 billion or 0.3% to a record high at $653.8 billion, and unfilled factory orders rose by $10.4 billion or 1.0% to $1,098.5 billion, which was also the highest level value of unfilled orders on record…. 
  • the Fed’s G-19 report on Consumer Credit for June, which showed that seasonally adjusted consumer borrowing increased at an annual rate of 6.5% in June, or by $17.2 billion over May to $3,211.2 billion outstanding at the end of the month…revolving credit, which is mostly credit card debt, grew at an annual rate of 1.3%, increasing to $873.1 billion in May from $872.1 billion in May, while non-revolving debt, which includes long term borrowing for items such as cars and tuition, but not real estate, rose In June at an annual rate of 8.4% to a seasonally adjusted $2,338.1 billion in June from $2,321.8 billion in May…
  • the Wholesale Trade report on Sales and Inventories for June (pdf) from the Census Bureau, which estimated that seasonally adjusted sales of merchant wholesalers increased by 0.2 percent (+/-0.7)* to $454.4 billion for the month and by 6.5 percent (+/-1.8%) over the sales of June 2013, not adjusted for inflation, while seasonally adjusted wholesale inventories at the end of June were 0.3 percent (+/-0.4%)* higher than the downwardly revised May figure at $533.5 billion, a level 7.9% (+/-0.9%) higher than a year earlier…May’s inventory increase was revised from a gain of 0.5% to a gain of 0.3%, implying a similar revision to 2nd quarter GDP..

in addition, the Institute for Supply Management published their July Non-Manufacturing ISM Report On Business, which generates diffusion indices resulting from their survey of service industry purchasing managers; their headline Non-Manufacturing Composite Index (MNI) came in at 58.7%, up from last month’s 56.0% and a record high for this index, which was first published in January 2008…

Trade Deficit Falls 7.2% in June to $41.5 Billion

the June report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $41.5 billion for the month, down from the revised trade deficit of $44.7 billion in May, as our exports rose $0.3 billion to $195.9 billion on a $0.2 billion increase to $136.9 billion in our goods exports and a $0.1 billion increase to $59.0 billion in our services exports, while our imports fell $2.9 billion to $237.4 billion on a $2.9 billion increase to $197.2 billion in our imports of goods while our imports of services were virtually unchanged at $40.2  billion…the May trade deficit was revised up from the previously reported $44.4 billion…you may recall that in computing second quarter GDP last week, the BEA assumed an decrease in both exports and imports, so the larger than expected decrease in imports and small increase in exports both suggest upward revisions to 2nd quarter GDP, although the data isn’t directly comparable, because all GDP amounts are inflation adjusted and at a seasonally adjusted annual rate vs the monthly data reported here…

factors in the May to June increase in exports included a $411 million increase in our exports of consumer goods to $17,158 million, largely on a $423 million increase in our exports of pharmaceutical preparations, and a $163 million increase to $13,654 million in our exports of automotive vehicles, parts, and engines; we also exported $42,232 million worth of industrial supplies and materials in June, $51 million more than May, as a $316 million increase in exports of organic chemicals and a $226 million increase in our exports of crude oil were mostly offset by $314 million lower exports of other petroleum products, $272 million less exports of natural gas, and a $234 decrease in exports of fuel oil…similarly, our exports of capital goods were up by just $33 million to $45,677 million as a $513 increase in our exports of civilian aircraft was offset by decreases of $278 million in our exports of telecommunications equipment and $179 million in other industrial machinery not itemized separately…meanwhile, our exports of food, feeds and beverages fell by $264 million to $11,701 million on a $324 million decrease in our exports of soybeans and a $109 million decrease in our exports of fish and shellfish, which was only partially offset by an increase of $117 million in our exports of nuts…in addition, our exports of goods not categorized by end use fell by $518 million to $5,120 million…

end use categories of imports that saw seasonally adjusted decreases in June included consumer goods, imports of which fell by $1,279 million to $45,793 million on a $1,124 million decrease in our imports of cellphones and similar household products, and automotive vehicles, parts, and engines, imports of which fell by $1,074 million to $27,466 million…at $55,268 million, we also imported $548 million less industrial supplies and materials in June, as a $381 increase in our imports of crude oil was more than offset by decreases of $594 million in our imports of fuel oil and $699 million in our imports of other petroleum products…our imports of capital goods fell by $259 million to $49,363 million on a $162 million decrease in imports of oilfield equipment, a $143 million decrease in telecommunications equipment imports, and a $124 million decrease in imports of industrial machinery not itemized separately, offset in part by a $343 million increase in imports of computers…meanwhile our imports of foods, feeds, and beverages rose by $235 million to $10,834 million on a $201 million increase in our imports of oils and oilseeds, while our imports of goods not categorized by end use rose by $36 million to $6,293 million….

our FRED bar graph below shows the monthly change in exports in blue and the monthly change in imports in red over the past two years, with the net of them resulting in the change in the balance of trade, which is shown in brown…each group of three bars represents one month’s of trade data, with positive changes above the ‘0’ line and negative changes below it; note that when exports (blue) increase in a given month, they add to the trade balance change in brown; and when exports decrease, they subtract from the brown trade balance bar, while the action of imports on the balance is just the reverse, ie, when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…the interactive version of this bar graph at FRED loads with 20 years of trade data, which you can view monthly by moving your cursor across the graph, or use the sliders across the bottom of the graph to adjust the time period viewed…

June 2014 trade balance

Mortgage Delinquency and Foreclosure Reports

we’re also going to take a look at two private reports on the ongoing mortgage crisis that were released this week: the Mortgage Monitor for June (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) and the 2nd Quarter National Delinquency Survey from the MBA (Mortgage Bankers Association); both of these reports cover essentially the same data on home mortgages: those that are delinquent, or behind on their payments, and those that are in the process of being foreclosed…the Mortgage Monitor is a monthly report that we’ve covered monthly for several years, while the MBA National Delinquency Survey is only released quarterly and is seasonally adjusted based on patterns of mortgage delinquency that have repeatedly occurred annually…since both of these reports are of mortgage conditions as of the last day of June, comparing them side by side should give us a more complete picture into the ongoing mortgage crisis than looking at one or the other in isolation… 

MBA Reports 6.04% of Mortgages Delinquent, 2.49% in Foreclosure at End of 2nd Quarter

according to the MBA, the seasonally adjusted national delinquency rate, which is the percentage of homeowners who were late at least one house payment late but not in foreclosure, fell to 6.04% of all mortgage loans outstanding at the end of the 2nd quarter, down from 6.11% at the end of the second quarter, and down from a delinquency rate of 6.96% at the end of the 2nd quarter a year ago, and also the lowest level since the first quarter of 2008…in addition, they report that 2.49% of all mortgage loans were in the foreclosure process at the end of the quarter, down from 2.65% at the end of the 1st  quarter and from 3.33% at the end of the 3rd quarter last year, which was also the lowest percentage foreclosure inventory since 2008…new foreclosure actions were initiated on 0.40% of mortgages in the 2nd quarter, down from the 0.45% rate of new foreclosures in the 1st quarter…the serious delinquency rate, which combines the percentage of mortgages in foreclosure with those that are more than 90 days behind on their housepayments but still not in foreclosure, fell to 4.80% in the 2nd quarter from 5.04% in the 1st quarter, and was well below the serious delinquency rate of 5.88% a year earlier…combining those at least one payment overdue on their mortgage with those seriously delinquent or in foreclosure gives us a total percentage of 8.53% of homeowners who were behind on their mortgage at the end of the quarter, or still more than one in twelve…these percentages over time are illustrated visually in the bar graph below, from Bill McBride at Calculated Risk, which stacks the percentage of foreclosures in red on the top of each quarterly bar, which each also shows the number of more than 30 but less than 90 days delinquent each quarter in the blue portion of each bar, and the number of mortgages more than 90 days behind on payments in yellow…we can see on that graph that the percentage of mortgages in trouble peaked at 14.7% in the first quarter of 2010 and has been trending downward since, and although the total is still well above the levels of the pre-crisis year of 2005, the shorter term new delinquencies in blue are now at near normal levels…

2nd quarter MBA delinquencies & foreclosures

Mortgage Monitor Finds Average Time in Foreclosure Approaching 1000 Days

in contrast with the MBA delinquency report, the Mortgage Monitor for June (pdf) from from Black Knight Financial Services (BKFS) shows that delinquencies have increased since their last report, with 5.70% of all mortgaged homeowners at least one payment overdue on their mortgage but not in foreclosure In June, up from 5.62% in May and up from 5.52% in March, the monthly report that would correspond with the MBA’s 1st quarter delinquency survey…the difference is likely in the seasonal adjustments applied by the MBA, as it’s well known that mortgage delinquencies peak around Christmas and fall into the spring, and that June usually sees an uptick…June delinquencies are still down nearly a full percent compared to June a year earlier, when the BKFS predecessor LPS gave the delinquency rate at 6.68%…of those delinquent but not in foreclosure in June, 1,155,114 mortgages were more than 90 days delinquent, aka “seriously delinquent” and 1,727,541 homeowners were more than 30 days but less than 90 days past due…

in addition to those homeowners who were simply delinquent, BKFS also showed that 951,348 home loans, or 1.88% of all mortgages outstanding, remained in the foreclosure process at the end of June, which was down from 966,062, or 1.91% of all active loans in May and down from 2.93% of all mortgages in June of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and May’s so-called “foreclosure inventory” was the lowest percentage of homes in foreclosure since 2008…however, new foreclosure starts rose in June for the 2nd month in a row, as the 88,314 new foreclosures started in June was 2.38% higher than the 86,258 homes foreclosed on in May and 12.1% higher than the 78,796 foreclosures started in April…nonetheless, new foreclosures are still well off the pace of last year, as year-to-date foreclosure starts were at their lowest since 2007 and down 19% from a year ago…

the graph below, from page 7 of the Mortgage Monitor pdf, shows the percentage of mortgages that were in the foreclosure process monthly since 1995 in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble monthly in blue over the same period…we can see that the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 1.88% in June is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice they’re still more than 4 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.70% of all mortgage outstanding in June, that count is nearly down to half of the 10.57% of mortgages that were delinquent but not in foreclosure at the peak of the mortgage crisis in January of 2010, but still somewhat above the December 2005 delinquency percentage of 4.27% noted on the graph…comparing this graph to the one from the MBA above, we can see that the overall trends are quite similar, but that the Mortgage Monitor totals have generally been slightly less in each category…also note the seasonality of mortgage delinquencies apparent in the track of the red graph below, wherein they usually begin to increase at the beginning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping…

June 2014 LPS delinquencies and foreclosures

as you’ll recall, the monthly mortgage monitor is a largely graphic presentation of mortgage conditions with only 3 pages of summary data in table form (pages 21 through 23 in this month’s pdf); the areas covered graphically in the June mortgage monitor include originations and prepayments, ie, new mortgages, and homeowners who are paying off their mortgage ahead of its term; delinquencies and foreclosure inventory, with a focus on judicial states, where foreclosures must proceed through the court; mortgage modifications, contrasting government HAMP modifications with proprietary modifications; and home sales volume, with a focus on short sales and discounters properties…since our concern in following this report has been homeowners who are in trouble, we’ll include a few graphics below to expand on homeowners who remain in foreclosure….

as the far left margin tells us, this first graph below, from page 10 of the Mortgage Monitor, shows the percentage of those homeowners who have been in foreclosure for more than two years from the beginning of 2008 to the present, with the percentage for judicial states shown in blue, the percentage for non-judicial states shown in red, and the overall total percentage of homeowners who have been in foreclosure for more than two years shown in black….you can see that prior to 2009, almost no non-judicial  foreclosures were taking more than two years, and only a few foreclosures in judicial states were thus tied up…as of June, more than 57% of all homes in foreclosure had been there more than 2 years, with over 61% of homes in judicial states so encumbered…as we’ve pointed out, the mortgage banking industry blames the delay in foreclosures on the courts, but note that even in non-judicial states, where the court proceedings are unnecessary, roughly 42% of foreclosures are now taking more than 2 years…

June 2014 LPS foreclosures over 24 mo overdue

the next graphic, from page 11 of the mortgage monitor pdf, is a map of the lower 48 states showing the average number of days those homes in foreclosure have been delinquent on their mortgage, which in this graphic BKFS says has grown to 995 days nationally…the states are color-coded such that those states where the foreclosure pipeline is the longest are in the darker shades of red, and the states where the foreclosure proceeding are the shortest are in the darkest green…so the average length of time of mortgage delinquency for homes in the foreclosure process runs from 475 days in Wyoming, 520 days in Nebraska, and 525 days in Michigan 525 at the low end to 1246 days in Florida, 1276 days in New Jersey, 1285 days in the District of Columbia to 1350 days in New York at the high end…an inset below the map also notes that the average length of time of delinquency for foreclosed homes in judicial states has grown to 1084 days, in contrast to 775 days in non-judicial states…understand that these are averages, and thus some newly foreclosed homes may well have been delinquent as few a 90 days; thus, it’s likely that a fair percentage of homes that were foreclosed on as early as 2008 and 2009 are still in foreclosure today…

June 2014 LPS duration of delinquency by state

finally, for an overview of how this foreclosure crisis has played out from the beginning, we’ll also include, from page 23 of the pdf, a portion of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status…the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages in the foreclosure process, the total non-current mortgages, including those that just missed one or two payments, and the number of foreclosure starts going back to January 2008, with monthly data since January 2013….then, in the last two columns, we see the average length of time those who’ve been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…here we can see that the total of non-current mortgages ballooned to 7,680,916 in January 2010 and has now dropped to levels lower than those of 2008….we can also see that although the count of monthly foreclosure starts peaked in 2010, the count of those in foreclosure continued to rise until 2012 as the average time of mortgage delinquency for homes in the foreclosure process lengthened…and although the total counts of both mortgages that are seriously delinquent and those that are in foreclosure has fallen considerably, the average length of time for those who have been delinquent without foreclosure remains at 502 days, while the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 997 days…

June 2014 LPS non current state table 2

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts,contact me…)

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