Underwater Mortgages Hit 11.3 Million

There is a reason that 702 American banks, nearly one in ten, were on the FDIC “problem list” as of the end of 2009. A large number of small and mid-sized banks are burdened with home and commercial mortgages that are in default and may even go into foreclosure.

New data from First American CoreLogic shows why the solution to the problem banks face is so difficult to find. Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year. That number represent 24% of all residential homes loans in America.The mortgage numbers are much worse when homes with equity of less than 5% are included. First American reports that ”an additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity.” That means that three out of ten homes have virtually no financial value to their owners. (more)

FDIC Hits Record "Default" Level As Deposit Insurance Fund Plunges By $12.7 Billion To NEGATIVE 20.9 Billion

The U.S. banking industry continued to struggle in the fourth quarter, as the number of banks on the brink of failure continued
to rise and the government's fund to protect deposits fell sharply into the red.

The Federal Deposit Insurance Corp. said Tuesday that its deposit-insurance fund fell to $20.9 billion at the end of 2009, a $12.6 billion drop in the final three months of the year, as bank failures continued at a pace not seen since the savings and loan crisis. The fund's reserve ratio was -0.39% at the end of the quarter, the lowest on record for the combined bank and thrift fund. (more)

New U.S. Homes Sales Plunged to Record Low in January

Sales of new U.S. homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rebound to an annual rate of 360,000 units.

The January decline will heighten fears about the fledgling recovery in housing. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.

Double Dip Recession Risk Is Near: CIO

The global economy looks set to plunge back into recession as the sovereign debt pressure currently rocking Europe intensifies, Ashok Shah, CIO of London & Capital, told CNBC Wednesday.
"There's a risk of a double dip recession round the corner," Shah said. "Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe."

The economic outlook for Europe is deteriorating very rapidly and that is adding to the factors dragging on the economic recovery, Shah told CNBC. (more)

NAR Forecasts No Recovery for Commercial Real Estate This Year

The National Association of Realtors® (NAR) released its latest projections for commercial real estate (CRE). The outlook remains grim as the NAR forecasts no recovery in CRE this year. Rents are expected to decline across all segments (although slightly lower than last year’s rent declines) as vacancy rates remain extremely high. CRE is not expected to recover until after employment materially improves. Since the NAR does not anticipate this improvement until later this year, it is projecting a CRE recovery no earlier than 2011.

The NAR also notes a related index finally stopped declining in the last quarter: (more)

Charts of the Day

Mass Layoffs by U.S. Manufacturers Surge in January

By definition, a mass layoff in the United States is those job cuts that involve 50 or more workers from the same company. Those types of events increased by 35 in January 2010 to 1,761, according to data released.

This is odd in that it has been asserted by government officials that we're on the edge of new jobs being created in the U.S. economy. That doesn't seem likely in the light of the real numbers and not just wishful thinking by politicians.

I believe the reason for the discrepancy is that companies were replenishing supplies, as I've mentioned before here, and those needs have probably been met in general, so as expected, the manufacturing jobs to produce them are no longer needed. At least that would be part of the reason for increase in mass layoffs. (more)