Consumer credit falls $9.5 billion in August (Reuters)

WASHINGTON (Reuters) – U.S. consumer credit posted its largest decline in more than a year in August, according to a Federal Reserve report on Friday that suggested consumers were reluctant to hold more debt amid a shaky economic recovery.

Consumer credit fell a surprising $9.50 billion in August after rising $11.92 billion in July, the report said. That was well below economists' expectations of a $7.75 billion increase.

"Consumers are extraordinarily sensitive to economic conditions and as things started to look a bit more sour, they stopped using their credit card," said Steve Blitz, a senior economist with ITG Investment Research in New York.

The U.S. credit rating downgrade and Europe's debt problems triggered wild swings in global equity markets in August. That combined with higher unemployment to hold consumers back, economists suggested.

Revolving credit, which mostly measures credit card use, dropped $2.27 billion in August after falling $3.56 billion in July.

Non-revolving credit, which includes mostly auto loans, fell $7.23 billion, the largest decline since August 2008, after rising $15.48 billion in July.

(Reporting by Rachelle Younglai, editing by Andrea Ricci and Dan Grebler)

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Consumer borrowing dropped $9.5 billion in August (AP)

By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer – Fri Oct 7, 5:24 pm ET

WASHINGTON – Consumers slashed their borrowing in August by the most in 16 months. The drop suggests many worried about taking on new debt while the economy slumped and the stock market fluctuated wildly.

Fewer people used their credit cards. And a measure of demand for auto and student loans fell.

Total borrowing dropped $9.5 billion in August, the Federal Reserve said Friday. In July, borrowing increase $11.9 billion.

Americans have been struggling all year with high unemployment, meager pay raises and pricier goods and gas. That has depressed consumer spending, which fuels 70 percent of economic growth.

In August, consumer confidence tumbled to a two-year low, and retail sales were flat. The weak economy, along with gridlock in Washington and heightened concerns over Europe's debt crisis, rattled financial markets.

The August drop in borrowing was the largest since April 2010. Prior to that, consumers had increased their borrowing for 10 straight months.

Borrowing for auto and student loans plunged $7.2 billion in August. A category that includes credit cards fell $2.3 billion.

The overall decline lowered total borrowing to a seasonally adjusted $2.44 trillion. Borrowing is just 2.1 percent higher than the recent low hit in September of last year.

The August decline came as a surprise to economists who had been expecting a solid increase for the month. Some analysts said they believed the figure overstated the weakness in borrowing and reflected trouble the government has with seasonally adjusting the borrowing figures.

Troy Davig, an economist at Barclays Capital, said he expected borrowing to continue rising at a modest pace in coming months, reflecting his expectation that consumers will keep borrowing cautiously.

"We are looking for consumer borrowing to keep rising slowly at a pace that will not get ahead of income growth," Davig said.

Households began borrowing less and saving more when the country fell into recession and unemployment surged.

While economists believe borrowing will gradually increase in coming months, they don't expect consumers to load up on debt the way they did during the housing boom. Americans felt wealthier then and were more willing to take on added debt because of the soaring value of their homes.

The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.

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Pending home sales fall 1.2 percent in August: NAR (Reuters)

WASHINGTON (Reuters) – Pending sales of existing U.S. homes fell less than expected in August despite rock-bottom mortgage rates, underscoring the difficulties policymakers face in helping the struggling housing sector.

The National Association of Realtors said on Thursday that its pending home sales index, based on contracts signed in August, was down 1.2 percent to 88.6, its lowest since April.

Analysts polled by Reuters ahead of the report were expecting sales to decline 1.8 percent.

Hurricane Irene, which battered the Northeast at the end of the month, was likely a factor in the decline. Sales in the Northeast fell 5.8 percent.

But the NAR's chief economist Lawrence Yun said tight credit was also holding back the overall housing market.

Banks clamped down on credit when the financial crisis struck in 2007 and credit conditions remain restrictive for many households.

"The housing market is basically stuck at a low level. I don't see any evidence that sales will fall much further, but there is no rebound yet either," said Jim O'Sullivan, chief economist at MF Global in New York.

The U.S. Federal Reserve slashed interest rates during the crisis and has continued to break out new tools to try to get banks to lend more to help the economy recover from recession.

Last week it unveiled measures to boost lending to home-buyers but analysts caution that the level of mortgage rates is not the main hurdle to buying.

The Fed's low interest rate policies have helped push 30-year mortgage rates to their lowest since at least 1971, when mortgage finance provider Freddie Mac started tracking them. This week they hit a record low 4.01 percent.

Many economists are skeptical attempts to lower rates will help much because millions of Americas owe more on their mortgages than their homes are worth, which can effectively chain them to their properties while also preventing them from refinancing to lower their monthly costs.

The White House is also trying to work out a plan to help the depressed sector. The administration is working with the Federal Housing Finance Agency, a regulator, to try to expand a program that helps distressed borrowers with government-backed loans.

Some other government props for the sector, however, are set to fall away. At the end of this month, the size of the loans federal housing agencies can back will fall and next year government-controlled mortgage finance companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) will begin to raise fees on the loans they purchase.

(Reporting by Jason Lange; Editing by James Dalgleish)

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Pending home sales fall 1.2 percent in August: NAR (Reuters)

WASHINGTON (Reuters) – Pending sales of existing homes fell less than expected in August despite rock-bottom mortgage rates, underscoring the difficulties policymakers face in helping the struggling housing sector.

The National Association of Realtors said on Thursday that its pending home sales index, based on contracts signed in August, was down 1.2 percent to 88.6, its lowest since April.

Analysts polled by Reuters ahead of the report were expecting sales to decline 1.8 percent.

Hurricane Irene, which battered the Northeast at the end of the month, was likely a factor in the decline. Sales in the Northeast fell 5.8 percent.

But the NAR's chief economist Lawrence Yun said tight credit was also holding back the overall housing market.

Banks clamped down on credit when the financial crisis struck in 2007 and credit conditions remain restrictive for many households.

"The housing market is basically stuck at a low level. I don't see any evidence that sales will fall much further, but there is no rebound yet either," said Jim O'Sullivan, chief economist at MF Global in New York.

The U.S. Federal Reserve slashed interest rates during the crisis and has continued to break out new tools to try to get banks to lend more to help the economy recover from recession.

Last week it unveiled measures to boost lending to home-buyers but analysts caution that the level of mortgage rates is not the main hurdle to buying.

The Fed's low interest rate policies have helped push 30-year mortgage rates to their lowest since at least 1971, when mortgage finance provider Freddie Mac started tracking them. This week they hit a record low 4.01 percent.

Many economists are skeptical attempts to lower rates will help much because millions of Americas owe more on their mortgages than their homes are worth, which can effectively chain them to their properties while also preventing them from refinancing to lower their monthly costs.

The White House is also trying to work out a plan to help the depressed sector. The administration is working with the Federal Housing Finance Agency, a regulator, to try to expand a program that helps distressed borrowers with government-backed loans.

Some other government props for the sector, however, are set to fall away. At the end of this month, the size of the loans federal housing agencies can back will fall and next year government-controlled mortgage finance companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) will begin to raise fees on the loans they purchase.

(Reporting by Jason Lange; Editing by James Dalgleish)

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Summary Box: Housing starts down 5 pct. in August (AP)

CONSTRUCTION DIPS: Builders began work on a seasonally adjusted 571,000 homes in August, the Commerce Department said Tuesday. That's a 5 percent decline from July and a three-month low.

SINGLE-FAMILY, APARTMENTS: Single-family homes, which represent roughly two-thirds of home construction, fell 1.4 percent. Apartment building plunged 12.4 percent. Building permits, a gauge of future construction, rose 3.2 percent.

BUILDERS WAITING: Home construction is down nearly 6 percent over the past year. But permits are up nearly 8 percent. That suggests builders aren't working on new homes, but may be preparing to start dormant projects when the economy improves.

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Instant View: Housing starts fall more than expected in August (Reuters)

NEW YORK (Reuters) – Housing starts fell more than expected in August as groundbreaking for both single-family and multi-family units declined, while permits for future construction rose, a government report showed on Tuesday.

KEY POINTS: * The Commerce Department said housing starts decreased the most since April, down 5.0 percent to a seasonally adjusted annual rate of 571,000 units. * July's starts were revised down to a 601,000 unit pace, which was previously reported as a 604,000 unit rate. * Economists polled by Reuters had forecast housing starts to fall to a 590,000-unit rate in August. * An overhang of previously owned homes on the market has left builders with little appetite to break ground on new projects and is frustrating the economy's recovery from the 2007-09 recession. * Housing starts are at less than a third of their peak during the housing boom.

COMMENTS:

SEAN INCREMONA, ECONOMIST, 4CAST, NEW YORK:

"The data really isn't very surprising. Housing starts were much weaker than anticipated, that looks more to do with the volatile multiples sector, but still there was the underlying deterioration of singles as well, which continues to suggest that housing isn't going anywhere fast. The permits side is a little bit more positive looking, but it doesn't look like things are really finding their way off the ground much at this point.

"It's an ongoing impediment on the economy and it's not helping but at this point it's really at the bottom so it can't really hurt that much more either."

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG,

FLORIDA:

"It's kind of a mixed bag. The sense is that housing is still pretty weak. It won't improve until the labor market improves substantially and that doesn't look like that would happen this year. Housing is still bouncing around the bottom here even though mortgage rates are so low."

SAL CATRINI, MANAGING DIRECTOR, EQUITIES, CANTOR FITZGERALD &

CO, NEW YORK:

"They missed and revised down. It's bad that the housing market is not only bad, but still missing low expectations. Obviously the market has been ignoring bad news and has been rallying. We were oversold and this is a continuation of what we've seen over the past week."

MARKET REACTION: STOCKS: U.S. stock index futures hold gains BONDS: U.S. bond prices hold losses FOREX: The dollar holds slight losses versus euro

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August home building fell 5 pct., slide continues (AP)

By DEREK KRAVITZ, AP Real Estate Writer Derek Kravitz, Ap Real Estate Writer – Tue Sep 20, 9:28 am ET

WASHINGTON – Builders broke ground on fewer homes in August, evidence that the housing market remains depressed.

The Commerce Department said Tuesday that builders began work on a seasonally adjusted 571,000 homes last month, a 5 percent decline from July and a three-month low. That's less than half the 1.2 million that economists say is consistent with healthy housing markets.

Single-family homes, which represent roughly two-thirds of home construction, fell 1.4 percent. Apartment building plunged 12.4 percent.

Hurricane Irene slowed construction in the Northeast, analysts said.

Building permits, a gauge of future construction, rose 3.2 percent. Jennifer Lee, senior economist at BMO Capital Markets, said the increase was an "encouraging morsel" in an otherwise disappointing report.

Home construction is down nearly 6 percent over the past year. But permits are up nearly 8 percent. That suggests builders aren't working on new homes, but may be preparing to start dormant projects when the economy improves.

Builders typically begin construction on single-family homes six months after getting a permit. With apartment projects, the lag time can be up to a year.

Construction fell to its lowest levels in 50 years in 2009, when builders began work on just 554,000 homes. Last year was not much better and this year is shaping up to be just bad.

While home construction represents a small portion of the housing market, it has an outsize impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.

After previous recessions, housing accounted for at least 15 percent of economic growth in the United States. Since the recession officially ended in June 2009, it has contributed just 4 percent.

Pierre Ellis, an economist at Decision Economics, said a "major revival" in home construction would be needed before there is any "discernible impact" on the economy.

Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales, when lenders allow borrowers to sell homes for less than what is owed on their mortgages. And few homes are selling.

New-home sales fell in July to a seasonally adjusted annual rate of 298,000, the weakest pace in five months. This year is shaping up to be the worst for sales on records dating back a half-century.

Renting has become a preferred option for many Americans who lost their jobs during the recession and were forced to leave their homes. Still, the surge in apartments has not been enough to offset the loss of single-family homebuilding.

Another reason sales have fallen is that previously occupied homes are a better deal than new homes. The median price of a new home is nearly 28 percent higher than the median price for a re-sale. That's almost twice the markup in a healthy housing market.

The trade group said Monday that its survey of industry sentiment fell slightly to 14 in September. The index has been below 20 for all but one month during the past two years. Any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached 50 since April 2006, the peak of the housing boom.

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Summary Box: Foreclosure activity rises in August (AP)

DEFAULTS RISE: The number of U.S. homes receiving an initial mortgage default notice jumped 33 percent last month from July, as banks stepped up their actions against homeowners who have fallen behind on mortgage payments.

NEW WAVE?: Default notices are the first step in the foreclosure process, so the sharp increase in the number of homes receiving them last month signals a potential new wave of foreclosures.

REPOSSESSIONS DOWN: Even as more homes entered the foreclosure process, lenders took back fewer homes in August. Home repossessions fell 4 percent from July and hit a six-month low.

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Mortgage default warnings surged in August (AP)

LOS ANGELES – Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.

The number of U.S. homes that received an initial default notice — the first step in the foreclosure process — jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.

The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.

"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."

Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.

Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.

Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales.

A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market.

Foreclosures weigh down home values and create uncertainty among would-be homebuyers who fret over prospects that prices may further decline as more foreclosures hit the market. There are about 3.7 million more homes in some stage of foreclosure now than there would be in a normal housing market, according to Citi analyst Josh Levin.

"This bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," Levin said in a client note this week.

Banks have been working through a backlog of properties that first entered the foreclosure process months, if not years ago. But the August increase in homes entering that process sets the stage for a host of new properties being targeted for foreclosure.

That's bad news for homeowners who may have grown accustomed to missing payments for several months without the threat of foreclosure bearing down on them. In states such as New York and Florida, for instance, processing delays have helped some homeowners stay in their homes for more than two years before banks got around to taking back their properties.

In all, 78,880 properties received a default notice in August. Despite the sharp increase from July, last month's total was still down 18 percent versus August last year and 44 percent below the peak set in April 2009, RealtyTrac said.

Some states, however, saw a much larger increase.

California saw a 55 percent increase in homes receiving a default notice last month, while in Indiana they climbed 46 percent. In New Jersey, where last month a judged ruled that four major banks could resume uncontested foreclosure actions in the state under court monitoring, homes receiving a default notice increased 42 percent.

Despite the increase in new defaults, the number of homes scheduled for auction and those repossessed by banks slowed in August.

Scheduled foreclosure auctions declined 1 percent from July and fell 43 percent from a year earlier, RealtyTrac said.

Auctions increased from July levels in several states, including Colorado, where they rose 51 percent, and Arizona, where they grew 20 percent.

Lenders repossessed 64,813 properties last month, a drop of 4 percent from July and down 32 percent from a year earlier. Home repossessions peaked September last year at 102,134.

Banks are now on track to repossess some 800,000 homes this year, down from more than 1 million last year, Sharga said.

The firm had originally anticipated some 1.2 million homes would be repossessed by lenders this year.

In all, 228,098 U.S. homes received a foreclosure-related notice last month, a 7 percent increase from July, but a nearly 33 percent decline from August last year. That translates to one in every 570 U.S. households, said RealtyTrac.

Nevada still leads the nation, with one in every 118 households receiving a foreclosure-related notice last month.

Rounding out the top 10 states with the highest foreclosure rate in August are California, Arizona, Georgia, Idaho, Michigan, Florida, Illinois, Colorado and Utah.

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