prudentbear.com
...From Countrywide Credit’s July operational data: “Driven by continued low interest rates and market share growth, Countrywide’s core mortgage banking business delivered outstanding performance results in July. Average daily loan applications hit a record $1.4 billion, an increase of 28 percent from the prior month. The mortgage loan pipeline jumped 33 percent over the prior month to $31 billion. Application and pipeline trends indicate robust loan fundings for the near term. Mortgage loan fundings in July were $17.1 billion, fast approaching the company record set in December 2001 of $17.6 billion. July’s purchase fundings reached an all-time high of $8.5 billion, eclipsing the prior month's record by 10 percent.” Making year-over-year comparisons, average daily volume was up 98%, while the mortgage pipeline was up 73% ($31.1 billion). Purchase volume was up 81% ($8.5 billion) y-o-y, while refi volume jumped 50% to $8.7 billion. E-commerce volume increased 49% to $7.7 billion, and home-equity volume surged 78% to surpass $1 billion during July. Subprime originations jumped 42% to $729 million.
With fixed mortgage rates sinking to the lowest level in 32 year, it is not surprising that the Mortgage Bankers Association’s weekly application index increased to its highest level on record (10 years of surveys). The refi index jumped 6.2% to the highest level since November (up 103% y-o-y), while the purchase index gained 3.7% (up 17.5% y-o-y). The index of adjustable-rate mortgages is up 210% y-o-y.
Despite the flood of additional mortgage finance, July was a very disappointing month for retailers. Best Buy shocked the Street with news of a major spending slowdown in July. Elsewhere, the Bank of Tokyo-Mitsubishi retail survey had July same-store sales up a disappointing 2.6%, down from June’s 5.1% increase. Wal-Mart saw same store sales slow to a below-plan 4.5%, compared to last July 2001’s comps that were up 6.0%. This is a notable decline from June’s 7.9% same store sales gain (up from June 2001’s 6.9%) and May’s 6.2% (up from May 2001’s 3.8%). Ex-Wal-Mart, same store sales were up only 1.5%. Target same-stores sales increased 1% (vs. year ago 4.6%), down significantly from June’s 4.9% . The Gap saw its same store sales decline 8%, J.C. Penney dropped 2.2%, Federated 5.2%, Sears 4.9%, and Dillards 3.0%.
The Rockefeller Institute (Nicholas W. Jenny) this week reported that second-quarter state tax receipts fell an alarming 10.9% from last year’s second quarter. With the well of huge stock market capital gains having run dry, personal income taxes sank 23%. Corporate taxes were down 12.5%. By state, California had the worst performance as its quarterly revenue dropped a shocking 24.7% from a year ago. Oregon saw its tax revenue decline 24.1%, New York 19.4% and Connecticut 19%. This is quite a change from the peak of the boom in 2000, when y-o-y increases in quarterly personal income tax receipts averaged 12.3%. The National Conference of State Legislatures is estimating that states will run deficits this year approaching $58 billion. The California legislature is locked in a stalemate with the state's estimated $23.6 billion budget shortfall. Governor Davis’s administration yesterday (Sacramento Bee: “State Budget Stalemate: Day 38”) warned that individual agencies may be required to institute permanent 20% spending cuts. A spokesperson from the governor’s office stated, “We’ve got to get this budget passed and move forward to the bigger challenge that lies ahead of us.” Estimates have an additional deficit of $51.6 billion accruing over the next five years. The state is considering significant tax increases for cigarettes, automobile registrations, satellite television, and real estate to go along with a reduced state services.
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