Nothing in any of the data released this week suggested that we're about to break out of the murky environment which is the present state of the economy. Data gathered by the Fed in its regional surveys of economic conditions, called the "beige book," found firm or steady growth in only two of twelve districts, with "modest or moderate" expansion in the remaining ten. Residential real estate markets largely remain weak, with moderate or scattered reports of higher delinquency rates in four districts. Manufacturing was said to be "slow overall"; labor markets remain tight in most areas, and consumer prices were "generally stable or increasing modestly."

That survey closed two weeks ago, and was probably gathered in the weeks prior to that, so it does reflect what was a weak end to the first quarter of 2007. As far as residential real estate goes, Existing Home Sales slumped by 8% in March, landing with a thud at a 6.12 million annualized rate of sale. Much was made over the decline (the largest one-month drop since 1989), but the rate of sale, while slow, is actually on par with levels seen as recently as 2003, so we don't think the drop was all that dire. For existing homes, prices rose just a touch, up 0.8% for the month, while inventory levels bloated to 7.3 months worth of supply at the present sales pace.

7% of Mortgagors Have Negative Equity
Roughly 7% of U.S. homeowners have negative home equity, and the housing industry is currently in the throes of a "deep recession," according to the chief economist for Global Insight Inc., a forecasting firm. But Global Insight's Nariman Behravesh also said Thursday that the subprime mortgage crisis "is now off the front pages, but more firms could go belly up." Speaking at a forecast conference sponsored by the National Association of Home Builders, Mr. Behravesh added that "housing demand is beginning to recover." Even though 7% of mortgages are under water, 60% of homeowners have equity of 30% or more, he said. Outstanding subprime loans account for just 13% to 14% of the total market, according to Global Insight.

Negative equity means that if the homeowner wants to sell their homes, they need to bring funds to the settlement table. It also means that they are not in any position to refinance their mortgage. This brings up a point that I have been trying to tell financial planners and other mortgage professionals - it is important to pull the equity out of your home and invest it so that you have it available in case you need it later.

HUD Can Help B&C Borrowers, Official Says
While rejecting the idea of a government bailout for delinquent subprime borrowers, a top government housing official said Wednesday that the Federal Housing Administration can come to the aid of "tens of thousands" of consumers through the refinancing process. Roy Bernardi, deputy secretary for the Department of Housing and Urban Development, said, "If a refi is doable, FHA would look at it and work with servicers." Mr. Bernardi noted that the agency could do more to help subprime borrowers if FHA reforms are passed by Congress, including a proposal that would allow the agency to charge risk-based premiums. "We must reach out to help the borrower," he said, speaking before a policy meeting sponsored by the Mortgage Bankers Association. "But we can't simply throw money at the problem."