NEW YORK (Reuters) - One in every eight U.S. households, a record share, ended 2008 behind on their mortgage payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices, the Mortgage Bankers Association said on Thursday.
New orders received by U.S. factories fell for a sixth straight month in January, official data showed on Thursday, further evidence the economy’s downward spiral was gathering momentum.
The Commerce Department said factory orders fell 1.9 percent in January from a revised 4.9 percent decline in December, previously reported as a 3.9 percent drop.
Federal Reserve Vice Chairman Donald Kohn on Thursday said that the risks to policy holders and the broad economy are too great for the government not to prevent insurance company American International Group Inc from failing.
Kohn told the panel that disorderly failure of systemically important financial institutions during the current period of economic stress would deepen the recession, which is already one of most severe in more than 20 years.
JONATHAN BASILE, ECONOMIST, CREDIT SUISSE, NEW YORK
FACTORY ORDERS: “Manufacturing continues to decline. This is not as bad as anticipated because there was an uptick in non-durables. But durable goods remain very soft.”
“Just because we have a smaller negative here, it doesn’t mean we are at a turning point. Manufacturing continues to worsen as supply is not falling as much demand.”
MORTGAGE DELINQUENCIES: “It tells you how dire this situation is. Anything close to 8 percent in terms of mortgages past due is so far from normal. No one is unscathed from this situation, even the prime borrowers.”
“Anything that the government and the Fed try to do to diminish foreclosures, if it works, will stop the drop in home prices. The problem is big and will require long adjustments. There is no quick fix. The government’s programs will help ease the pain.”
MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA, NEW YORK:
MORTGAGE DELINQUENCIES: “It looks like there was a noticeable increase in homes either delinquent or in foreclosure from quarter to quarter. It looks like the number of problem loans is still moving higher. In the prior two quarters we didn’t see that much of a change but in the fourth quarter it looks as if the pace of problem loans picked up and it’s probably tied to problems in the economy such as increased layoffs.
FACTORY ORDERS: “Factory orders were better than expected with a drop of only 1.9 percent instead of the bigger drop that was expected. Orders for non-durable goods rose 0.5 percent while durable goods orders were down 4.5 percent. The increase in non-durable orders is not necessarily good news. Most of that was higher prices of petroleum products. Excluding petroleum products, orders for non-durable goods were down 1.1 percent. That’s a slower decline than in the prior two months, but it still indicates softening.”
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