Wells CFO: California economy close to bottom

Wells Fargo, the San Francisco banking giant, is sounding more bullish on the California housing market – at least compared with places like New York, where the downturn began later.

“It’s premature to say the economy has bottomed out,” Wells’ chief financial officer, Howard Atkins, said in an interview this morning as the bank reported record earnings.

 “But clearly there are signs that indicate to me we are closer to the bottom,”  Atkins said. “Some of that is in the housing sector. With interest rates so low, we are seeing volumes picking up, even in California – not just refinancings, but home purchases.”

Because California’s housing market collapsed earlier than many other states, “it will come out earlier. New York is definitely still  declining,” Atkins said.

Wells' first-quarter statistics showed $1.6 billion in revenue from mortgage loan originations and sales on $101 billion in new home loans. That put it ahead of Bank of America Corp. as the biggest originator.

There were $100 billion in additional mortgages in the pipeline at the end of the first quarter, up 41% from the previous quarter, Wells said.

Atkins said that Wells has added 5,000 mortgage employees to handle the surge caused by rates in the 5% range for 30-year fixed-rate loans. Given the backlog of pending home loans, they’ll be kept busy at least through the end of this quarter, he said.

Bank of America also recently said that it is adding 5,000 employees to handle the huge volume of loans.

Atkins’ comments came as Wells released first-quarter earnings. As the bank pre-announced April 9, its profit was about $3 billion before dividends to preferred shareholders. After dividend payments – including $372 million owed on $25 billion in taxpayer bailout funds – it earned $2.38 billion.

A year earlier, Wells had turned a profit of $2 billion. But in the fourth quarter it lost $2.7 billion.

-- E. Scott Reckard

Comments

[fezco]

NY Times seem to differ.

http://tinyurl.com/cybduw

Also... the forclosure party has started up again.

http://tinyurl.com/dlvbmy

So what makes this guy think we hit bottom? Knifecatching?

[Move 2 CA]

"Close" to the bottom and "closer" to the bottom are two different things. Yes, we are obviously closer. I mean, prices generally aren't going up. On the other hand, there is obviously a lot of overly-optimistic thinking, and I can't imagine that we are really close to the bottom, but even if we are, so what? The prices are still way to high for most renters to comfortably afford; and, I'm not convinced that all of these "buyers on the sidelines" are locked into buying in SoCal. The idea that these renters will all be forced to jump in is VERY optimistic. If this is the bottom, then there may be an uptick, but I don't think if follows that we'll necessarily see a stampede of buying. Yes, people are waiting, but if this is the bottom, then I expect we'll be seeing lots of relocations out of state. Plenty of nice, liberal, green, clean, lower stress, low crime, low cost of living communities in Texas, Georgia, North Carolina, etc. with jobs that pay as much or almost as much. If this is the bottom, these people would be stupid to lock themselves into buying here.

[Nick]

"Bank of America also recently said that it is adding 5,000 employees to handle the huge volume of loans."

Now can we PLEASE get some mainstream news media outlets loudly and openly calling BS whenever some government official says banks are not lending, or credit is not available, or any other absurd statements?

[Jason]

Since when does closer mean close?

[sailor7x]

We can definitely trust this guy. He has no stake in the situation. He is NOT just "talking his position"!

LOL!!!!

[jo]

The housing market is showing signs of easing? Which market would that be? We've seen a rise in sales in the lower end, but a lot of those have been foreclosures. NODs are still at records highs and are about to hit the mid to high end. Shadow inventory is stacked up to the hilt. The IMF now says they got it wrong and the recession will last through 2010. Unemployment will therefore continue and with it foreclosures. We're probably only half way through this. Our friend is just seeing the speed bumps common to any downward spiral.

[wizard]

What are these CFO's smoking...!!
Time to move my money from WFB & BofA and...
Seriously, these are the ones that make decisions,
that's why we're in the trouble we're in.

[Cal]

Whats the problems, He is talking volume not price. Does anyone think we will hit the never seen before sales lows of last year again?

[Fourth Generation]

The bank executive seems to forget that we are in a recession and jobs are disapearing fast. It is not just a low interest rate and lower house prices that will turn the housing market around. And about housing, in CA due to the excessive pricing during the bubble there still more price correction before reaching the bottom. Of course if you are a knife catcher by all means get in line.....

[T-Bone]

It's easy to generate profits when you don't have to mark to market all of the real estate you have on your books, but can just say what you 'think' it is worth. Wells Fargo is getting by with creative accounting. Everyone that looks at their financials deeper would see this. It is in there best interest to create buying interest in homes so that they can get their inventory down.

[NoHoDolphin]

When did this Country loose it's investigating journalism? You post this "fantasy" spewed, like pea soup, from bankers who steal from tax payers claiming a bottom but you don't dig AT ALL! The majority of homes being sold are in the dead zones of CA. Banks aren't even listing properties in decent areas. When I put in a search for up to $450,000, 2/2, FP & Pool for decent cities in SFV I come up with 7 results. SEVEN! And most are in Reseda and 6 of the 7 are short sales. Why not REPORT on this? Why do you just keep regurgitating garbage that's fed to you?

Which brings me to a deeper issue. You post this crap but not ONE WORD about CFO David Kellermann? What's up folks? The more I don't read about this, the more I am convinced that there is a MAJOR cover up. Where are the INVESTIGATORS in journalism?????????

very frustrating....

[jonah1979]

There's going to be another 25%+ drop in california realestate prices over the next year. This will happen until prices fall to an amount that salaries can support. Then you will see about 3 years of pretty flat prices...nothing really going up.

[Tim K.]

We are always "closer" to the next whatever it is, as long as time is moving forward and the next event is staying still. But maybe we're not - the bottom looks to be moving outward according to the latest Businessweek article that said that because of record low interest rates, all those Option-ARMs that were going to recast starting Spring 2009 until 2012 are now pushed back another year to 2010. So maybe we are further from the bottom. Or the bottom just got deeper.

But the sad part of the above talking points from Wells Fargo is it shows just how badly it appears they want to believe that there is not much future pain. I lends an incredible insight into their thinking, which explains how they can be continually "surprised" by all the new defaults that keep popping up.

[Drew]

Move2CA posts: "The prices are still way to high for most renters to comfortably afford"

Home prices in places like LA, SF and NYC have ALWAYS been "way too high for most renters to comfortably afford." There have ALWAYS been more renters than owners in these cities.

[Move 2 CA]

Drew -
You are right about that, and it's also true that things aren't as absurd as they were a few years ago. All I'm saying is that there seems to be this idea that all of "the people on the sidelines" will jeventually ump in once we reach a bottom, and I think that there is another option open to many people if the bottom is too high: relocated. My guess is that many people "on the sidelines" are indeed renting temporarily waiting for their chance to buy an affordable house here in LA. But if it transpires that they can't and will never be able to so, then I suspect many of them will simply move on to another place rather than overspend in LA or continue renting forever.

[pangea]

NoHoDolphin I live in that area and I've noticed a huge hole in the market in that price range. Everything is either a trashed out foreclosure or way too expensive. Anything nice and under 400k is getting snatched up fast.

[Mickey Mouse]

@NoHoDolphin
You are right. Banks are withholding foreclosed homes in desirable areas from the market. I've seen the Dataquick numbers and there have been 40 foreclosures in my zip code in two months yet none of these show up in the RE listings. There are lots of homes listed in undesirable locations.

[Joan J.]

This Wells Fargo nut is a damn liar! His bank is an insolvent Zombie surviving on the tax payer life support.
These banks are hiding 80k houses in shadow inventory in CA alone. How the hell can you foracast a bottom when you are hiding 80k houses and a tsunami of new foreclosures is happening right now!

Never forget Mozillo said CountryWide had very little exposure to sub-prime right before he dumped his stock and then the news started leaking that CW had one of the highest exposures.

Lies, damn lies, and banker lies. I hope this guy rots!

[Fourth Generation]

Drew, it is true that places like LA and SoCal have housing prices higher than other parts of the country for most renters to comfortably afford. But in here because of the bubble that situation reached a point in which even people pulling over 100K a year were priced out of the market. Now these are not a flood of people waiting on the sidelines, but nonetheless is a group of families that were denied the opportunity to buy a house due to the Ponzi scheme that just got deflated.