Calculated Risk

Misc: Kansas City Fed manufacturing index "Rebounds", "Flash PMI" shows slower expansion, Mortgage Rates at record low

2012-05-24T12:32:00.000-04:00

• From the Kansas City Fed: Growth in Tenth District Manufacturing Eased Further but Activity Remained Expansionary

Growth in Tenth District manufacturing activity rebounded in May, and producers were more optimistic than in previous months. The majority of producers reported stable or increasing capital spending plans in the next six to twelve months, with very few anticipating a decrease. Most price indexes moderated, although more producers than in April plan to raise selling prices in future months.

The month-over-month composite index was 9 in May, up from 3 in April and equal to 9 in March ... In contrast, the employment index eased slightly from 12 to 8.

The regional manufacturing surveys have been mixed in May. The NY (Empire State) and Kansas City Fed surveys showed faster expansion, but the Richmond Fed showed slower expansion. And the Philly Fed survey showed contraction.

• Also for manufacturing, the new Markit Flash PMI showed slower expansion. From Markit: PMI falls to three-month low, signalling slower rate of manufacturing expansion

The May Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) indicated a solid improvement in U.S. manufacturing sector business conditions, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. However, with the seasonally adjusted PMI falling from 56.0 in April to 53.9, the headline PMI nonetheless signalled the weakest expansion in three months.

This is the first release of the Flash PMI, and it has no track record of predicting the ISM number (the May report will be released June 1st).

• From Freddie Mac: Historic Lows for Fixed Mortgage Rates Hold Steady

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing the record lows for average fixed mortgage rates holding steady for the week. The 30-year fixed-rate mortgage ticked slightly down to 3.78 percent and 15-year fixed-rate mortgages remained unchanged from last week at 3.04 percent.

30-year fixed-rate mortgage (FRM) averaged 3.78 percent with an average 0.8 point for the week ending May 24, 2012, down from last week when it averaged 3.79 percent. Last year at this time, the 30-year FRM averaged 4.60 percent.

FDIC-insured institutions’ 1-4 Family Real Estate Owned (REO) decreased in Q1

2012-05-24T10:45:00.000-04:00

The FDIC released the Quarterly Banking Profile today for Q1 2012.

Here is the press released from the FDIC: FDIC - Insured Institutions Earned $35.3 Billion in the First Quarter of 2012

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $35.3 billion in the first quarter of 2012, a $6.6 billion improvement from the $28.8 billion in net income the industry reported in the first quarter of 2011. This is the 11th consecutive quarter that earnings have registered a year-over-year increase. However, loan balances declined by $56.3 billion (0.8 percent) after three consecutive quarterly increases.

FDIC Acting Chairman Martin J. Gruenberg said, "The condition of the industry continues to gradually improve. Insured institutions have made steady progress in shedding bad loans, bolstering net worth, and increasing profitability." He also noted, "The overall decline in loan balances is disappointing after we saw three quarters of growth last year. But we should be cautious in drawing conclusions from just one quarter."
...
The number of "problem" institutions fell for the fourth quarter in a row. The number of "problem" institutions declined from 813 to 772. This is the smallest number of "problem" banks since year-end 2009. Total assets of "problem" institutions declined from $319 billion to $292 billion. Sixteen insured institutions failed during the first quarter. This is the smallest number of failures in a quarter since the fourth quarter of 2008, when there were 12.

The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance — the net worth of the fund — rose to $15.3 billion at March 31 from $11.8 billion at the end of 2011. Assessment revenue and fewer bank failures continued to drive growth in the fund balance.

On 1-4 family Real Estate Owned (REO), the report showed that REO by FDIC insured institutions declined to $11.08 billion in Q1, from $11.64 billion in Q4 2011. FDIC insured institutions REO peaked at $14.8 billion in Q3 2010.

Unfortunately the FDIC does not collect data on the number of properties held by FDIC-insured institutions, instead they aggregate the carrying value of 1-4 family residential REO on FDIC-insured institutions’ balance sheets.

Click on graph for larger image in new window.

Here is a graph of the 1-4 family REO carrying value for FDIC insured institutions since Q1 2003.

Note: FDIC insured institutions have other REO and this is just the 1-4 family residential REO (other REO includes Construction & Development, Multi-family, Commercial, Farm Land).

Of course this is just a small portion of the total 1-4 family REO. The FHA, Fannie and Freddie have already reported that REO declined in Q1. I'll have more on REO soon.

Weekly Initial Unemployment Claims essentially unchanged at 370,000

2012-05-24T08:30:00.000-04:00

The DOL reports:

In the week ending May 19, the advance figure for seasonally adjusted initial claims was 370,000, a decrease of 2,000 from the previous week's revised figure of 372,000. The 4-week moving average was 370,000, a decrease of 5,500 from the previous week's revised average of 375,500.

The previous week was revised up from 370,000 to 372,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 370,000.

The 4-week average has declined for three consecutive weeks. The average has been between 363,000 and 384,000 all year.

And here is a long term graph of weekly claims:

This was close the consensus forecast of 371,000.

All current Employment Graphs

Grexit Update and Look Ahead: Durable Goods, Weekly Unemployment Claims

2012-05-23T21:01:00.000-04:00

The Greek election is June 17th, and Greece will be funded through the election. But the contingency planning has started ... from the WSJ: Europe Plans for Greece Exit

Finance-ministry officials from the 17 countries that use the euro agreed earlier this week on the need to develop national contingency plans in case Greece drops out of the common currency, euro-zone officials said. The plans would seek to address what would be an unprecedented event in the modern financial system: how to buffer government bond markets, the banking sector and other financial markets in the event of a Greek exit.
...
Europe's leaders emphasize they want to avoid a Greek exit and warn of turmoil in Greece and beyond if the country leaves.

From the Athens News: Euro exit fears hinder tax collecting efforts

Two tax officials who declined to be named told Reuters that May revenues fell by 15-30 percent in tax offices away from the major cities and relative wealth centres of Athens and Thessaloniki.

"People are suspending some payments because we are in a pre-election period and also because of uncertainty stemming from a potential Greek euro exit," said the finance ministry official

And on Thursday:

• At 8:30 AM ET, the Census Bureau is scheduled to release the Durable Goods report for April. The consensus is for a 0.5% increase in durable goods orders.

• At 8:30 AM, the Department of Labor will release the Unemployment Insurance Weekly Claims report. The consensus is for claims to be essentially unchanged at 371 thousand compared to 370 thousand last week.

• Also the Kansas City Fed regional Manufacturing Survey for May will be released at 11:00 AM, and NY Fed Predisent William Dudley speaks at 10:30 AM.

Earlier on new home sales:
• New Home Sales increase in April to 343,000 Annual Rate • New Home Sales Comments
• New Home Sales graphs

Kolko: Dissecting the House Price Indices

2012-05-23T17:16:00.000-04:00

CR Note: This is from Trulia chief economist Jed Kolko:

Dissecting the House Price Indices

Each month, several data releases track house price changes. Case-Shiller, CoreLogic, the Federal Housing Finance Agency (FHFA), the National Association of Realtors (NAR) and others report monthly sales-price trends, and the Trulia Price Monitor reports trends in asking prices, a leading indicator of sales prices. These indices often show different trends even for the same time period. Some of the differences among these indices are well-known, such as the fact that FHFA’s traditional index is based on transactions involving conforming, conventional Fannie Mae & Freddie Mac mortgages, while other indices (including the newer FHFA expanded-data index) cover a broader set of homes. But other, more technical differences help account for why some indices go up while others go down, including how they handle:

• The mix of homes listed and sold.
• Seasonal patterns in home prices.
• Weighting of homes and metros.

How much do these issues really matter for price trends? A lot, it turns out. In constructing the Trulia Price Monitor, we (1) adjust for the mix of homes listed, (2) adjust for seasonality, and (3) “weight” homes equally so that our national trend best represents what’s going on with the typical home in the largest 100 metros. Using this approach, we found that asking prices nationally rose 0.2% year-over-year and 1.9% quarter-over-quarter in April. Other price indices take different approaches, and mix-adjustment, seasonal adjustment, and value-weighting all have pros and cons. To see how much these issues matter, we used our data to see what the price trends would look like using different technical approaches.

Mix of homes listed and sold.

The price of a home depends on its size, location, and many other factors. For example, if larger homes or homes in more expensive neighborhoods happen to be listed or sold, the average (or median) listing or sales price will rise. That doesn’t mean that the typical home has increased in value – which is what most owners, buyers, sellers, and investors really care about. To know how the typical home’s value has changed, most price indices adjust for the mix of homes that are listed or sold, either by factoring in specific attributes of the home like its size and location (hedonic models, which the Trulia Price Monitor and FNC use) or by looking only at how prices have changed for the same home over time (repeat-sales models, which Case-Shiller, FHFA, and CoreLogic use). How much does the changing the mix of homes matter? The Trulia Price Monitor for April 2012 showed that prices nationally increased 0.2% year-over-year; this adjusts for the mix of homes. But without adjusting for home size, neighborhood, and other factors, the median listing price increased by 8.1% year-over-year. That’s a huge difference and that can partly be attributed to the fact that homes listed today are, on average, 6.2% larger than a year ago. They also tend to be located in slightly more expensive neighborhoods.

The shift toward larger homes on the market means that price indices that don’t adjust for the mix of homes are showing much larger price increases than what the typical home is experiencing. So why look at any price trends that don’t adjust for the mix of homes? Unadjusted price trends do reflect how typical transaction amounts are changing, which affects real estate commissions and the health of the real estate industry.

Seasonal patterns in home prices.

Home prices – both asking and sales – follow predictable seasonal patterns, dipping in winter and rising in spring and summer. (Other housing activities, like sales volume and construction starts, swing even more with the seasons than prices do.) Comparing home prices at the same time of the year takes out any seasonal effect, but quarter-over-quarter or month-over-month changes can be strongly affected by seasonal patterns.

The Trulia Price Monitor for April 2012 showed that prices increased nationally quarter-over-quarter by 1.9%, seasonally adjusted, but by 4.8% without adjusting for seasonality since the adjustment removes the regular springtime price jump.

Seasonal adjustment has its challenges. If the seasonal pattern changes over time – like if winters get warmer and cause housing activity to drop off less in winter – seasonal adjustment methods need to reflect those changes. Not-seasonally-adjusted trends are still useful because they show what buyers and sellers are actually experiencing in the market right now and can help them time when in the year to buy or sell. But to detect if and when housing prices are finally reaching a sustained turnaround, seasonal adjustment is needed to distinguish the underlying trend from regular seasonal patterns.

The Trulia Price Monitor, Case-Shiller and FHFA report seasonally adjusted price changes, even though Case-Shiller emphasizes the non-seasonally-adjusted trends. Most other indices only report non-seasonally-adjusted trends.

Weighting of homes and metros.

In the Case-Shiller and CoreLogic indices, higher-priced homes count more – they are “value-weighted”; in contrast, the Trulia Price Monitor, the FHFA index, and most other indices don’t put extra weight on higher-priced homes. Why give more weight to pricier homes? Higher-priced homes should get more weight if the purpose of an index is to assess movements in the value of a real-estate portfolio. If, for instance, a $1,000,000 real estate portfolio consists of two homes, one initially worth $900,000 and one initially worth $100,000, the change in the overall value of the portfolio depends a lot more on the percentage change in the value of the $900,000 house than the $100,000 house. In other words, weighting by home price yields an index that shows how the value of a dollar invested in real estate changes. The Trulia Price Monitor weights homes equally, regardless of price, in order to show how the value of a typical home is changing – rather than the value of a dollar invested in real estate. (FHFA doesn’t use value-weighting, either.)

Value-weighting potentially matters a lot for price trends if high-priced and low-priced homes in a market are trending differently. We tested the potential impact of value-weighting by comparing the year-over-year price change in several metro areas from the Trulia Price Monitor with the price change we would have reported for those same metros over the same time period but with value-weighting. The Trulia Price Monitor for April 2012 showed that prices in New York decreased 2.6% year-over-year, but with value-weighting prices decreased just 0.3%. In Los Angeles, the Trulia Price Monitor showed that prices decreased 2.8% without value-weighting but increased 0.7% value-weighted. In Phoenix, the Trulia Price Monitor showed that prices increased 15.8% without value-weighting, but increased only 11.1% value-weighted. In short, value-weighting can change the price trend either up or down by several percentage points – a big difference for what sounds like an obscure technical issue.

Finally, value-weighting can lead to expensive metro areas counting heavily in a broad home price index. The New York and Los Angeles metros together account for 48% of the Case-Shiller Composite 10 index and 35% of the Composite 20 index (based on weights in the published methodology) -- not only because those metros are large but also because they are expensive. At the same time, Houston and Philadelphia, which are among the ten largest metros in the US, are not included in the Case-Shiller Composite 20 – even though much smaller metros, like Charlotte, NC, and Portland, OR, are.

To sum up: home-price indices can disagree with each other by several percentage points depending on whether they adjust for the mix of homes, whether they adjust for seasonal patterns, and how they weight homes and local markets in the index. These technical issues help explain why different indices looking at the same market at the same time can tell very different stories.

FHFA: Quarterly House Price Index shows first year-over-year gain since 2007

2012-05-23T13:55:00.000-04:00

The Federal Housing Finance Agency (FHFA) releases several house prices indexes. The most followed are the Purchase Only repeat sales index, both monthly and quarterly, based on Fannie and Freddie loans only, and the quarterly "expanded data series" that includes data from FHA endorsed mortgages and county recorder data licensed from DataQuick.

Here are the key results released today:
1) The quarterly Q1 seasonally adjusted purchase-only house price index showed the first year-over-year (YoY) increase since 2007.

2) The monthly (March) purchase only house price index showed a larger YoY increase of 2.7% in March compared to a 0.3% YoY increase in February. This is the largest YoY increase since 2006.

3) The expanded data series showed a smaller YoY decline of 1.3% in Q1 (smaller than the 3.0% YoY decline in Q4).

From the FHFA: HPI Shows Quarterly Increase and First Annual Increase Since 2007

U.S. house prices rose modestly in the first quarter of 2012 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The FHFA HPI was up 0.6 percent on a seasonally adjusted basis since the fourth quarter of 2011. The HPI is calculated using home sales price information from Fannie Mae and Freddie Mac mortgages. ... FHFA’s seasonally adjusted monthly index for March was up 1.8 percent from February.

FHFA’s expanded-data house price index, a metric introduced in August 2011 that adds transactions information from county recorder offices and the Federal Housing Administration to the HPI data sample, rose 0.2 percent over the latest quarter. Over the latest four quarters, the index is down 1.3 percent.

New Home Sales Comments

2012-05-23T11:22:00.000-04:00

Clearly new home sales have bottomed. Although sales are still historically very weak, sales are up 25% from the low, and up about 15% from the May 2010 through September 2011 average.

Update: Some people think housing will recover rapidly to the 1.2+ million rate we saw in 2004 and 2005. I think that is incorrect for two reasons. First, I think the recovery will be sluggish - 2012 will probably be the third worst year ever. Second, the 1.2 million in annual sales was due to an increasing homeownership rate and speculative buying. With a stable homeownerhip rate, and little speculative buying, sales will probably only rise to around 800 thousand at full recovery.

There were more upward revisions this month too. Sales were revised up for January, February and March.

And inventory of completed homes is at a new record low

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

Click on graph for larger image.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was at a record low 46,000 units in April. The combined total of completed and under construction is at the lowest level since this series started.

The second graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In April 2012 (red column), 33 thousand new homes were sold (NSA). Last year only 30 thousand homes were sold in March. This was the fourth weakest April since this data has been tracked. The high for April was 116 thousand in 2005.

The debate is now about the strength of the recovery, not whether there is a recovery. My view is housing will remain sluggish for some time, and I expect 2012 to be another historically weak year, but clearly better than 2011.

Below is an update to the "distressing gap" graph that shows existing home sales (left axis) and new home sales (right axis) through April. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders haven't been able to compete with the low prices of all the foreclosed properties.

I expect this gap to eventually close, but it will probably take a number of years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

New Home Sales graphs

New Home Sales increase in April to 343,000 Annual Rate

2012-05-23T10:00:00.000-04:00

The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 343 thousand.

This was up from a revised 332 thousand SAAR in March (revised up from 328 thousand).

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

Months of supply decreased to 5.1 in April from 5.2 in March.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

Even though sales are still very low, new home sales have clearly bottomed. New home sales have averaged 340 thousand SAAR over the last 5 months, after averaging under 300 thousand for the previous 18 months. All of the recent revisions have been up too.

This was a solid report and above the consensus forecast of 335 thousand.

More graphs soon ...

MBA: Mortgage Refinance activity increases, Mortgage Rates at Record Low

2012-05-23T08:30:00.000-04:00

From the MBA: Record Low Mortgage Rates Fuel Third Consecutive Increase In Refinance Applications In Latest MBA Weekly Survey

The Refinance Index increased 5.6 percent from the previous week. This is the third consecutive weekly increase in the Refinance Index which is at its highest level since February 10, 2012. The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier to its lowest level since April 20, 2012.

"Mortgage rates again dipped to new record lows in the survey, which spurred more borrowers back into the refinance market. As a result, applications for refinance loans have increased for the third straight week and are at the highest level since February of this year. The HARP share of refinance applications was essentially unchanged over the week at 28 percent, so it was not the primary driver of the increase over the previous week." [said] Michael Fratantoni, MBA's Vice President of Research and Economics.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.93 percent, the lowest rate in the history of the survey, from 3.96 percent,with points increasing to 0.39 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The purchase index is still very weak.

Look Ahead: New Home Sales

2012-05-22T21:05:00.000-04:00

• At 10:00 AM ET, the Census Bureau is scheduled to release the New home sales report for April. The consensus is for an increase in sales to 335,000 on a Seasonally Adjusted Annual Rate basis (SAAR) in April from 328,000 in March. Based on recent builder comments, and the homebuilder confidence survey, new home sales probably increased in April. Also, watch for upward revisions to prior reports.

• Also at 10:00 AM, the FHFA House Price Index for March 2012 will be released. This is based on GSE repeat sales and is not as closely followed as Case-Shiller or CoreLogic. Last month this index turned positive on a year-over-year basis: "For the 12 months ending in February, U.S. prices rose 0.4 percent, the first 12-month increase since the July 2006 - July 2007 interval." Look for a larger year-over-year increase in March.

For the monthly economic question contest:

Earlier on existing home sales:
• Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

ATA Trucking index declined 1.1% in April

2012-05-22T17:31:00.000-04:00

From ATA: ATA Truck Tonnage Fell 1.1% in April

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 1.1% in April after increasing 0.6% in March. (March’s gain was more than the preliminary 0.2% increase ATA reported on April 24.) The latest drop put the SA index at 118.7 (2000=100), down from March’s level of 120. Compared with April 2011, the SA index was up 3.5%, better than March’s 3.1% increase. Year-to-date, compared with the same period last year, tonnage was up 3.8%.
...
“While April’s decrease was a little disappointing, the March gain turned out to be stronger than originally thought,” ATA Chief Economist Bob Costello said. “The ups and downs so far this year are similar to other economic indicators.”

“While just one month, the April’s decrease also matches with an economy that is likely to grow slightly slower in the second quarter than in the first quarter,” he said. Costello reiterated last month’s noting that the industry should not expect the rate of growth seen over the last couple of years, when tonnage grew 5.8% in both 2010 and 2011. “I continue to expect tonnage to moderate from the pace over the last two years. Annualized growth in the 3% to 3.9% seems more likely.”

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index. The index is above the pre-recession level and up 3.5% year-over-year.

From ATA:

Trucking serves as a barometer of the U.S. economy, representing 67.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9 billion tons of freight in 2010. Motor carriers collected $563.4 billion, or 81.2% of total revenue earned by all transport modes.

Lawler: Comments on Existing home sales and FHA REO

2012-05-22T14:32:00.000-04:00

Some comments from housing economist Tom Lawler:

The National Association of Realtors estimated that US existing home sales ran at a seasonally adjusted annual rate of 4.62 million in April, up 3.4% from March’s downwardly revised (to 4.47 million from 4.48 million) pace and up 10.0% from last April’s pace. The NAR’s estimate exceeded my estimate based on regional tracking, though almost all of my “miss” was related to the NAR’s seasonal adjustment factor: while seasonally adjusted sales were up 10.0% YOY, unadjusted sales showed just a 6.7% YOY gain (I guess the timing of Easter was the reason; my bad).

The NAR also estimated that the inventory of existing homes for sale at the end of April totaled 2.540 million, up 9.5% from March’s downwardly revised (to 2.32 million from 2.37 million) level and down 20.6% from last April. This was pretty close to my “guess” for a 21% YOY decline, and today’s report continued the trend for the NAR’s inventory estimates to show significantly lower monthly gains (or larger declines) in March and significantly larger monthly gains in April than that suggested by actual listings data.

Finally, the NAR estimated that the median existing home sales price in April was $177,400, up a whopping 10.1% from last April. The median existing SF sales price last month was $178,000, up 10.4% from last April. According to the NAR, the median existing SF sales price in the Northeast showed a YOY gain of 10.9%; in the Midwest, 8.1%; in the South, 8.5%; and in the West, 14.7%. While I was looking for a YOY increase exceeding 5%, this gain was obviously a boatload larger. Based on regional data I’ve seen the gain in the Northeast that the NAR reported seemed particularly “whacky,” though other regions – including the West – seemed high as well (Phoenix had a YOY gain of around 24%, but that was an outlier!).

CR Note: Remember the median price is impacted by the change in mix, and there are fewer low end foreclosures for sale this year and that pushes up the median price.

Lawler on FHA REO:

HUD finally got around to releasing the Monthly Report to the FHA Commissioner for March, and one “stand-out” stat was the sharp rise in SF property conveyances in March. Here are some historical stats (from the current and past monthly commissioner reports).

The number of SF properties “conveyed” to FHA has been surprising low over the last year given the number of properties in the foreclosure process, and FHA had noted that servicing “issues” were artificially depressing conveyances. Obviously, that was not the case in March!

Monthly Report to FHA Commissioner
	SF REO Inventory (EOM)	Conveyances	Sales	Adjustments
10-Jun	44,850	8,487	8,893	41
10-Jul	44,944	8,341	8,508	261
10-Aug	47,007	9,810	7,686	-61
10-Sep	51,487	11,411	7,439	508
10-Oct	54,609	9,908	7,289	503
10-Nov	55,488	6,752	5,817	-56
10-Dec	60,739	7,728	2,749	272
11-Jan	65,639	7,709	2,632	-177
11-Feb	68,801	7,383	4,221	0
11-Mar	68,997	8,647	8,728	277
11-Apr	65,063	7,410	11,375	31
11-May	59,465	7,032	12,659	29
11-Jun	53,164	7,240	13,600	59
11-Jul	48,507	6,509	11,379	213
11-Aug	44,749	8,005	11,701	-62
11-Sep	40,719	6,567	10,554	-43
11-Oct	37,922	6,541	9,883	545
11-Nov	35,192	6,212	9,178	236
11-Dec	32,170	5,997	8,800	-219
12-Jan	31,046	6,771	7,670	-225
12-Feb	30,005	7,132	7,637	-536
12-Mar	35,613	14,007	8,219	-180

CR Note: This probably means FHA REO sales will increase in May and June.

Click on graph for larger image.

This graph shows the combined REO inventory for Fannie, Freddie and the FHA.

The combined REO inventory is down to 209 thousand in Q1 2012, down about 16% from Q1 2011.

CR Note: Even though REO inventories are down, there are still more distressed sales coming because of all the loans 90+ days delinquent and in the foreclosure process.

Earlier on existing home sales:
• Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

Existing Home Sales: Inventory and NSA Sales Graph

2012-05-22T12:08:00.000-04:00

The NAR reported inventory increased to 2.54 million units in April, up 9.5% from the downwardly revised 2.32 million in March (revised down from 2.40 million). This is down 20.6% from April 2011, and up 2.7% from the inventory level in April 2005 (mid-2005 was when inventory started increasing sharply). Inventory was down slightly compared to April 2004 (see first graph below). This decline in inventory remains a significant story.

There is a seasonal pattern for inventory - usually inventory is the lowest in the winter months, and inventory usually peaks mid-summer. However most of the seasonal increase typically happens by April - so we could be close to the peak for this year.

Earlier this year, there were several analysts projecting that inventory would increase to 3 million by mid-summer. I thought that was too high, and it now looks like inventory will peak in the 2.6+ million range. That would be well below the inventory peak in 2005 of 2.9 million units.

At the current sales rate, 2.6 million units of inventory this would push the months-of-supply measure up to 6.7 to 6.8 months from the current 6.6 months. Note: Months-of-supply uses the seasonally adjusted sales rate, and the not seasonally adjusted inventory (even though there is a seasonal pattern for inventory). That would be the lowest seasonal peak for months-of-supply since 2005.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we comparing inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. However, in the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

The following graph shows inventory by month since 2004. In 2005 (dark blue columns), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red for 2012) inventory is at the lowest level for the month of April since 2005, and inventory is slightly below the level in April 2004 (not counting contingent sales). Sometime this summer, I expect inventory to be below the same month in 2005. However inventory is still elevated - especially with the much lower sales rate.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA (red column) are above the sales for the 2008, 2009 and 2011 (2010 was higher because of the tax credit). Sales are well below the bubble years of 2005 and 2006.

Also it appears distressed sales were down in April. From the NAR:

Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 28 percent of April sales (17 percent were foreclosures and 11 percent were short sales), down from 29 percent in March and 37 percent in April 2011.

The increase in existing home sales, combined with fewer distressed sales, is a positive sign for the housing market.

Earlier:
• Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
• Existing Home Sales graphs

Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply

2012-05-22T10:00:00.000-04:00

The NAR reports: April Existing-Home Sales Up, Prices Rise Again

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3.4 percent to a seasonally adjusted annual rate of 4.62 million in April from a downwardly revised 4.47 million in March, and are 10.0 percent higher than the 4.20 million-unit level in April 2011.
...
Total housing inventory at the end of April rose 9.5 percent to 2.54 million existing homes available for sale, a seasonal increase which represents a 6.6-month supply at the current sales pace, up from a 6.2-month supply in March. Listed inventory is 20.6 percent below a year ago when there was a 9.1-month supply; the record for unsold inventory was 4.04 million in July 2007.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in April 2012 (4.62 million SAAR) were 3.4% higher than last month, and were 10.00% above the April 2011 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 2.54 million in April from the downwardly revised 2.32 million in March (revised down from 2.40 million). Inventory is not seasonally adjusted, and usually inventory increases from the seasonal lows in December and January to the seasonal high in mid-summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 20.6% year-over-year in April from April 2011. This is the fourteenth consecutive month with a YoY decrease in inventory.

Months of supply was increased to 6.6 months in April.

This was slightly below expectations of sales of 4.66 million. I'll have more soon ...

All current Existing Home Sales graphs

New Push for Eurozone Bonds

2012-05-22T08:48:00.002-04:00

From the Financial Times: OECD joins call for eurozone bonds

The Organization for Economic Co-operation and Development has joined French and EU officials in calling for a move towards jointly-guaranteed euro bonds ...

Speaking to the Financial Times, Pier Carlo Padoan, the OECD deputy secretary general and chief economist, said fiscal consolidation alone without other elements of a “growth compact” could ruin chances of a longer-term economic union.

“We need to get on the path towards the issuance of euro bonds sooner rather than later,” he said.
excerpts with permission

Earlier from the Financial Times: France to push for eurozone bonds

France is determined to push the idea of jointly guaranteed bonds as a new form of borrowing for eurozone countries despite Germany’s opposition, Pierre Moscovici, finance minister, said in Berlin on Monday.

Speaking after a first intensive meeting with Wolfgang Schäuble, his German counterpart, Mr Moscovici confirmed that François Hollande, the newly elected French president, would include the concept as part of a package of growth measures to be debated by European leaders at an informal summit on Wednesday.

Update: From the WSJ: IMF Chief, OECD Call For More Euro Debt Sharing

International Monetary Fund head Christine Lagarde Tuesday called on euro-zone governments to accept more common liability for each other's debts, saying that the region urgently needs to take further steps to contain the crisis.

"We consider that more needs to be done, particularly by way of fiscal liability-sharing, and there are multiple ways to do that," Ms. Lagarde told a press conference in London to mark the completion of a regular review of U.K. finances.

Look Ahead: Existing Home Sales

2012-05-21T21:31:00.003-04:00

• Existing home sales for April will be released by the National Association of Realtors (NAR) at 10 AM ET. Existing home sales were at a 4.48 million seasonally adjusted annual rate in March, and the consensus is that sales increased to 4.66 million in April. Housing economist Tom Lawler is forecasting the NAR will report sales of 4.53 million.

Inventory will be closely watched. The NAR reported inventory at 2.37 million in March, and usually inventory increases sharply in April. The median increase from March to April over the last 10 years was 8%. Other sources suggest a smaller than normal seasonal increase, but as Tom Lawler noted last week: "for some reason the NAR’s inventory number in April has for many years shown a much larger monthly gain than listings data might suggest ...", and Lawler is projecting the NAR will report a 6.8% increase for April.

• Also at 10:00 AM, the Richmond Fed will release the regional Survey of Manufacturing Activity for May. The consensus is for a decrease to 11 for this survey from 14 in April (above zero is expansion).

For the monthly economic question contest:

LPS: Mortgage delinquencies increased slightly in April

2012-05-21T16:45:00.000-04:00

LPS released their First Look report for April today. LPS reported that the percent of loans delinquent increased slightly in April from March, and declined year-over-year. The percent of loans in the foreclosure process was unchanged and remained at a very high level.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) increased to 7.12% from 7.09% in March. The percent of delinquent loans is still significantly above the normal rate of around 4.5% to 5%. The percent of delinquent loans peaked at 10.97%, so delinquencies have fallen over half way back to normal. Note: There is a seasonal pattern for delinquencies, and it is not unusual to see an increase in April after a sharp decline in March.

The following table shows the LPS numbers for April 2012, and also for last month (March 2012) and one year ago (April 2011).

LPS: Percent Loans Delinquent and in Foreclosure Process
	Apr-12	Mar-12	Apr-11
Delinquent	7.12%	7.09%	7.97%
In Foreclosure	4.14%	4.14%	4.14%
Number of loans:
Loans Less than 90 days	1,927,000	1,888,000	2,243,000
Loans More than 90 days	1,595,000	1,643,000	1,961,000
Loans In foreclosure	2,048,000	2,060,000	2,184,000
Total	5,570,000	5,591,000	6,388,000

The number of delinquent loans is down about 16% year-over-year (682,000 fewer mortgages delinquent), and the number of loans in the foreclosure process is down 136,000 year-over-year (the percent in foreclosure is unchanged, but the number of total loans has declined).

The percent of loans less than 90 days delinquent is about normal, but the percent (and number) of loans 90+ days delinquent and in the foreclosure process are still very high.

DOT: Vehicle Miles Driven increased 0.9% in March

2012-05-21T14:34:00.000-04:00

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by +0.9% (2.3 billion vehicle miles) for March 2012 as compared with March 2011. Travel for the month is estimated to be 251.4 billion vehicle miles.

The following graph shows the rolling 12 month total vehicle miles driven.

Even with the year-over-year increase in March, the rolling 12 month total is mostly moving sideways.

Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 52 months - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

This is the fourth consecutive month with a year-over-year increase in miles driven.

Even though gasoline prices were up sharply earlier this year, prices also increased quickly last year in March and April - so we might not see a year-over-year decline in miles driven in the coming months.

The lack of growth in miles driven over the last 4+ years is probably due to a combination of factors: the great recession and the lingering effects, the high price of gasoline - and the aging of the overall population.

As I noted last month, HS Dent has a graph of gasoline demand by age (see page 13 of Age of Consumer demand curves based on Census Bureau data) - and this data shows that gasoline demand peaks around age 50 and then starts to decline. So the flattening of miles driven is probably, at least partially, another impact from the aging of the baby boomers (ht Brian).

FNC: Residential Property Values increase 0.5% in March

2012-05-21T11:18:00.001-04:00

In addition to Case-Shiller, CoreLogic, and LPS, I'm also watching the FNC, Zillow and RadarLogic indexes.

FNC released their March index data today. FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.5% in March (Composite 100 index). The other RPIs (10-MSA, 20-MSA, 30-MSA) increased about 0.8% in March. These indices are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

The year-over-year trends continued to show improvement in March, with the Composite 100 index down only 2.4% compared to March 2011. This is the smallest year-over-year decline in the FNC index since 2007.

The year-to-year declines in the largest housing markets, as indicated by the 10- and 30-MSA composites, are now below 3.0%, the slowest year-over-year decline since 2007.

Click on graph for larger image.

This graph is based on the FNC index (four composites) through March 2012. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

The indexes are showing less of a year-over-year decline in March. If house prices have bottomed, the year-over-year decline should turn positive later this year or early in 2013.

The March Case-Shiller index will be released next Tuesday.

Chicago Fed: Economic growth near historical trend in April

2012-05-21T08:44:00.001-04:00

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic activity increased in April

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.11 in April from –0.44 in March. ...

The index’s three-month moving average, CFNAI-MA3, ticked down to –0.06 in April from +0.02 in March, falling below zero for the first time since November 2011. April’s CFNAI-MA3 suggests that growth in national economic activity was near its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests growth was near trend in April.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

Sunday Night Futures

2012-05-20T22:49:00.000-04:00

There are no major economic releases scheduled for Monday. Atlanta Fed President Dennis Lockhart speaks in Tokyo on monetary policy at 5:15 AM ET, and at 8:30 AM, the Chicago Fed National Activity Index for April is scheduled to be released.

The Asian markets are mixed tonight. The Nikkei is up about 0.3%, and the Shanghai Composite is down 0.4%. On China, here is a worrisome article from the Financial Times: China buyers defer raw material cargos

Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and – in some cases – defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets.

The deferrals and defaults have only emerged in the last few days ...
Excerpt with permission

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are up about 5, and Dow futures are up 40.

Oil: WTI futures are down to $91.49 (this is down from $109.77 in February) and Brent is at $107.24 per barrel.

Yesterday:
• Summary for Week Ending May 18th
• Schedule for Week of May 20th

For the monthly economic question contest (for data to be released Tuesday, Wednesday and Friday):

Comment: We need more and better data, not less

2012-05-20T14:32:00.000-04:00

The Depression led to an effort to enhance and expand data collection on employment, and I was hoping the housing bubble and bust would lead to a similar effort to collect better housing related data. From the BLS history:

[T]he growing crisis [the Depression], spurred action on improving employment statistics. In July [1930], Congress enacted a bill sponsored by Senator Wagner directing the Bureau to "collect, collate, report, and publish at least once each month full and complete statistics of the volume of and changes in employment." Additional appropriations were provided.

In the early stages of the Depression, policymakers were flying blind. But at least they recognized the need for better data, and took action. All business people know that when there is a problem, a key first step is to measure the problem. That is why I've been a strong supporter of trying to improve data collection on the number of households, vacant housing units, foreclosures and more.

But unfortunately some people want to eliminate a key source of data ...

From Matthew Philips at Businessweek: Killing the American Community Survey Blinds Business

On May 9 the House voted to kill the American Community Survey, which collects data on some 3 million households each year and is the largest survey next to the decennial census. The ACS—which has a long bipartisan history, including its funding in the mid-1990s and full implementation in 2005—provides data that help determine how more than $400 billion in federal and state funds are spent annually. Businesses also rely heavily on it to do such things as decide where to build new stores, hire new employees, and get valuable insights on consumer spending habits. Check out this video of Target (TGT) executives talking about how much they use ACS data.

From Catherine Rampell at the NY Times: The Beginning of the End of the Census?

“This is a program that intrudes on people’s lives, just like the Environmental Protection Agency or the bank regulators,” said Daniel Webster, a first-term Republican congressman from Florida who sponsored the relevant legislation.

“We’re spending $70 per person to fill this out. That’s just not cost effective,” he continued, “especially since in the end this is not a scientific survey. It’s a random survey.”

In fact, the randomness of the survey is precisely what makes the survey scientific, statistical experts say.

The good news is this vote is being criticized across the political spectrum ...

From the WSJ: Republicans try to kill data collection that helps economic growth

The House voted 232 to 190 to abolish the Census's American Community Survey, or ACS, which is the new version of the long-form questionnaire and is conducted annually. Republicans claim the long form—asking about everything from demographics to income to commuting times—is prying into private life and is unconstitutional.

In fact, the ACS provides some of the most accurate, objective and granular data about the economy and the American people, in something approaching real time. Ideally, Congress would use the information to make good decisions. Or economists and social scientists draw on the resource to offer better suggestions. Businesses also depend on the ACS's county-by-county statistics to inform investment and hiring decisions. As the great Peter Drucker had it, you can't manage or change what you don't measure.
...
Since the political class is attempting to define the GOP as insane and redefine "moderation" as anything President Obama favors, Republicans do themselves no favors by targeting a useful government purpose.

From the NY Times: Operating in the Dark

The Web site of Representative Daniel Webster, Republican of Florida, instructs visitors to click on a link for “Census data for the 8th district” to learn about the area’s economy, businesses, income, employment, homeownership and other important features. And yet, on Wednesday, Mr. Webster declared that the Census Bureau’s American Community Survey — the source for much of that data — is an unconstitutional breach of privacy.

From AEI's Norman Ornstein at Roll Call: Research Cuts Are Akin to Eating Seed Corn

significant was the House vote to eliminate the annual American Community Survey and the Economic Census to provide basic information on the state of businesses and industries in the country and data used for generating quarterly gross domestic product estimates.

If ever we need evidence of ideology run rampant, these actions become exhibit A. Learning about the population and about the economy are fundamental for a society to understand where it has been and where it is going ...

From the WaPo: The American Community Survey is a count worth keeping

Every year, the Census Bureau asks 3 million American households to answer questions on age, race, housing and health to produce timely information about localities, states and the country at large. This arrangement began as a bipartisan improvement on the decennial census. Yet last week the Republican-led House voted to kill the ACS. This is among the most shortsighted measures we have seen in this Congress, which is saying a lot.

And from Menzie Chinn at Econonbrowser: The War on Data Collection

Pretty sad. The only good news is this vote was condemned across the political spectrum.

The Real Estate Agent Bust

2012-05-20T10:48:00.001-04:00

Way back in 2005, I posted a graph of "the Real Estate Agent Boom". I saw the following article, and decided to update the graph of the number of real estate licensees in California.

Eric Wolff at the NC Times writes: Real estate agents bailing out, except in Southwest Riverside County

Real estate agents are getting out of the profession in California ---- except in Southwest Riverside County, according to the California Department of Real Estate and the Southwest Riverside County Association of Realtors.

A housing crunch left real estate agents faced with selling houses for less than what homeowners owed in mortgages, working with lenders suddenly terrified to give out loans, and otherwise battling headwinds that dramatically reduced their sales.

For many agents, especially those attracted by a housing boom that made the profession seem like easy money, that meant it was time to leave. But in Southwest Riverside County, a few people decided a slow market was just the time to jump in.

Click on graph for larger image.

Here is a long term graph of the number of real estate licensees in California. The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 29% from the peak, and has fallen to 2004 levels. But brokers' licenses are only off 7% and has only fallen to early 2007 levels. Even if activity and prices have bottomed, the number of agents will probably continue to decline.

Yesterday:
• Summary for Week Ending May 18th
• Schedule for Week of May 20th

Unofficial Problem Bank list increases to 928 Institutions

2012-05-19T21:53:00.000-04:00

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 18, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

The OCC released its actions through mid-April 2012, which contributed to many changes in the Unofficial Problem Bank List. For the week, there were eight additions and four removals that leave the list with 928 institutions and assets of $361.9 billion. The list is up from 924 institutions last week, which represents the first weekly count increase since February 24th, a period of 11 weeks. A year ago, the list held 988 institutions with assets of $423.8 billion.

Among the removals is the failed Alabama Trust Bank, National Association, Sylacauga, AL ($56 million). There were two action terminations -- National Bank of Commerce, Birmingham, AL ($426 million) and BankTennessee, Collierville, TN ($247 million). The Peoples National Bank, Easley, SC ($324 million Ticker: PBCE) was removed because of an unassisted merger.

The eight additions this week are Sterling Bank and Trust, FSB, Southfield, MI ($762 million); The First National Bank of Talladega, Talladega, AL ($421 million); First Federal Bank Texas, Tyler, TX ($212 million Ticker: FFBT); Bank of St. Augustine, Saint Augustine, FL ($186 million); The First National Bank of Wamego, Wamego, KS ($159 million); The First National Bank of Hartford, Hartford, IL ($146 million); The First National Bank of Paducah, Paducah, TX ($56 million); and Flint River National Bank, Camilla, GA ($27 million). Flint River was removed from the list on April 20th when the OCC terminated an Formal Agreement, but the removal was inadvertent as they subsequently put the bank under a Consent Order.

Next week, we anticipate the FDIC will release the 2012q1 Official Problem Bank List and its enforcement actions through April 2012.

Earlier:
• Summary for Week Ending May 18th
• Schedule for Week of May 20th

Quarterly Housing Starts by Intent compared to New Home Sales

2012-05-19T18:00:00.000-04:00

We can't directly compare single family housing starts to new home sales. For starts of single family structures, the Census Bureau includes owner built units and units built for rent that are not included in the new home sales report. For an explanation, see from the Census Bureau: Comparing New Home Sales and New Residential Construction

We are often asked why the numbers of new single-family housing units started and completed each month are larger than the number of new homes sold. This is because all new single-family houses are measured as part of the New Residential Construction series (starts and completions), but only those that are built for sale are included in the New Residential Sales series.

However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. The Q1 2012 quarterly report was released this week and showed there were 77,000 single family starts, built for sale, in Q1 2012, and that was below the 83,000 new homes sold for the same quarter (Using Not Seasonally Adjusted data for both starts and sales).

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

Click on graph for larger image.

Single family starts built for sale were up about 17% compared to Q1 2011. Usually Q2 is the strongest quarter seasonally, and single family starts, built for sale, will probably be close to 100 thousand in Q2 - the highest level since 2008.

Owner built starts were up 30% year-over-year from a record low in Q1 2011. And condos built for sale are still near the record low.

The 'units built for rent' has increased significantly and is up about 41% year-over-year.

The second graph shows the difference (quarterly) between single family starts, built for sale and new home sales.

In 2005, and most of 2006, starts were higher than sales, and inventories of new homes increased. In 2008 and 2009, the home builders started far fewer homes than they sold as they worked off the excess inventory they had built up in 2005 and 2006.

For the last 2+ years, the builders have sold a few more homes than they started, and inventory levels are now at record lows. In Q1, builders started 6 thousand fewer homes than they sold.

Note: new home sales are reported when contracts are signed, so it is appropriate to compare sales to starts (as opposed to completions). This is not perfect because of the handling of cancellations, but it does suggest the builders are keeping inventories.

Earlier:
• Summary for Week Ending May 18th
• Schedule for Week of May 20th