Sunday, September 26, 2010

Summary for Week ending Sept 25th

by Bill McBride on 9/26/2010 09:27:00 AM

A summary of last week - mostly in graphs.

There were a few key non-graphical stories this week: Fed Chairman Ben Bernanke expressed concern about the recovery, suggesting to many that QE2 will arrive in early November, Larry Summers is leaving the Obama Administration, the NBER announced the end date for the recent recession (June 2009), and the corporate credit union bailout was announced (coming for some time).

There are links for all of these stories and more at the bottom of this post.

  • New Home Sales: Unchanged from July, Worst August on Record

    The Census Bureau reported New Home Sales in August were at a seasonally adjusted annual rate (SAAR) of 288 thousand. This was unchanged from July.

    New Home Sales Monthly Not Seasonally Adjusted Click on graph for larger image in new window.

    The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted or annualized).

    Note the Red columns for 2010. In August 2010, 25 thousand new homes were sold (NSA). This is a new record low for August.

    The previous record low for the month of August was 34 thousand in 1981; the record high was 110 thousand in August 2005.

    New Home Sales and Recessions The second graph shows New Home Sales vs. recessions for the last 47 years. The dashed line is the current sales rate.

    Sales of new single-family houses in August 2010 were at a seasonally adjusted annual rate of 288,000.

    And another long term graph - this one for New Home Months of Supply.

    New Home Months of Supply and RecessionsMonths of supply decreased to 8.6 in August from 8.7 in July. The all time record was 12.4 months of supply in January 2009. This is still very high (less than 6 months supply is normal).

    The 288 thousand annual sales rate for August is just above the all time record low in May (282 thousand). This was another very weak report. New home sales are important for the economy and jobs - and this indicates that residential investment will be a sharp drag on GDP in Q3.

  • Existing Home Sales at 4.1 million SAAR, 11.6 months of supply

    The NAR reported: Existing-Home Sales Move Up in August

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

    Sales in August 2010 (4.13 million SAAR) were 7.6% higher than last month, and were 19.0% lower than August 2009 (5.1 million SAAR).

    The next graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.

    Year-over-year Inventory Although inventory decreased slightly from July 2010 to August 2010, inventory increased 1.5% YoY in August.

    Note: Usually July is the peak month for inventory.

    The year-over-year increase in inventory is especially bad news because the reported inventory is already historically very high (around 4 million), and the 11.6 months of supply in August is far above normal.

  • NAHB Builder Confidence stuck at low level in September

    The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 13 in September. This is the same low level as in August and below expectations. The record low was 8 set in January 2009, and 13 is very low ...

    Note: any number under 50 indicates that more builders view sales conditions as poor than good.

    HMI and Starts Correlation This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the September release for the HMI and the July data for starts (August starts were released after this report).

    This shows that the HMI and single family starts mostly move in the same direction - although there is plenty of noise month-to-month.

    Press release from the NAHB: Builder Confidence Unchanged in September

  • Single Family Housing Starts increase slightly in August

    Total Housing Starts and Single Family Housing Starts Total housing starts were at 598 thousand (SAAR) in August, up 10.5% from the revised July rate of 541 thousand (revised down from 546 thousand), and up 25% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).

    Single-family starts increased 4.3% to 438 thousand in August. This is 22% above the record low in January 2009 (360 thousand).

    Total Housing Starts and Single Family Housing StartsThe second graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over a year - with a slight up and down over the last several months due to the home buyer tax credit.

    Here is the Census Bureau report on housing Permits, Starts and Completions.

    This was above expectations of 550 thousand, mostly because of the volatile multi-family starts. This low level of starts is good news for the housing market longer term (there are too many housing units already), but bad news for the economy and employment short term.

  • AIA: Architecture Billings Index shows contraction in August

    Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

    Reuters reports that the American Institute of Architects’ Architecture Billings Index increased to 48.2 in August from 47.9 in July. Any reading below 50 indicates contraction.

    AIA Architecture Billing Index This graph shows the Architecture Billings Index since 1996. The index has remained below 50, indicating falling demand, since January 2008.

    According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So there will probably be further declines in CRE investment into 2011.

  • Moody's: Commercial Real Estate Price Index declined 3.1% in July

    Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index declined 3.1% in July. This is a repeat sales measure of commercial real estate prices.

    Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

    Notes: Beware of the "Real" in the title - this index is not inflation adjusted. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.

    CRE and Residential Price indexesCRE prices only go back to December 2000.

    The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

    It is important to remember that the number of transactions is very low and there are a large percentage of distressed sales.

    The index is now down 43.2% from the peak in October 2007. And the index is only 0.9% above the October 2009 low.

  • Other Economic Stories ...

  • Press Release: NCUA Adopts Reforms for Corporate Credit Union System, Protects Consumers

  • From the WSJ: On the Secret Committee to Save the Euro, a Dangerous Divide

  • From the WSJ: Bernanke: Efforts Failed to Produce Recovery With 'Sufficient Vigor'

  • From David Streitfeld at the NY Times: GMAC’s Errors Leave Foreclosures in Question

  • From NPR Planet Money: Toxie, Planet Money's pet toxic asset, died this week.

  • DOT: Vehicle Miles driven increase slightly in July

  • From the White House: Dr. Lawrence H. Summers, Director of the National Economic Council, to Return to Harvard University at the End of the Year

  • From NBER: NBER Business Cycle Dating Committee Announces Trough Date

  • Unofficial Problem Bank List increases to 872 institutions
    Best wishes to all.