Sunday, November 28, 2010

A Summary for Week ending November 27th

by Bill McBride on 11/28/2010 09:10:00 AM

Below is a summary of last week mostly in graphs.

Here is the economic schedule for the coming week.

Note: A key story has been the rescue of Ireland. The Irish Times reports that a deal is done, but the details haven't been released.

New Home Sales declined in October

New Home Sales and RecessionsClick on graph for larger image in graph gallery.

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

The Census Bureau reported New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 283 thousand. This is down from 308 thousand in September. "This is 8.1 percent below the revised September rate ... and is 28.5 percent below the October 2009 estimate of 396,000."

New Home Months of Supply and RecessionsMonths of supply increased to 8.6 in October from 7.9 in September. The all time record was 12.4 months of supply in January 2009. This is still high (less than 6 months supply is normal).

The 283 thousand annual sales rate for October is just above the all time record low in August (275 thousand). This was the weakest October on record and well below the consensus forecast of 314 thousand.

October Existing Home Sales: 4.43 million SAAR, 10.5 months of supply

The NAR reports: Existing-Home Sales Decline in October Following Two Monthly Gains

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

Sales in October 2010 (4.43 million SAAR) were 2.2% lower than last month, and were 25.9% lower than October 2009.

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 InventoryAlthough inventory decreased from September 2010 to October 2010, inventory increased 8.4% YoY in October. This is the largest YoY increase in inventory since early 2008.

The year-over-year increase in inventory is especially bad news because the reported inventory is very high (3.864 million), and the 10.5 months of supply in October is far above normal.

Existing Home Sales NSA This graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2010. Sales for the last four months are significantly below the previous years, and sales will probably be weak for the remainder of 2010.

Existing home sales were weak in October, and will continue to be weak for some time. Inventory is very high - and the significant year-over-year increase in inventory is very concerning. The high level of inventory and months-of-supply will put downward pressure on house prices.

Moody's: Commercial Real Estate Prices increase in September

Moody's reported that the Moody’s/REAL All Property Type Aggregate Index increased 4.3% in September. This reverses the sharp decline in August. Note: 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 and make the index very volatile.

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

CRE 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.

CoreLogic: Total unsold housing inventory increases to 6.3 million units

CoreLogic Shadow Inventory From CoreLogic: Shadow Inventory Jumps More Than 10 Percent in One Year, Pushing Total Unsold Inventory to 6.3 Million Units

This graph from CoreLogic shows the breakdown of "shadow inventory" by category. For this report, CoreLogic estimates the number of 90+ day delinquencies, foreclosures and REOs not currently listed for sale. Obviously if a house is listed for sale, it is already included in the "visible supply" and cannot be counted as shadow inventory.

CoreLogic estimates the "shadown inventory" (by this method) at about 2.1 million units.

Other Economic Stories ...
Housing Supply: What do all the numbers mean?
Galleries and more ...
• From the Chicago Fed: Index shows economic activity picked up in October
• From the BEA: Q3 real GDP growth revised up to 2.5% annualized rate
• From the BEA October report: Personal income increased $57.6 billion, or 0.5 percent ... Personal consumption expenditures (PCE) increased $44.0 billion, or 0.4 percent.
• From the Fed FOMC Minutes: Forecasts revised down again, Disagreement on outlook.
• From LPS Applied Analytics Over 4.3 million loans 90+ days or in foreclosure
• From the American Trucking Association: ATA Truck Tonnage Index Rose 0.8 Percent in October
Unofficial Problem Bank list increases to 919 Institutions

Best wishes to all!

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