by Bill McBride on 3/09/2014 11:24:00 AM
Sunday, March 09, 2014
Note: This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008.
The following data is calculated from the Fed's Flow of Funds data (released last week) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW", but there is little MEW right now - and normal principal payments and debt cancellation.
For Q4 2013, the Net Equity Extraction was minus $46 billion, or a negative 1.5% of Disposable Personal Income (DPI).
Click on graph for larger image.
This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.
There are smaller seasonal swings right now, perhaps because there is a little actual MEW (this is heavily impacted by debt cancellation right now).
The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding decreased by $10.8 billion in Q4. Compared to recent years, this was a small decrease in mortgage debt and following Q3 when mortgage debt increased for the first time since Q1 2008
The Flow of Funds report also showed that Mortgage debt has declined by over $1.3 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. With residential investment increasing, and a slower rate of debt cancellation, it is possible that MEW will turn positive again soon.
Dr. James Kennedy also has a simple method for calculating equity extraction: "A Simple Method for Estimating Gross Equity Extracted from Housing Wealth". Here is a companion spread sheet (the above uses my simple method).
For those interested in the last Kennedy data included in the graph, the spreadsheet from the Fed is available here.
Saturday, March 08, 2014
by Bill McBride on 3/08/2014 08:17:00 PM
By request, here is an update on an earlier post through the February employment report.
Note: I added President Carter.
Important: There are many differences between these periods. Overall employment was smaller in the '80s, so a different comparison might be to look at the percentage change. Of course the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is declining now. But these graphs give an overview of employment changes.
The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). President George H.W. Bush only served one term, and President Obama is just starting the second year of his second term.
Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.
There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.
Click on graph for larger image.
The first graph is for private employment only.
The employment recovery during Mr. G.W. Bush's (red) first term was very sluggish, and private employment was down 841,000 jobs at the end of his first term. At the end of Mr. Bush's second term, private employment was collapsing, and there were net 462,000 private sector jobs lost during Mr. Bush's two terms.
Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.
Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).
There were only 1,998,000 more private sector jobs at the end of Mr. Obama's first term. Just over one year into Mr. Obama's second term, there are now 4,451,000 more private sector jobs than when he initially took office.
A big difference between the presidencies has been public sector employment. Note the bumps in public sector employment due to the decennial Census in 1990, 2000, and 2010.
The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).
However the public sector has declined significantly since Mr. Obama took office (down 728,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level. This has been a significant drag on overall employment.
Looking forward, I expect the economy to continue to expand for the next few years, so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).
A big question is when the public sector layoffs will end. It appears the cutbacks are mostly over at the state and local levels, but there are ongoing cutbacks at the Federal level. Right now I'm expecting some increase in public employment in 2014.
by Bill McBride on 3/08/2014 09:31:00 AM
The key report this week is February retail sales on Thursday.
No economic releases scheduled.
7:30 AM ET: NFIB Small Business Optimism Index for February.
10:00 AM: Job Openings and Labor Turnover Survey for January from the BLS.
This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.
The number of job openings (yellow) were up 10.5% year-over-year in December compared to December 2012, and Quits increased in December and were up about 12% year-over-year.
10:00 AM: Monthly Wholesale Trade: Sales and Inventories for January. The consensus is for a 0.4% increase in inventories.
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
2:00 PM ET: the Monthly Treasury Budget Statement for February.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 330 thousand from 323 thousand.
8:30 AM ET: Retail sales for February will be released.
This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales decreased 0.4% from December to January (seasonally adjusted), and sales were up 2.6% from January 2013.
The consensus is for retail sales to increase 0.2% in February, and to increase 0.1% ex-autos.
10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for January. The consensus is for a 0.4% increase in inventories.
8:30 AM: The Producer Price Index for February from the BLS. The consensus is for a 0.2% increase in prices.
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for March). The consensus is for a reading of 81.8, up from 81.6 in February.
Friday, March 07, 2014
by Bill McBride on 3/07/2014 09:25:00 PM
This is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for March 7, 2014.
Changes and comments from surferdude808:
Not many changes to report this week to the Unofficial Problem Bank List. After two removals, the institution count and asset total dropped to 564 and $180.1 billion. A year ago, the list held 805 institutions with assets of $296.4 billion.
Totals have declined for the past 67 consecutive weeks.
Removals include an action termination against Bank of Hampton Roads, Virginia Beach, VA ($1.6 billion Ticker: HMPR) and a merger for Park Cities Bank, Dallas, TX ($406 million). Next week should be quiet as well as the OCC likely will not release its update until March 21st.
by Bill McBride on 3/07/2014 04:53:00 PM
Note: The FHA has stopped releasing REO inventory on a monthly basis. I was able to obtain data for February as show on the graph below.
I'm still trying to get Quarter ending data from the FHA.
In their Q4 SEC filing, Fannie reported their Real Estate Owned (REO) increased to 103,229 single family properties, up from 100,941 at the end of Q3.
Freddie reported their REO increased to 47,308 in Q4, up from 44,623 at the end of Q3.
The FHA reported their REO decreased to 25,306 in February 2014, down from 32,226 in October 2013.
The combined Real Estate Owned (REO) for Fannie, Freddie and the FHA decreased to 175,843, down from 180,286 at the end of Q3 2013 (note: FHA data is not for Quarter end). The peak for the combined REO of the F's was 295,307 in Q4 2010.
This following graph shows the REO inventory for Fannie, Freddie and the FHA.
Click on graph for larger image.
This is only a portion of the total REO. There is also REO for private-label MBS, FDIC-insured institutions (declined in Q4), VA and more. REO has been declining for those categories.
REO for Fannie and Freddie has increased a little over the last two quarters and is still elevated, but REO for the FHA is apparently back to normal levels.