by Calculated Risk on 6/23/2010 11:59:00 PM

Note: on New Home sales, please see: New Home Sales collapse to Record Low in May

The Department of Transportation (DOT) reported that vehicle miles driven in April were up 1.2% from April 2009:

Travel on all roads and streets changed by +1.2% (3.1 billion vehicle miles) for April 2010 as compared with April 2009. Travel for the month is estimated to be 255.9 billion vehicle miles.

Cumulative Travel for 2010 changed by -0.2% (-1.6 billion vehicle miles).

Click on graph for larger image in new window.

This graph shows the rolling 12 month total vehicle miles driven.

On a rolling 12 month basis, miles driven are still 2.0% below the peak - and only 0.6% above the recent low - suggesting a sluggish recovery.

by Calculated Risk on 6/23/2010 08:06:00 PM

This is something I've been tracking for years ... the first graph shows existing home sales (left axis) and new home sales (right axis) through May. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble, and the "distressing gap" (due partially to distressed sales).

Click on graph for larger image in new window.

Initially the gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn't compete with the low prices of all the foreclosed properties.

The two spikes in existing home sales were due primarily to the first time homebuyer tax credit (the initial credit last year, followed by the extension to April 30th / close by June 30th). There were also two smaller bumps for new home sales related to the tax credit. Since new home sales are reported when contracts are signed, the 2nd spike for new home sales was in April and then sales collapsed in May.

The second graph shows the same information as a ratio - new home sales divided by existing home sales - through May 2010.

The ratio decreased because the expiration of the tax credit impacts new home sales first. This is the all time low for the ratio (due to timing issues), and the ratio will increase somewhat as existing home sales collapse in July.

I expect that eventually this ratio will return to the historical range of new home sales being around 15% to 20% of existing home sales. However that will only happen after the huge overhang of existing inventory (especially distressed inventory) is significantly reduced.

by Calculated Risk on 6/23/2010 04:00:00 PM

Note: Earlier post on New Home sales: New Home Sales collapse to Record Low in May

From Fannie Mae: Fannie Mae Increases Penalties for Borrowers Who Walk Away

Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.
...
Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

I'm not sure how they can tell if someone "walks away" (a borrower who could afford to make their mortgage payments, but instead strategically defaults), or if the borrower had no real choice.

But this suggests that the number of strategic defaults is increasing.

And this reminds us of one of the tragedies of the bubble: many people bought before they were ready, or bought too much home. Whether they are "walking away" or losing their home because they can't afford it, they will be out of the market for some time.

by Calculated Risk on 6/23/2010 02:15:00 PM

The comments on the economy were slightly more negative than last meeting. The Fed noted the financial issues in Europe, and also commented that "underlying inflation has trended lower". Each statements was slightly less positive ...

From the Fed:

Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

The key language about rates stayed the same: "The Committee ... continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

by Calculated Risk on 6/23/2010 12:16:00 PM

The Census Bureau released the weekly payroll data for the week ending June 12th this morning (ht Bob_in_MA). If we subtract the number of temporary 2010 Census workers in the week containing the 12th of the month, from the same week for the previous month - this provides a close estimate for the impact of the Census hiring on payroll employment.

The Census Bureau releases the actual number with the employment report.

Click on graph for larger image in new window.

This graph shows the number of Census workers paid each week. The red labels are the weeks of the BLS payroll survey.

The Census payroll decreased from 573,779 for the week ending May 15th to 330,737 for the week ending June 12th.

So my estimate for the impact of the Census on June payroll employment is minus 243 thousand (this will be close). The employment report will be released on July 2nd, and the headline number for June - including Census numbers - will almost certainly be negative. But a key number will be the hiring ex-Census (so we will add back the Census workers this month).