by Calculated Risk on 3/14/2012 12:09:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities. Prices, as of the December report, were off 61.8% from the peak according to Case-Shiller, and off 8.9% over the last year.

Sales in 2011 were at record levels, more than during the bubble, and it looks like 2012 will be an even stronger year - even with some new rules that slow the foreclosure process.

From the LVGAR: GLVAR reports increasing home sales, prices, decreasing inventory. First on a record sales pace:

According to GLVAR, the total number of local homes, condominiums and townhomes sold in February was 3,794. That’s up from 3,591 in January, and up from 3,371 total sales in February 2011.

Compared to one year ago, single-family home sales during February increased by 17.8 percent, while sales of condos and townhomes decreased by 5.0 percent.

And on the decline in inventory:

By the end of February, GLVAR reported 6,543 single-family homes listed without any sort of offer. That’s down 18.2 percent from 8,001 such homes listed in January and down 45.6 percent from one year ago. For condos and townhomes, the 1,598 properties listed without offers in February represented an 8.5 percent decline from 1,746 such properties listed without offers in January and a decrease of 45.6 percent from one year ago.

And on the percent distressed:

Meanwhile, 29.3 percent of all existing local homes sold during February were short sales ... Bank-owned homes accounted for 42 percent of all existing home sales in February, down from 45.5 percent in January.

So 71.3% of the sales were distressed, and over half were purchased with cash.

One of the keys is the decline in inventory. Note that the GLVAR reports both total inventory, and inventory excluding "contingent" listings (usually short sales). Total single family inventory was down 15.4% from a year ago, and excluding contingent listings, inventory was down 45.6%!

by Calculated Risk on 3/14/2012 09:07:00 AM

Purchase activity has picked up a little from the beginning of the year. Refinance activity fell, but HARP refinance activity is picking up ...

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 4.1 percent from the previous week to its lowest level since January 6, 2012. This is the fourth consecutive weekly decline in the Refinance Index.

The seasonally adjusted Purchase Index increased 4.4 percent from one week earlier to its highest level since January 13, 2012.
...
“Applications for home purchase increased again last week, coinciding with another strong job market report. Purchase applications are now almost 12 percent above the level one month ago, even after adjusting for typical seasonal patterns. However, this level of purchase activity, adjusted or unadjusted, was essentially unchanged when compared to the same time last year. Purchase activity remains subdued and within the narrow range we have seen since the expiration of the homebuyer tax credit in 2010,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Refinance application volume fell last week. Although rates were unchanged on average, they trended up through the course of the week, and this likely discouraged many potential refinance applicants. HARP volume continued to grow as a share of total refinance volume, reaching roughly 30 percent of refinance activity in the last two weeks. Typical HARP loans had loan-to-value ratios above 90 percent, indicating that lenders are reaching out to underwater borrowers.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 4.06 percent ...

by Calculated Risk on 3/13/2012 10:37:00 PM

This is the UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index Increased 0.7 Percent in February

The Ceridian-UCLA Pulse of Commerce Index® (PCI®), issued today by the UCLA Anderson School of Management and Ceridian Corporation, rose 0.7 percent in February but was not enough to offset the 1.7 percent decline in the previous month. The most recent three-month period from December to February is lower than the previous three months from September to November 2011 by 3.2 percent at an annualized rate.
...
“The continuing weakness of the PCI is signaling that, perhaps, the recovery in home building has not yet taken hold. The recent improvement in building permits and housing starts may get building going again and therefore, trucking as well, as it has been said that it takes 17 truckloads to build a home. If we get the saws and hammers going again, we will have a real recovery with much healthier job growth,” said Ed Leamer, chief economist for the Ceridian-UCLA Pulse of Commerce Index and Director of the UCLA Anderson Forecast.

Click on graph for larger image.

This graph shows the index since January 2000.

This index has been weaker than the ATA trucking index and the reports for rail traffic. It is possible that the high cost of fuel is shifting some long haul traffic from trucks to rail (intermodal).
All current Transportation graphs

by Calculated Risk on 3/13/2012 04:44:00 PM

Update from FT Alphaville: Citi fails Fed stress test. They say Citi, SunTrust, Ally and MetLife all failed. Hard to believe BofA passed.

From the Fed: Federal Reserve announces summary results of latest round of bank stress tests

The Federal Reserve on Tuesday announced summary results of the latest round of bank stress tests, which show that the majority of the largest U.S. banks would continue to meet supervisory expectations for capital adequacy despite large projected losses in an extremely adverse hypothetical economic scenario.

Reflecting the severity of the stress scenario--which includes a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices--losses at the 19 bank holding companies are estimated to total $534 billion during the nine quarters of the hypothetical stress scenario. The aggregate tier 1 common capital ratio, which compares high-quality capital to risk-weighted assets, falls from 10.1 percent in the third quarter of 2011 to 6.3 percent in the fourth quarter of 2013 in the hypothetical stress scenario. That number incorporates the firms' proposals for planned capital actions such as dividends, share buybacks, and share issuance.

Despite the large hypothetical declines, the post-stress capital level in the test exceeds the actual aggregate tier 1 common ratio for the 19 firms prior to the government stress tests conducted in the midst of the financial crisis in early 2009, and reflects a significant increase in capital during the past three years. In fact, despite the significant projected capital declines, 15 of the 19 bank holding companies were estimated to maintain capital ratios above all four of the regulatory minimum levels under the hypothetical stress scenario, even after considering the proposed capital actions, such as dividend increases or share buybacks.

by Calculated Risk on 3/13/2012 04:22:00 PM

From the WSJ: J.P. Morgan Spurs Fed to Move Up Stress-Test Results

The Federal Reserve will release the results of its latest stress tests today at 4:30 p.m. Eastern time, two days before it had planned to unveil the sensitive review of big banks.

The schedule change came after J.P. Morgan Chase & Co . sent out a news release announcing it had passed the stress test. ... Bankers were scrambling Tuesday after the unexpected timing of J.P. Morgan's announcement. ...

The Fed had planned to release the results of this year's Comprehensive Capital Analysis and Review, or stress tests, on Thursday afternoon. It decided to move up the timing after some banks had disclosed their results, the Fed said.

The stress test scenario was announced last November and is outlined here. Here is a look at the house price scenario (the Fed uses CoreLogic).

Click on graph for larger image.

The first graph shows the nominal prices for the CoreLogic index. The adverse scenario was for prices to bottom in Q1 2014 at about 17% below the current price (it was 20% further when the stress tests were announced, but prices have fallen).

For the baseline scenario (not shown) prices would bottom in Q3 2011 at close to the current level.

The second graph shows what would happen to the price-to-rent ratio for the adverse scenario assuming a 1.5% annual increase in Owners' equivalent rent (OER).

This would put the price-to-rent ratio about 15% below historic lows. Three words: Not. Gonna. Happen.

The "adverse" scenario was severe.