Saturday, April 30, 2011

Summary for Week ending April 29th

by Calculated Risk on 4/30/2011 11:15:00 AM

Below is a summary of economic data last week mostly in graphs (I'll add some thoughts on the economy later):

New Home Sales in March at 300 Thousand SAAR, Record low for March

The Census Bureau reported New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 300 thousand. This was up from a revised 270 thousand in February.

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

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Although the 300 thousand sales (SAAR) was slightly above the consensus forecast, this was a new record low for March.

New Home Sales, NSAThe second graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In March 2011 (red column), 29 thousand new homes were sold (NSA). This is a new record low for the month of March.

The previous record low for March was 31 thousand in 2009. The high was 127 thousand in 2005.

Distressing Gap The third graph shows existing home sales (left axis) and new home sales (right axis) through March. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales).

The gap is due mostly to the flood of distressed sales. This has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

Case Shiller: Home Prices near post-bubble lows in February

S&P/Case-Shiller released the monthly Home Price Indices for February (actually a 3 month average of December, January and February).

Case-Shiller House Prices IndicesThis graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 31.7% from the peak, and down 0.2% in February (SA). The Composite 10 is still 1.8% above the May 2009 post-bubble bottom.

The Composite 20 index is also off 31.4% from the peak, and down 0.2% in February (SA). The Composite 20 is only 0.4% above the May 2009 post-bubble bottom and will probably be at a new post-bubble low soon.

Case-Shiller Price Declines This shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 6 of the 20 Case-Shiller cities in February seasonally adjusted. Prices in Las Vegas are off 58% from the peak, and prices in Dallas only off 6.8% from the peak.

Real House Prices Real Prices: This graph shows the quarterly Case-Shiller National Index (through Q4 2010), and the monthly Case-Shiller Composite 20 and CoreLogic House Price Indexes (both through February release) in real terms (adjusted for inflation using CPI less Shelter).

In real terms, the National index is back to Q1 2000 levels, the Composite 20 index is back to November 2000, and the CoreLogic index back to January 2000.

Q1 2011: Homeownership Rate at 1998 Levels

Homeownership RateThe Census Bureau reported the homeownership rate declined to 66.4%, down from 66.5% in Q4 2010. This is the same as in 1998.

The homeownership rate increased in the '90s and early '00s because of changes in demographics and "innovations" in mortgage lending. Some of the increase due to demographics (older population) will probably stick, so I've been expecting the rate to decline to around 66%, and probably not all the way back to 64%.

Advance Report: Real Annualized GDP Grew at 1.8% in Q1

GDP Growth RateThis graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The dashed line is the current growth rate. Growth in Q1 at 1.8% annualized was below trend growth (around 3.1%) - and very weak for a recovery, especially with all the slack in the system.

The following graph shows the rolling 4 quarter contribution to GDP from residential investment, equipment and software, and nonresidential structures. This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

For the following graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. The usual pattern - both into and out of recessions is - red, green, blue.

Investment Contributions Residential Investment (RI) made a negative contribution to GDP in Q1 2011, and the four quarter rolling average is negative again following the slight boost from the tax credit early in 2010.

Equipment and software investment has made a significant positive contribution to GDP for seven straight quarters (it is coincident).

The contribution from nonresidential investment in structures was negative in Q1. Nonresidential investment in structures typically lags the recovery. The key leading sector - residential investment - has lagged this recovery because of the huge overhang of existing inventory.

Here is a look at office, mall and lodging investment:

Office Investment as Percent of GDP This graph shows investment in offices, malls and lodging as a percent of GDP. Office investment as a percent of GDP peaked at 0.46% in Q1 2008 and has declined sharply to a new series low as a percent of GDP (data series starts in 1959).

Investment in multimerchandise shopping structures (malls) peaked in 2007 and has fallen by 70% (note that investment includes remodels, so this will not fall to zero). Lodging investment peaked at 0.32% of GDP in Q2 2008 and has fallen by 80% already.

Residential Investment ComponentsThis graph shows the various components of Residential Investment (RI) as a percent of GDP for the last 50 years. Usually the most important components are investment in single family structures followed by home improvement.

Investment in single family structures was just above the record low set in Q2 2009.

Investment in home improvement was at a $151.0 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (about 1.0% of GDP), significantly above the level of investment in single family structures of $106.3 billion (SAAR) (or 0.7% of GDP).

Brokers' commissions declined slightly in Q1, and are near the lowest level (as a percent of GDP) since the early '80s. In nominal dollar terms, brokers' commissions are back to the 1999 level.

And investment in multifamily structures has been bouncing along at a series low for the last few quarters, although this is expected to increase this year as starts increase.

Regional Fed Manufacturing Surveys show slower expansion in April

Three regional Fed manufacturing surveys released this week showed slower expansion in April:

From the Richmond Fed: Manufacturing Growth Moderates in April

From the Dallas Fed: Texas Manufacturing Activity Increases but at a Slower Pace

From the Kansas City Fed: Growth in Tenth District manufacturing activity moderated somewhat in April

Fed Manufacturing Surveys and ISM PMIEven with slower expansion, these reports were fairly solid. Here is a graph comparing the regional Fed surveys to the ISM manufacturing survey.

The New York and Philly Fed surveys are averaged together (dashed green, through April), and averaged five Fed surveys (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

The regional surveys suggest the ISM manufacturing index will in the mid-to-high 50s range (fairly strong expansion). The ISM index for April will be released on Monday, May 2nd.

Other Economic Stories ...
A few takeaways from Bernanke Press Briefing
• LPS: Mortgage Delinquency Rates declined in March, Foreclosure pipeline "Bloated"
HVS: Homeowner and Rental Vacancy Rates
Restaurant Performance Index increases in March
Consumer Sentiment increases slightly in April compared to March
Personal Income and Outlays Report for March
Unofficial Problem Bank list at 978 Institutions

Best wishes to all!