Thursday, June 30, 2011

Ford on Car Sales: May and June "slowest sales rates of the year"

by Calculated Risk on 6/30/2011 11:09:00 PM

From Ford: Industry Car Sales to Rise after June

Ford Motor Co.’s chief sales analyst predicts June car sales will be level with or somewhat better than those in May, but after June, the sales rate will begin to rise through year-end. “There are some indications that May and June could be the slowest sales rates of the year,” George Pipas told media Wednesday. “There are positive signs in June’s results that suggest at some point in the second half, we’ll return to a sales rate of the first half or better.”
Pipas said July should be improved but it won’t be until at least August before the U.S. industry returns to a 13 million or more SAAR due to inventory shortages of Japanese automakers caused by the March 11 earthquake.
June sales will be announced tomorrow and no one expects a huge rebound. A few estimates:

• From Bloomberg: Auto Sales at 12 Million Rate Slowed by Missing Inventory: Cars
June light-vehicle deliveries, to be released tomorrow, may have run at a 12 million seasonally adjusted annual rate, the average estimate of 12 analysts surveyed by Bloomberg. That would be an increase from 11.8 million in May
• From
The estimated sales volume translates to a Seasonally Adjusted Annualized Rate (SAAR) of 11.9 million in June, according to analysts
• From
The June 2011 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 12.17 million new car sales, up from 11.83 million in May 2011 and up from 11.16 million in June 2010
• From J.D. Power and Associates:
[The] forecast by J.D. Power would mean a seasonally adjusted annualized rate ... for total light vehicles of 12 million
The rebound - according to Ford - should show up in July and August.

Hotels: Occupancy Rate increased 2.8 percent compared to same week in 2010

by Calculated Risk on 6/30/2011 07:59:00 PM

Here is the weekly update on hotels from Orlando posts weekly decreases in all three key metrics

Overall, the U.S. hotel industry’s occupancy rose 2.8% to 71.6%, ADR increased 3.3% to US$102.33, and RevPAR finished the week up 6.2% to US$73.30.
Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average for the occupancy rate.

Hotel Occupancy RateClick on graph for larger image in graph gallery.

The summer leisure travel season is now starting, and the occupancy rate will increase over the next few of months. Right now the occupancy rate is tracking closer to 2008 than to 2010 - and well above 2009.

A reminder: the occupancy rate started to fall off in the summer of 2008, and really fell off a cliff in the fall of 2008. Who can forget the ruckus following the AIG post-bailout party at the St. Regis Monarch Beach Resort?

Travel was already declining, and then that scandal lead to a collapse in corporate travel ... so I expect the occupancy rate in 2011 to be above 2008 pretty soon.

Data Source: Smith Travel Research, Courtesy of

Earlier today ...
• Kansas City Manufacturing Survey: Manufacturing activity rebounded solidly in June
Weekly Initial Unemployment Claims decline slightly to 428,000
• CoreLogic: May Home Price Index increased 0.8%

Restaurant Performance Index decreases in May

by Calculated Risk on 6/30/2011 04:15:00 PM

The restaurant index is one of several industry specific indexes I track each month. The following report is for May.

From the National Restaurant Association: Restaurant Industry Outlook Softened in May as the Restaurant Performance Index Fell Below 100 for First Time in Six Months

The National Restaurant Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.9 in May, down 1.0 percent from April’s level. May represented the first time in six months that the RPI stood below 100, which signifies contraction in the index of key industry indicators.
“Like the economy as a whole, the restaurant industry’s recovery hit a speed bump in May, with same-store sales and traffic levels softening from recent months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “However, the overall economic fundamentals of the restaurant industry remain positive, which will likely lead to stronger performances in the months ahead.”
Restaurant operators reported softer same-store sales results in May. ... Restaurant operators also reported a net decline in customer traffic in May.
Restaurant Performance Index Click on graph for larger image in graph gallery.

The index decreased to 99.9 in May (above 100 indicates expansion).

Unfortunately the data for this index only goes back to 2002.

The economy clearly slowed in May, so a decline was expected. This is a minor report (really not even "D-List" data), but I'd expect discretionary spending to slow sharply if consumers become really worried - and that doesn't seem to be happening.

Fannie Mae and Freddie Mac Serious Delinquency Rates decline in May

by Calculated Risk on 6/30/2011 01:40:00 PM

Fannie Mae reported that the serious delinquency rate decreased to 4.14% in May, down from 4.19% in April. This is down from 5.15% in May of 2010. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate decreased to 3.53% in May from 3.57% in April. This is down from 4.06% in May 2010. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are loans that are "three monthly payments or more past due or in foreclosure".

Fannie Freddie Seriously Delinquent RateClick on graph for larger image in graph gallery.

Some of the rapid increase in 2009 was probably because of foreclosure moratoriums, and also because loans in trial mods were considered delinquent until the modifications were made permanent.

Now the serious delinquency rate is falling as Fannie and Freddie work through the backlog of loans and either modify the loan, foreclose, short sale, or the loan cures.

The normal serious delinquency rate is under 1%, so this is still very high. At the current pace of improvement, it will take 3 or 4 years to get back to "normal".

Earlier today ...
• Kansas City Manufacturing Survey: Manufacturing activity rebounded solidly in June
Weekly Initial Unemployment Claims decline slightly to 428,000
• CoreLogic: May Home Price Index increased 0.8%

Kansas City Manufacturing Survey: Manufacturing activity rebounded solidly in June

by Calculated Risk on 6/30/2011 11:14:00 AM

From the Kansas City Fed: Manufacturing Sector Shows Rebound After Last Month's Slowdown

The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity rebounded solidly in June after a brief slowdown last month, and producers remained generally optimistic about future activity.

“Factories in the region basically resumed their solid pace of growth from earlier in the year, following some disruptions in May,” said Wilkerson. “Also, hiring plans remain fairly solid for the second half of the year.”
The month-over-month composite index was 14 in June, up from 1 in May and equal to 14 in April. ... Most other month-over-month indicators also improved in June. The production index jumped from -2 to 22, and the shipments, new orders, and order backlog indexes also posted solid gains. The employment index increased from 9 to 17, and the new orders for exports index also edged higher.
This was a solid rebound from May.

Earlier, the Chicago PMI indicated a rebound in June with the index at 61.1 (SA), up from 56.6 in May. New orders were up sharply from 53.5 to 61.2, although employment was down a little to 60.8 from 58.7 (above 50 is expansion).

This is the last of the regional Fed surveys for June. The regional surveys provide a hint about the ISM manufacturing index - and the regional surveys were fairly weak this month as the following graph shows.

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image in graph gallery.

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

The regional surveys suggest the ISM manufacturing index will fall to the low 50s or so in June. After the NY and Philly Fed surveys were released, it seems that a reading below 50 was possible (and could still happen).

However the more recent surveys (Richmond, Dallas, Kansas City and Chicago PMI) all showed expansion in June. The ISM index for June will be released tomorrow, July 1st, and expectations are for a decrease to 51.7 from 53.5 in May.

CoreLogic: May Home Price Index increased 0.8%

by Calculated Risk on 6/30/2011 09:58:00 AM

Notes: Case-Shiller is the most followed house price index, but CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average of March, April and May (May weighted the most) and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® Home Price Index Shows Second Consecutive Month-Over-Month Increase

CoreLogic ... today released its May Home Price Index (HPI) which shows that home prices in the U.S. increased on a month-over-month basis. According to the CoreLogic HPI, national home prices, including distressed sales, increased by 0.8 percent in May 2011 compared to April 2011, the second consecutive month-over-month increase. On a year-over-year basis, home prices declined by 7.4 percent in May 2011 compared to May 2010 after declining by 6.7 percent in April 2011 compared to April 2010. Excluding distressed sales, year-over-year prices declined by 0.4 percent in May 2011 compared to May 2010 and by 0.8 percent in April 2011 compared to April 2010. Distressed sales include short sales and real estate owned (REO) transactions.

“Two consecutive months of month-over-month growth and continued relative strength in the non-distressed market segment are positive seasonal signs in the housing market. Slowly declining shadow inventory and stabilized negative equity levels are also positive signs. Nonetheless, the fragile economic recovery is still critical to the long-term recovery in the housing market,” said Mark Fleming, chief economist for CoreLogic.
CoreLogic House Price Index Click on graph for larger image in graph gallery.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.8% in May, and is down 7.4% over the last year, and off 32.7% from the peak.

This is the tenth straight month of year-over-year declines, and the index is still 2.4% below the March 2009 low (the previous post-bubble low).

Some of this increase is seasonal (the CoreLogic index is NSA) and the index is still off 7.4% from last May (the largest year-over-year decline since Sept 2009).

Weekly Initial Unemployment Claims decline slightly to 428,000

by Calculated Risk on 6/30/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending June 25, the advance figure for seasonally adjusted initial claims was 428,000, a decrease of 1,000 from the previous week's unrevised figure of 429,000. The 4-week moving average was 426,750, an increase of 500 from the previous week's unrevised average of 426,250.
The following graph shows the 4-week moving average of weekly claims for the last 40 years.

Weekly Unemployment Claims Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased slightly this week to 426,750.

This is the 12th straight week with initial claims above 400,000, and the 4-week average is at about the same the level as in January. This suggests the labor market weakness in May continued into June.

NY Times Poll: 89% of Americans view homeownership as important part of the American dream

by Calculated Risk on 6/30/2011 02:49:00 AM

No "hate" for housing here ...

From David Streitfeld and Megan Thee-Brenan at the NY Times: Despite Fears, Owning Home Retains Allure, Poll Shows

Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll.
Here are the poll results. Unfortunately there is no history for this polling question. The question asked was: "How important a part of the American dream is owning a home – is it a very important part of the American dream, somewhat important, not too important, or not at all important?"

55% said important and another 34% said "somewhat important".

There are a series of new questions on housing (see questions 31 through 61). As an example, Question 54: "In the last three years, have you delayed selling your house because you are waiting for the housing market to improve, or are you not interested in selling your house now?"

Delayed 10%
Not interested 88%
NA 2%

That might indicate a fairly large number of homeowners are "waiting for a better market".

Wednesday, June 29, 2011

After Foreclosure: The Bounce Back Buyers

by Calculated Risk on 6/29/2011 06:01:00 PM

From Maryann Haggerty at the NY Times: The Post-Foreclosure Wait (ht Ann)

Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances.
Mortgage broker "Soylent Green is People" sent me this short summary last month (with many more details):
"Pre-Foreclosure" = Short Sale.

VA - immediate, providing you've got 12 months clean credit.
FHA - 3 years.
Conventional 4 years.


VA - 2 years, providing you've got 12 months clean credit AND the loan that was foreclosed was not a VA
FHA - 3 years, providing that the foreclosed loan was not an FHA mortgage
Conventional - 7 years.
Soylent Green is People thinks we will start seeing "bounce back buyers" later this year and in 2012.

Debt Ceiling Charade Update: S&P Warns on Default

by Calculated Risk on 6/29/2011 03:38:00 PM

This will never happen ...

A quote from Reuters: Exclusive: S&P to deeply cut U.S. ratings if debt payment missed

"If the U.S. government misses a payment, it goes to D," [Standard & Poor's managing director John Chambers told Reuters]. "That would happen right after August 4, when the bills mature, because they don't have a grace period."
That would be the first default in U.S. history.

Reuters quotes Chambers as saying that he views the likelihood of a U.S. default as "extremely low," and that he expects a last minute agreement.

Of course there will be a last minute agreement; the debt ceiling is all about political posing.

Here is what I wrote in early May:
Congress will probably push this to the brink, but they will raise the debt ceiling before the country defaults. The first rule for most politicians is to get re-elected, and the easiest way to guarantee losing in 2012 is to throw the country back into recession. If that happened, I believe the voters would correctly blame the leaders of Congress, and I think Congress knows that too. Therefore it won't happen. I'm not worried and neither are investors.

LPS: Mortgage Delinquency Rates decreased slightly in May

by Calculated Risk on 6/29/2011 12:45:00 PM

LPS Applied Analytics released their May Mortgage Performance data. From LPS:

The May Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that the number of mortgages that are 90 or more days delinquent, combined with the foreclosure inventory at the end of May, totaled 4,084,557. With foreclosure sales at 78,676 at month end, the volume of serious delinquencies and foreclosures over-shadowed the number of foreclosure sales by 50:1. In fact, there are still significantly fewer foreclosure sales than there were before foreclosure moratoria were put into place, and foreclosure sales are declining.

New problem loans, defined as loans that were current six months ago and were 60 or more days delinquent at the end of May, are now less than half the peak levels seen in 2009, and are currently at 1.27%. Overall, when compared to historical norms, delinquencies are almost double and foreclosures are eight times higher.

Negative equity also remains a concern, with nearly 30% of current loans in a negative equity position. The equity impact on new seriously delinquent loans is significant, with loans significantly under-water defaulting up to 10 times as much as loans with equity.
According to LPS, 7.96% of mortgages were delinquent in May, down slightly from 7.97% in April, and down from 9.74% in May 2010.

LPS reports that 4.11% of mortgages were in the foreclosure process, down from 4.14% in April. This gives a total of 12.07% delinquent or in foreclosure. It breaks down as:

• 2.27 million loans less than 90 days delinquent.
• 1.92 million loans 90+ days delinquent.
• 2.16 million loans in foreclosure process.

For a total of 6.35 million loans delinquent or in foreclosure in May.

Delinquency Rate Click on graph for larger image in graph gallery.

This graph shows the total delinquent and in-foreclosure rates since 1995.

The total delinquent rate has fallen to 7.96% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is still a long way to go.

However the in-foreclosure rate at 4.11% is barely below the peak rate of 4.21% in March 2011. There are still a large number of loans in this category (about 2.16 million).

Again In-Foreclosure This graph provided by LPS Applied Analytics shows the aging for the in-foreclosure bucket.

About 34% of those 2.16 million loans in the foreclosure process have not made a payment in over 2 years. Another 35% have not made a payment in over a year (but less than 2 years).

The good news is there has been some improvement in the early stages, however there are still 4.08 million loans seriously delinquent or in the foreclosure process.

Misc: Pending Home Sales increase, Greek Parliament Votes for Austerity

by Calculated Risk on 6/29/2011 10:00:00 AM

• From the NAR: Pending Home Sales Turn Around in May

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April [from 81.9] and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
This is the first time since April 2010 that contract activity was above year-ago levels ...
This was very close to Tom Lawler's forecast.

• From the WSJ: Greece Secures Austerity Vote
Greece's Parliament has passed a ... five-year austerity plan ... additional €28.4 billion ($40.81 billion) in spending cuts and new taxes [that] was set as a condition for another international bailout to keep Greece from defaulting on its debt.
Greece faces another critical test Thursday, when parliament is set to hold an article-by-article vote on the legislation implementing the austerity plan and a promised €50 billion privatization program.
Another vote tomorrow ...

MBA: Mortgage Purchase Application activity decreases

by Calculated Risk on 6/29/2011 07:26:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 2.6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46 percent from 4.57 percent, with points increasing to 1.19 from 0.91 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year rate recorded in the survey since the middle of November 2010.
The following graph shows the MBA Purchase Index and four week moving average since 1990.

MBA Purchase Index Click on graph for larger image in graph gallery.

The four week average of purchase activity is at about 1997 levels - and mostly moving sideways. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through the next month or two.

Tuesday, June 28, 2011

BofA Settlement

by Calculated Risk on 6/28/2011 10:19:00 PM

Two stories on the proposed BofA settlement with MBS investors:

• From the WSJ: BofA Nears Huge Settlement

Bank of America Corp. is close to an agreement to pay $8.5 billion ... with a group of 22 investors who hold mortgage-backed securities originally valued at $105 billion, including the giant money manager BlackRock Inc., the insurer MetLife
• From the NY Times: $8.5 Billion Deal Near in Suit on Bank Mortgage Debt
The settlement goes beyond the securities owned by these investors, however. It covers nearly all of Countrywide’s first-lien mortgages, which total $424 billion worth of original, unpaid principal balances. As a result, investors beyond those that are concluding the settlement stand to benefit.
This potential settlement started with repurchase requests from private investors based on Reps and Warranties for the mortgages included in the MBS. This was a complicated negotiation because these loans had significant risk layering (stated income, option ARMs, high LTV, and high debt-to-income ratios etc.) and these risk factors were disclosed to the investors. However, even with the disclosures, many of the loans were clearly defective; the underwriting didn't even meet the disclosed loose standards. I guess they should have disclosed that the underwriting standard was "fog a mirror, get a loan"!

Earlier on Case-Shiller:
Case Shiller: Home Prices increase in April
Update: Real House Prices and Price-to-Rent

HousingTracker: Homes For Sale inventory down 8.5% Year-over-year in June

by Calculated Risk on 6/28/2011 05:05:00 PM

A couple of key points on existing home inventory:

1) Changes in inventory usually lead prices.

2) The NAR method for estimating inventory has probably led to inventory being overstated for the last few years (along with sales). It appears this discrepancy started in 2007 (or earlier), and the error has probably increased since then.

Keeping those two points in mind, here is a repeat of a graph I posted last week.

Year-over-year InventoryClick on graph for larger image in graph gallery.

This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change.

According to the NAR, inventory decreased 4.4% year-over-year in May from May 2010. This was the fourth consecutive month with a YoY decrease in inventory. So even though inventory (and months-of-supply) is still very high, it appears that inventory is now decreasing.

However it appears the NAR is understating the decline in inventory.

A few weeks ago, Tom Lawler posted on how the NAR estimates existing home inventory. The NAR does NOT aggregate data from the local boards (see Tom's post for how the NAR estimates inventory). Sometime this summer, I expect the NAR to revise down their estimates of inventory and sales for the last few years. Also the NAR methodology for estimating sales and inventory will likely (hopefully) be changed.

NAR vs. Existing Home InventoryWhile we wait for the NAR, I think the HousingTracker data that Tom mentioned might be a better estimate of changes in inventory (and always more timely). Ben at is tracking the aggregate monthly inventory for 54 metro areas.

This graph shows the NAR estimate of existing home inventory through May (left axis) and the HousingTracker data for the 54 metro areas through June. The HousingTracker data shows a steeper decline (as mentioned above, the NAR will probably revise down their inventory estimates this summer). YoY Home InventoryThe third graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the weekly average for June listings - for the 54 metro areas - declined 8.5% from last June.

Although inventory is still high, the decline in inventory will put less downward pressure on house prices and is something to watch carefully this year.

Earlier ...
Case Shiller: Home Prices increase in April
Update: Real House Prices and Price-to-Rent

Richmond Fed: Manufacturing Activity Stabilized in June

by Calculated Risk on 6/28/2011 02:05:00 PM

Earlier today from the Richmond Fed: Manufacturing Activity Stabilized in June; Expectations Edge Higher

In June, the seasonally adjusted composite index of manufacturing activity — our broadest measure of the sector — picked up nine points to 3 from May's reading of −6. Among the index's components, shipments added twelve points to −1, new orders rose sixteen points to finish at 1, while the jobs index slipped two points to 12.
Hiring activity at District plants was also mixed in June. The manufacturing employment index eased two points to 12 and the average workweek measure turned negative, losing five points to −5. However, wage growth edged higher, gaining three points to finish at 9.
This is the second regional survey to show expansion in June and was slightly stronger than expected (the Dallas Fed showed slower expansion in June).

Earlier this month, the Philly and Empire State surveys indicated contraction. So far these regional surveys suggest the ISM index will be in the low 50s in June (or possibly even below 50). I'll post a graph of the regional surveys vs. the ISM index on Thursday. The ISM index will be released Friday.

Earlier ...
Case Shiller: Home Prices increase in April
Update: Real House Prices and Price-to-Rent

Update: Real House Prices and Price-to-Rent

by Calculated Risk on 6/28/2011 11:13:00 AM

First a comment on the Case-Shiller seasonal adjustment: A few years ago, several people (including me), noticed that the seasonal adjustments weres getting pretty "wild". This was because of all the distressed sales - distressed sales are distributed throughout the year (with no seasonal pattern), and non-distressed sales were still following the usual pattern. So there was a very large percentage of distressed sales in the winter, and this led to huge swings in the seasonal adjustment.

In response, S&P started reporting on the Not Seasonally Adjusted (NSA) data. This is OK, but it can be a little confusing. Seasonally prices usually increase in April from March - so some of the increase this morning was due to seasonal factors. In fact the Seasonally Adjusted (SA) Case-Shiller composite 20 index was at a new post-bubble low. Note: April is still a seasonally weak month (the NSA index is below the SA index), but not as weak as March.

Just on a seasonal basis, the NSA index should increase through September. Starting in June, the NSA index will be above the SA index. A little confusing.

Case-Shiller, CoreLogic and others report nominal house prices. However it is also useful to look at house prices in real terms (adjusted for inflation), as a price-to-rent ratio, and also price-to-income (not shown here).

Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices are back to 1999/2000 levels, and the price-to-rent ratio is also back to 1999/2000 levels.

Nominal House Prices

Nominal House PricesClick on graph for larger image in graph gallery.

The first graph shows the quarterly Case-Shiller National Index SA (through Q1 2011), and the monthly Case-Shiller Composite 20 SA (through April) and CoreLogic House Price Indexes (through April) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index is back to Q3 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to June 2003 levels, and the CoreLogic index is back to January 2003.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q4 1999 levels, the Composite 20 index is back to September 2000, and the CoreLogic index back to January 2000.

A few key points:
• In real terms, all appreciation in the last decade is gone.

• Real prices are probably still too high. This isn't like in 2005 when prices were way out of the normal range. In many areas - with an increasing population and land constraints - there is an upward slope to real prices (see: The upward slope of Real House Prices)


In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller Composite 20 and CoreLogic House Price Index (through March).

This graph shows the price to rent ratio (January 1998 = 1.0).

Note: the measure of Owners' Equivalent Rent (OER) was mostly flat for two years - so the price-to-rent ratio mostly followed changes in nominal house prices. In recent months, OER has been increasing - lowering the price-to-rent ratio.

On a price-to-rent basis, the Composite 20 index is back to October 2000 levels, and the CoreLogic index is back to February 2000.

Earlier ...
Case Shiller: Home Prices increase in April

Case Shiller: Home Prices increase in April

by Calculated Risk on 6/28/2011 09:00:00 AM

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

This includes prices for 20 individual cities and and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports NSA, I use the SA data.

From S&P:April Seasonal Boost in Home Prices

Data through April 2011 ... show a monthly increase in prices for the 10- and 20-City Composites for the first time in eight months. The 10- and 20-City Composites were up 0.8% and 0.7%, respectively, in April versus March. Both indices are lower than a year ago; the 10-City Composite fell 3.1% and the 20-City Composite is down 4.0% from April 2010 levels.
Six of the 20 MSAs showed new index lows in April – Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa. Thirteen of the cities and both composites posted positive monthly changes. With index levels of 152.51 and 138.84, respectively, both the 10- and 20-City Composites are above their March 2011 levels, which had been a new crisis low for the 20-City Composite.
Case-Shiller House Prices Indices Click on graph for larger image in graph gallery.

The first 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 31.8% from the peak, and up slightly in April (SA). The Composite 10 is still 1.6% above the May 2009 post-bubble bottom (Seasonally adjusted).

The Composite 20 index is off 31.8% from the peak, and down slightly in April (SA). The Composite 20 is slightly below the May 2009 post-bubble bottom seasonally adjusted.

Case-Shiller House Prices Indices The second graph shows the Year over year change in both indices.

The Composite 10 SA is down 3.1% compared to April 2010.

The Composite 20 SA is down 3.9% compared to April 2010.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Case-Shiller Price Declines Prices increased (SA) in 9 of the 20 Case-Shiller cities in April seasonally adjusted. Prices in Las Vegas are off 58.6% from the peak, and prices in Dallas only off 8.8% from the peak.

From S&P (NSA):
As of April 2011, 19 of the 20 MSAs and both Composites are down compared to April 2010. Washington D.C. continues to be the only market to post a year-over-year gain, at +4.0%. Minneapolis was the only city that demonstrated a double-digit annual decline, -11.1%. While 13 markets rose on a monthly basis, 16 markets saw their annual rates of change fall deeper into negative territory.

From their 2006/2007 peaks, six MSAs posted new index level lows in April 2011, a modest improvement over March’s report when 12 MSAs reported new lows. Thirteen of the markets rose in April over March, with six of them increasing by more than 1.0%. Washington DC, once again, stands out with a +3.0% monthly increase and a +4.0% annual growth rate.

With respective index levels of 100.36 and 101.95, Phoenix and Atlanta are two markets that are close to losing any value gained since January 2000. As of April 2011, Cleveland, Detroit and Las Vegas are the three markets where average home prices are lower than where they were 11 years ago.
There could be some confusion between the SA and NSA numbers, but this is some improvement over the last few months.

I'll have more ...

Monday, June 27, 2011

Greece: 48-hour general strike begins

by Calculated Risk on 6/27/2011 09:57:00 PM

From the BBC: Greece general strike: Unions act amid cuts debate

Trade unions in Greece have begun a 48-hour general strike, hours after PM George Papandreou urged parliament to back an austerity package.

Huge crowds of protesters are expected on the streets of Athens, while public transport is set to grind to a halt.
More than 5,000 police officers are due to be deployed in the centre of Athens on Tuesday morning, when tens of thousands of striking workers are expected to march towards parliament at 1000 (0700 GMT).
Airports will be shut for hours at a time, with air traffic controllers walking out between 0800 and 1200 (0500-0900 GMT) and 1800 and 2200 (1500-1900 GMT). Ferries, buses and trains will also stop running.
We will probably wake up to images of the strike in Greece. The austerity votes are scheduled for Wednesday and Thursday.

Note: Case-Shiller house prices will be released at 9 AM ET tomorrow.

Greece Update

by Calculated Risk on 6/27/2011 05:51:00 PM

From the WSJ: European Bankers Tackle Greece Debt Plan

The efforts to get a meaningful private-sector contribution to the bailout, as demanded by Germany and other governments, face a tight deadline. Finance ministers of Greece's fellow members of the 17-nation euro zone will meet to discuss a new rescue on Sunday ...

The ECB has taken a hard-line public stance against any private-sector participation that would result in a default rating for Greece.
They are trying to find a way for the private-sector to participate without it being called a default. Not easy ... and of course all of this is contingent on Greece passing the new austerity plan.

Looks like next Sunday will be interesting ...

The yield for Greek 2 year bonds is up to 29.4%, and the 10 year yield are down to 16.8%. Portuguese and Irish 10 year yields are up to new record highs (12.1% for Ireland, 11.7% for Portugal).

Here are the links for bond yields for several countries (source: Bloomberg):
Greece2 Year5 Year10 Year
Portugal2 Year5 Year10 Year
Ireland2 Year5 Year10 Year
Spain2 Year5 Year10 Year
Italy2 Year5 Year10 Year
Belgium2 Year5 Year10 Year
France2 Year5 Year10 Year
Germany2 Year5 Year10 Year

ATA Trucking index decreased 2.3% in May

by Calculated Risk on 6/27/2011 01:05:00 PM

From ATA Trucking: ATA Truck Tonnage Index Fell 2.3% in May

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 2.3% in May after decreasing a revised 0.6% in April 2011. April’s drop was slightly less than the 0.7% ATA reported on May 25, 2011.
Compared with May 2010, SA tonnage climbed 2.7%, although this was the smallest year-over-year gain since February 2010. In April, the tonnage index was 4.8% above a year earlier.

“Truck tonnage over the last four months shows that the economy definitely hit a soft patch this spring,” ATA Chief Economist Bob Costello said. “With our index falling in three of the last four months totaling 3.7%, it is clear why there is some renewed anxiety over the economic recovery.”

However, Costello added that he is cautiously optimistic that freight volumes will improve in the second half of the year along with economic activity.

“With oil prices falling and some of the Japan-related auto supply problems ending, I believe this was a soft patch and not a slide back into recession, and we should see better, but not great, economic activity in the months ahead,” he said.
Pulse of Commerce Index Click on graph for larger image in graph gallery.

Here is a long term graph that shows ATA's Fore-Hire Truck Tonnage index.

The dashed line is the current level of the index. From ATA:
Trucking serves as a barometer of the U.S. economy, representing 67.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9 billion tons of freight in 2010. Motor carriers collected $563.4 billion, or 81.2% of total revenue earned by all transport modes.
Obviously economic activity was weak in May as the Personal Income and Outlays report indicated this morning. Some of the weakness was due to supply chain issues and the sharp decline in auto sales - and some of the weakness was probably due to high oil and gasoline prices.

Texas Manufacturing survey shows slower expansion in June

by Calculated Risk on 6/27/2011 10:30:00 AM

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

Texas factory activity expanded in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained positive but fell from 12.7 to 5.6, suggesting output growth slowed this month.

Other measures of current manufacturing conditions indicated flat activity, while new orders picked up. ... The new orders index rose from 1.1 in May to 6.4 in June, its eighth consecutive month in positive territory. ... Labor market indicators reflected slower growth in labor demand. The employment index came in at 5.3, with 14 percent of manufacturers reporting hiring new workers compared with 9 percent reporting layoffs. ... Price and wage pressures moderated this month.
There are two more regional manufacturing surveys that will be released this week (Richmond and Kansas City), and those surveys will probably show weakness similar to the Philly and Empire State surveys. So far the regional surveys suggest the ISM index will be in the low 50s in June - and might show contraction (below 50) for the first time since July 2009.

Personal Income increased 0.3% in May, PCE increased less than 0.1%

by Calculated Risk on 6/27/2011 08:30:00 AM

Note: sorry for typos.

The BEA released the Personal Income and Outlays report for May:

Personal income increased $36.2 billion, or 0.3 percent ... Personal consumption expenditures (PCE) increased $4.6 billion, or less than 0.1 percent.
Real PCE decreased 0.1 percent, the same decrease as in April.
The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image in graph gallery.

PCE increased less than 0.1% in May, but real PCE decreased 0.1% as the price index for PCE increased 0.2 percent in May. The graph shows that real PCE declined in the first two month of Q2.

Note: The PCE price index, excluding food and energy, increased 0.3 percent.

The personal saving rate was at 5.0% in May.
Personal saving -- DPI less personal outlays -- was $591.1 billion in May, compared with $568.0 billion in April. Personal saving as a percentage of disposable personal income was 5.0 percent in May, compared with 4.9 percent in April.
Personal Saving rate This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the May Personal Income report.

The saving rate has declined recently even as growth for real personal consumption expenditures has slowed. Part of this is due to higher overall inflation and higher oil / gasoline prices.

This would have been the first monthly decline in real PCE since January 2010 - except April was revised down too. This puts real PCE growth in Q2 on pace for only about 1% (an average of Q2 over Q1) - the slowest pace since Q4 2009.

Sunday, June 26, 2011

Sunday Night Futures

by Calculated Risk on 6/26/2011 11:39:00 PM

Summary for Week Ending June 24th
Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
Schedule for Week of June 26th

The Asian markets are red tonight with the Nikkei off almost 1%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is off about 2.7 points, and Dow futures are off about 30 points.

Oil: WTI futures are down to $90.60 and Brent is down to $104.47.

Of course we will be watching Greece again tomorrow: The Greek 2 year yield is at 28.3% and the ten year yield is at 16.8%.

Best to all.

Week Ahead: Better or Worse News?

by Calculated Risk on 6/26/2011 06:45:00 PM

Although I expect the recovery to remain sluggish and choppy, I do think some of the recent slowdown was temporary, and I expect some pickup in U.S. economic activity in Q3. There are downside risks to this forecast, such as spillover from the European financial crisis, another surge in oil and gasoline prices (or a supply shock), and more rapid fiscal tightening in the U.S. - to name a few risks.

Even though most of the U.S. data will be weak, there might be a few hints of improvement this week, although events overseas might overshadow U.S. economic data once again.

There are several regional manufacturing surveys that will be released this week (Richmond, Dallas and Kansas City), and all will probably show weakness similar to the Philly and Empire State surveys. The Chicago PMI will probably be weak too, and the closely watched ISM manufacturing survey might show contraction (below 50) for the first time since July 2009.

Also the Personal Income and Outlays report for May (to be released Monday) will probably show the first monthly decline in real PCE since early last year. So there will be plenty of "bad news".

However auto sales should be a little better in June than in May, although the supply chain issues are still impacting sales. And falling oil and gasoline prices might lead to a little more positive consumer sentiment - and a pickup in consumer spending in June and July.

On housing, the monthly mortgage delinquency reports from LPS and Fannie Mae will probably show a lower serious delinquency rate (continuing the recent trend). And even though expectations are for the Pending Home Sales index to show a 2% decline in May, housing economist Tom Lawler expects an increase in this index (based on limited data).

And on house prices, expectations are for the Case-Shiller index (NSA) to show a 0.3% decline in April, about half the decline reported in March. However several house prices indexes showed an increase in April:

• From CoreLogic: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010

FNC reported:

Despite broad economic and job market weakness, home prices have increased for the first time since the withdrawal of the homebuyer tax credits a year ago.

Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index™ (RPI) indicated that single-family home prices in April were up from March at a seasonally unadjusted rate of 0.5%.

• The FHFA (GSEs only): FHFA House Price Index Rises 0.8 Percent in April; First Monthly Increase Since May 2010

• And Radar Logic went further and predicted the Case-Shiller index will show an increase for April:
Last month, we predicted that the S&P/Case-Shiller 10-City composite for March 2011 would be about 152 and the 20-City composite would be roughly 138. In fact, the 10-City composite was 151.66 and the 20-City composite was 138.16.

This month, we expect the April 2011 10-City composite index to be about 153 and the 20-City index to be roughly 140.
EDITED for clarity: Seasonally April is usually slightly stronged than March, even though March is still a weak month (The NSA index will be below the SA index). However this means the NSA index would show a larger increase than the SA index. That might be a little confusing since S&P reports the NSA index, and I report the SA numbers.

It looks like the sharp house price declines are over for the summer months. I still think prices will fall further in real terms over the next couple of years (inflation adjusted), but I think we are close to the bottom nationally in nominal terms.

Overall most of the news flow will still be negative this week.

Summary for Week Ending June 24th
Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
Schedule for Week of June 26th

Greece Update: Banks to Propose Rolling over 50% of Debt

by Calculated Risk on 6/26/2011 01:44:00 PM

From the WSJ: French Banks Submit Plan for Greek Debt Rollover

French banks will propose on Monday ... for private creditors to halve their exposure to Greece by rolling over only about 50% of the Greek government bonds they hold ... Under the proposal, financial institutions would effectively reduce their exposure but tie their hands to Greece for a long period by committing to buy up to 30-year bonds ...
Since some analysts were expecting haircuts of up to 70 percent, rolling over half their debt would be a huge positive for the banks.

The Greek parliament is expect to vote on the new austerity package on Wednesday or Thursday. The German finance minister, Wolfgang Schaeuble, made it clear that the next bailout tranche was contingent on Greece passing the austerity package. From Reuters: No Greek budget cuts, no bailout aid -German FinMin (ht jb)
"If the package is rejected, which no one expects actually, then the prerequisites would no longer exist for the IMF, EU and euro zone countries to release the next tranche of aid," [Wolfgang Schaeuble] told German Sunday newspaper Bild am Sonntag.
Although the Greek government is "confident" the legislation will pass, the reaction in the streets - and the market reaction are less certain.

Falling Gasoline Prices

by Calculated Risk on 6/26/2011 09:14:00 AM

Summary for Week Ending June 24th
Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
Schedule for Week of June 26th

Oil prices are down sharply this month - and the announcement last week by the International Energy Agency (IEA) of the release of 60 million barrels of oil from emergency stockpiles (30 million U.S.) pushed oil prices down further.

Brent crude futures fell to $105 per barrel and WTI futures are down to $91 per barrel.

And gasoline prices are still falling. According to, prices are now down almost 40 cents per gallon nationally from the recent peak in early May. And it looks like gasoline prices will probably fall some more over the next few weeks ...

Orange County Historical Gas Price Charts Provided by

The sharp increase in oil prices in March appeared to impact consumer spending and sentiment. Consumer sentiment, as measured by Reuters / University of Michigan, fell sharply in March to 67.5 from 77.5 in February (and has only recovered slightly to 71.8 in early June).

Personal Consumption Expenditure (PCE) growth also slowed in March. Tomorrow the BEA will release the income and outlay report for May (it will be ugly), but falling gasoline prices should help some in June and July. On Friday, Reuters / University of Michigan will release the final sentiment report for June (might show a slight increase), and falling prices will probably boost sentiment in July.

Saturday, June 25, 2011

Schedule for Week of June 26th

by Calculated Risk on 6/25/2011 05:55:00 PM

Summary for Week Ending June 24th
Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix

This will be busy week for economic data. The key releases will be the ISM manufacturing index on Friday, Case-Shiller house prices (April) on Tuesday, and auto sales on Friday.

Some of these releases will show ongoing weakness such as the ISM manufacturing index and the Chicago PMI. The regional surveys suggest the ISM index will be in the low 50s – or possibly below 50 in June (below 50 would indicate contraction for manufacturing).

However other releases might show some improvement such as auto sales and pending home sales. Of special interest will be the Case-Shiller index for April (a three month average of prices in February, March and April). Other house price indexes have indicated prices increased in April, however, because of the averaging, Case-Shiller might still show a decline.

----- Monday, June 27th -----

8:30 AM: Personal Income and Outlays for May. The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars).

Personal Consumption ExpendituresClick on graph for larger image in graph gallery.

PCE increased 0.4% in April, but real PCE only increased 0.1% as the price index for PCE increased 0.3 percent in April.

The consensus is for a 0.4% increase in personal income in May, and a 0.1% increase in personal spending, and for the Core PCE price index to increase 0.2%.

10:30 AM: Dallas Fed Manufacturing Survey for June. The Texas production index increased to 12.7 in May from 8.1 in April.

----- Tuesday, June 28th -----

Case-Shiller House Prices Indices9:00 AM: S&P/Case-Shiller Home Price Index for April. Although this is the April report, it is really a 3 month average of February, March and April.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

House prices have continued to decline, and the Composite 20 index hit a new post-bubble low in March. The consensus is for prices to decline about 0.3% in April, however other indexes suggest the decline will be less (or even an increase).

10:00 AM: Conference Board's consumer confidence index for June. The consensus is for a slight increase to 61.0 from 60.8 last month, possibly due to slightly lower gasoline prices.

10:00 AM: Richmond Fed Manufacturing Survey for June. The consensus is for the survey to show modest contraction with a reading of -2.

----- Wednesday, June 29th -----

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through early summer (not counting all cash purchases).

10:00 AM: Pending Home Sales Index for May. The consensus is for a 2% decrease in the index, however economist Tom Lawler is forecasting a possible double digit increase.

----- Thursday, June 30th -----

8:30 AM: The initial weekly unemployment claims report will be released. The number of claims has been elevated for the last couple of months. The consensus is for a decrease to 420,000 from 429,000 last week.

9:45 AM: Chicago Purchasing Managers Index for June. The consensus is for a decrease to 54.0, down from 56.6 in May.

11:00 AM: Kansas City Fed regional Manufacturing Survey for June. The index was at 1 in May, down from 14 in April.

----- Friday, July 1st -----

10:00 AM: Construction Spending for May. The consensus is for no change in construction spending.

10:00 AM: ISM Manufacturing Index for June. The consensus is for a decrease to 51.7 from 53.5 in May. Based on the regional manufacturing surveys, the ISM index could be below 50 for June (indicating contraction).

All day: Light vehicle sales for June. Light vehicle sales are expected to increase to 12.0 million (Seasonally Adjusted Annual Rate), from 11.8 million in May.

Vehicle SalesThis graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the May sales rate.

Edmunds is forecasting:
The estimated sales volume translates to a Seasonally Adjusted Annualized Rate (SAAR) of 11.9 million in June, according to analysts. Even with SAAR coming in below 12 million for the second month in a row, continues to project an annual SAAR of 12.9 light vehicle sales overall in 2011.
The supply chain disruption is impacting sales, however sales will probably pick up in Q3.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for June). The consensus is for a slight increase to 72.0 from the preliminary reading of 71.8.

Best wishes to All!

Summary for Week Ending June 24th

by Calculated Risk on 6/25/2011 11:11:00 AM

Probably the three most talked about stories of the week were 1) the Greek financial situation, 2) the release of oil from the petroleum reserves, and 3) Fed Chairman Bernanke’s press briefing following the FOMC meeting.

Oil prices fell sharply after the announcement of oil releases from reserves. And gasoline prices are expected to continue to decline (Gasoline prices are already down over 30 cents per gallon from the recent peak).

There were no surprises with the FOMC announcement or during Bernanke’s press briefing. The Fed’s forecast for growth was revised down, and the forecast for the unemployment rate and inflation were revised up. The Fed believes that most of the recent economic weakness was temporary, and the increase in inflation was transitory. QE2 will end as scheduled and the Fed is clearly on hold waiting for additional data.

This was a light week for economic data: Home sales – both existing and new home sales – were weak. However durable goods orders were a little better this month, and there were several house price reports suggesting prices increased slightly in April (Case-Shiller will be released next Tuesday).

Below is a summary of economic data last week mostly in graphs:

May Existing Home Sales: 4.81 million SAAR, 9.3 months of supply

The NAR reports: Existing-Home Sales Decline in May

Existing Home Sales Click on graph for larger image in graph gallery.

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

Sales in May 2011 (4.81 million SAAR) were 3.8% lower than last month, and were 15.3% lower than in May 2010.

Year-over-year InventoryThe next graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, so it really helps to look at the YoY change.

Inventory decreased 4.4% year-over-year in May from May 2010. This is the fourth consecutive month with a YoY decrease in inventory.

Existing Home Sales NSAInventory should increase over the next couple of months months (the normal seasonal pattern), and the YoY change is something to watch closely this year.

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

The red columns are for 2011.

Sales NSA are well below the tax credit boosted level of sales in May 2010, but slightly above the level of May sales in 2009. The level of sales is still elevated due to investor buying.

New Home Sales in May at 319 Thousand SAAR

The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 319 thousand. This was down from a revised 326 thousand in April (revised from 323 thousand).

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

Sales of new one-family houses in May 2011 were at a seasonally adjusted annual rate of 319,000 ... This is 2.1 percent (±10.7%)* below the revised April rate of 326,000, but is 13.5 percent (±13.6%)* above the May 2010 estimate of 281,000.

NHS InventoryStarting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale fell to 64,000 units in May. The combined total of completed and under construction is at the lowest level since this series started.

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

In May 2011 (red column), 30 thousand new homes were sold (NSA). The record low for May was 26 thousand in 2010 (following the expiration of the homebuyer tax credit) and now 2011. The high was 120 thousand in 2005.

Although above the consensus forecast of 305 thousand, this was just above the record low for May - and new home sales have averaged only 300 thousand SAAR since the expiration of the tax credit ... moving sideways at a very low level.

AIA: Architecture Billings Index indicates declining demand in May

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

AIA Architecture Billing Index This graph shows the Architecture Billings Index since 1996. The index decreased in May to 47.2 from 47.6 in April. Anything below 50 indicates a decrease in billings.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this suggests another dip in CRE investment towards the end of this year - and into 2012.

Moody's: Commercial Real Estate Prices declined 3.7% in April, Prices at new Post-Bubble Low

Moody's reported that the Moody’s/REAL All Property Type Aggregate Index declined 3.7% in April.

CRE and Residential Price indexes Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. Beware of the "Real" in the title - this index is not inflation adjusted.

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).

According to Moody's, CRE prices are down 13% from a year ago and down about 49% from the peak in 2007. Prices are at new post-bubble lows - and at new lows for the index.

Other Economic Stories ...
From CoreLogic: CoreLogic® Reports Shadow Inventory Continues to Decline
DOT: Vehicle Miles Driven decreased -2.4% in April compared to April 2010
• FOMC Statement: No Change, "Economic recovery is continuing at a moderate pace"
FHA sells record number of REO in May, Freddie Mac Serious Delinquency Rate declines
Q1 real GDP growth revised up to 1.9%, Durable-goods orders up 1.9%

Best wishes to all!

Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix

by Calculated Risk on 6/25/2011 08:26:00 AM

Note: this is an unofficial list of Problem Banks compiled only from public sources. This post includes an update to the transition matrix (see comments and table at bottom).

Here is the unofficial problem bank list for June 24, 2011.

Changes and comments from surferdude808:

As anticipated, the FDIC released its actions for May 2011, which contributed to many changes to the Unofficial Problem Bank List. This week there are eight additions and three removals. The net five additions push the list back over the 1,000 threshold to 1,001. Assets total $419.2 billion, up $2.5 billion from last week. For the month of June, changes included 17 additions and 13 removals, with four from failure, two from unassisted mergers, and seven from action terminations.

Removals this week include the failed Mountain Heritage Bank, Clayton, GA ($104 million) and action terminations against Commercial State Bank of El Campo, El Campo, TX ($127 million) and Slovak Savings Bank, Pittsburgh, PA ($85 million). This month the FDIC terminated 13 consent orders and two Prompt Corrective Action orders, but, strangely, nine of the terminations were for banks that had failed.

Among the eight additions this week are Patriot Bank, Houston, TX ($1.3 billion); American Bank of the North, Nashwauk, MN ($644 million); and Stonebridge Bank, Exton, PA ($365 million). One other change of note includes the FDIC issuing a Prompt Corrective Action Order against Colorado Capital Bank, Castle Rock, CO ($718 million).

With this being the last Friday of the second quarter, it is time to update the transition matrix. The Unofficial Problem Bank List debuted on August 7, 2009 with 389 institutions with assets of $276.3 billion (see table below).

Over the past 22 months, about 49 percent or 192 institutions have been removed from the original list with 125 due to failure, 49 due to action termination, and 18 due to unassisted merger. About 32 percent of the 389 institutions on the original list have failed, which is substantially higher than the 12 percent figure usually cited by the media as the failure rate for institutions on the FDIC Problem Bank List.

Since the publication of the original list, another 1,009 institutions have been added. However, only 804 of those 1,009 additions remain on the current list as 205 institutions have been removed in the interim. Of the 205 interim removals, 134 were from failure, 44 were from an unassisted merger, 25 from action termination, and two from voluntary liquidation.

In total, 1,398 institutions have made an appearance on the Unofficial Problem Bank List and 259 or 18.5 percent have failed. Of the 397 total removals, the primary way of exit from the list is failure at 259 or 65 percent. Only 74 or 18.6 percent have been rehabilitated while another 62 or 15.6% have found merger partners. Total assets that have appeared on the list amount to $768.9 billion and $258.6 billion have been removed due to failure. The average asset size of removals from failure is nearly $1 billion.
Unofficial Problem Bank List
Change Summary
 Number of InstitutionsAssets ($Thousands)
Start (8/7/2009) 389 276,313,429
 Action Terminated49 (12,581,702)
 Unassisted Merger18 (3,105,440)
 Voluntary Liquidation0 -
 Failures125 (169,470,405)
 Asset Change  (20,083,711)
Still on List at 6/24/2011 197 71,072,171
Additions 804 348,177,411
End (6/24/2011) 1001 419,249,582
Intraperiod Deletions1   
 Action Terminated25 22,538,068
 Unassisted Merger44 31,856,880
 Voluntary Liquidation2 833,567
 Failures134 89,146,292
 Total205 144,374,807
1Institution not on 8/7/2009 or 6/24/2011 list but appeared on a list between these dates.

Friday, June 24, 2011

Las Vegas: Bubble Monuments

by Calculated Risk on 6/24/2011 09:39:00 PM

Steve Kanigher at the Las Vegas Sun presents several photos of bubble monuments in Nevada: Abandoned projects leave lasting reminder of economic crash

"It wasn’t long ago that hotels, high-rise condominiums and massive retail and office complexes sprang up in Southern Nevada seemingly faster than one could drive from one end of the valley to the other. Take that same drive today, though, and you’ll likely see vestiges of the Great Recession: partially built structures with exposed foundations or steel beams ..."
Check out the photos ...

It sure seemed like projects with names like "Manhattan West" (see the 4th slide) or "Central Park West" were doomed.

Bank Failure #48 in 2011: Mountain Heritage Bank, Clayton, Georgia

by Calculated Risk on 6/24/2011 05:38:00 PM

From the FDIC: First American Bank and Trust Company, Athens, Georgia, Assumes All of the Deposits of Mountain Heritage Bank, Clayton, Georgia

As of March 31, 2011, Mountain Heritage Bank had approximately $103.7 million in total assets and $89.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $41.1 million. ... Mountain Heritage Bank is the 48th FDIC-insured institution to fail in the nation this year, and the fourteenth in Georgia.
What a surprise ... a bank in Georgia fails. That is a pretty big percentage loss.