by Calculated Risk on 1/31/2012 07:07:00 PM

Another sign that the mortgage settlement will be announced soon ... from Ally Financial 8-K filed today:

Ally Financial Inc. (“Ally”) has concluded that it will record a charge of approximately $270 million in the fourth quarter of 2011 for penalties expected to be imposed by certain of our regulators and other governmental agencies in connection with foreclosure related matters, which is anticipated to result in an overall net loss for Ally in the fourth quarter. This charge was recorded effective December 31, 2011, considering developments subsequent to year-end.

The mortgage settlement (deadline for states is Friday) is one of several upcoming policy announcements that could impact the economy both in the US and in Europe.

Earlier on House Prices:
• Case Shiller: House Prices fall to new post-bubble lows in November (seasonally adjusted)
• Real House Prices and House Price-to-Rent
• All current house price graphs

by Calculated Risk on 1/31/2012 04:27:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined in December to 3.91%, down from 4.0% in November. This is down from 4.48% in December 2010. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate increased to 3.58% in December, up from 3.57% in November. This is the fourth month in a row with a small increase in the delinquency rate. Freddie's rate is down from 3.84% in December 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".

Click on graph for larger image

The serious delinquency rate has been declining, but declining very slowly (Freddie's decline seems to have stalled). The reason for the slow decline is most likely the backlog of homes in the foreclosure process due to processing issues (aka robo-signing).

I expect a mortgage servicer settlement agreement to be reached very soon, and that will probably lead to more modifications and foreclosures - so the delinquency rate should start to decline faster.

The "normal" serious delinquency rate is under 1%, so there is a long way to go.

All current mortgage delinquency graphs

Earlier on House Prices:
• Case Shiller: House Prices fall to new post-bubble lows in November (seasonally adjusted)
• Real House Prices and House Price-to-Rent
• All current house price graphs

by Calculated Risk on 1/31/2012 02:28:00 PM

From the National Restaurant Association: Restaurant Performance Index Rose to Highest Level in Nearly Six Years in December

The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.2 in December, up 1.6 percent from November and its highest level in nearly six years. In addition, December represented the third time in the last four months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“Aided by favorable weather conditions in many parts of the country, a solid majority of restaurant operators reported higher same-store sales and customer traffic levels in December,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators are solidly optimistic about sales growth in the months ahead, and their outlook for the economy is at its strongest point in nearly a year.”
...
Building on a solid November performance that saw the strongest same-store sales results in more than four years, restaurant operators reported even better numbers in December. ... Restaurant operators also reported solid customer traffic results in December. ... In addition to positive sales and traffic levels, capital spending activity among restaurant operators continues to trend upward. Forty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the highest level in six months.

Blame in on the lack of snow!

Click on graph for larger image.

The index increased to 102.2 in December (above 100 indicates expansion).

The data for this index only goes back to 2002.

This is "D-list" data (at best), but restaurant spending is discretionary and can tell us a little something about the overall economy. This index showed contraction in July and August, but is now solidly positive.

All current retail related graphs

Earlier on House Prices:
• Case Shiller: House Prices fall to new post-bubble lows in November (seasonally adjusted)
• Real House Prices and House Price-to-Rent
• All current house price graphs

by Calculated Risk on 1/31/2012 11:47:00 AM

A monthly update: Case-Shiller, CoreLogic and others report nominal house prices. It is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio.

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 2000 levels.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q3 2011), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through November) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to February 2003 levels, and the CoreLogic index is back to April 2003.

Real House Prices

The 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 Q1 1999 levels, the Composite 20 index is back to April 2000, and the CoreLogic index back to February 2000.

In real terms, all appreciation in the '00s is gone.

Price-to-Rent

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.

Here is a similar graph using the Case-Shiller Composite 20 and CoreLogic House Price Index.

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

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

In real terms - and as a price-to-rent ratio - prices are mostly back to 2000 levels and will probably be back to 1999 levels within the next few months.

Note: In late 2010 I guessed that prices would decline another 5% to 10% on these national indexes (from October 2010 prices). So far prices have fallen another 4% to 5% on these indexes.

All current house price graphs
Earlier:
• Case Shiller: House Prices fall to new post-bubble lows in November (seasonally adjusted)

by Calculated Risk on 1/31/2012 10:15:00 AM

The Census Bureau released the Housing Vacancies and Homeownership report for Q4 this morning.

As Tom Lawler has been discussing, this is from a fairly small sample, and the homeownership and vacancy rates are higher than estimated in other reports (like Census 2010). This report is commonly used by analysts to estimate the excess vacant supply for housing, but it doesn't appear to be useful for that purpose.

It might show the trend, but I wouldn't rely on the absolute numbers.

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate declined to 66.0%, down from to 66.3% in Q3 2011.

I'd put more weight on the decennial Census numbers and that suggests the actual homeownership rate is probably in the 64% to 65% range.

The Census researchers are investigating differences in Census 2010, ACS 2010, and HVS 2010 vacant housing unit estimates, but there is no scheduled date for any report.

The HVS homeowner vacancy rate declined to 2.3% from 2.4% in Q3. This is the lowest level since early 2006 for this report.

The homeowner vacancy rate has probably peaked and is now declining. However - once again - this probably shows that the trend is down, but I wouldn't rely on the absolute numbers.

The rental vacancy rate declined to 9.4% from 9.8% in Q3.

I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the overall trend in the rental vacancy rate - and Reis reported that the rental vacancy rate has fallen to the lowest level since 2001.

This is the most timely survey on households, but unfortunately the survey has serious issues - and sadly many analysts still use this survey to estimate the excess vacant supply. However this does suggest that the housing vacancy rates are falling.

by Calculated Risk on 1/31/2012 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for November (a 3 month average of September, October, and November). This release 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: Home Prices Continued to Decline in November 2011 According to the S&P/Case-Shiller Home Price Indices

Data through November 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices ... showed declines of 1.3% for both the 10- and 20-City Composites in November over October. For a second consecutive month, 19 of the 20 cities covered by the indices also saw home prices decrease. The 10- and 20-City composites posted annual returns of -3.6% and -3.7% versus November 2010, respectively. These are worse than the -3.2% and -3.4% respective rates reported for October.

“Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall. Weakness was seen as 19 of 20 cities saw average home prices decline in November over October,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “... Nationally, home prices are lower than a year ago. The 10-City Composite was down 3.6% and the 20-City was down 3.7% compared to November 2010. The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand."

“The crisis low for the 10-City Composite was April 2009; for the 20-City Composite the more recent low was March 2011. The 10-City Composite is now about 1.0% above its low, and the 20-City Composite is only 0.6% above its low. From their 2006 peaks, both Composites are down close to 33% through November.

Click on graph for larger image.

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 33.5% from the peak, and down 0.7% in November (SA). The Composite 10 is at a new post bubble low (Seasonally adjusted), but still above the low NSA.

The Composite 20 index is off 33.5% from the peak, and down 0.7% in November (SA). The Composite 20 is also at a new post-bubble low.

The second graph shows the Year over year change in both indices.

The Composite 10 SA is down 3.6% compared to November 2010.

The Composite 20 SA is down 3.7% compared to November 2010. This was a slightly larger year-over-year decline for both indexes than in October.

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

Prices increased (SA) in 3 of the 20 Case-Shiller cities in November seasonally adjusted (only one city increased NSA). Prices in Las Vegas are off 61.6% from the peak, and prices in Dallas only off 9.2% from the peak.

The NSA indexes are around 1% above the March 2011 lows - and these indexes will hit new lows in the next month or two since prices are falling again. Using the SA data, the Case-Shiller indexes are now at new post-bubble lows.

by Calculated Risk on 1/30/2012 10:52:00 PM

Housing, payroll tax extension, a Greek deal and more ...

• Mortgage Servicer Settlement. Loren Berlin at the HuffPo writes: As Mortgage Settlement Deal Nears Feb. 3 Deadline, Nevada AG Raises Concerns

As the Obama administration, state attorneys general and the nation's biggest banks close in on a settlement over allegations of widespread mortgage fraud, Nevada's attorney general is pushing back with concerns and questions. Meanwhile a Feb. 3 deadline looms for states to declare whether they are joining the settlement.

In a letter sent Friday, emailed to federal officials and obtained by The Huffington Post, Nevada's attorney general, Catherine Cortez Masto, asked 38 questions relating to a variety of concerns, including fears that states would play second fiddle to the federal government in making decisions. She also questioned if states would lose their ability to pursue certain types of lawsuits against banks and whether states would get their fair share of the housing assistance for their borrowers.

It sounds like these issues will be clarified, and I expect most states (if not all) to join the settlement. Note that Masto has been working closely with California AG Harris.

• A surge in refinance activity in March. Not a new policy - this was announced last October when the FHFA made changes to Home Affordable Refinance Program (HARP) to allow more homeowners with GSE loans and with negative or near negative equity - and who are current on their mortgages - to refinance into lower interest rate loans.

The key to this program - for the lenders - was that the lender was not responsible for any of the representations and warranties associated with the original loan (this is huge for the lenders). The elimination of Reps and warrants for the original loans applies to Desktop Underwriter® (DU) and that will not be updated until March.

• REO to Rental Program: This rental program for Fannie and Freddie REO is being pushed by several agencies, and was discussed earlier this month in the Fed white paper "The U.S. Housing Market: Current Conditions and Policy Considerations" and by NY Fed President William Dudley: Housing and the Economic Recovery

This program could include bulk REO sales to investors, but might also include Fannie and Freddie renting out more REOs. There will be a similar effort for non-GSE properties as regulators relax the rules on banks renting out properties. Note: This program isn't needed in many areas because of the strong demand from small investor groups.

• Extension of payroll tax cut and extended unemployment benefits: The two month extension expires Feb 29th, and I expect these two programs will be extended through the end of the year. From Bloomberg: Boehner Says He’s Confident Congress Will Extend Payroll Tax-Cut

House Speaker John Boehner said he’s confident that Republicans and Democrats in Congress will agree to a payroll tax-cut extension supported by President Barack Obama.

“We are in a formal conference with the Senate, and I’m confident that we’ll be able to resolve this fairly quickly,” Boehner, an Ohio Republican, said on ABC’s “This Week” program yesterday.

And on Europe:

• Although a default is possible, I expect the Greek debt deal and next bailout agreement to be reached sometime in February. From the Athens News: Troika stick delays PSI carrot

Despite its agreement with bondholders on all the parameters of private-sector involvement (PSI) in the Greek debt writedown, the government will have to wait for another week before winning approval from the EU-IMF-ECB troika for a second bailout package worth 130bn euros.

A timely PSI deal for the haircut of 50 percent – or 100bn euros – from the 205bn euro privately held portion of Greek debt was crucial to avert a Greek default before March 20 when a 14.4bn euro bond redemption comes due.

These deals always happen at the last minute, and this will be no exception.

• The second round of the ECB's 3 year Long Term Refinancing Operation (LTRO) will probably be for over €1 trillion (the first 3 year LTRO was for €489 billion). The second auction will be held on February 29th. From the Financial Times: Banks set to double crisis loans from ECB

Several of the eurozone’s biggest banks have told the Financial Times that they could well double or triple their request for funds ... “Banks are not going to be as shy second time round,” said the head of one eurozone bank .. “We should have done more first time.”
excerpt with permission

It may be well over €1 trillion.

by Calculated Risk on 1/30/2012 07:28:00 PM

The average duration of unemployment in the US increased sharply during the recent recession, and was still near the record high in December. One of the reasons the average has stayed high is because of a change in the measurement methodology, but even after accounting for that change, the duration is still near record levels.

Another measure - the median duration of unemployment - has declined slightly from a peak of 25 weeks in June 2010, to 21 weeks in December 2011. In the severe recession of the early '80s, the median duration peaked at 12.3 weeks, even though the unemployment rate was higher in the early '80s than during the recent employment recession.

Researchers Rob Valletta and Katherine Kuang at the San Francisco Fed look at the reasons the duration increased: Why Is Unemployment Duration So Long?

During the recent recession, unemployment duration reached levels well above those of past downturns. Duration has continued to rise during the uneven economic recovery that began in mid-2009. Elevated duration reflects such factors as changes in survey measurement, the demographic characteristics of the unemployed, and the availability of extended unemployment benefits. But the key explanation is the severe and persistent weakness in aggregate demand for labor.

This seems obvious, but it is important for policymakers to understand that the primary cause of the increase in duration is not extended unemployment benefits or changes in demographics, but weak aggregate demand.

by Calculated Risk on 1/30/2012 03:42:00 PM

From Reuters: States to decide this week on mortgage deal

State and federal officials are close to a settlement with the largest U.S. banks over mortgage abuses, with states facing an end-of-the-week deadline to decide whether they will sign on, people close to the talks said.

... negotiators have overcome a sticking point and agreed on Joseph Smith, North Carolina's banking commissioner, as a monitor to ensure the banks comply with the terms of the settlement ...

In exchange for up to $25 billion, much in the form of cutting mortgage debt for distressed homeowners, the banks will resolve civil state and federal lawsuits about servicing misconduct and faulty foreclosures, and state lawsuits about how they made some of the loans.

If this settlement goes forward (and I expect it will), then there will be more modification and foreclosure activity in coming months.

This is just one of several policy changes in the works including the automated HARP refinance program (starts in March) and a possible GSE REO to rental program. Plus the Federal Reserve is "contemplating issuing guidance to banking organizations and examiners" to allow banks to also rent more residential REO.

Currently, according to LPS, there are 1.79 million loans 90+ days delinquent and an additional 2.07 million loans in the foreclosure process.

As I noted earlier this year, it appears the overall goal of these policy changes is to reduce the large backlog of seriously delinquent loans while, at the same time, not flood the housing market with distressed homes.

by Calculated Risk on 1/30/2012 02:00:00 PM

The Federal Reserve released the quarterly January 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices today. The survey had "three sets of special questions: the first set asked banks about lending to firms with European exposures; the second set asked banks about changes in their lending policies on commercial real estate (CRE) loans over the past year; and the third set asked banks about their outlook for credit quality in 2012."

Overall, in the January survey, domestic banks reported that their lending standards had changed little and that they had experienced somewhat stronger loan demand, on net, over the past three months.
...
On the household side, lending standards and demand for loans to purchase residential real estate were reportedly little changed over the fourth quarter on net. Standards on home equity lines of credit (HELOCs) were about unchanged, while demand for such loans weakened on balance. Moderate net fractions of banks reported that they had eased standards on all types of consumer loans over the past three months, and some banks also eased terms on auto loans. Demand for credit card and auto loans reportedly had increased somewhat, while demand for other types of consumer loans was about unchanged.

On Europe:

Large fractions of domestic and foreign respondents again reported having tightened standards on loans to European banks or their affiliates and subsidiaries. There was more widespread tightening of standards than in the previous survey on loans to nonfinancial firms that have operations in the United States and significant exposures to European economies. Demand for credit was reportedly little changed, on net, from European banks (or their affiliates and subsidiaries) and from nonfinancial firms with significant European exposures.

A new special question asked if domestic respondents had experienced an increase in business over the past six months as a result of decreased competition from European banks (or their affiliates and subsidiaries). About half of the respondents who reported competing with European banks noted such an increase in business.

On CRE:

The January survey also included a question regarding changes in terms on CRE loans over the past year (repeated annually since 2001). During the past 12 months, on net, some domestic banks reportedly eased maximum CRE loan sizes and many domestic banks trimmed loan rate spreads. A few large domestic banks, on balance, reported that they had lengthened maximum loan maturities. Other terms for CRE loans were reportedly little changed. The January results were the first in five years to find a net easing in some of the CRE loan terms covered in the survey.

On credit quality in 2012:

The January survey contained a set of special questions that asked banks about their outlook for delinquencies and charge-offs across major loan categories in the current year, assuming that economic activity progresses in line with consensus forecasts. These questions have been asked once each year for the past six years. Overall, between 15 and 60 percent of domestic banks, on net, expected improvements in delinquency and charge-off rates during 2012 in the major loan categories included in the survey.

There are several charts here.

So far the European financial crisis hasn't led to tighter lending standards in the U.S., but standards remain pretty tight.

by Calculated Risk on 1/30/2012 10:39:00 AM

This is the last of the regional Fed surveys for January. The regional surveys provide a hint about the ISM manufacturing index - and all of the regional surveys were stronger in January.

From the Dallas Fed: Texas Manufacturing Activity Picks Up

Texas factory activity increased in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 0.2 to 5.8, suggesting growth resumed this month.

Other measures of current manufacturing conditions also indicated growth in January. The new orders index jumped to 9.5, its highest reading in six months, after two months in negative territory. ... Perceptions of broader economic conditions were notably more positive in January. The general business activity index shot up to 15.3 after dipping into negative territory in December.
...
Labor market indicators reflected continued labor demand growth. The employment index came in at 12.2, up from 9.9 in December. ... The hours worked index continued to suggest average workweeks lengthened.
...
Expectations regarding future business conditions were markedly more optimistic in January.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

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

The ISM index for January will be released Wednesday, Feb 1st and the regional surveys suggest another small increase in January. The consensus is for a slight increase to 54.5 from 53.9 in December.

by Calculated Risk on 1/30/2012 08:32:00 AM

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

Personal income increased $61.3 billion, or 0.5 percent ... in December, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $2.0 billion, or less than 0.1 percent.
...
Real PCE -- PCE adjusted to remove price changes -- decreased 0.1 percent in December ... PCE price index -- The price index for PCE increased 0.1 percent in December, in contrast to a decrease of less than 0.1 percent in
November. The PCE price index, excluding food and energy, increased 0.2 percent, compared with an increase of 0.1 percent.

The following graph shows real Personal Consumption Expenditures (PCE) through December (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

PCE decreased less than 0.1% in December, and real PCE decreased 0.1%.

Note: The PCE price index, excluding food and energy, increased 0.2 percent.

The personal saving rate was at 4.0% in December.

Not much of an increase in PCE since October.

by Calculated Risk on 1/29/2012 07:28:00 PM

The European Union leaders meet in Brussels tomorrow and there is a growing recognition that austerity alone will not work. From the NY Times: E.U. Leaders Set to Admit Austerity Is Not Enough

European leaders are expected to conclude this week that what the debt-laden, sclerotic countries of the Continent need are a dose of economic growth.
...
A draft of the European Union summit meeting communiqué calls for ‘‘growth-friendly consolidation and job-friendly growth,’’ an indication that European leaders have come to realize that austerity measures, like those being put in countries like Greece and Italy, risk stoking a recession and plunging fragile economies into a downward spiral.

And on Greece from the NY Times: Greek Coalition Partners to Back New Reforms

As Greece tries to reach a debt-swap agreement with its private creditors, the country’s prime minister suggested on Sunday that the three leaders in his fractious coalition were prepared to back additional austerity measures and reforms needed to receive a second bailout.

Prime Minister Lucas Papademos is in the middle of a three ring circus negotiating with private creditors, negotiating with the "troika" (European Union, ECB, IMF), and negotiating with the various political parties in Greece.

Yesterday:
• Summary for Week Ending January 27th
• Schedule for Week of Jan 29th

by Calculated Risk on 1/29/2012 02:11:00 PM

Another update: I've been using inventory numbers from HousingTracker / DeptofNumbers to track changes in inventory. Tom Lawler mentioned this last year.

According to the deptofnumbers.com for monthly inventory (54 metro areas), listed inventory is probably back to early 2005 levels. Unfortunately the deptofnumbers only started tracking inventory in April 2006.

This graph shows the NAR estimate of existing home inventory through December (left axis) and the HousingTracker data for the 54 metro areas through January.

Click on graph for larger image.

Since the NAR released their revisions for sales and inventory, the NAR and HousingTracker inventory numbers are tracking pretty well.

Seasonally, housing inventory usually bottoms in December and January and then starts to increase again in February. So inventory should increase over the next 6+ months.

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the January listings - for the 54 metro areas - declined 17% from the same month last year. The year-over-year decline will probably start to slow since listed inventory is getting close to normal levels. Also if there is an increase in foreclosures (as expected), this will give some boost to listed inventory.

This is just inventory listed for sale, sometimes referred to as "visible inventory". There is also a large "shadow inventory" that is currently not on the market, but is expected to be listed in the next few years. Shadow inventory could include bank owned properties (REO: Real Estate Owned), properties in the foreclosure process, other properties with delinquent mortgages (both serious delinquencies of over 90+ days, and less serious), condos that were converted to apartments (and will be converted back), investor owned rental properties, and homeowners "waiting for a better market", and a few other categories - as long as the properties are not currently listed for sale. Some of this "shadow inventory" will be forced on the market, such as completed foreclosures, but most of these sellers will probably wait for a "better market".

However listed inventory has clearly declined in many areas. And it is the listed months-of-supply (currently 6.2 months) combined with the number of distressed sales that mostly impacts prices.

All current existing home sales graphs
Yesterday:
• Summary for Week Ending January 27th
• Schedule for Week of Jan 29th

by Calculated Risk on 1/29/2012 11:15:00 AM

Last week President Obama announced a new task force to investigate abuses related to the origination and securitization of mortgages during the housing bubble: "I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis."

Some people have argued that his will derail the proposed mortgage settlement.

Even though Eric Schneiderman, the New York attorney general will be a co-chair, it sounds like this will be a federal investigation and will be focused on origination and securtization abuses.

Loren Berlin at the HuffPo noted:

Senior officials at the Department of Justice were quick to emphasize that the fate of the settlement talks is unrelated to the new unit. "We have certainly heard criticisms that the settlement would give immunity for all [the mortgage-related misconduct], but that's simply not true ...This [unit] is addressing a very different problem than the servicing settlement," said one official.

I've seen several commentaries that lump servicing and origination abuses together. Obviously the banks wanted broad immunity in any mortgage settlement, and the state attorneys general wanted narrower releases.

According to reports about the mortgage settlement, the banks would be released from claims brought by the states and the federal government for servicing and foreclosure abuses, but injured homeowners could still bring legal action.

And the states (but not the federal government) would release the banks from origination claims. Note: I could have the details wrong, but that is what has been reported.

Since the new task force is a federal investigation, my guess is this is intended to address complaints from some attorneys general about origination and securitization, since the states were being asked to release the banks on origination claims. So this new investigation doesn't sound like it will derail the mortgage servicer settlement - it might even lead to more states joining the settlement (although the banks may not like it).

by Calculated Risk on 1/28/2012 08:43:00 PM

The European Union leaders meet in Brussels on Monday, and two key topics will be a "re-focus on growth and job creation"¹ and Greece. Even if a deal is reached on the debt - and enough bondholders can be persuaded to participate - Greece still needs to come to terms on the next round of financing.

¹Quote from European Council President Herman Van Rompuy.

From the WSJ: Greek Debt Deal, New Loan Agreement to Finish Next Week

Greece and its private sector creditors said Saturday they were on the verge of a deal to write off €100 billion ($132 billion) worth of the country's debt, pending the outcome of separate talks on a new, multi-billion euro bailout for Athens.
...
Effectively, the focus now shifts to a European summit in Brussels Monday where the continent's leaders will sanctify -- or not -- the terms of the debt restructuring and the new loan. But complicating those discussions are concerns that Greece's funding needs might be bigger than originally thought ...

From the NY Times: Greek Debt Talks Again Seem to Be on the Verge of a Deal

[C]reditors now seem willing to accept a rate below 4 percent for the 30-year bonds — perhaps as low as 3.6 percent. ... Officials from the three institutions that are keeping the near-bankrupt nation financially afloat — the European Commission, the monetary fund and the European Central Bank — are demanding another round of spending cuts and reforms to justify a release of as much as 30 billion euros ($39 billion) in the months ahead.

Here are a few key dates in Europe:
Jan 30th: European Union leaders meet in Brussels on debt crisis.

Feb 9th: ECB holds rate meeting.
Feb 20th: Euro-area finance ministers meet in Brussels.
Feb 29th to March 1st: Italy redeems 46.5 billion euros of bonds.

March 1st and 2nd: EU leaders meet in Brussels.
March 8th: ECB holds rate meeting
March 12th: Euro-area finance ministers meet in Brussels
March 20th: Greece redeems 14.4 billion euros of bonds.
March 30th: Euro-area finance ministers meet in Copenhagen.

Late April: Proposed date for Greek general election.
April 22nd: France election.

Earlier:
• Summary for Week Ending January 27th
• Schedule for Week of Jan 29th

by Calculated Risk on 1/28/2012 04:29:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Jan 27, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

Busy week with many changes to the Unofficial Problem Bank List as the FDIC released its enforcement action activity for December 2011 and they closed several banks. In total, there were 11 removals and six additions, which leave the list with 958 institutions with assets of $389.0 billion. A year ago, there were 949 institutions with assets of $410.9 billion on the list. For the month of January 2012, changes to the list were nine cures, six failures, four unassisted mergers, one voluntary liquidation, and eight additions. The list fell by 12 institutions during the current month and it is the seventh consecutive monthly decline after the list peaked on a month-end basis at 1,001 institutions in June 2011.

The FDIC terminated actions against Open Bank, Los Angeles, CA ($136 million Ticker: OPBK); Citizens Bank & Trust Company, Covington, LA ($110 million); First Security Bank & Trust Company, Norton, KS ($63 million); and West One Bank, Kalispell, MT ($44 million). Three banks were removed as they were acquired through unassisted deals including Ravalli County Bank, Hamilton, MT ($187 million); First State Bank of Red Bud, Red Bud, IL ($94 million); and Griffith Savings Bank, Griffith, IN ($89 million), which was acquired by United Federal Credit Union in the reportedly first successful acquisition of a commercial bank by a federally chartered credit union.

The FDIC stepped up its closing activities this week with four closures. The last time the FDIC closed this many banks in a week was on October 21, 2011. Failures include Tennessee Commerce Bank, Franklin, TN ($1.2 billion Ticker: TNCC); First Guaranty Bank and Trust Company of Jacksonville, Jacksonville, FL ($378 million); BankEast, Knoxville, TN ($273 million); and Patriot Bank Minnesota, Forest Lake, MN ($111 million). The failures in Tennessee are the first in that state since the on-set of the financial crisis. Conspicuously, the state stood out for not having yet experienced a failure. Ironically, the banking trade publication American Banker had an article today that questioned how much longer the state could remain failure free and said several lawyers thought the state banking commissioner wanted to avoid failures. While avoiding failures is laudable; however, some may say the delay in closing leads to higher resolution costs. As a share of their assets, the FDIC estimates the resolution of Tennessee Commerce Bank will cost 35.2% and BankEast 27.7%. Perhaps the reluctance for closings as mentioned in the article contributed to the high resolution costs of these banks.

The additions this week include Colorado East Bank & Trust, Lamar, CO ($829 million); Chambers Bank, Danville, AR ($722 million); American Gateway Bank, Port Allen, LA ($434 million); Pacific International Bank, Seattle, WA ($250 million Ticker: PIBW); Prairie Community Bank, Marengo, IL ($128 million); and Woodland Bank, Deer River, MN ($108 million).

The FDIC issued Prompt Corrective Action Orders against Mile High Banks, Longmont, CO ($1.0 billion) and Waukegan Savings Bank, Waukegan, IL ($88 million). Also, the FDIC issued an order terminating the deposit insurance of Fireside Bank, Pleasanton, CA ($278 million). Usually a chartering authority does not allow an institution to operate very long after receiving a deposit insurance termination order. Under a deposit insurance termination order, existing deposits eligible for insurance are covered for two years but any new deposits are not covered.

Earlier:
• Summary for Week Ending January 27th
• Schedule for Week of Jan 29th

by Calculated Risk on 1/28/2012 01:07:00 PM

Earlier:
• Summary for Week Ending January 27th

This will be a very busy week for economic releases. The key report is the January employment report to be released on Friday, Feb 3rd. Other key reports include the Case-Shiller house price index on Tuesday, the ISM manufacturing index on Wednesday, vehicle sales on Wednesday, and the ISM non-manufacturing (service) index on Friday.

On Thursday, Fed Chairman Ben Bernanke provides testimony to Congress on the economic outlook.

----- Monday, Jan 30th -----
8:30 AM ET: Personal Income and Outlays for December. The consensus is for a 0.4% increase in personal income in December, and a 0.1% increase in personal spending, and for the Core PCE price index to increase 0.1%.

10:30 AM: Dallas Fed Manufacturing Survey for January. The consensus is for expansion of 1.0 from contraction of -1.3 in December. This is the last of the regional Fed manufacturing surveys for January, and the other surveys have shown stronger expansion in January.

2:00 PM: The January 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.

----- Tuesday, Jan 31st -----
9:00 AM: S&P/Case-Shiller House Price Index for November. Although this is the November report, it is really a 3 month average of September, October and November.

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

The consensus is for a 0.4% decrease in prices in November. I expect a larger decline NSA, and a decline of 0.1% to 0.2% seasonally adjusted. The CoreLogic index declined 1.4% decrease in November (NSA).

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for an increase to 63.0, up from 62.5 in December.

10:00 AM: Conference Board's consumer confidence index for January. The consensus is for an increase to 68.0 from 64.5 last month.

10:00 AM: Q4 Housing Vacancies and Homeownership report from the Census Bureau. As a reminder: Be careful with the Housing Vacancies and Homeownership report. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. Unfortunately the report is based on a fairly small sample, and does not track the decennial Census data.

----- Wednesday, Feb 1st -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index was especially weak last year, although this does not include all the cash buyers.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 172,000 payroll jobs added in January, down from the 325,000 reported last month.

10:00 AM: Construction Spending for December. The consensus is for a 0.5% increase in construction spending.

10:00 AM ET: ISM Manufacturing Index for January.

Here is a long term graph of the ISM manufacturing index. The consensus is for a slight increase to 54.5 from 53.9 in December.

All day: Light vehicle sales for January. Light vehicle sales are expected to increase to 13.6 million from 13.5 million in December (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

Edmunds is forecasting:

[A] projected Seasonally Adjusted Annual Rate (SAAR) of 13.4 million units, forecasts Edmunds.com ... This sales pace is relatively flat from the 13.5 million SAAR recorded last month, but up from the 12.6 million SAAR from January 2011.

And TrueCar is forecasting:

The January 2012 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 13.6 million new car sales, up from 12.7 million in January 2011

Expected: National Multi Housing Council (NMHC) Quarterly Apartment Survey. This is a key survey for apartment vacancy rates and rents.

----- Thursday, Feb 2nd -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a dencrease to 370,000 from 377,000 last week.

10:00 AM: Testimony from Fed Chairman Ben Bernanke, "The Economic Outlook and the Federal Budget Situation", Before the Committee on the Budget, U.S. House of Representatives

----- Friday, Feb 3rd -----
8:30 AM: Employment Report for December. The consensus is for an increase of 135,000 non-farm payroll jobs in January, down from the 200,000 jobs added in December. Note: it appears the seasonal adjustment for "Transportation and warehousing" over-counted employment in December by about 42,000 and this should be unwound in January. So December payroll growth was probably overstated, and January will be understated.

The consensus is for the unemployment rate to remain unchanged at 8.5%.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through December.

The economy has added 2.65 million jobs since employment bottomed in February 2010 (3.16 million private sector jobs added, and 500 thousand public sector jobs lost).

There are still 5.7 million fewer private sector jobs now than when the recession started. (6.1 million fewer total nonfarm jobs).

10:00 AM: ISM non-Manufacturing Index for January. The consensus is for an increase to 53.3 in January from 52.6 in December. Note: Above 50 indicates expansion, below 50 contraction.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is for a 1.5% increase in orders.

by Calculated Risk on 1/28/2012 08:12:00 AM

The key story last week was that the Federal Open Market Committee (FOMC) noted that “economic conditions … are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.” This was a change from mid-2013.

In addition the FOMC released their inaugural forecasts of the appropriate path for the Fed Funds rate, and most participants expect rates to be low for a long long time. The FOMC also set a long run inflation target of 2 percent (this was understood, but now it is official).

The January Summary of Economic Projections (SEP) showed the FOMC is projecting inflation will remain below target through 2014, whereas the unemployment rate will remain too high for years. This suggest that further action is likely, and Fed Chairman Bernanke seemed to pave the way for QE3 with his comments at the press briefing. My view is QE3 could be announced as early as the next FOMC meeting in March, or perhaps at one of the two day meetings in April or June.

In general the economic data released last week was disappointing. The advance report showed that real GDP only increased at a 2.8% annual rate in Q4. Much of the increase was related to changes in private inventories, and PCE only increased at a 2.0% annual rate. New home sales also disappointed, with sales falling to 307 thousand annual rate in December.

There was some mild good news: two regional Fed manufacturing surveys (Richmond and Kansas City) showed faster expansion in January, and consumer sentiment increased again.

Overall this is consistent with sluggish growth.

Here is a summary in graphs:

• Real GDP increased 2.8% annual rate in Q4

The BEA reported that "Real gross domestic product ... increased at an annual rate of 2.8 percent in the fourth quarter of 2011"

Click on graph for larger image.

This 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 Q4 at 2.8% annualized was below trend growth (around 3%) - and very weak for a recovery - but the best since Q2 2010.

PCE increased at a 2.0 percent annual rate. GDP was boosted significantly by the "change in private inventories" that added 1.94 percentage points. That was somewhat offset by a decline in government spending (subtracted 0.93 percentage points).

Another key story is that residential investment is now adding to GDP. Since RI is historically the best leading indicator for the economy, this suggests further growth in 2012 (although still sluggish).

• New Home Sales declined in December to 307,000 Annual Rate

The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 307 thousand. This was down from a revised 314 thousand in November (revised down from 315 thousand).

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

Starting in 1973 the Census Bureau broke down inventory 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 was at 61,000 units in December. The combined total of completed and under construction is at the lowest level since this series started.

New home sales have averaged only 300 thousand SAAR over the 20 months since the expiration of the tax credit ... mostly moving sideways at a very low level.

All New Home Sales graphs
• ATA Trucking Index increased sharply in December

"The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index jumped 6.8% in December after rising 0.3% in November 2011. The latest gain put the SA index at 124.5 (2000=100) in December, up from the November level of 116.6."

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

The dashed line is the current level of the index. This index stalled early in 2011, but increased sharply at the end of the year.
All current Transportation Graphs
• State Unemployment Rates "slightly lower" in December

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). Every state has some blue - indicating no state is currently at the maximum during the recession.

The states are ranked by the highest current unemployment rate. Only four states and the District of Columbia still have double digit unemployment rates. This is the fewest since early 2009. At the end of 2009, 18 states and D.C. had double digit unemployment rates.
All current employment graphs
• Weekly Initial Unemployment Claims increased to 377,000

The following graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 377,500.

The 4-week moving average remains below 400,000.

Weekly claims have been bouncing around lately - January is a period with large seasonal adjustments and that can lead to some large swings - but the 4-week average of weekly claims have been mostly trending down.
All current Employment Graphs
• Consumer Sentiment increased in January

The final January Reuters / University of Michigan consumer sentiment index increased to 75.0, up from the preliminary reading of 74.0, and up from the December reading of 69.9.

Sentiment is still fairly weak, although above the consensus forecast of 74.0.

• Other Economic Stories ...
• FOMC Statement: Rates likely exceptionally low through late 2014
• FOMC: Sets 2% Inflation Target, January Summary of Economic Projections (SEP) and Press Briefing
• Analysis: Bernanke paves the way for QE3
• Pending Home Sales Decline in December
• From the Richmond Fed: Manufacturing Activity Picks Up the Pace in January; Expectations Upbeat
• Kansas City Fed: Tenth District Manufacturing Activity Rebounded in January
• DOT: Vehicle Miles Driven declined 0.9% in November

by Calculated Risk on 1/27/2012 09:03:00 PM

From Jon Prior at HousingWire: Treasury to pay investors triple for HAMP principal reductions

The Treasury Department will triple payments to mortgage investors for reducing borrower principal through an expanded Home Affordable Modification Program announced Friday [CR note: Treasury will pay incentives ranging from .18 to .63 cents on the dollar - depending on the change in LTV]

Officials announced several critical changes to HAMP, including an enrollment extension to Dec. 31, 2013, from its original expiration date at the end of this year.

The Treasury will also require servicers to factor in second liens and other obligations in the debt-to-income ratio calculation. Previously, if a borrower's first-lien mortgage monthly payment was below 31% of the income, the borrower was deemed ineligible. Factoring other debts to the DTI evaluation will expand the pool of borrowers who could receive the assistance.

To combat blight, officials said they would also expand HAMP to investors who are renting properties to tenants.
...
Department of Housing and Urban Development Secretary Shaun Donovan said in the conference call Friday that the Treasury would make these payments to Fannie Mae and Freddie Mac if they participate in the principal reduction program.

To date, the GSEs have not committed to such a program.
...
"FHFA’s assessment of the investor incentives now being offered will follow its previous analysis, including consideration of the eligible universe, operational costs to implement such changes, and potential borrower incentive effects," said FHFA Acting Director Edward DeMarco in a statement Friday.

Based on DeMarco's comments, it doesn't sound like Fannie and Freddie will participate in the principal reductions.

by Calculated Risk on 1/27/2012 06:10:00 PM

Inequality
Failure for all the small fish
Pardons for the whales
by Soylent Green is People
From the FDIC: First Resource Bank, Savage, Minnesota, Assumes All of the Deposits of Patriot Bank Minnesota, Forest Lake, Minnesota

As of September 30, 2011, Patriot Bank Minnesota had approximately $111.3 million in total assets and $108.3 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $32.6 million. ... Patriot Bank Minnesota is the sixth FDIC-insured institution to fail in the nation this year, and the first in Minnesota. The last FDIC-insured institution closed in the state was The Riverbank, Wyoming, Minnesota, on October 7, 2011.

From the FDIC: U.S. Bank National Association, Cincinnati, Ohio, Assumes All of the Deposits of BankEast, Knoxville, Tennessee

As of September 30, 2011, BankEast had approximately $272.6 million in total assets and $268.8 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $75.6 million. ... BankEast is the seventh FDIC-insured institution to fail in the nation this year, and the second in Tennessee. The last FDIC-insured institution closed in the state was Tennessee Commerce Bank, Franklin, earlier today.

That makes four today.

by Calculated Risk on 1/27/2012 05:13:00 PM

Federal Giants
Sack Panther and Titan banks
A Patriots chore
by Soylent Green is People
From the FDIC: CenterState Bank of Florida, National Association, Winter Haven, Florida, Assumes All of the Deposits of First Guaranty Bank and Trust Company of Jacksonville, Jacksonville, Florida

As of September 30, 2011, First Guaranty Bank and Trust Company of Jacksonville had approximately $377.9 million in total assets and $349.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $82.0 million. ... First Guaranty Bank and Trust Company of Jacksonville is the fourth FDIC-insured institution to fail in the nation this year, and the second in Florida. The last FDIC-insured institution closed in the state was Central Florida State Bank, Belleview, on January 20, 2012.

From the FDIC: Republic Bank & Trust Company, Louisville, Kentucky, Assumes All of the Deposits of Tennessee Commerce Bank, Franklin, Tennessee

As of September 30, 2011, Tennessee Commerce Bank had approximately $1.185 billion in total assets and $1.156 billion in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $416.8 million. ... Tennessee Commerce Bank is the fifth FDIC-insured institution to fail in the nation this year, and the first in Tennessee. The last FDIC-insured institution closed in the state was Bank of Alamo, Alamo, on November 8, 2002.

Hey, Tennessee is on the board. Another failure in Florida? No surprise.

by Calculated Risk on 1/27/2012 02:46:00 PM

From LPS Applied Analytics: LPS' Mortgage Monitor Shows 2010, 2011 Originations Among Best Quality on Record

The December Mortgage Monitor report released by Lender Processing Services shows mortgage originations continued their decline from 2011’s September peak, down 10.1 percent from the month before. At the same time, those loans originated over the last two years have proven to be some of the best quality originations on record.
...
Looking at judicial vs. non-judicial foreclosure states, LPS found that half of all loans in foreclosure in judicial states have not made a payment in more than two years. Foreclosure sale rates in non-judicial states stood at approximately four times that of judicial foreclosure states in December. Still, on average, pipeline ratios (the time it would take to clear through the inventory of loans either seriously delinquent or in foreclosure at the current rate of foreclosure sales) have declined significantly from earlier this year.

According to LPS, 8.15% of mortgages were delinquent in December, unchanged from November, and down from 8.83% in December 2010.

LPS reports that 4.11% of mortgages were in the foreclosure process, down from 4.16% in November, and down slightly from 4.15% in December 2010.

This gives a total of 12.26% delinquent or in foreclosure. It breaks down as:

• 2.31 million loans less than 90 days delinquent.
• 1.79 million loans 90+ days delinquent.
• 2.07 million loans in foreclosure process.

For a total of 6.17 million loans delinquent or in foreclosure in December.

Click on graph for larger image.

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

The total delinquent rate has fallen to 8.15% from the peak in January 2010 of 10.97%, but the decline has "halted". A normal rate is probably in the 4% to 5% range, so there is a long ways to go.

The in-foreclosure rate was at 4.11%, down from the record high in October 2011 of 4.29%. There are still a large number of loans in this category (about 2.07 million). LPS reported that foreclosure starts were down nearly 40% in December, probably due to process issues.

This graph provided by LPS Applied Analytics shows foreclosure inventories by process.

As LPS noted earlier: "Judicial vs. non-judicial foreclosure processes remain a significant factor in the reduction of foreclosure pipelines from state to state, with non-judicial foreclosure inventory percentages less than half that of judicial states. This is largely a result of the fact that foreclosure sale rates in non-judicial states have been proceeding at four to five times that of judicial. Non-judicial foreclosure states made up the entirety of the top 10 states with the largest year-over-year decline in non-current loans percentages."

The third graph shows the 90+ day default rate by vintage.

LPS noted "2010 and 2011 originations are among the best on record".

And this isn't just because of tighter lending standards, LPS also noted (see report) that there were vintage improvements for high risk cohorts too (high risk defined as "Credit Score less than 660 and LTV greater than 80").

Notice the early payment default for the bubble years. The jump in payment 3 means the buyer missed the first three payments!

Overall this means newer loans are performing very well, but that there are a large number of delinquent loans stuck in the pipeline - especially in the judicial states.

All current mortgage delinquency graphs

by Calculated Risk on 1/27/2012 11:19:00 AM

The following graph shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter centered average). 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. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Click on graph for larger image.

Residential Investment (RI) made a positive contribution to GDP in Q4 for the third consecutive quarter. Usually residential investment leads the economy, but not this time because of the huge overhang of existing inventory.

The contribution from RI will probably continue to be sluggish compared to previous recoveries. Still the positive contribution is a significant story.

Equipment and software investment has made a significant positive contribution to GDP for ten straight quarters (it is coincident). However the contribution from equipment and software investment in Q4 was the weakest since the recovery started.

The contribution from nonresidential investment in structures was negative in Q4. Nonresidential investment in structures typically lags the recovery, however investment in energy and power has masked the ongoing weakness in office, mall and hotel investment (the underlying details will be released next week).

Residential Investment as a percent of GDP increased slightly in Q4.

Most of the increase was probably due to multifamily and home improvement investment. I'll break down Residential Investment (RI) into components after the GDP details are released this coming week. Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Residential investment will increase further in 2012, and I expect investment in single family structures will also add to growth this year.

The last graph shows non-residential investment in structures and equipment and software.

Equipment and software investment had been increasing sharply, however the growth slowed in Q4.

Non-residential investment in structures decreased in Q4 and is still near record lows as a percent of GDP. The recent small increase has come from investment in energy and power. I'll add details for investment in offices, malls and hotels next week.

The key story is that residential investment is starting to increase. This trend will probably continue in 2012 - although the recovery in RI will be sluggish.

Earlier ...
• Real GDP increased 2.8% annual rate in Q4

by Calculated Risk on 1/27/2012 09:55:00 AM

Click on graph for larger image.

The final January Reuters / University of Michigan consumer sentiment index increased to 75.0, up from the preliminary reading of 74.0, and up from the December reading of 69.9.

Sentiment is still fairly weak, although above the consensus forecast of 74.0.

by Calculated Risk on 1/27/2012 08:30:00 AM

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.8 percent in the fourth quarter of 2011 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.

The acceleration in real GDP in the fourth quarter primarily reflected an upturn in private inventory investment and accelerations in PCE and in residential fixed investment that were partly offset by a deceleration in nonresidential fixed investment, a downturn in federal government spending, an acceleration in imports, and a larger decrease in state and local government spending.

The following 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 Q4 at 2.8% annualized was below trend growth (around 3%) - and very weak for a recovery - but the best since Q2 2010.


Click on graph for larger image.

A few key numbers:
• Real personal consumption expenditures increased 2.0 percent in the second quarter, compared with an increase of 1.7 percent in the third.

• Change in private inventories added 1.94 percentage point. This was partially ffset by a decline in government spending (subtracted 0.93 percentage points).

• Investment growth slowed, except residential investment: "Real nonresidential fixed investment increased 1.7 percent in the fourth quarter, compared with an increase of 15.7 percent in the third. Nonresidential structures decreased 7.2 percent, in contrast to an increase of 14.4 percent. Equipment and software increased 5.2 percent, compared with an increase of 16.2 percent. Real residential fixed investment increased 10.9 percent, compared with an increase of 1.3 percent."

I'll have more on GDP later ...

by Calculated Risk on 1/26/2012 10:05:00 PM

On December New Home Sales:
• New Home Sales decline in December to 307,000 Annual Rate
• 2011: Record Low New Home Sales and 'Distressing Gap'
• New Home Sales graphs

Last week on Existing Home sales:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

The BEA will release the Q4 advance GDP report Friday morning. The consensus is that real GDP increased 3.0% annualized in Q4.

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The Red column is the forecast for Q4 GDP.

At 3% this would be the fastest growth rate since Q2 2010, however PCE growth will probably still be weak and will probably be closer to 2% annualized.

by Calculated Risk on 1/26/2012 05:07:00 PM

The Case Shiller house price indexes for November will be released next Tuesday. Here are a couple of forecasts:

• Zillow Forecast: November Case-Shiller Composite-20 Expected to Show 3.2% Decline from One Year Ago

Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted, NSA) will decline by 3.2 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will show a year-over-year decline of 2.7 percent. The seasonally adjusted (SA) month-over-month change from October to November will be -0.2 percent and -0.1 percent for the 20 and 10-City Composite Home Price Index (SA), respectively.

• From RadarLogic: Home Prices Declined at an Accelerating Rate in November as Sales Increased

The S&P/Case-Shiller Composite Home Price Indices for November 2011 will decline again on a month-over-month basis.
...
This month, we expect the November 2011 10-City composite index to be about 152 and the 20-City index to be roughly 138.

Below is a summary table. Case-Shiller will probably report house prices are at a new post-bubble low seasonally adjusted, but still above the NSA (Not Seasonally Adjusted) levels of March 2011.

		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (actual)	Nov-10	157.5	156.44	143.77	142.77
	Oct-11	154.1	152.24	140.3	138.56
Zillow Forecast	YoY	-2.7%	-2.7%	-3.2%	-3.2%
	MoM	-0.6%	-0.1%	-0.8%	-0.2%
Zillow Forecasts1		153.2	152.2	139.2	138.2
RadarLogic Forecast		152		138
Post Bubble Lows2		150.44	152.24	137.64	138.56
1Estimate based on Year-over-year and Month-over-month Zillow forecasts 2NSA lows were in March 2011, SA lows were last month.