Saturday, November 30, 2013

Schedule for Week of December 1st

by Bill McBride on 11/30/2013 01:11:00 PM

This will be a very busy week for economic data with several key reports including the November employment report on Friday, New Home sales for September and October on Wednesday, and the 2nd estimate of Q3 GDP on Thursday.

Other key reports include the ISM manufacturing index on Monday, November vehicle sales on Tuesday, the ISM service index on Wednesday, and the October trade deficit report on Wednesday.

----- Monday, December 2nd -----

9:00 AM ET: The Markit US PMI Manufacturing Index for November.  The consensus is for an increase to 54.2 from 51.8 in October.

ISM PMI10:00 AM ET: ISM Manufacturing Index for November. The consensus is for a decrease to 55.5 from 56.4 in October.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in October at 56.4%. The employment index was at 53.2%, and the new orders index was at 60.6%.

10:00 AM: Construction Spending for September and October. The consensus is for a 0.5% increase in September, and a further 0.5% increase in October construction spending.

----- Tuesday, December 3rd -----

Vehicle Sales>All day: Light vehicle sales for November. The consensus is for light vehicle sales to increase to 15.7 million SAAR in November (Seasonally Adjusted Annual Rate) from 15.2 million SAAR in October.

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

----- Wednesday, December 4th -----

7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 185,000 payroll jobs added in November, up from 130,000 in October.  

U.S. Trade Exports Imports8:30 AM: Trade Balance report for October from the Census Bureau.

Imports increased and exports decreased slightly in September.

The consensus is for the U.S. trade deficit to decrease to $40.2 billion in October from $41.8 billion in September.

New Home Sales10:00 AM: New Home Sales for September and October from the Census Bureau.

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

The consensus is for an increase in sales to 425 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 421 thousand in August. 

10:00 AM: ISM non-Manufacturing Index for November. The consensus is for a reading of 55.5, up from 55.4 in October. Note: Above 50 indicates expansion, below 50 contraction.

10:00 AM: Trulia Price Rent Monitors for November. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, December 5th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 322 thousand from 316 thousand last week.

8:30 AM: Q3 GDP (second estimate). This is the second estimate of Q3 GDP from the BEA. The consensus is that real GDP increased 3.1% annualized in Q3, revised up from the advance estimate of 2.8%.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is for a 1.2% decrease in October orders.

----- Friday, December 6th -----

8:30 AM: Employment Report for November. The consensus is for an increase of 180,000 non-farm payroll jobs in November, down from the 204,000 non-farm payroll jobs added in October.

The consensus is for the unemployment rate to decrease to 7.2% in November from 7.3% in October.  A key will be if the participation rate increases too, reversing the sharp decline last month.

The following graph shows the percentage of payroll jobs lost during post WWII recessions through October.

Percent Job Losses During RecessionsThe economy has added 7.8 million private sector jobs since employment bottomed in February 2010 (7.2 million total jobs added including all the public sector layoffs).

There are still almost 1.0 million fewer private sector jobs now than when the recession started in 2007.

8:30 AM ET: Personal Income and Outlays for October. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for December). The consensus is for a reading of 75.5, up from 75.1 in November.

3:00 PM: Consumer Credit for October from the Federal Reserve. The consensus is for credit to increase $15.0 billion in October.

Unofficial Problem Bank list declines to 645 Institutions

by Bill McBride on 11/30/2013 09:20:00 AM

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

Here is the unofficial problem bank list for November 29, 2013.

Changes and comments from surferdude808:

The FDIC released details of its enforcement action activity through October 2013. For the week, there were nine removals that lower the Unofficial Problem Bank List to 645 with assets of $221.2 billion. At the end of November last year, the list held 856 institutions with assets of $326.4 billion. For the month, the list declined from 670 to 645 after one failure, six unassisted mergers, and 18 action terminations. It was the first month that an institution was not added to the list since its first publication in August 2009.

FDIC terminated actions against First State Financial, Inc., Pineville, KY ($363 million); EvaBank, Eva, AL ($321 million); First Bank, Clewiston, FL ($243 million); Commerce Bank, Geneva, MN ($155 million); Farmers Exchange Bank, Louisville, AL ($135 million); American Heartland Bank and Trust, Sugar Grove, IL ($110 million); Security First Bank, Fresno, CA ($98 million Ticker: SFRK); and Integrity First Bank, Wausau, WI ($78 million). The other removal was The Wilton Bank, Wilton, CT ($75 million Ticker: WIBW), which found a merger partner.

Earlier in the week, the FDIC released third quarter industry results including figures of 515 institutions with assets of $174 billion on the Official Problem Bank List. The difference between the official and unofficial lists narrowed to 130 institutions and $47.2 billion of assets from 148 institutions and $58.6 billion of assets last quarter. For five quarters during 2009 and 2010, the official list had a higher count and more assets but subsequently the official list has declined at a faster pace. We anticipated the institution count difference could narrow to around 120. Still, the narrowing by 18 was the second most since the first quarter of 2013.

Friday, November 29, 2013

Will the Fed "Taper" in December? Inflation is the Key

by Bill McBride on 11/29/2013 08:49:00 PM

A month ago I asked Will the Fed "Taper" in December? Although the consensus is the Fed will wait until 2014 to start to taper asset purchases, December is still possible.

From a month ago:

There are many key releases right at the beginning of December, and we know the Fed is "data dependent".  So here is what the FOMC would like to see to start tapering: 1) the unemployment rate fall to 7.2% in the November report, 2) Employment up about 2.2 million year-over-year in November, 3) inflation increasing toward 2% target, and 4) some sort of fiscal agreement by Dec 13th.  All possible.
• The unemployment rate criteria should probably be expanded - not only would the Fed like to see the unemployment rate decline in November, they'd like to see the participation rate increase (the participation rate declined sharply in October to 62.8% from 63.2% in September, and I suspect the Fed will like to see some of that reversed in the November report). The unemployment report will be released next Friday, and the consensus is the unemployment rate will decline to 7.2%.

• Following the solid October employment report, it will be pretty easy for total employment to be up 2.2 million year-over-year in November (employment was up 2.33 million year-over-year in October).  The Fed will probably be looking for November job growth in line with the consensus of 180 thousand.

• Inflation is probably the key right now.  Core PCE was up 1.2% year-over-year in September, and the Fed would like to see this increasing towards their 2.0% target.   PCE prices for October will be released next Friday, and the consensus is for core PCE prices to only be up 1.1% year-over-year.  Low inflation might stop the Fed from tapering in December.

• Some sort of fiscal agreement looks likely now since Congress is playing "small ball". Of course you never know with Congress.

Right now the key is inflation.

Fannie Mae: Mortgage Serious Delinquency rate declined in October, Lowest since December 2008

by Bill McBride on 11/29/2013 03:24:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in October to 2.48% from 2.55% in September. The serious delinquency rate is down from 3.35% in October 2012, and this is the lowest level since December 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier this week, Freddie Mac reported that the Single-Family serious delinquency rate declined in October to 2.48% from 2.58% in September. Freddie's rate is down from 3.31% in October 2012, and this is the lowest level since March 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

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

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.87 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in less than 2 years. Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be back to normal in late 2015 or 2016.

Europe: Euro Zone Unemployment Rate dips slightly

by Bill McBride on 11/29/2013 01:37:00 PM

From the NY Times: Euro Zone Inflation Rises to 0.9% as Jobless Rate Dips to 12.1%

Unemployment in the 17 countries of the euro zone dropped to 12.1 percent in October from 12.2 percent the previous month, according to official figures. While that was certainly decent news for the 61,000 fewer people who are jobless, unemployment remains near a record high.

At the same time, inflation in the euro zone rose to 0.9 percent in November from a year earlier, up from 0.7 percent in October, according to Eurostat, the European Union’s statistics office. The inflation rate is still well below the European Central Bank’s target rate of below but close to 2 percent, and short of the level required to convince many economists that the euro zone is safe from deflation, a persistent and broad decline of prices that is a typical feature of economic depression.
Here is the unemployment data from Eurostat:
Eurostat estimates that 26.654 million men and women in the EU-28, of whom 19.298 million were in the euro area (EA-17), were unemployed in October 2013. Compared with September 2013, the number of persons unemployed decreased by 75 000 in the EU-28 and by 61 000 in the euro area. Compared with October 2012, unemployment rose by 512 000 in the EU-28 and by 615 000 in the euro area.

The euro area seasonally-adjusted unemployment rate was 12.1% in October 2013, down from 12.2% in September; it was 11.7% in October 2012. The EU-28 unemployment rate was 10.9 % in October 2013, stable compared with September; it was 10.7 % in October 2012.
This was the first decline in the unemployment rate since 2011, but the situation is still very grim, especially in Greece (27.3%) and Spain (26.7%).

Budget Negotiations Update: Playing "Small Ball"

by Bill McBride on 11/29/2013 10:41:00 AM

From the WSJ: Narrow Budget Agreement Comes Into View

Negotiators in Congress are moving toward a narrow agreement on this year's federal budget that ... modestly reduce the roughly $100 billion in across-the-board spending cuts, known as sequestration, that will hit in January.
...
To replace the sequester cuts, officials close to the talks said, lawmakers are looking at increasing airport-security fees, cutting costs in federal-employee retirement programs and drawing on revenue from the auction of broadband spectrum. Democrats also want to count savings from program changes in a farm bill, which is being negotiated in a separate process, to offset sequester cuts, but Republicans say those savings should go to general deficit reduction.
The budget conference committee is scheduled to present any agreement on December 13th, and then vote on the spending bill by January 15th.  It appears a "small ball" agreement is likely.

Thursday, November 28, 2013

Philly Fed: State Coincident Indexes increased in 44 states in October

by Bill McBride on 11/28/2013 08:14:00 PM

This was released this week by the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2013. In the past month, the indexes increased in 44 states, decreased in four states, and remained stable in two, for a one-month diffusion index of 80. Over the past three months, the indexes increased in 45 states and decreased in five, for a three-month diffusion index of 80.
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Philly Fed Number of States with Increasing ActivityClick on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In October, 45 states had increasing activity(including minor increases). This measure has been and up down over the last few years ...


Philly Fed State Conincident Map Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all green at times during the recovery.

There are a few states with three month declining activity, but most of the map is green.

Irwin: "Five economic trends to be thankful for"

by Bill McBride on 11/28/2013 10:47:00 AM

From Neil Irwin at the WaPo looked for a few positives again this year: Five economic trends to be thankful for. Some excerpts a few comments:

1) Falling gasoline prices. ... The average national price of a gallon of gas has fallen from $3.67 in July to $3.29 as of Tuesday, a 10 percent drop in Americans' fuel costs.
CR Note: This is a trend we've been falling.  See this graph from gasbuddy.com.
2) Fewer layoffs. The job market isn't great overall, with unemployment still high. But one key measure of the labor market has shown major progress in 2013. The number of people filing new claims for unemployment insurance benefits was a mere 316,000 last week, and over the last four weeks has averaged 332,000. That's below the 340,000 of December 2007, the month the recession began, and far, far below the high of 670,000 the last week of March 2009.
CR Note: Here is a graph of initial weekly unemployment claims.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 331,750.

Some of the recent volatility in weekly claims was due to processing problems in California (now resolved).

The level of weekly claims suggests an improving labor market.
3) Home prices are rising. ... In the year that ended in September, prices rose 13.3 percent in 20 major metro areas, according to the S&P/Case-Shiller home price index. This translates into higher wealth levels among Americans, leaving them the confidence to spend more money. And it that fewer people are underwater on their mortgages, or owing more than their homes are worth.
CR Note: This has been a real positive for homeowners - but a negative for potential home buyers.
4) More job openings. Hiring has been slow to rebound, but employers are increasingly reporting that they have jobs open. There were 3.91 million job openings in September, the Labor Department said in its Job Openings and Labor Turnover Survey. That was the highest since May 2008 and returns the number of jobs available to early 2005 levels (though the population was smaller then). The story through this slow, halting jobs recovery has been about employers failing to hire; this data suggest things are starting to thaw.
Job Openings and Labor Turnover Survey CR Note: Here is a graph of the data Irwin is mentioning on job openings.

Jobs openings increased in September to 3.913 million from 3.844 million in August.  The number of job openings (yellow) is up 8.6% year-over-year compared to September 2012 and openings are at the highest level since early 2008.

Also Quits were mostly unchanged in September and are up about 18% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").
5) Debt burdens keep on falling. The ratio of Americans' income going to meet debt obligations has plummeted in recent years, as consumers have both reduced debt burdens (by paying them down and in some cases defaulting) and benefited from lower interest rates. The debt service ratio was only 9.89 percent in the second quarter, hovering near an all-time low of 9.84 percent from late 2012 (the data go back to 1980). That ratio was 13.5 percent in the third quarter of 2007, before the crisis.
Financial ObligationsCR Note: This graph based on data from the Fed shows the debt service ratio (DSR) for both renters and homeowners (red), and the homeowner financial obligations ratio for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio is just above the record low set in Q4 2012 thanks to very low interest rates. The homeowner's financial obligation ratio for consumer debt is back to levels last seen in early 1995.

Also the homeowner's financial obligation ratio for mortgages (blue) is at a new record low.  This ratio increased rapidly during the housing bubble, and continued to increase until 2008. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined to an all time low.

Happy Thanksgiving!  

Wednesday, November 27, 2013

Zillow: Case-Shiller House Price Index expected to show 13.9% year-over-year increase in October

by Bill McBride on 11/27/2013 06:08:00 PM

The Case-Shiller house price indexes for September were released Tuesday. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.   It looks like another very strong month ...

From Zillow: Zillow Predicts October Case-Shiller Will Show Still More Inflated Appreciation

The Case-Shiller data for September came out [Tuesday], and based on this information and the October 2013 Zillow Home Value Index (ZHVI, released Nov. 26), we predict that next month’s Case-Shiller data (October 2013) will show that both the non-seasonally adjusted (NSA) 20-City Composite Home Price Index and the NSA 10-City Composite Home Price Index increased 13.9 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from August to September will be 1 percent for both the 20-City Composite and the 10-City Composite Home Price Indices (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for October will not be released until Tuesday, Dec. 31.
...
The Zillow Home Value index continues to show moderation in home value appreciation, with several of the largest metros showing month-over-month declines in October, as well as a fair amount of volatility in home value growth as the housing recovery continues. Case-Shiller indices have also shown slowdowns in monthly appreciation, but have not yet recorded monthly declines (at least not in their seasonally-adjusted monthly numbers). Even when the Case-Shiller indices do begin to show monthly depreciation in some areas, they will continue to show an inflated picture of home prices, especially when considering year-over-year growth. The Case-Shiller indices are biased toward the large, coastal metros currently seeing enormous home value gains, and they include foreclosure resales. The inclusion of foreclosure resales disproportionately boosts the index when these properties sell again for much higher prices — not just because of market improvements, but also because the sales are no longer distressed.
The following table shows the Zillow forecast for the October Case-Shiller index.

Zillow October Forecast for Case-Shiller Index
 Case Shiller Composite 10Case Shiller Composite 20
NSASANSASA
Case Shiller
(year ago)
Oct 2012158.66156.72146.03144.26
Case-Shiller
(last month)
Sept 2013180.03176.19165.66162.19
Zillow ForecastYoY13.9%13.9%13.9%13.9%
MoM0.4%1.0%0.4%1.0%
Zillow Forecasts1 180.7178.2166.3164.1
Current Post Bubble Low 146.45149.62134.07136.87
Date of Post Bubble Low Mar-12Jan-12Mar-12Jan-12
Above Post Bubble Low 23.4%19.1%24.1%19.9%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

Freddie Mac: Mortgage Serious Delinquency rate declined in October, Lowest since March 2009

by Bill McBride on 11/27/2013 03:01:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in October to 2.48% from 2.58% in September. Freddie's rate is down from 3.31% in October 2012, and this is the lowest level since March 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

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

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for October next week.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen from 3.31% in October 2013 - and at that rate of improvement, the serious delinquency rate will not be below 1% until mid-to-late 2015. 

Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications.  Therefore I expect an above normal level of distressed sales for 2+ years (mostly in judicial states).

Merrill Lynch: Economy "Out of Rehab"

by Bill McBride on 11/27/2013 01:01:00 PM

Note: Ethan Harris and the Merrill Lynch team has done an excellent job of forecasting the U.S. economy. Here is their outlook for 2014, from Ethan Harris at Merrill Lynch: Out of rehab. A few excerpts:

As we have been arguing for more than a year, we think 2014 is the year when the economy finally exits rehab and starts growing at a healthy 3% (4Q/4Q). In our view, the economy would have already exited rehab this year if the politicians had not hit the economy with a double dose of austerity and confidence shocks. Two keys to better growth—the housing market and the banking sector—had already shown serious signs of improvement in 2012, with solid gains in home prices and construction and a modest improvement in bank lending. ... Absent the shocks out of Washington, we believe growth this year would have been 3 to 3.5%.
...
Not only are structural headwinds fading, we expect Washington to be less shocking. While the sequester shock is not over—there is about a 0.2pp hit to GDP in 2014—the vast majority of the 2%-plus in fiscal austerity has already been absorbed into the economy. At the same time, with the election looming, we expect moderate politicians in each party to assert themselves and avoid another shutdown.
...
While some of the cyclical bounce has already happened, it is important to recognize that the US is still in the early stage of the business cycle. Business cycles don’t die of old age, they die from overexpansion and inflation. ... In our view, the auto recovery is fairly well-advanced, but there is a long way to go in other consumer durables, housing, and business investment. Even more important ... inflation seems a distant concern.
emphasis added
Harris makes several key points that I agree with (see my post from a month ago: Comment: Looking for Stronger Economic Growth in 2014). As Harris notes, the auto recovery is "well-advanced", but many other sectors of the economy (like housing) have "a long way to go". With improved balance sheets, improving housing market, the end of state and local government austerity, less Federal government austerity, 2014 should be a better year for growth.

Final November Consumer Sentiment increases to 75.1, Chicago PMI at 63.0

by Bill McBride on 11/27/2013 09:59:00 AM

Consumer Sentiment
Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for November was at 75.1, up from the October reading of 73.2, and up from the preliminary November reading of 72.0.

This was above the consensus forecast of 73.3. Sentiment has generally been improving following the recession - with plenty of ups and downs - and one big spike down when Congress threatened to "not pay the bills" in 2011. 

Unfortunately Congress shut down the government in October, and once again threatened to "not pay the bills", and this impacted sentiment last month.  The spike down wasn't as large this time, probably because many people realized the House was bluffing with a losing hand.  And now sentiment is starting to recover.

Chicago PMI: From the Chicago ISM:

November 2013:

The November Chicago Business Barometer softened to 63.0 after October’s sharp rise to a 31-month high of 65.9. November’s slight correction came amid mild declines in New Orders, Production and Order Backlogs after double digit gains in the prior month.

Despite November’s weakening, the Barometer remained well above 60 for the second month, pushing the three month moving average to the highest level since November 2011 [note: above 50 is expansion]

Employment was up for the second consecutive month, reaching the highest level since October 2011, and the first time above 60 since February 2012.

Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “The Barometer might be down in November, but this was another impressive month with companies reporting firm growth”.

“Having kept inventories lean for so long, a pick-up in demand has led to a sharp rise in stock building among the companies in our panel. And to handle the latest production and new orders boost, companies are hiring at the fastest pace for two years,” he added.
This was a solid report and above the consensus estimate of 60.5.

Weekly Initial Unemployment Claims decline to 316,000

by Bill McBride on 11/27/2013 08:34:00 AM

The DOL reports:

In the week ending November 23, the advance figure for seasonally adjusted initial claims was 316,000, a decrease of 10,000 from the previous week's revised figure of 326,000. The 4-week moving average was 331,750, a decrease of 7,500 from the previous week's revised average of 339,250.
The previous week was up from 323,000.

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

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 331,750.

Some of the recent volatility in weekly claims was due to processing problems in California (now resolved).

The level of weekly claims suggests an improving labor market.

MBA: Mortgage Applications Decrease Slightly

by Bill McBride on 11/27/2013 07:02:00 AM

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

Mortgage applications decreased 0.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 22, 2013. ...

The Refinance Index increased 0.1 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.48 percent from 4.46 percent, with points decreasing to 0.31 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Purchase Index Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down 62% from the levels in early May.


Mortgage Refinance Index The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 5% from a year ago.

Tuesday, November 26, 2013

Wednesday: Unemployment Claims, Durable Goods, Chicago PMI, Consumer Sentiment

by Bill McBride on 11/26/2013 08:01:00 PM

Sort of a follow-up to my posts two weeks ago: The Return of the Cranes and The Cranes of Miami ... from the WSJ: In Downtown L.A., a Housing Revival

Six parking lots in downtown Los Angeles recently sold for $82 million. But the buyers aren't interested in the parking business: They want to build 1,500 rental apartments on the properties.
...
A dearth of apartments is fueling one of the city's largest building booms in years. There are about 14,000 apartment units in downtown Los Angeles. About 5,100 units are under construction, and more than 3,400 units were built between 2008 and 2013, according to Polaris Pacific, a real-estate sales, marketing and research firm. More than 3,000 additional rental units have been approved, with another 7,000 proposed.
The cranes are returning to downtown LA!

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 330 thousand from 323 thousand last week.

• Also at 8:30 AM, the Durable Goods Orders for October from the Census Bureau. The consensus is for a 2.0% decrease in durable goods orders.

• Also at 8:30 AM, the Chicago Fed National Activity Index for October.

• At 9:45 AM, the Chicago Purchasing Managers Index for November. The consensus is for a decrease to 60.5, down from 65.9 in October.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for November). The consensus is for a reading of 73.3, up from the preliminary reading of 72.0, and up from the October reading of 73.2.

• At 10:00 AM, the Conference Board Leading Indicators for October. The consensus is for a 0.1% increase in this index.

FDIC reports Earnings Decline for insured institutions, Fewer Problem banks, Residential REO Declines in Q3

by Bill McBride on 11/26/2013 06:30:00 PM

The FDIC released the Quarterly Banking Profile for Q3 today.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $36.0 billion in the third quarter of 2013, a $1.5 billion (3.9 percent) decline from the $37.5 billion in profits that the industry reported a year earlier. This is the first time in 17 quarters — since the second quarter of 2009 — that earnings registered a year-over-year decline. The earnings decline was mainly attributable to a $4 billion increase in litigation expenses at one institution. Lower revenue from reduced mortgage activity and lower gains on asset sales also contributed to the reduction in earnings. Half of the 6,891 insured institutions reporting had year-over-year growth in earnings, while half reported declines. The proportion of banks that were unprofitable fell to 8.6 percent, from 10.7 percent a year earlier.
emphasis added
The FDIC reported the number of problem banks declined:
The number of banks on the FDIC's "Problem List" declined from 553 to 515 during the quarter. The number of "problem" banks is down more than 40 percent from the recent high of 888 at the end of the first quarter of 2011. Six FDIC-insured institutions failed in the third quarter of 2013, down from 12 in the third quarter of 2012. Thus far in 2013, there have been 23 failures, compared to 50 during the same period in 2012.
FDIC Insured Institution REO Click on graph for larger image.

The dollar value of 1-4 family residential Real Estate Owned (REOs, foreclosure houses) declined from $6.98 billion in Q2 2013 to $6.79 billion in Q3. This is the lowest level of REOs since Q4 2007. Even in good times, the FDIC insured institutions have about $2.5 billion in residential REO.

This graph shows the dollar value of Residential REO for FDIC insured institutions. Note: The FDIC reports the dollar value and not the total number of REOs.

FHFA: Most Conforming Limits Unchanged in 2014, Increased in Several High-Cost Areas

by Bill McBride on 11/26/2013 03:37:00 PM

From the FHFA: FHFA Announces Fannie Mae and Freddie Mac Conforming Loan Limits for 2014

The Federal Housing Finance Agency (FHFA) today announced that the 2014 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will remain at $417,000 for one-unit properties in most areas of the country.

The Housing and Economic Recovery Act of 2008 (HERA) establishes the maximum conforming loan limit that Fannie Mae and Freddie Mac are permitted to set for mortgage acquisitions. HERA also requires annual adjustments to these limits to reflect changes in the national average home price.
...
Link to maximum conforming loan limits for 2014
...
In determining the 2014 HERA loan limits in high-cost areas, FHFA continued its policy of not permitting declines relative to prior HERA limits. While HERA did not explicitly prohibit declines in high-cost area loan limits, that approach is consistent with the statutory procedure for responding to changes in prices on a national basis. Subject to this policy, the 2014 HERA limits reflect the higher of the limits directly calculated for 2014 and HERA loan limits determined for years 2009 through 2013.

The 2014 loan limits are higher than 2013 HERA limits in several counties. Those increases were, in some cases, a function of rising median home values.
The conforming loan limit was increased in 18 counties. Seven counties saw large increases from $417,000 in 2013 to $625,000 in 2014, including Garfield, CO, and some counties in New York, Virginia and Idaho.

Note: For comparison, here are the 2013 conforming loan limits.

Comment on House Prices and Graphs

by Bill McBride on 11/26/2013 01:32:00 PM

It appears house price increases have slowed recently based on agent reports and asking prices (a combination of a little more inventory and higher mortgage rates), but this slowdown in price increases is not showing up yet in the Case-Shiller index because of the reporting lag and because of the three month average (the September report was an average of July, August and September prices). I expect to see smaller year-over-year price increases going forward and some significant deceleration towards in early 2014.

Zillow's chief economist Stan Humphries said today: “Zillow’s own data, which excludes REO re-sales, shows the same markets that dominate the Case-Shiller indices – particularly some of the California markets – to be cooling. This suggests that Case-Shiller’s inclusion of REO re-sales is heavily skewing overall appreciation in these markets."

I also think many of us expect house price increase to slow.

Note: My image server (Google) was down this morning. Here are some graphs:

Case-Shiller House Prices Indices 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 22.3% from the peak, and up 0.9% in September (SA). The Composite 10 is up 17.8% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 21.5% from the peak, and up 0.9% (SA) in September. The Composite 20 is up 18.5% from the post-bubble low set in Jan 2012 (SA).

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

The Composite 10 SA is up 13.2% compared to September 2012.

The Composite 20 SA is up 13.2% compared to September 2012. 

Prices increased (SA) in 20 of the 20 Case-Shiller cities in August seasonally adjusted.  Prices in Las Vegas are off 46.9% from the peak, and prices in Denver and Dallas are at new highs.

Case-Shiller CitiesThe last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 41% above January 2000. 

These are nominal prices, and as I noted above real prices (adjusted for inflation) are up about 38% since January 2000 - so the increase in Phoenix from January 2000 until now is about the change in inflation.

Two cities - Denver (up 44% since Jan 2000) and Dallas (up 30% since Jan 2000) - are at new highs (no other Case-Shiller Comp 20 city is very close).    Denver is up slightly more than inflation over that period, and Dallas slightly less.  Detroit prices are still below the January 2000 level.

Richmond Fed: Manufacturing improved in November

by Bill McBride on 11/26/2013 11:45:00 AM

From the Richmond Fed: Fifth District Survey of Manufacturing Activity

Manufacturing in the Fifth District improved in November, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders rose. Employment, average workweek, and wages also picked up this month. Capacity utilization and the backlog of orders flattened, while vendor lead-time rose at a slower pace.

Manufacturers were optimistic about their future business prospects. Firms anticipated shipments and the volume of new orders would grow more quickly during the next six months.
...

The composite index of manufacturing strengthened, climbing to a reading of 13 in November following last month's reading of 1. The index of shipments improved 18 points, ending at 16, and the index for new orders advanced 15 points compared to a month ago. In addition, the index for the number of employees gained two points, finishing at a reading of 6.

Manufacturing employment edged up this month, moving the index to 6 from 4. The average workweek grew solidly, pushing that index up 13 points to end at a reading of 12. Additionally, average wages grew more quickly, reaching an index of 15 compared to last month's reading of 9.
emphasis added
This is the last of the regional surveys.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

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

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

The NY Fed survey indicated contraction in November, but the other surveys showed expansion.  The ISM index for November will be released Monday, December 2nd and will probably decline from the 56.4 reading in October (but still show expansion).

Case-Shiller: Comp 20 House Prices increased 13.3% year-over-year in September

by Bill McBride on 11/26/2013 09:15:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for September ("September" is a 3 month average of July, August and September prices).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities) and the national quarterly index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Advance in Third Quarter According to the S&P/Case-Shiller Home Price Indices

Data through September 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices ... showed that the U.S. National Home Price Index rose 3.2% in the third quarter of 2013 and 11.2% over the last four quarters.

In September 2013, the 10- and 20-City Composites gained 0.7% month-over-month and 13.3% year-over-year. While 13 of 20 cities posted higher year-over-year growth rates, 19 cities had lower monthly returns in September than August.

“The second and third quarters of 2013 were very good for home prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The National Index is up 11.2% year over- year, the strongest figure since the boom peaked in 2006. The 10-City and 20-City Composites year-over-year growth at 13.3% was their highest annual numbers since February 2006."
This was at the consensus forecast. I'll post graphs later (Google is having a server problem this morning).

Housing Permits increase to 1.03 million SAAR in October

by Bill McBride on 11/26/2013 08:30:00 AM

Note: The Census Bureau has announced that the housing starts releases for September and October will be delayed until December 18th.

From the Census Bureau: New Residential Construction in October 2013

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,034,000. This is 6.2 percent above the September rate of 974,000 and is 13.9 percent above the October 2012 estimate of 908,000.

Single-family authorizations in October were at a rate of 620,000; this is 0.8 percent above the September figure of 615,000. Authorizations of units in buildings with five units or more were at a rate of 387,000 in October.
The graph shows total and single unit permits since 1960.

Total Housing Permits and Single Family Housing PermitsClick on graph for larger image.

This shows the huge collapse following the housing bubble, and that housing starts have been generally increasing after moving sideways for about two years and a half years.

The increase in permits was mostly due to the volatile multi-family sector.  This is the highest level for permits since 2008.

Monday, November 25, 2013

Tuesday: Housing Permits, Case-Shiller House Prices

by Bill McBride on 11/25/2013 10:47:00 PM

Just a reminder ... housing starts have been delayed again ... but permits will be released on Tuesday. This will apparent surprise some people, from CNBC: Tuesday look-ahead: Markets watching housing starts

"The most telling news is tomorrow with housing starts," said Terry Sandven, chief equity strategist for U.S. Bank Wealth Management. ... The report will offer "one more nice data point as to how healthy the economy really is and where it might be going," said JJ Kinahan, chief strategist at TD Ameritrade
Tuesday:
• At 8:30 AM ET, the Housing Permits for September and October. Housing starts have been delayed until December 18th.

• At 9:00 AM, the FHFA House Price Index for September 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% increase.

• Also at 9:00 AM, the S&P/Case-Shiller House Price Index for September. Although this is the September report, it is really a 3 month average of July, August and September. The consensus is for a 13.1% year-over-year increase in the Composite 20 index (NSA) for August.

• At 10:00 AM, the Conference Board's consumer confidence index for November. The consensus is for the index to increase to 72.9 from 71.2.

• Also at 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for November. The consensus is a reading of 4, up from 1 in October (above zero is expansion).

Weekly Update: Housing Tracker Existing Home Inventory up 3.2% year-over-year on Nov 25th

by Bill McBride on 11/25/2013 05:40:00 PM

Here is another weekly update on housing inventory ... for the sixth consecutive week, housing inventory is up year-over-year.  This suggests inventory bottomed early this year.

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for October).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years.

Existing Home Sales Weekly data Click on graph for larger image.

This graph shows the Housing Tracker reported weekly inventory for the 54 metro areas for 2010, 2011, 2012 and 2013.

In 2011 and 2012, inventory only increased slightly early in the year and then declined significantly through the end of each year.

Inventory in 2013 is now 3.2% above the same week in 2012 (red is 2013, blue is 2012).

We can be pretty confident that inventory bottomed early this year, and I expect the seasonal decline to be less than usual at the end of the year - so the year-over-year change will continue to increase.

Inventory is still very low, but this increase in inventory should slow house price increases.  One of the key questions for 2014 will be: How much will inventory increase?  I'll post some thoughts on inventory at the end of the year.

Vehicle Sales Forecasts: Stronger Sales Expected in November

by Bill McBride on 11/25/2013 01:01:00 PM

Note: The automakers will report November vehicle sales on December 3rd.

Here are a few forecasts:

From WardsAuto: Forecast Calls for Post-Shutdown Bounce

U.S. automakers should sell 1.21 million light vehicles in November, according to a new WardsAuto forecast.
...
The forecast sales volume (over 26 days) would represent ... equate to a 15.9 million-unit SAAR.
From JD Power: Consumer Demand for New Vehicles Picks Up in November
In November, U.S. new-vehicle sales are likely to reach 1.2 million units ... based on an auto sales forecast update from J.D. Power and strategic partner LMC Automotive.

The average sales pace in November is expected to translate to a 16.1 million-unit seasonally adjusted annual rate, or SAAR, which would ... outpace the 15.2 million-unit SAAR in October, 2013.
From Edmunds.com: November Auto Sales Set the Tone for Final Stretch of 2013, Forecasts Edmunds.com
Edmunds.com ... forecasts that 1,196,663 new cars and trucks will be sold in the U.S. in November for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.7 million.

"Any economic uncertainty that car shoppers might have felt in October seems to be a distant memory by now," says Edmunds.com Senior Analyst Jessica Caldwell. "Car buyers are already taking advantage of advertised holiday deals, and as we plow deeper into the holiday season, the table is set for 2013 to finish on a very strong note."
It appears sales in November will be significantly above the government slowdown pace of 15.154 million in October 2013.

LPS: House Price Index increased 0.2% in September, Up 9.0% year-over-year

by Bill McBride on 11/25/2013 11:08:00 AM

Notes: I follow several house price indexes (Case-Shiller, CoreLogic, LPS, Zillow, FHFA, FNC and more). The timing of different house prices indexes can be a little confusing. LPS uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From LPS: LPS Home Price Index Report: September Transactions, U.S. Home Prices Up 0.2 Percent for the Month; Up 9.0 Percent Year-Over-Year

Lender Processing Services ... today released its latest LPS Home Price Index (HPI) report, based on September 2013 residential real estate transactions. The LPS HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The LPS HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.
The LPS HPI is off 14.1% from the peak in June 2006. Note: The press release has data for the 20 largest states, and 40 MSAs. Prices declined slightly in seven of the 20 largest states in September. LPS shows prices off 44.5% from the peak in Las Vegas, off 37.8% in Orlando, and 35.7% off from the peak in Riverside-San Bernardino, CA (Inland Empire). Prices were at new peaks in Austin, Dallas, Houston and San Antonio.

Note: Case-Shiller for September will be released tomorrow.

Pending Home Sales Index declines 0.6% in October

by Bill McBride on 11/25/2013 10:00:00 AM

From the NAR: October Pending Home Sales Down Again, but Expected to Level Out

The Pending Home Sales Index, a forward-looking indicator based on contract signings, slipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September, and is 1.6 percent below October 2012 when it was 103.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings.
...
[Lawrence Yun, NAR chief economist said:]“The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17 percent of Realtors® reported delays in October, mostly from waiting for IRS income verification for mortgage approval,” he said.

The PHSI in the Northeast rose 2.8 percent to 85.8 in October, and is 8.1 percent above a year ago. In the Midwest the index increased 1.2 percent to 104.1 in October, and is 3.2 percent higher than October 2012. Pending home sales in the South slipped 0.8 percent to an index of 114.5 in October, and are 1.5 percent below a year ago. The index in the West fell 4.1 percent in October to 93.3, and is 12.1 percent lower than October 2012.
emphasis added
Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in November and December.

Sunday, November 24, 2013

Sunday Night Futures: Oil Prices Decline

by Bill McBride on 11/24/2013 07:49:00 PM

On oil from the WSJ: Iran Accord Likely to Push Oil Prices Down

Oil prices are likely to drop, analysts said, as the nuclear accord between Iran and six world powers potentially paves the way for more crude oil to reach the global market.
...
Brent crude futures ended Friday at $111.05 a barrel, the highest since Oct. 11, in part because a deal with Iran looked remote at the time the market closed.
...
"There's about a million barrels of oil a day that could be very quickly returned to the global market," said Jason Schenker, economist and president at Prestige Economics, LLC.

Iran exported 1.5 million barrels a day in 2012, down from 2.5 million barrels a day in 2011, according to the Energy Information Administration.
Monday:
• At 10:00 AM ET, the Pending Home Sales Index for October. The consensus is for a 1.1% increase in the index.

• At 10:30 AM ET, the Dallas Fed Manufacturing Survey for November. The consensus is a reading of 5.0, up from 3.6 in October (above zero is expansion).

Weekend:
Schedule for Week of November 24th

Housing Starts and Permits

The Nikkei is up about 0.8%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are 5 and DOW futures are up 50 (fair value).

Oil prices are down with WTI futures at $94.01 per barrel and Brent at $108.65 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices have increased recently to $3.26 per gallon.  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.



Orange County Historical Gas Price Charts Provided by GasBuddy.com

Housing Starts and Permits

by Bill McBride on 11/24/2013 01:29:00 PM

The Census Bureau has announced that the housing starts releases for September and October will be delayed until December 18th, but that housing permits for September and October will be released this coming Tuesday.

The good news is housing starts and permits mostly move together. "Housing starts" are an estimate for the entire country, and "permits" are only for areas requiring building permits.  From the Census Bureau:

Housing starts and completions estimates cover the entire United States, not just areas requiring building permits. The number of housing units built in non-permit areas is about 2.5 percent of the total. Nearly all are single-family houses. (Note that the number of jurisdictions (or "places") requiring building permits increases over time as non-permit places become permit-issuing. The Census Bureau's universe of permit offices was increased in 2005 from 19,000 to 20,000 places.)
Total Housing Starts and Permits Click on graph for larger image.

The first graph shows total housing starts and permits since January 2008.

Over time, more areas have required permits, and now permits and starts mostly move together.

The second graph shows total and single unit permits since 1960.  This is the graph I'll post on Tuesday when permits are released.

Total Housing Permits and Single Family Housing PermitsThis shows the huge collapse following the housing bubble, and that housing permits have been generally increasing after moving sideways for about two years and a half years.

Since housing starts will be delayed, there will be an extra focus on permits on Tuesday - especially since some of the homebuilders have posted weak results recently.

Housing Starts for September and October Delayed Again until December 18th

by Bill McBride on 11/24/2013 10:06:00 AM

The Census Bureau has delayed the release of housing starts again. They will release permit data for September and October this week (on Tuesday), but housing start data for September and October will be released on December 18th.

From the Census Bureau: Census Bureau to Postpone Release of Some New Residential Construction Information

Due to the recent lapse in federal funding, the U.S. Census Bureau today announced revisions to the release date for the September and October New Residential Construction indicator's housing starts and housing completions statistics. Originally scheduled for release on October 17 and November 19 respectively, these dates had been previously revised to November 26, 2013.

The Census Bureau's monthly New Residential Construction indicator includes statistics on building permits, housing starts and housing completions. On November 26 at 8:30 a.m., the Census Bureau will release estimates of housing units authorized by building permits in September and October. However, the release of new housing unit starts and housing unit completions will now be released on December 18, 2013.

The lapse in federal funding affected the data collection schedule for the Survey of Construction, which is the source of data on new housing unit starts and housing unit completions. Accurate data collection for September and October could not be completed in time for the November 26 release. As a result, the December 18 release will include data on housing units started and completed in September, October and November 2013.

Saturday, November 23, 2013

Schedule for Week of November 24th

by Bill McBride on 11/23/2013 01:03:00 PM

This will be a short, but busy week. The key reports this week are housing permits for both September and October, and Case-Shiller house prices.

For manufacturing, the Dallas and Richmond Fed November surveys will be released this week.

----- Monday, November 25th -----

10:00 AM ET: Pending Home Sales Index for October. The consensus is for a 1.1% increase in the index.

10:30 AM: Dallas Fed Manufacturing Survey for November.  The consensus is a reading of 5.0, up from 3.6 in October (above zero is expansion).

----- Tuesday, November 26th-----

8:30 AM: Housing Permits for September and October. Housing starts have been delayed until December 18th.

9:00 AM: FHFA House Price Index for September 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% increase.

Case-Shiller House Prices Indices 9:00 AM: S&P/Case-Shiller House Price Index for September. Although this is the September report, it is really a 3 month average of July, August and September.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through July 2012 (the Composite 20 was started in January 2000).

The consensus is for a 13.1% year-over-year increase in the Composite 20 index (NSA) for August. The Zillow forecast is for the Composite 20 to increase 13.2% year-over-year, and for prices to increase 0.8% month-to-month seasonally adjusted.

10:00 AM: Conference Board's consumer confidence index for November. The consensus is for the index to increase to 72.9 from 71.2.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for November.  The consensus is a reading of 4, up from 1 in October (above zero is expansion).

----- Wednesday, November 27th -----

7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 330 thousand from 323 thousand last week.

8:30 AM: Durable Goods Orders for October from the Census Bureau. The consensus is for a 2.0% decrease in durable goods orders.

8:30 AM ET: Chicago Fed National Activity Index for October.

9:45 AM: Chicago Purchasing Managers Index for November. The consensus is for a decrease to 60.5, down from 65.9 in October.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for November). The consensus is for a reading of 73.3, up from the preliminary reading of 72.0, and up from the October reading of 73.2.

10:00 AM: Conference Board Leading Indicators for October. The consensus is for a 0.1% increase in this index.

----- Thursday, November 28th -----

All US markets will be closed in observance of the Thanksgiving Day Holiday.

----- Friday, November 29th -----

US markets will close at 2:00 PM ET following the Thanksgiving Day Holiday. The NYSE will close at 1:00 PM ET.


Unofficial Problem Bank list declines to 654 Institutions

by Bill McBride on 11/23/2013 10:00:00 AM

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

Here is the unofficial problem bank list for November 22, 2013.

Changes and comments from surferdude808:

Another quiet week for the Unofficial Problem Bank List as there was only removal. The OCC terminated the action against Lafayette Savings Bank, FSB, Lafayette, IN ($355 million Ticker: LSBI). After removal, the list holds 654 institutions with assets of $222.8 billion. A year ago, the list held 857 institutions with assets of $329.2 billion. We thought the FDIC would release industry results and the Official Problem Bank List totals for the third quarter, but perhaps that will happen next week along with the FDIC's enforcement action activity through October.

According to SNL Securities, Capitol Bancorp was able to sell its controlling interest in Bank of Maumee, Maumee, OH ($28 million) to Princeton Capital LLC (Princeton Capital completes buy of majority stake in Bank of Maumee). The FDIC issued a cross-guaranty waiver/tolling agreement in 2011 to facilitate the transaction that was set to expire this past Tuesday, November 19, 2013. There are reports of potential buyers other than previously identified Talmer Bancorp, Inc. surfacing that are interested in acquiring some of the remaining banks controlled by Capitol Bancorp.

Friday, November 22, 2013

WSJ: Survey Indicates Weak New Home Sales in October

by Bill McBride on 11/22/2013 07:28:00 PM

From the WSJ: Weak October Sales Have Home Builders Fretting About Spring

A monthly survey of builders across the U.S. by John Burns Real Estate Consulting, a housing research and advisory firm, has found that respondents’ sales of new homes declined by 8% in October from the September level and by 6% from a year earlier. Last month’s result marked the second consecutive month in which the survey yielded a year-over-year decline in sales volumes, the first dips since early 2011.
...
“October was basically a crummy month for a lot of builders,” said Jody Kahn, a senior vice president at Irvine, Calif.-based Burns. “Their frustration is about the government shutdown and how it probably trumped any seasonal (sales) lift that builders were hoping to see. Most did not have very good sales.”
...
“I think this (slowdown) is a good wakeup call for the industry,” Mr. [Scott Laurie, chief executive of The Olson Co] said. “You can’t just raise prices 2% a month. That doesn’t work. What works is affordability.”
New home sales have been weak for a few months. Part of the reason is that builders have been raising prices significantly, and in October the government shut down probably hurt sales too.  Still 2013 has seen a solid increase in new home sales over 2012, and I'm pretty confident new home sales will continue to increase in 2014.

DOT: Vehicle Miles Driven increased 1.5% in September

by Bill McBride on 11/22/2013 04:00:00 PM

The Department of Transportation (DOT) reported:

◦ Travel on all roads and streets changed by 1.5% (3.7 billion vehicle miles) for September 2013 as compared with September 2012.

◦ Travel for the month is estimated to be 241.7 billion vehicle miles.

◦ Cumulative Travel for 2013 changed by 0.4% (9.8 billion vehicle miles).
The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways but has started to increase a little recently.


Vehicle Miles Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 70 months - almost 6 years - and still counting.  Currently miles driven (rolling 12 months) are about 2.5% below the previous peak.

The second graph shows the year-over-year change from the same month in the previous year.

Vehicle Miles Driven YoYGasoline prices were down in September compared to September 2012. In September 2013, gasoline averaged of $3.60 per gallon according to the EIA. In 2012, prices in September averaged $3.91 per gallon.  (In 2012 there were refinery issues in September).

Gasoline prices were down sharply year-over-year in October, so I expect miles driven to be up in October too.  

As we've discussed, gasoline prices are just part of the story.  The lack of growth in miles driven over the last 6 years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take a few more years before we see a new peak in miles driven. 

BLS: State unemployment rates were "little changed" in October

by Bill McBride on 11/22/2013 12:23:00 PM

From the BLS: Regional and state unemployment rates were little changed in October

Regional and state unemployment rates were little changed in October. Twenty-eight states had unemployment rate decreases from September, 11 states and the District of Columbia had increases, and 11 states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada had the highest unemployment rate among the states in October, 9.3 percent. The next highest rates were in Rhode Island, 9.2 percent, and Michigan, 9.0 percent. North Dakota continued to have the lowest jobless rate, 2.7 percent.
State Unemployment Click on graph for larger image in graph gallery.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement - Michigan, Nevada and Florida have seen the largest declines and many other states have seen significant declines. 

The states are ranked by the highest current unemployment rate. No state has double digit unemployment and the unemployment rate is at or above 9% in three states: Nevada, Rhode Island and Michigan.

State UnemploymentThe second graph shows the number of states with unemployment rates above certain levels since January 2006. At the worst of the employment recession, there were 9 states with an unemployment rate above 11% (red).

Currently three states have an unemployment rate at or above 9% (purple), thirteen states at or above 8% (light blue), and 23 states at or above 7% (blue).

Kansas City Fed: Manufacturing Survey shows Activity Growing at "Moderate Rate"

by Bill McBride on 11/22/2013 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Survey Continued to Grow

The Federal Reserve Bank of Kansas City released the November Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity continued to grow, and producers’ expectations for future activity improved moderately.

Factory activity in our region continues to hum along at a moderate rate of growth” said Wilkerson. “The marked improvement in hiring plans was a nice development"
...
The month-over-month composite index was 7 in November, up from 6 in October and 2 in September ... The new orders index jumped from 3 to 15 ...
emphasis added
In aggregate the regional surveys have suggested slower growth in November. The last of the regional Fed manufacturing surveys for November will be released early next week (Richmond and Dallas Fed).

BLS: Job Openings "little changed" in September

by Bill McBride on 11/22/2013 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 3.9 million job openings on the last business day of September, little changed from August, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.4 percent) and separations rate (3.2 percent) were little changed in September. ...
...
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. ... The number of quits (not seasonally adjusted) increased over the 12 months ending in September for total nonfarm and total private, and was little changed for government. The number of quits rose in several industries. Over the year, quits increased in the Midwest, South, and West regions.
The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for September, the most recent employment report was for October.

Job Openings and Labor Turnover Survey Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in September to 3.913 million from 3.844 million in August.  The number of job openings (yellow) is up 8.6% year-over-year compared to September 2012 and openings are at the highest level since early 2008.

Quits were mostly unchanged in September and are up about 18% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Not much changes month-to-month in this report - and the data is noisy month-to-month, but the general trend suggests a gradually improving labor market.

LPS: Mortgage Delinquency Rate declined in October, In-Foreclosure Rate lowest since 2008

by Bill McBride on 11/22/2013 08:44:00 AM

According to the First Look report for October to be released today by Lender Processing Services (LPS), the percent of loans delinquent decreased in October compared to September, and declined about 11% year-over-year. Also the percent of loans in the foreclosure process declined further in October and were down 30% over the last year.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) decreased to 6.28% from 6.46% in September. The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined to 2.54% in October from 2.63% in September.   The is the lowest level since late 2008.

The number of delinquent properties, but not in foreclosure, is down 348,000 properties year-over-year, and the number of properties in the foreclosure process is down 524,000 properties year-over-year.

LPS will release the complete mortgage monitor for October in early December.

LPS: Percent Loans Delinquent and in Foreclosure Process
October 2013September 2013October 2012
Delinquent6.28%6.46%7.03%
In Foreclosure2.54%2.63%3.61%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:1,869,0001,935,0001,957,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:1,283,0001,331,0001,543,000
Number of properties in foreclosure pre-sale inventory:1,276,0001,328,0001,800,000
Total Properties4,427,0004,593,0005,300,000

Thursday, November 21, 2013

Friday: JOLTS, Kansas City Mfg Survey

by Bill McBride on 11/21/2013 07:53:00 PM

From the Financial Times: Fed chair nominee Janet Yellen wins Senate committee backing

US Federal Reserve chair nominee Janet Yellen received approval by the Senate banking committee on Thursday, clearing the way for a full Senate vote possibly before the end of the year.
And here is a clueless comment from Senator Marco Rubio:
"While Dr Yellen is an accomplished individual, I will be voting against her nomination to chair the Fed because of her role as a lead architect in authoring monetary policies that threaten the short and long-term prospects of strong economic growth and job creation."
That is complete nonsense and shows Rubio (and many others) do not understand monetary policy.   Larry Summers is correct: Summers Says History Will Favor Fed's QE `98 to 2'

Friday:
• At 10:00 AM ET, the Job Openings and Labor Turnover Survey for September from the BLS. This results of this survey has been mentioned by Fed Chair nominee Janet Yellen.  In general, the number of job openings has been increasing.

• Also at 10:00 AM, the Regional and State Employment and Unemployment (Monthly) for October 2013.

• At 11:00 AM, the Kansas City Fed manufacturing survey for November. The consensus is for a reading of 6, unchanged from last month (above zero indicates expansion).

Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in October (including Florida)

by Bill McBride on 11/21/2013 04:49:00 PM

Economist Tom Lawler sent me an updated table below of short sales, foreclosures and cash buyers for several selected cities in October.

Lawler writes: "Note the low share of short sales relative to foreclosure sales in Florida last month, which reflects the “very aged” nature of the “distressed” property inventory."

From CR: Also note that foreclosures have declined significantly in most areas - but not in Florida. This is probably because of the large backlog of foreclosures in the judicial system.

The All Cash Share (last two columns) is mostly declining year-over-year.   However in certain areas of Florida there is still a significant amount of cash buying (frequently investors, but in Florida this might be foreigners - and maybe some drug related buying).

 Short Sales ShareForeclosure Sales Share Total "Distressed" ShareAll Cash Share
Oct-13Oct-12Oct-13Oct-12Oct-13Oct-12Oct-13Oct-12
Las Vegas21.0%44.7%6.0%11.6%27.0%56.3%44.9%54.1%
Reno16.0%40.0%4.0%12.0%20.0%52.0%  
Phoenix8.4%26.2%6.9%12.9%15.3%39.1%31.6%43.9%
Sacramento11.4%35.7%5.1%12.0%16.5%47.7%23.9%36.9%
Minneapolis5.1%10.4%16.4%24.9%21.5%35.3%  
Mid-Atlantic7.9%9.1%8.2%13.0%16.1%22.1%19.9%20.0%
Orlando15.1%29.8%20.7%23.2%35.8%53.0%  
California*12.6%26.7%6.6%17.1%19.2%43.8%  
Bay Area CA*10.3%22.9%3.6%11.7%13.9%34.6%22.8%29.6%
So. California*12.9%27.2%6.3%16.3%19.2%43.5%27.5%32.8%
Florida SF12.0%22.6%19.3%17.9%31.3%40.5%44.4%46.5%
Florida C/TH9.5%18.4%17.3%16.7%26.9%35.1%68.7%74.3%
Miami MSA SF16.0%24.2%14.9%16.9%30.9%41.1%46.9%44.1%
Miami MSA C/TH11.4%20.4%19.5%16.9%30.9%37.4%73.4%78.3%
Northeast Florida    35.7%44.2%  
Chicago    34.0%43.0%  
Hampton Roads    25.5%28.3%  
Toledo      37.0%38.6%
Tucson      32.9%31.8%
Memphis      39.2%39.6%
Wichita      30.5%27.2%
Des Moines      20.2%21.7%
Peoria      21.1%23.7%
Omaha      20.0%20.4%
SE Michigan      34.5%44.3%
Spokane  13.8%8.4%    
Houston  7.5%15.5%    
Memphis*  18.4%22.9%    
Birmingham AL  21.0%30.8%    
Springfield IL  15.3%18.4%    
*share of existing home sales, based on property records