by Calculated Risk on 10/27/2005 09:58:00 AM

According to the Census Bureau report, New Home Sales in September were at a seasonally adjusted annual rate of 1.222 million vs. market expectations of 1.25 million. August sales were revised down to 1.197 million from 1.237 million.


Click on Graph for larger image.

NOTE: The graph starts at 700 thousand units per month to better show monthly variation.

Sales of new one-family houses in September 2005 were at a seasonally adjusted annual rate of 1,222,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.



The Not Seasonally Adjusted monthly rate was 97,000 New Homes sold, down from a revised 103,000 in August.

On a year over year basis, September 2005 sales are still higher than September 2004.





The median sales price continued to fall.

The median sales price of new houses sold in September 2005 was $215,700; the average sales price was $285,700.



The seasonally adjusted estimate of new houses for sale at the end of September was 493,000. This represents a supply of 4.9 months at the current sales rate.

The 493,000 units of inventory is the all time record for new houses for sale. On a months of supply basis, this is the highest inventory since December 1996 - the end of the previous housing slowdown.

The downturn observed in August has continued into September. This report shows a significant downturn in the New Home Sales market. Sales were off. Inventories were up. Revisions were negative.

It appears the housing market is slowing.

by Calculated Risk on 10/26/2005 12:10:00 PM

Just some stories ...

MBA: Mortgage Application Volume Down in Latest Survey

"The seasonally-adjusted Purchase Index decreased by 7.4 percent ... from ... the previous week whereas the Refinance Index decreased by 8.5 percent..."

Denver: October housing market still soft

Sellers are having to make more concessions, having to adjust their prices downward," said Steve McGuire with Re/Max Professionals in Highlands Ranch. "Maybe we are seeing a little bit of a trend."

Florida: More houses in region hitting the market, tempering prices

A report by the Sarasota Association of Realtors due out this week shows listings in Sarasota County more than doubled in September to 1,331 compared with the same month last year.

In Manatee, listings for August jumped a whopping 157 percent compared with the same month last year.

The increase is mostly because of the longer time listings are remaining on the market.

More Mass. articles: Mass. home prices fall in September and Mass. housing market showing signs of fatigue

And on the possible Canary in the Coal mine (The UK, thanks to Joshua):

More homeowners in debt trouble

Mortgage repossession orders during the past three months in England and Wales were up 66% on a year ago to nearly 20,000, official figures have shown.
Repossession orders have been on the increase since early 2004.
...
The Department for Constitutional Affairs figures will add to concerns about debt and the housing market.

"The increase in mortgage possessions fits with the slowdown in house price inflation," Alan Clarke, UK economist at BNP Paribas, said.

"The conclusion is there are still signs of financial stress among homeowners," he added.

Job losses will accelerate, predicts CBI

A gloomy picture of British manufacturing industry emerged from the latest CBI survey which predicts the loss of thousands more manufacturing jobs. ... The October survey of business by the Confederation of British Industry tells a sorry tale of declining order books and falling optimism brought on mainly by the tough conditions on the shopping high streets.
...
The CBI said: "Rising raw material and energy prices have continued to push up costs and hit profits. Against this background, firms are cutting back on their investment plans and expect the rate of job losses to increase."

by Calculated Risk on 10/26/2005 05:23:00 AM

The Boston Herald reports: Housing prices weaken

...median house and condo sale prices also fell – something not directly affected by seasonal issues.

Additionally, the number of unsold houses and condos on the market rose to 56,016 last month – apparently the highest inventory ever recorded.

John Bitner, chief economist at Eastern Bank, said the latest data "very well may confirm that (the market has) passed the peak."

He said that as housing booms die, prices rise year over year for a time, but fall month over month – exactly what yesterday's report showed.

In Boston, CPI less Shelter has increased 8.7% over the last 12 months. Therefore, in real terms and using the 4% YoY nominal increase reported in the story, house prices have fallen in Massachusetts by almost 5%.

I believe Bitner is correct, the market has passed the peak.

by Calculated Risk on 10/25/2005 10:40:00 AM

UPDATE: Add Graph of Year over Year inventory increase.

Click on graph for larger image.

Inventories were up slightly from August to 2.849 million units. This represents an increase of 19.6% over last September. Usually inventories decline in September after the summer selling season. For comparison, August was up 12.2% Year over year, so seasonally this indicates a significant increase in inventories.

Reuters reports: Sept existing home sales flat

Sales of existing U.S. homes were unchanged in September at a 7.28 million unit pace, as strong post-Katrina sales in the U.S. South helped offset weaker activity elsewhere, a trade group said on Tuesday.

Sales of the previously owned homes were flat compared with August's downwardly revised 7.28 million unit pace, the National Association of Realtors said. That figure includes both single-family homes and condominiums.

Analysts had expected overall sales to decline to a 7.20 million unit pace from the originally reported 7.29 million unit pace in August.

Sales would have been lower in September without the strong purchase activity reported for areas around the hurricane-hit zone, the Realtors' chief economist said. For example, while sales dropped 85 percent in New Orleans, Baton Rouge reported a 150 percent increase, the group said.

Median prices declined to $212K, the lowest since May, probably because of the strong activity in the South. Average prices also decreased to $260K, the lowest since May.

by Calculated Risk on 10/24/2005 09:01:00 PM

Here is my forecast for September petroleum import and exports using the same model (described here).

The ERPP (Energy Related Petroleum Products) trade numbers for September are forecast to be:

Forecast: Total NSA ERPP Imports: $23.0 Billion

Total SA ERPP FORECAST:
Imports SA: $23.1 Billion (seasonal factor estimated at 1.003 for Sept)
Exports SA: $2.0 Billion
SA Balance ERPP: $21.1 Billion

This compares to the record $20.6 Billion SA petroleum trade deficit for August.

I am forecasting a record average price per barrel of $56.47 compared to the August record of $52.65.

Imports SA and NSA will be close to the records set in August. Although unit prices were substantially higher in September, imported quantities were lower. A new record depends on the quantity of refined products imported in September.

by Calculated Risk on 10/24/2005 06:59:00 PM

The National Debt is now $8,009,131,433,464.30.

by Calculated Risk on 10/24/2005 10:47:00 AM

UPDATE3: Also see Dr. Thoma's comments.

Dr. Hamilton praises Bernanke:

He absolutely has a first-rate mind, just as sharp as they come. And he'll need all the gray matter that can be mustered in his new job, I fear, to figure out how to respond to simultaneous threats of recession, inflation, global imbalances, and systemic financial risk.

The WSJ Econoblog quotes several economists / bloggers: Taking Bernanke's Measure

UPDATE2: Bernanke.

Dr. Delong says "a very good choice".

Dr. Kash Mansori (Angry Bear) writes:

"a pretty good choice .... (Full disclosure: he was one of my professors in grad school, so I accept the possibility that I might be biased on this.) Bernanke is a superb macroeconomist, a nice guy, and, despite his current position as chair of the CEA (a position that has historically been filled by highly respected academics with only minor partisan leanings), he is not a sharply partisan or ideological person."

Barry Ritholtz writes:

"Ben Bernanke is a safe, strong choice, sure to be liked by both the Bond and Equity markets."

Original Post:
Dow Jones News Service reports that Bush To Name Greenspan Successor Monday Afternoon. Reuters reports: Bush said eyeing Greenspan successor

President George W. Bush was believed poised on Monday to announce who he wants to replace Federal Reserve Chairman Alan Greenspan, according to sources familiar with the situation.

White House officials had no comment, but other sources said Bush was believed to be ready to make his announcement. The markets were awash in rumors that an announcement was coming.

Greenspan's 18-year tenure at the Fed runs out on January 31. Although he could stay longer if a successor is not in place, the Fed chief has signaled he prefers to leave on time.

Three potential candidates are regularly mentioned for the Fed chairman job: Glenn Hubbard, a past adviser to Bush; Harvard economist Martin Feldstein; and Fed governor-turned White House adviser Ben Bernanke.

Other potential contenders include former Bush economic aide and ex-Federal Reserve Governor Lawrence Lindsey; Fed Governor Donald Kohn; Fed Vice Chairman Roger Ferguson; and ex-Dallas Fed President Robert McTeer.

Most of the candidates are Republicans. But Kohn is a political independent and Ferguson a moderate Democrat.

by Calculated Risk on 10/23/2005 10:50:00 PM

My most recent post is up on Angry Bear: This Week's Housing Data.

Also see David Jackson's first hand account: Washington, DC Area Update

The big stories of the week will probably be Wilma and the Fitzgerald announcement. Wilma is now a dangerous Category 3 hurricane:


Map from: Weather Underground

Radar Key West.

And some thoughts on the Fitzgerald investigation: Not to personify the markets too much, but there is an old adage: Wall Street is not Republican or Democrat, it is Capitalist!

And market participants hate uncertainty. Once the Fitzgerald announcement is made, uncertainty will be removed and the market will probably rally short term. This is true if there are no indictments, or just a handful of aides are indicted. Most people on Wall Street don't care about Libby or Rove.

If a large number of people are indicted or Fitzgerald harpoons the Great White Whale (Cheney), then all bets are off. However I think this is an unlikely scenario.

Best to all.

by Calculated Risk on 10/23/2005 12:55:00 PM

The London Times reports: Profit warnings worst since 9/11

PROFIT WARNINGS by British companies hit their highest level last month since the September 11 attacks on America four years ago
...
So far this year there have been 370 profit warnings by quoted companies, up from 261 in the first nine months of last year.

"With profit warnings averaging 92 a quarter in the past 12 months, businesses are clearly finding it difficult to forecast in the current environment," said Andrew Wollaston, an Ernst & Young partner. "Though the economy is weaker than a year ago, this continued high level of warnings is a real concern."

The increase in profit warnings is blamed on rising costs, particularly for energy, and weaker-than-expected demand.

And Reuters adds: Slowdown in housing precipitates consumer pullback; debt correction ahead?

A UK housing market slowdown and subsequent curbs in consumer spending have precipitated companies' woes, E&Y's London head of corporate restructuring, Andrew Wollaston, said.

"The last three or four years there's been a credit boom, and now people are paying off debt."

The downward cycle continues (thanks to Joshua for the Times story).

by Calculated Risk on 10/21/2005 05:47:00 PM

Foreign Policy asks Morgan Stanley Chief Economist Stephen S. Roach: What Awaits the Next Alan Greenspan?

FP: If you had to give the current U.S. economy a grade, what would it be?

SR: I’d give it a gentleman’s C. On the surface, GDP is good, inflation is low, and so is the unemployment rate. Beneath the surface, we have unprecedented imbalances in terms of low national savings. Two of the three pieces of national savings—the consumer piece and the government piece—are in the red. We have a record balance-of-payments deficit. We have record levels of household-sector indebtedness, and [a record number] of consumers living beyond their means. Superficially, it looks ok. Beneath the surface, it looks disconcerting.

Roach is too generous. The biggest problem is that the US is not seriously addressing the 'unprecedented imbalances', and there appears to be no leadership even arguing to take the first step towards more fiscal discipline. For the consumer, they have been using their homes as ATMs, and even if prices just stabilize, the ATM will dry up.

FP: What’s the likelihood of a U.S. recession?

SR: I put a 40 percent chance on a recession next year, which is high.

[Rising energy prices] are a big concern because they are hitting a consumer that has been stretched in an unprecedented fashion. The consumer savings rate right now is negative 1 percent, the lowest it’s been since 1933, which was not a terrific year. [During] the last 3 energy shocks—mid 70s, late 70s and early 90s—the same savings rate averaged 8 percent. We had a cushion that we could use to fund higher energy expenses. There is no cushion today. Consumption is going to get hit hard unless there’s immediate relief on energy product prices such as natural gas and gasoline, and home heating oil.

See the interview for more.