RSS Feed by Calculated Risk on 6/23/2009 11:59:00 AM
Tuesday, June 23, 2009
Philly Fed State Coincident Indicators: Widespread Recession
Click on map for larger image.
Here is a map of the three month change in the Philly Fed state coincident indicators. Forty nine states are showing declining three month activity.
This is what a widespread recession looks like based on the Philly Fed states indexes.
On a one month basis, activity decreased in 47 states in May, and was unchanged in 2 more states. Here is the Philadelphia Fed state coincident index release for May.
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for May 2009. In the past month, the indexes have increased in one state (North Dakota), decreased in 47, and were unchanged in the other two (South Dakota and Vermont), for a one-month diffusion index of -92. Over the past three months, the indexes have increased in one state (again, North Dakota) and decreased in the other 49 states, for a three-month diffusion index of -96.
The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. Most of the U.S. was has been in recession since December 2007 based on this indicator.Note: this graph includes states with minor increases (the Philly Fed lists as unchanged).
Almost all states showed declining activity in May. Still a very widespread recession ...
Existing Home Sales Graphs
by Calculated Risk on 6/23/2009 10:07:00 AM
The previous post was the NAR release for May existing home sales. Here are some graphs ...
Click on graph for larger image in new window.
The first graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in May 2009 (4.77 million SAAR) were 2.4% higher than last month, and were 3.6% lower than May 2008 (4.95 million SAAR).
Here is another way to look at existing homes sales: Monthly, Not Seasonally Adjusted (NSA):
This graph shows NSA monthly existing home sales for 2005 through 2009. Continuing the recent trend, sales (NSA) were lower in May 2009 than in May 2008.
It's important to note that the NAR says about one-third of these sales were foreclosure resales or short sales. Although these are real transactions, this means activity (ex-distressed sales) is much lower. 
The third graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 3.80 million in May. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted.
Typically inventory increases in May, and then really increases over the next couple months of the year until peaking in the summer. This decrease in inventory was a little unusual, and the next few months will be key for inventory.
Also, many REOs (bank owned properties) are included in the inventory because they are listed - but not all. Recently there have been stories about a substantial number of unlisted REOs - this is possible.
The fourth graph shows the 'months of supply' metric for the last six years.
Months of supply declined to 9.6 months.
Sales increased slightly, and inventory decreased, so "months of supply" decreased. A normal market has around 6 months of supply, so this is still very high.
Here is another graph of inventory. This shows inventory by month starting in 2004.
Inventory in May 2009 was below the levels in May 2007 and 2008 (this is the 4th consecutive month with inventory levels below 2 years ago). Inventory levels have been below the year ago level for ten consecutive months.
It is important to watch inventory levels very carefully. If you look at the 2005 inventory data, instead of staying flat for most of the year (like the previous bubble years), inventory continued to increase all year. That was one of the key signs that led me to call the top in the housing market!
Note: there is probably a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. And as noted above, there are also reports of REOs being held off the market, so inventory is probably under reported.
The final graph shows the year-over-year change in existing home inventory.
If the trend of declining year-over-year inventory levels continues in 2009 that will be a positive for the housing market. Prices will probably continue to fall until the months of supply reaches more normal levels (closer to 6 months compared to the current 9.6 months), and that will take some time.
I'll have more on Existing Home sales tomorrow after New Home sales are released tomorrow.
Existing Home Sales in May
by Calculated Risk on 6/23/2009 10:00:00 AM
The NAR reports: May Existing-Home Sales Continue Rising Trend
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.4 percent to a seasonally adjusted annual rate of 4.77 million units in May from a downwardly revised level of 4.66 million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008.Graphs soon (as soon as the NAR updates their site).
...
Total housing inventory at the end of May fell 3.5 percent to 3.80 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in April.
...
Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April ...
Yun said the appraisal problem is serious. “Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales,” he said. “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”
The Next Fed Chairman? And 1930 ...
by Calculated Risk on 6/23/2009 08:48:00 AM
A couple of morning stories ...
From Bloomberg: Bernanke Set to Defend Record as Reappointment Debate Begins
Besides keeping Bernanke, Obama’s options include appointing Summers or Janet Yellen [San Francicso Fed President]And Paul Krugman directs us to a site tracking the news from 1930 day by day. A couple quotes from June 23, 1930:
Summers, 54, a former Treasury secretary who heads Obama’s National Economic Council, is considered the front-runner should the president want a change. San Francisco Fed President Yellen, 62, was previously a Fed governor and chairman of the Council of Economic Advisers ....
Summers wants the job, Senator Robert Bennett of Utah [said]. Asked if he would support Summers for Fed chairman, Bennett said: “I am told that Larry would very much like me to. I would have no objection to Larry.”
Col. Ayres, VP Cleveland Trust, predicts an abrupt recovery in stock and commodity prices by Labor Day due to current consumption exceeding production. Distinguishes between two types of depression, “V”-shaped and “U”-shaped.And heard on the Street:
“'Things are getting back to normal,' remarked the head of a Broadway house. 'Again the main topic of discussion among our customers is the 18th amendment.'” [Prohibition]
Fed Meeting Tuesday and Wednesday
by Calculated Risk on 6/23/2009 12:05:00 AM
The Fed is meeting over the next two days, and although there is no chance of a change in the federal funds rate, it is possible the Fed will announce additional purchases of Treasury securities or agency MBS (I think this is unlikely) or change the Fed statement to reflect the view that the federal funds rate will stay at essentially zero for some time (this is very possible).
The most recent statement read:
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.The "exceptionally low levels" phrase might have confused some people into thinking that a modest rate hike was coming soon, so it is possible that the Fed will change that phrase to indicate "the current low levels ... for an extended period."
No one expects a rate change this week, but a few investors expect a rate increase by August. This graph from the Cleveland Fed shows public expectations of the Fed Funds rate after the August meeting. Maybe the Fed will try to change those expectations.
A short preview from Bloomberg ...
Monday, June 22, 2009
For Returning Visitors: A Few Posts from the Missing Days
by Calculated Risk on 6/22/2009 10:18:00 PM
Note: For visitors of many Google hosted blogs, the redirect feature from a blogspot address to a custom URL failed for six days (from late Tuesday June 16th until Monday afternoon June 22nd). This is now resolved. Welcome back! I apologize for any inconvenience.
Here are a few posts and links that might interest you:
“I am not particularly of the green shoots group yet,” [General Electric Co. Vice Chairman John] Rice said ... “I have not seen it in our order patterns yet. At the macro level, there may be statistics suggesting the economy is starting to turn. I am not seeing it yet. ... We are preparing for 12 or 18 months of tough sledding.”
Once again, welcome back!
"A number of banks" Suspend TARP Dividends
by Calculated Risk on 6/22/2009 08:00:00 PM
From the WSJ: Three Banks Suspend Their TARP Dividends (ht jb)
Treasury spokeswoman Meg Reilly said Monday that "a number of banks" that got taxpayer-funded capital under TARP are no longer paying dividends to the government.The article mentions three banks by name: Pacific Capital Bancorp, of Santa Barbara, Seacoast Banking Corp. of Florida, of Stuart, and Midwest Banc Holdings Inc., of Melrose Park, Ill.
...
"Here the government has given the banks money at great terms, but the fact that they can't keep up with it is worrisome," said Michael Shemi, an investor at New York hedge-fund firm Christofferson, Robb & Co. "It tells you of the deep problems of community and regional banks."
These banks received the funds in December.
Note: missing up to six dividend payments was allowed under the TARP agreement, so this isn't a default.
CRE: Chicago Eyesore
by Calculated Risk on 6/22/2009 06:00:00 PM
Michael sent me this photo of the halted Waterview Tower project in Chicago.
Click on image for larger graph in new window.
Photo Credit: Michael C.
The development was halted at 26 stories - the plan was for a 90 story building with a combination of condos and a hotel.
Every CRE bust leaves what Crain's Chicago Business calls the Waterview: "a 26-story concrete monument symbolizing the excesses of the real estate boom" ... here are couple of recent stories on the Waterview.
From Crain's Chicago Business: Waterview Hotel project on the market
CB Richard Ellis Inc. is taking on one of the toughest jobs in today’s languishing downtown real estate market: finding a buyer for the stalled Waterview Tower and Shangri-La Hotel project on Wacker Drive.And from the Chicago Sun-Times: City wants high-rise crane removed
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The developer is tangling in court with the Bank of America, which is trying to collect on a $20-million loan, and construction firms that claim they’re owed a combined $85 million.
Impatient about the stillborn construction site on Wacker Drive, city officials are demanding the removal of the high-rise crane at the proposed Waterview Tower. No work has been done on the planned 90-story building since last year, and now it stands as a shell about 27 stories tall at the southwest corner of Wacker and Clark.Another CRE eyesore.
A spokesman for the city's Buildings Department said it is worried that an unused crane can pose a safety hazard.
White House Expects 10% Unemployment Soon, and Stock Market
by Calculated Risk on 6/22/2009 04:00:00 PM
The AP reports that White House spokesman Robert Gibbs says Obama expects "10 percent unemployment within the next few months".
By popular demand ...
Click on graph for larger image in new window.
The first graph shows the S&P 500 since 1990.
The dashed line is the closing price today.
The S&P 500 is up almost 32% from the bottom (235 points), and still off almost 43% from the peak (672 points below the max).
Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.
Moody's: CRE Prices Fall 8.6% in April
by Calculated Risk on 6/22/2009 02:17:00 PM
From Dow Jones: Commercial Real-Estate Prices Fall 8.6% On Month In April
Commercial real-estate prices fell 8.6% in April ... which leaves prices down one-quarter from a year earlier ...Prices in the CRE market are not as sticky as the residential market, so prices fall much quicker. We've seen plenty of half off sales for distressed CRE, and this report suggests the average decline is about 25% over the last year.
"The size of April's decline, following a 5.5% decline in January, also suggests that sellers are beginning to capitulate to the realities of commercial real-estate markets," says Moody's Managing Director Nick Levidy. ...
