by Calculated Risk on 3/30/2010 11:58:00 PM

The BLS will host a live chat on Friday starting at 9:30 AM ET.

You can submit questions in advance here or submit questions during the event. I'm planning on posting the event on the blog (I'm not involved), so you can (hopefully) read the Q&A and ask questions from the blog on Friday morning.

I sent an advance question asking how we should adjust the seasonally adjusted headline payroll number for the NSA 2010 Census hiring data to try to determine the underlying trend (not counting the snow storms!).

Friday, April 2, 2010 from 9:30 to 10:30 a.m. EDT. From the BLS: "BLS subject matter experts will take your questions on national employment and unemployment data, with a particular focus on the figures for March that will be released that morning at 8:30 a.m. EDT."

by Calculated Risk on 3/30/2010 08:51:00 PM

Building gated communities for young families in exurbia was a great idea ...

From Alana Semuels at the LA Times: From bucolic bliss to 'gated ghetto'

The 427-home Willowalk tract, built by developer D.R. Horton, featured eight distinct "villages" within its block walls. Along with spacious homes, Willowalk boasted four lakes, a community pool and clubhouse. Fanciful street names such as Pink Savory Way and Bee Balm Road added to the bucolic image.
...
Home foreclosures have devastated neighborhoods throughout the country, but the transformation from suburban paradise to blighted community has been especially stark in places like Willowalk -- isolated developments on the far fringes of metropolitan areas that found ready buyers when home prices were soaring but then saw an exodus as values crashed.

Vacant homes are sprinkled throughout Willowalk, betrayed by foot-high grass. Others are rented, including some to families that use government Section 8 vouchers to live in homes with granite countertops and vaulted ceilings.
...
The contrast between occupied and empty houses is evident on one block, where high grass in weedy clumps gives way to a neatly mowed lawn with handwritten signs pleading "Please do not let your dog poop on our yard."

by Calculated Risk on 3/30/2010 06:03:00 PM

One of the key questions is: Will house prices fall as the government support for housing eases? From CNBC: Housing Prices May Be Heading for a Double Dip

Anyone thinking housing prices have reached a bottom had better do some recalculating. Despite Tuesday's Case Schiller report showing smaller declines in January, housing prices may already be in another free fall.

Newly revised numbers are pointing to the decline.

The Federal Housing Finance Agency's (FHFA) adjusted figures show a housing price decline of 2 percent in December and 0.6 percent decline in January—reversing some regional price increases in 2009.

And more pricing dips are predicted.

Few people use the FHFA index anymore, but I do think prices will fall further in many areas. And I think the key housing price indexes, Case-Shiller and First American CoreLogic, have not bottomed yet - although it is possible.

Right now the Case-Shiller composite 10 index is 4.4% above the bottom of May 2009 (seasonally adjusted), and CoreLogic's index is 3.5% above the bottom of March 2009 (NSA), so it will not take much of a decline to see new post-bubble lows.

Last year I listed some of the temporary Government housing support programs (as opposed to permanent programs like tax breaks). This included:

Housing Tax Credit: Buyer must sign a contract by April 30th and close by June 30, 2010 to qualify. Real estate agents in SoCal are telling me there has been a pickup in activity lately - more than seasonal - of buyers trying to beat the deadline for the tax credit. But it is nothing like the buying spurt last November. Most economists opposed the tax credit as misdirected, expensive and ineffective at reducing the supply. Luckily the supporters have promised no extension, from the LA Times: No more extensions of tax credit for first-time home buyers

Federal Reserve MBS Purchase Program: The Federal Reserve is has purchased $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. This is scheduled to end tomorrow, March 31, 2010. It seems very unlike there will be a huge surge in rates as some feared, but I do expect the spread to Treasury yields to increase slightly.

Treasury MBS Purchase Program: This program ended Dec 31, 2009. The Treasury purchased approximately $220 billion of securities.

HAMP Trial Programs Extended: Although the most recent extension ended Jan 31, 2010, the Treasury has added more hoops and hurdles before the lenders can foreclosure, effectively extending the timeframe once again. Now borrowers might be eligible for a temporary unemployment reduction, principal reduction, or participate in the HAFA short sale program.

Support for Fannie and Freddie: This is ongoing.

FHA to tighten Lending Standards: In January the FHA announced slightly tighter standards, but the standards are still pretty loose.

Various Holiday Foreclosure Moratoria: Although this ended back in January, some lenders like Marshall & Ilsley have extended their foreclosure moratoriums:

Marshall & Ilsley Corporation (M&I) today announced it has extended its foreclosure moratorium an additional 90 days – through June 30, 2010. The initial moratorium was announced on December 18, 2008, as part of M&I's Homeowner Assistance Program. The moratorium is on all owner-occupied residential loans for customers who agree to work in good faith to reach a successful repayment agreement. The moratorium applies to applicable loans in all M&I markets.

And other lenders are clearly not been aggresive in foreclosing.

So although some key programs are ending (MBS purchase program and housing tax credit), there are still a number of temporary programs providing support for the housing market.

by Calculated Risk on 3/30/2010 02:28:00 PM

From the IrishTimes.com: Irish banks may require up to €32 billion to cover losses

Irish banks may require up to €32 billion to cover the losses from bad property loans transferred to the National Asset Management Agency (Nama), it has emerged.

The true scale of the “black hole” left in the sector by toxic property debt was laid bare today as Nama confirmed the initial tranche of bad loans would be acquired at a discount of 47 per cent, substantially more than the Government’s initial estimate of 30 per cent.

And all the details from the Minister for Finance.

	Book value of amounts transferred in Tranche 1	Price paid by NAMA for tranche 1	Haircut
AIB	€3.29	€1.88	43%
BOI	€1.93	€1.26	35%
Anglo	€10.00	€5.00(1)	50%
INBS	€0.67	€0.28	58%
EBS	€0.14	€0.09	36%

⁽¹⁾ Estimate; every 1% increase in haircut reduces price paid by NAMA for
tranche 1 by €100m

by Calculated Risk on 3/30/2010 12:41:00 PM

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Twenty five states are showing declining three month activity. The index increased in 18 states, and was unchanged in 7

Here is the Philadelphia Fed state coincident index release for February.

In the past month, the indexes increased in 21 states, decreased in 22, and remained unchanged in seven for a one-month diffusion index of -2. Over the past three months, the indexes increased in 18 states, decreased in 25, and remained unchanged in seven for a three-month diffusion index of -14.

The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. Based on this indicator, most of the U.S. was in recession in early 2008.

Although the graph shows the recession ending in July 2009 (based on other data), just over half the country was still in recession in February according to this index.

Note: this graph includes states with minor increases (the Philly Fed lists as unchanged).

by Calculated Risk on 3/30/2010 10:44:00 AM

Finally. Every month the S&P website crashes when the Case-Shiller data is released.

IMPORTANT: These graphs are Not Seasonally Adjusted (NSA). Unfortunately this month only the NSA data is currently available. Usually I report the SA data, but that isn't available.

S&P/Case-Shiller released the monthly Home Price Indices for January (actually a 3 month average).

The monthly data includes prices for 20 individual cities, and two composite indices (10 cities and 20 cities).

Click on graph for larger image in new window.

The first graph shows the nominal not seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 30.2% from the peak, and down about 0.2% in January (media reports are an increase seasonally adjusted - but that data isn't available).

The Composite 20 index is off 29.6% from the peak, and down about 0.4% in January (NSA).

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

The Composite 10 is essentially flat compared to January 2009.

The Composite 20 is off 0.7% from January 2009.

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

Prices decreased (NSA) in 18 of the 20 Case-Shiller cities in January NSA.

On a SA basis from the NY Times: U.S. Home Prices Prices Inch Up, but Troubles Remain

Twelve of the cities in the index went up in January from December. Los Angeles was the biggest gainer, up 1.7 percent. Chicago was the biggest loser, dropping 0.8 percent.

NOTE: Usually I report the Seasonally Adjusted data (see NY Times article), but that data wasn't available. So remember these graphs are NSA.

by Calculated Risk on 3/30/2010 09:04:00 AM

From Bloomberg: Home Prices in 20 U.S. Cities Increased 0.3% in January

The S&P/Case-Shiller home-price index climbed 0.3 percent from the prior month on a seasonally adjusted basis after a similar gain in December, the group said today in New York. The gauge was down 0.7 percent from January 2009, the smallest year- over-year decrease in two years.
...
“While we continue to see improvements in the year-over- year data for all 20 cities, the rebound in housing prices seen last fall is fading,” David Blitzer, chairman of the index committee at S&P, said in a statement.

Graphs soon (S&P site always crashes when this data is released).

by Calculated Risk on 3/29/2010 10:16:00 PM

As expected, sales are picking up again (contracts must be signed before April 30th to qualify for the Federal tax credit):

From David Streitfeld at the NY Times: Spurt of Home Buying as End of Tax Credit Looms (ht Ann)

After several disastrous months for home sales across the country, when volume dropped by 23 percent, the pace appears to be picking up again. The number of Des Moines homes under contract in February rose by a third from the January level. The number of pending contracts jumped 10 percent in Naples, Fla., 14 percent in Houston and 21 percent in Portland, Ore.

These deals will be reflected in the national sales reports when they become final, this month or next. There is no evidence that prices have begun to move in response to the higher volume. Indeed, so many homes are coming on the market that prices might well fall further.

And unfortunately some people are calling for an extension:

Robert Shiller, a professor of economics at Yale and co-developer of the Standard & Poor’s/Case-Shiller housing price index, is an early advocate. He thinks the credit was a bad idea that nevertheless the market cannot do without.

“You don’t make drug addicts go cold turkey,” Mr. Shiller said. “The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house.” He advocates phasing it out gradually.

Dr. Shiller is right that the credit was a bad idea, but he is forgetting that existing home sales add little to the economy - and encouraging new home sales with an excess supply is counterproductive.

I am hearing from agents that sales activity is picking up in California too. But I don't expect the increase in sales to be as significant this May and June (when contracts close), as last October and November when the first tax credit was expiring.

We must remember not to mistake activity with accomplishment (to quote John Wooden). This little extra activity does nothing to reduce the overall supply.

by Calculated Risk on 3/29/2010 07:52:00 PM

Two different perspectives, first from The Times: Ireland on the brink of full-scale bank nationalisation

The Republic of Ireland faced the prospect last night of having most of its banking system nationalised amid growing speculation that the Dublin Government would raise its stakes in both remaining private sector operators — Allied Irish Bank and Bank of Ireland.

[A] report [yesterday] that the Government’s stake in AIB would rise from 25 per cent to 70 per cent and its holding in BoI would be lifted from 16 per cent to 40 per cent.
...
With the Irish Nationwide and EBS building societies being merged and nationalised, and Anglo Irish Bank, the other large banking company, also nationalised, most of the industry would be in the State’s hands.

Ireland is the first significant Western country to be faced with the humiliation of wholesale bank nationalisation in this crisis, although the Republic took its three main banks into state ownership 18 months ago.

But Karl Whelan at The Irish Economy blog writes: Super Tuesday Leaks

There is nothing new about the idea of the state potentially owning 70 percent of AIB. Even based on previous expectations for NAMA discounts, this was always a possibility. ... [I]t is hard to reconcile the continuing circulation of the same ownership statistics as before with the new information (if such it is) on discounts and also on capital levels.

The world has come full circle. The main stream media screams "nationalization" and the blog keeps the numbers in perspective.

Note: NAMA is National Asset Management Agency, a "bad bank" set up by the government to take many of the distressed assets in Ireland. This was a very different approach than in the U.S.

by Calculated Risk on 3/29/2010 04:00:00 PM

First, from the NY Times: In Crucial Test, Greece Raises $6.7 Billion in Bond Sale

The bonds, worth $6.7 billion, were priced to yield 6 percent, according to banks that managed the sale, meaning that Greece was paying a princely 3.34 percentage points above what Germany, considered the European benchmark, pays to borrow at a similar maturity. It was also well above the rates paid by governments in Portugal, Spain, Ireland and Italy, other countries whose indebtedness has caused concern.

Since it is almost the end of Q1 ... here is a market update:

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 was first at this level in December 1998; over 11 years ago.

The S&P 500 is up 73.4% from the bottom in 2009 (497 points), and still off 25% from the peak (392 points below the max).


The second graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.