by Calculated Risk on 9/23/2010 06:54:00 PM

Here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Sept 22nd):

Click on graph for larger image in new window.

From the Atlanta Fed:

European bond spreads have for the most part risen and remain elevated since the August FOMC meeting.

As of today, the Ireland-to-German spread has increased to 418 bps, and the Portugal-to-German spread has increased to 402 bps - both new records.

Note: The Atlanta Fed data is a couple days old. Nemo has links to the current data on the sidebar of his site.

And from Liz Alderman at the NY Times: In Europe, a Mood of Austerity and Anxiety. And some video interviews from different countries ...

by Calculated Risk on 9/23/2010 04:09:00 PM

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Forty states are showing increasing three month activity. The index decreased in 6 states, and was unchanged in 4.

Based on the one month data, this three month activity map be turning red again.

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

In the past month, the indexes increased in 27 states, decreased in 16, and remained unchanged in seven for a one-month diffusion index of 22. Over the past three months, the indexes increased in 40 states, decreased in six, and remained unchanged in four (California, Iowa, Indiana, and Missouri) for a three-month diffusion index of 68.

The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity.

The indexes increased in 27 states, decreased in 16, and remained unchanged in 7. Note: this graph includes states with minor increases (the Philly Fed lists as unchanged).

This is the fewest number of states showing increasing activity since January of this year.

by Calculated Risk on 9/23/2010 02:03:00 PM

Hotel occupancy is one of several industry specific indicators I follow ...

From HotelNewsNow.com: STR: US hotels back on track in weekly results

Overall, the industry’s occupancy increased 6.7% to 63.5%, average daily rate was up 1.8% to US$100.25, and revenue per available room ended the week up 8.6% to US$63.66.

The following graph shows the four week moving average for the occupancy rate by week for 2008, 2009 and 2010 (and a median for 2000 through 2007).

Click on graph for larger image in new window.

Notes: the scale doesn't start at zero to better show the change. The graph shows the 4-week average, not the weekly occupancy rate.

On a 4-week basis, occupancy is up 6.8% compared to last year (the worst year since the Great Depression) and 5.7% below the median for 2000 through 2007.

The occupancy rate has fallen below the levels of 2008 again - and 2008 was a tough year for the hotel industry!

Important: Even though the occupancy rate is close to 2008 levels, 2010 is a much more difficult year. The average daily rate (ADR) is off more than 10% from 2008 levels - so even with the similar occupancy rates, hotel room revenue is off sharply compared to two years ago.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 9/23/2010 11:28:00 AM

Earlier the NAR released the existing home sales data for August; here are a couple more graphs ...

The first graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.

Click on graph for larger image in new window.

Although inventory decreased slightly from July 2010 to August 2010, inventory increased 1.5% YoY in August.

Note: Usually July is the peak month for inventory.

The year-over-year increase in inventory is especially bad news because the reported inventory is already historically very high (around 4 million), and the 11.6 months of supply in August is far above normal.

Based on the MBA mortgage purchase applications index, it appears there will be little increase in sales over the next couple of months (sales will probably remain in the low-to-mid 4 million SAAR range). That means we will see double digit months-of-supply for some time - and that suggests house prices will continue to fall.

By request - the second graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2010. Sales for the last two months are significantly below the previous years, and sales will probably be well below the previous years for the remainder of 2010.

The bottom line: Sales were very weak in August - almost exactly at the levels I expected - and will continue to be weak for some time. Inventory is very high, and that will put downward pressure on house prices.

by Calculated Risk on 9/23/2010 10:00:00 AM

The NAR reports: Existing-Home Sales Move Up in August

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July, but remain 19.0 percent below the 5.10 million-unit pace in August 2009.
...
Total housing inventory at the end of August slipped 0.6 percent to 3.98 million existing homes available for sale, which represents an 11.6-month supply at the current sales pace, down from a 12.5-month supply in July.

Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in August 2010 (4.13 million SAAR) were 7.6% higher than last month, and were 19.0% lower than August 2009 (5.1 million SAAR).

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased slightly to 3.98 million in August from 4.01 million in July. The all time record high was 4.58 million homes for sale in July 2008.

Inventory is not seasonally adjusted and there is a clear seasonal pattern with inventory increasing in the spring and into the summer. I'll have more on inventory later ...

The last graph shows the 'months of supply' metric.

Months of supply decreased to 11.6 months in August from 12.5 months in July. This is extremely high and suggests prices, as measured by the repeat sales indexes like Case-Shiller and CoreLogic, will continue to decline.

These weak numbers are exactly what I expected. Ignore the median price! Double digit supply and the low sales rate are the key stories. I'll have more ...

by Calculated Risk on 9/23/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Sept. 18, the advance figure for seasonally adjusted initial claims was 465,000, an increase of 12,000 from the previous week's revised figure of 453,000. The 4-week moving average was 463,250, a decrease of 3,250 from the previous week's revised average of 466,500.

Click on graph for larger image in new window.

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

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 3,250 to 463,250.

The 4-week moving average has been moving sideways at an elevated level for about 10 months - and that suggests a weak job market.

by Calculated Risk on 9/22/2010 10:42:00 PM

From Harriet Johnson Brackey at the Sun Sentinel: Man's home sold out from under him in foreclosure mistake (ht Clint)

When Jason Grodensky bought his modest Fort Lauderdale home last December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a [Fannie Mae]. ... Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

Talk about a foreclosure error. I'm surprised a notice wasn't posted on the front door. At least the property wasn't sold to another party on the court house steps - imagine if that 3rd party had shown up with an eviction notice.

by Calculated Risk on 9/22/2010 07:39:00 PM

Last month it was obvious that the consensus forecast for existing home sales was way too high. For July, the consensus was 4.65 million on a seasonally adjusted annual rate (SAAR) basis, and the National Association of Realtors (NAR) reported sales of 3.83 million SAAR (the lowest sales rate in almost 15 years).

Tomorrow (Thursday), the NAR will report existing home sales for August at 10 AM ET (existing home sales are counted when transactions close). The consensus is for an increase to 4.1 million (SAAR) in August from 3.83 million in July, and down sharply from the 5.1 million SAAR in August 2009.

Housing economist Tom Lawler is also projecting 4.1 million SAAR.

Other key numbers will be the the level of inventory and months-of-supply.

Inventory will be close to 4 million houses (not seasonally adjusted).

That would give about 11.5 months-of-supply, and that level of supply will put downward pressure on house prices.

Excluding July, the last time sales were this low was in 1997. And based on the MBA purchase index, I don't expect much of a sales increase in September or October either.

by Calculated Risk on 9/22/2010 05:18:00 PM

From Treasury: HAMP Servicer Performance Report Through August 2010

And here is the HUD Housing Scorecard.

Click on table for larger image in new window.

About 468 thousand modifications are now "permanent" - up from 422 thousand last month - and 663 thousand trial modifications have been cancelled.

The pace of new trial modifications has slowed sharply from over 150,000 in September 2009 to under 18,000 in August. The program has slowed way down.

The second graph shows the aged trials (greater than 6 months) as a percent of total trials.

According to HAMP, there are 202,521 "active trials", down from 255,934 last month.

The shows that the HAMP servicers have made progress on getting borrowers out of "modification limbo" - although the trial program was originally designed to be for 3 months - so maybe the measurement should be 4 months (instead of 6 months).

Debt-to-income ratios

If we look at the HAMP program stats (see page 3), the median front end DTI (debt to income) before modification was 44.9% - the same as last month. And the back end DTI¹ was an astounding 79.9%.

This means that for the median borrower, about 80% of the borrower's income went to servicing debt. And the median is 63.5% after the modification.

These borrowers still have too much debt, even after the modification - and that suggests an eventual high redefault rate. There have been 18,773 redefaults already. It would be nice to see percent defaults by months from when the "permanent modification" started.

¹ Back end DTI from HAMP:

Ratio of total monthly debt payments (including mortgage principal and interest, taxes, insurance, homeowners association and/or condo fees, plus payments on installment debts, junior liens, alimony, car lease payments and investment property payments) to monthly gross income.

by Calculated Risk on 9/22/2010 01:41:00 PM

Next week I'll have an estimate of the impact of the temporary decennial hiring and layoffs on the September employment report.

It is worth noting that the Census came in well under budget, and the temporary workers are almost all gone. One of the reasons the Census came in under budget was because of the quality of temporary workers hired (a small benefit from the high unemployment rate).

This month also marks the end of the weekly payroll report from the Census Bureau: "These data will continue through the end of September with the last release of data being the week of Sept. 26-Oct. 2."

Click on graph for larger image in new window.

This graph shows the number of Census workers paid each week. The red labels are the weeks of the BLS payroll survey.

The temporary Census payroll decreased to 9,820 last week, and September will be the last month with a significant impact on the employment report.