by Calculated Risk on 3/24/2011 08:39:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending March 19, the advance figure for seasonally adjusted initial claims was 382,000, a decrease of 5,000 from the previous week's revised figure of 387,000. The 4-week moving average was 385,250, a decrease of 1,500 from the previous week's revised average of 386,750.

Click on graph for larger image in graph gallery.

This graph shows the 4-week moving average of weekly claims for the last 40 years. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 1,500 to 385,250.

This is the 4th consecutive week with the 4-week average below the 400,000 level, and although there is nothing magical about 400,000, this is a small positive step for the labor market.

by Calculated Risk on 3/23/2011 07:27:00 PM

• The CBO has a new report Labor Force Projections Through 2021 (ht Catherine Rampell at Economix). The CBO's estimates are similar to mine (here and here). See Table 1 (on page 3) for their projections of the participation rate over the next decade.

The key is that a large portion of the recent decline in the participation rate is due to demographics, and we shouldn't expect the participation rate to rise back to the pre-recession levels.

• From the BBC: Portugal PM Jose Socrates resigns after budget rejected. This was expected, and it appears Portugal will be next in line for a bailout. The EU leaders meeting starts tomorrow - great timing!

Also, Ireland is expected to complete the next round of bank stress tests by the end of March - and if these show the need for additional capital (expected), then that will put the new Irish government in a difficult situation.

• From the NY Times: New Problems Arise at Japanese Nuclear Plant

The Japanese electricians who bravely strung wires this week to all six reactor buildings at a stricken nuclear power plant succeeded despite waves of heat and blasts of radioactive steam.

... [However] nuclear engineers say some of the most difficult and dangerous tasks are still ahead — and time is not necessarily on the side of the repair teams.

Progress, but still scary.

• And the impact on the supply chain continues, from the Detroit Free Press: Toyota and Honda extend auto shutdowns

Toyota ... said in a statement Tuesday that its shutdown of 11 factories would be extended until Saturday because of difficulty securing components, including rubber parts and electronics.

The shutdown had previously been announced through Tuesday. The automaker has lost production of about 140,000 vehicles since March 14.
...
Honda said its production halt would continue through Sunday

Earlier housing posts: Existing Home sales for February:
• February Existing Home Sales: 4.88 million SAAR, 8.6 months of supply
• Existing Home Inventory decreases 1.2% Year over Year
• Existing Home Sales and Inventory Graphs

New home sales for February:
• New Home Sales Fall to Record Low in February
• Home Sales: Distressing Gap
• New Home Sales and Inventory Graphs

by Calculated Risk on 3/23/2011 04:06:00 PM

The Department of Transportation (DOT) reported that vehicle miles driven in January were up 0.2% compared to January 2010:

Travel on all roads and streets changed by +0.2% (0.5 billion vehicle miles) for January 2011 as compared with January 2010. Travel for the month is estimated to be 223.5 billion vehicle miles.

Miles driven is barely up from last year, although the northeast was the weakest region in January, and driving in the northeast was probably impacted by the weather.

Click on graph for larger image in graph gallery.

This graph shows the rolling 12 month total vehicle miles driven.

• Note: 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 38 months - another record that will be broken in March!

• In January U.S. oil prices averaged $90 per barrel, and we might see $100 oil lead to a decrease in driving in March or April.

by Calculated Risk on 3/23/2011 12:49:00 PM

Another update ... this graph shows existing home sales (left axis) and new home sales (right axis) through February. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales).

Click on graph for larger image in graph gallery.

The gap is due mostly to the flood of distressed sales. This has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

Note: it is important to note that existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

In a few years - when the excess housing inventory is absorbed and the number of distressed sales has declined significantly - I expect existing home-to-new home sales to return to something close to this historical relationship.

Note: The National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers. As I noted in January, this benchmarking is expected to result in significant downward revisions to sales estimates for the last few years - perhaps as much as 10% to 15% for 2009 and 2010. Even with these revisions, most of the following "distressing gap" will remain.

Existing Home sales for February:
• February Existing Home Sales: 4.88 million SAAR, 8.6 months of supply
• Existing Home Inventory decreases 1.2% Year over Year
• Existing Home Sales and Inventory Graphs

New home sales for February:
• New Home Sales Fall to Record Low in February
• New Home Sales and Inventory Graphs

by Calculated Risk on 3/23/2011 10:00:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 250 thousand. This was down from a revised 301 thousand in January.

Click on graph for larger image in graph gallery.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in February 2011 were at a seasonally adjusted annual rate of 250,000 ... This is 16 9 percent 16.9 (±19.1%)* below the revised January rate of 301,000 and is 28.0 percent (±14.8%) below the February 2010 estimate of 347,000.

And a long term graph for New Home Months of Supply:

Months of supply increased to 8.9 in February from 7.4 months in January. The all time record was 12.1 months of supply in January 2009. This is very high (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of February was 186,000. This represents a supply of 8.9 months at the current sales rate.

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale fell to 76,000 units in February. The combined total of completed and under construction is at the lowest level since this series started.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In February 2010 (red column), 19 thousand new homes were sold (NSA). This is a new record low for the month of February.

The previous record low for February was 27 thousand in 2010. The high was 109 thousand in 2005.

This was a new record low sales rate and well below the consensus forecast of 290 thousand homes sold (SAAR). Another very weak report ...

by Calculated Risk on 3/23/2011 07:43:00 AM

The MBA reports: Mortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 2.7 percent from the previous week. The seasonally adjusted Purchase Index increased 2.7 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.80 percent from 4.79 percent, with points decreasing to 0.96 from 1.07 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in graph gallery.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four-week moving average of the purchase index is still at 1997 levels, and even with the large percentage of cash buyers recently, this still suggests fairly weak home sales through April. Note: Refinance activity has picked up a little with lower mortgage rates.

by Calculated Risk on 3/23/2011 12:01:00 AM

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

From the American Institute of Architects: Architecture Firm Billings Increase Slightly in February

The Architecture Billings Index (ABI) score of 50.6 for February indicates that very modest growth occurred at architecture firms that month. Although the pace of growth has slowed from the end of 2010, February still marks the fourth consecutive month that the ABI has been 50 or higher; an encouraging sign for a recovery. In addition, inquiries into new projects remain strong at firms.

Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index showed billings were slightly higher in February (at 50.6).

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this indicator suggests the drag from CRE investment will end mid-year 2011 or so - but there won't be a strong increase in investment.

by Calculated Risk on 3/22/2011 09:52:00 PM

There is more stress in Europe ahead of the meeting of all 27 EU leaders in Brussels on Thursday and Friday ...
• From the Guardian: Portugal edges towards 'inevitable' bailout from EU partners

Ireland's borrowing costs rose dramatically today in rumour-driven markets as speculation mounted that Portugal was also edging towards a bailout from its European partners.

Troubled Allied Irish Banks was forced to officially denounce widespread rumours that it was set to miss a crucial repayment on one of its bonds ... Portugal was also being battered ahead of a key vote on an austerity budget on Wednesday, which the prime minister José Sócrates is expected to lose.

• From the Irish Times: Borrowing costs rise for Ireland, Greece and Portugal

It does seem a bailout for Portugal is now "inevitable", although the Irish Times notes a Portuguese "caretaker administration might not have legal powers to seek emergency financial aid" ... an interesting twist.

by Calculated Risk on 3/22/2011 05:12:00 PM

CR Note: I'm trying to use the Census 2010 housing stock and vacancy data to estimate the excess vacant housing supply. Here are few "data nerdy" words of caution from economist Tom Lawler for anyone trying to use this data (including me):

CalculatedRisk is one of the few entities (people?) besides me who is tracking the release of Census 2010 housing stock data (total, occupied, and vacant) that have been released so far, and yesterday it put up a spreadsheet showing state data from Census 2010, Census 2000, and Census 1990. It is available here. As of this morning Census had released data for 42 states for 2010.

A word of caution (as I’ve noted before): the “official” Census data from both 2000 and 1990 appear to “undercount overall housing units, with the “undercount” being larger for vacant homes than for occupied homes. As a result, overall (or gross) vacancy rates are understated in the “official” Census data – though by how much is a subject of debate among analysts.

For both Census 1990 and Census 2000, Census analysts conducted a “Housing Units Coverage Study,” which uses data from the “Accuracy and Coverage Evaluation” (A.C.E.) to estimate the “accuracy” of the Census housing counts. The 2000 HUCS was released in February, 2003, and is available here (PDF). As with estimated population over/under counts, Census has not used these “post-Census” studies to change the “official” Census figures.

Here are some different data for occupied and vacant homes as of April 1, 2000. Note that the ACS data are based on a sample, and ACS assumes that the “official” housing unit estimate is “correct.”

	Official Census 2000	Including Reinstated Units	Dual System Estimate	ACS
Total Housing Units	115,904,641	115,877,639	116,586,458	115,904,641
Occupied	105,480,101	105,463,423	105,808,904	104,819,002
Vacant	10,424,540	10,414,216	10,777,553	11,085,639
Gross Vacancy Rate	8.99%	8.99%	9.24%	9.56%

The HUCS notes that the occupied plus vacant housing unit dual system estimates do not quite add up to total housing units because of “rounding.”

As I’ve noted before, the higher vacancy rate from the ACS C2SS was surprising to some given its “2-month” vs. “usual” residence rule. Some believe that since the main purpose of the decennial Census is to count people and not necessarily housing units, there may not have been enough “emphasis” placed on “finding” all vacant housing units – though not everyone agrees with that view.

The Census 1990 HUCS also estimated that the official Census 1990 housing unit counts missed more vacant than occupied units, and also “undercounted” total housing units by about 0.96%. The official “gross” vacancy rate for 1990 was 10.09%, while the HUCS suggested that a more “accurate” GVR was 10.46%. (There are other significant problems with the Census 1990 housing stock data by “type of structure,”)

Neither the 2000 nor the 1990 HUCS provided estimates of housing unit count “misses” by state, though they did provide some data on misses by broad Census region. In 1990 the housing unit undercounts were greatest in the South and the West, as were the gross vacancy rates. The Census 2000 HUCS “showed” less variability in estimated “misses” and vacancy rates across regions, though the gross vacancy rates were estimated to have been understated the most in the Northeast and the West.

The other “source” of housing vacancy data from the Census Bureau, of course, is the quarterly Housing Vacancy Survey, which compiles quarterly averages of monthly data based on a much smaller sample than either the ACS or (of course) the decennial Census. As I’ve noted many times, the HVS is NOT designed to estimate the housing stock; rather, the HVS uses “official” Census estimates of the housing stock (including the decennial Census, as well as subsequent estimates which “build up” off the decennial Census data, building permits, and “crude” estimates of the annual loss in the housing stock based on suspect data from the AHS). The HVS then assumes that its vacancy RATES by type are correct, and based on these rates and the “exogenous” (to the HVS) housing stock estimates, the HVS derives occupied and vacant housing units. If in fact the decennial Census focused on counting “people” and not on counting vacant housing units, however, then it actually doesn’t make “sense” for the HVS to assume that Census’ housing unit estimates are correct.

Instead, IF the HVS vacancy rates were correct, then in all likelihood that would imply the Census estimates of the housing stock were too low. If the Census housing stock estimates were correct, that would imply the HVS vacancy rates were too high. Truth may lie in between, but based on some of the HVS’ state and MSA vacancy rate data, it appears extremely likely that the HVS vacancy rates are way too high – mainly in the “rental” and the “other” category.

As is clear from various Census publications, not just counting all housing units but also determining whether a given housing unit is vacant or not can actually be tricky, and getting an accurate tally often involves having to do multiple “calls,” trips, or follow-ups. Many analysts believe that the HVS, which is a voluntary survey, doesn’t produce very accurate vacancy rates in any given quarter – in any words, there is high degree of “non-sampling” error, with a bias toward a vacancy rate that is too high (and, by the way, a homeownership rate that is too high.) In addition, the HVS’ sample size for some areas is extremely small, and since housing markets across the country are not even remotely close to homogenous, there is a pretty high (and not as easy to calculate as one thinks) sampling error as well.

I’m only putting all this in because it’s a lot trickier than it should be to look at available government information/data, including time series that for the most part are not consistently derived over time, to estimate the current (much less last year’s) “excess” supply of housing.

by Calculated Risk on 3/22/2011 02:08:00 PM

Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index declined 1.2% in January. Note: Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales and there are a large percentage of distressed sales - and that can impact prices and make the index very volatile.

Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. Beware of the "Real" in the title - this index is not inflation adjusted.

Click on graph for larger image in graph gallery.

CRE prices only go back to December 2000. The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

According to Moody's, CRE prices are down 4.3% from a year ago and down about 43% from the peak in 2007.