by Calculated Risk on 5/01/2011 11:50:00 PM

By request, a discussion thread.

The Asian markets are mixed tonight with the Nikkei up 1%.

From CNBC: Pre-Market Data shows the S&P 500 up about 11 points, and the Dow futures up about 100 points.

Weekend:
• Summary for Week ending April 29th
• Goldman estimates 3.5 million Excess Vacant Housing Units.
• Schedule for Week of May 1st

Best to all.

by Calculated Risk on 5/01/2011 08:44:00 PM

Three weeks ago there were a couple of articles in the WSJ about lower prices for steel and copper. Here is another more general article: Commodity Surprise: Some Are Now Heading Down

Cotton has pulled back 17% from the all-time record set in early March, and sugar is down 34% from its multidecade high in February. Lead and zinc have tumbled in recent weeks after shooting up in the second half of 2010. Copper has shed 6% this year.

The declines came amid a wild April in which other raw materials continued to climb. U.S. oil prices rose 7% for the month, while gold set fresh records in nominal terms 13 times and silver neared its all-time high.

Lower commodity prices would definitely help, but unfortunately the one that matters the most for the U.S. economy - oil prices - are still high (WTI futures are at $113.56 per barrel, and Brent Crude is at $125.56). High oil and gasoline prices are one of the key downside risks for the economy.

Weekend:
• Summary for Week ending April 29th
• Goldman estimates 3.5 million Excess Vacant Housing Units.
• Schedule for Week of May 1st

by Calculated Risk on 5/01/2011 02:16:00 PM

Catching up - this was released last week at the same time as several other releases. Note: This is a composite index based on a number of economic releases.

From the Chicago Fed: Economic Activity Improved in March

Led by gains in production indicators, the Chicago Fed National Activity Index increased to +0.26 in March from +0.16 in February. March marked the fourth consecutive positive reading of the index and the sixth consecutive positive contribution from employment-related indicators. Neither has exhibited such patterns since April 2006.

The index’s three-month moving average, CFNAI-MA3, edged down to +0.20 in March from +0.27 in February, but remained positive for the third consecutive month for the first time since May 2010. March’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. With regard to inflation, the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.

Click on graph for larger image in graph gallery.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

Not a robust recovery, but this index suggests the economy was growing somewhat above trend in March.

Weekend:
• Summary for Week ending April 29th
• Goldman estimates 3.5 million Excess Vacant Housing Units.
• Schedule for Week of May 1st

by Calculated Risk on 5/01/2011 08:15:00 AM

The key report for this week will be the April employment report to be released on Friday, May 6th. The ISM manufacturing report will be released on Monday, and the ISM non-manufacturing report on Wednesday. There are several Fed speeches this week (only a few are included below). Also the automakers report on vehicle sales on Tuesday.

----- Monday, May 2nd -----
10:00 AM: ISM Manufacturing Index for April. The consensus is for a decrease to a still strong reading of 59.5 from 61.2 in March.

10:00 AM: Construction Spending for March. The consensus is for a 0.3% increase in construction spending.

2:00 PM: The April 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve. The January survey indicated some slight easing of standards and more demand for commercial and industrial (C&I) loans over the fourth quarter. For other types of loans to businesses and households, the January survey indicated banks have stopped tightening standards (they are already very tight), and demand has stopped falling (there is little demand for loans).

----- Tuesday, May 3rd -----
All day: Light vehicle sales for April. Light vehicle sales are expected to decrease to 13.0 million (Seasonally Adjusted Annual Rate), from 13.1 million in March. The impact of the supply chain disruption is a big unknown.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the March sales rate.

Edmunds is forecasting: "Edmunds.com analysts predict that April's Seasonally Adjusted Annualized Rate (SAAR) will be 13.3 million, up from 13.1 in March 2011.

“As inventories rapidly deteriorate, April could be the last month that we’ll see strong sales numbers until late summer or early fall,” said Edmunds.com Senior Analyst Jessica Caldwell."

10:00 AM: Manufacturers' Shipments, Inventories and Orders for March. The consensus is for a 0.3% increase in orders.

----- Wednesday, May 4th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through the first few months of 2011.

8:00 AM: Boston Fed President Eric Rosengren speaks before the NAIOP Commercial Real Estate Development Association

8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for +195,000 payroll jobs in April, down slightly from the 201,000 reported in March.

10:00 AM: ISM non-Manufacturing Index for April.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. The March ISM Non-manufacturing index was at 57.3% in March. The employment index indicated slower expansion in March at 53.7%.

The consensus is for a slight increase in April to 58.0.

3:00 PM: San Francisco Fed President John Williams gives his first policy speech on "Maintaining Price Stability in a Global Economy" in Los Angeles.

----- Thursday, May 5th -----
8:30 AM: The initial weekly unemployment claims report will be released. The number of claims has increased over the last few weeks. The consensus is for a decrease to 410,000 from 429,000 last week.

9:00 AM: Fed Chairman Ben Bernanke, "Implementing a Macroprudential Approach to Supervision and Regulation" in Chicago.

----- Friday, May 6th -----
8:30 AM: Employment Report for April.

The consensus is for an increase of 185,000 non-farm payroll jobs in April, down slightly from the 216,000 added in March.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The estimate for April is in blue.

The consensus is for the unemployment rate to remain at 8.8% in April.

The second employment graph shows the percentage of payroll jobs lost during post WWII recessions through March - aligned at maximum job losses.

This shows the severe job losses during the recent recession - there are currently 7.25 million fewer jobs in the U.S. than when the recession started.

3:00 PM: Consumer Credit in March from the Federal Reserve. The consensus is for credit to increase $5 billion.

Best wishes to All!

by Calculated Risk on 4/30/2011 06:10:00 PM

Some key numbers for the U.S. economy are: 1) the current number of excess housing units, 2) how many new households are being formed each year, and 3) how many housing units are being added to the housing stock each year (at a record low this year).

Unfortunately reliable data for the first two numbers is unavailable except with a significant lag.

I've used the quarterly Housing Vacancy Survey (HVS), but that is not really designed for this purpose.

Goldman Sachs put out an estimate yesterday of 3.5 million units based on the HVS: "Based on data from the Census Bureau, we estimate that about 3.5 million housing units currently sit vacant, above and beyond normal seasonal and frictional vacancies." They calculated a range of 2.5 to 4.5 million units based on different assumptions.

Recently economist Tom Lawler took a long look at the 2010 Census data, and estimated there were about 2 to 3 million excess vacant housing units as of April 1, 2010. With the record low number of housing units delivered last year, Lawler estimated that as of April 1, 2011 the excess “would be somewhere in the range of 1.45 to 2.45 million units – with the latter almost certainly too high”. With another record low number of units added to the housing stock this year, the excess will be in the 750 thousand to 1.7 million range next April (with the latter “certainly too high"). This suggests the excess supply will be gone sometime between early 2014 and 2016.

Goldman has a higher estimate of excess vacant units, but they also have a higher estimate for household formation (partially because of pent up formation from all those people who doubled up during the recession). The conclude "[W]e think the recovery in single family housing starts will remain very slow. A plausible central scenario would be an increase in starts from about 475,000 units in 2010 to 600,000 by 2012. We do not expect single-family housing starts to return to their historical average rate of about 1 million units until 2015 or later."

In Thoughts on Residential Investment Recovery, I noted: 'My guess is housing starts will return to "normal" in 2015 or 2016.' It is hard to pinpoint an exact date because the data is uncertain. Frustrating!

But here is a little good news on data via Tom Lawler:

The Census Bureau announced that beginning next week it will release “demographic” profiles of 13 states each Thursday in May, with the first round of “states” will be the District of Columbia, Florida, Kentucky, Maine, Massachusetts, Michigan, Mississippi, New Mexico, North Dakota, Rhode Island, South Carolina, Tennessee and West Virginia. For folks interested in the housing markets, the data will include (among other things) data on housing tenure (owners/renters), occupancy/vacancy (include vacancy status – for rent, for sale, seasonal, etc.), age and sex distributions, and household types. These releases will help analysts get a much better “feel” for the overall housing market as of April 1, 2010, and will highlight just how “messed up” the data from the Census Housing Vacancy Survey really is – and why analysts should not use it to try to estimate the “excess supply” of housing.

I think the Goldman estimate is too high, but no one really knows. Hopefully by the end of May we will have a much better estimate for the excess supply as of April 1, 2010.

Earlier:
• Summary for Week ending April 29th

by Calculated Risk on 4/30/2011 11:15:00 AM

Below is a summary of economic data last week mostly in graphs (I'll add some thoughts on the economy later):

• New Home Sales in March at 300 Thousand SAAR, Record low for March

The Census Bureau reported New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 300 thousand. This was up from a revised 270 thousand in February.

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.

Although the 300 thousand sales (SAAR) was slightly above the consensus forecast, this was a new record low for March.

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

In March 2011 (red column), 29 thousand new homes were sold (NSA). This is a new record low for the month of March.

The previous record low for March was 31 thousand in 2009. The high was 127 thousand in 2005.

The third graph shows existing home sales (left axis) and new home sales (right axis) through March. 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).

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.

• Case Shiller: Home Prices near post-bubble lows in February

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

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 31.7% from the peak, and down 0.2% in February (SA). The Composite 10 is still 1.8% above the May 2009 post-bubble bottom.

The Composite 20 index is also off 31.4% from the peak, and down 0.2% in February (SA). The Composite 20 is only 0.4% above the May 2009 post-bubble bottom and will probably be at a new post-bubble low soon.

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

Prices increased (SA) in 6 of the 20 Case-Shiller cities in February seasonally adjusted. Prices in Las Vegas are off 58% from the peak, and prices in Dallas only off 6.8% from the peak.

Real Prices: This graph shows the quarterly Case-Shiller National Index (through Q4 2010), and the monthly Case-Shiller Composite 20 and CoreLogic House Price Indexes (both through February release) in real terms (adjusted for inflation using CPI less Shelter).

In real terms, the National index is back to Q1 2000 levels, the Composite 20 index is back to November 2000, and the CoreLogic index back to January 2000.

• Q1 2011: Homeownership Rate at 1998 Levels

The Census Bureau reported the homeownership rate declined to 66.4%, down from 66.5% in Q4 2010. This is the same as in 1998.

The homeownership rate increased in the '90s and early '00s because of changes in demographics and "innovations" in mortgage lending. Some of the increase due to demographics (older population) will probably stick, so I've been expecting the rate to decline to around 66%, and probably not all the way back to 64%.

• Advance Report: Real Annualized GDP Grew at 1.8% in Q1

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The dashed line is the current growth rate. Growth in Q1 at 1.8% annualized was below trend growth (around 3.1%) - and very weak for a recovery, especially with all the slack in the system.

The following graph shows the rolling 4 quarter contribution to GDP from residential investment, equipment and software, and nonresidential structures. This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

For the following graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. The usual pattern - both into and out of recessions is - red, green, blue.

Residential Investment (RI) made a negative contribution to GDP in Q1 2011, and the four quarter rolling average is negative again following the slight boost from the tax credit early in 2010.

Equipment and software investment has made a significant positive contribution to GDP for seven straight quarters (it is coincident).

The contribution from nonresidential investment in structures was negative in Q1. Nonresidential investment in structures typically lags the recovery. The key leading sector - residential investment - has lagged this recovery because of the huge overhang of existing inventory.

Here is a look at office, mall and lodging investment:

This graph shows investment in offices, malls and lodging as a percent of GDP. Office investment as a percent of GDP peaked at 0.46% in Q1 2008 and has declined sharply to a new series low as a percent of GDP (data series starts in 1959).

Investment in multimerchandise shopping structures (malls) peaked in 2007 and has fallen by 70% (note that investment includes remodels, so this will not fall to zero). Lodging investment peaked at 0.32% of GDP in Q2 2008 and has fallen by 80% already.

This graph shows the various components of Residential Investment (RI) as a percent of GDP for the last 50 years. Usually the most important components are investment in single family structures followed by home improvement.

Investment in single family structures was just above the record low set in Q2 2009.

Investment in home improvement was at a $151.0 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (about 1.0% of GDP), significantly above the level of investment in single family structures of $106.3 billion (SAAR) (or 0.7% of GDP).

Brokers' commissions declined slightly in Q1, and are near the lowest level (as a percent of GDP) since the early '80s. In nominal dollar terms, brokers' commissions are back to the 1999 level.

And investment in multifamily structures has been bouncing along at a series low for the last few quarters, although this is expected to increase this year as starts increase.

• Regional Fed Manufacturing Surveys show slower expansion in April

Three regional Fed manufacturing surveys released this week showed slower expansion in April:

From the Richmond Fed: Manufacturing Growth Moderates in April

From the Dallas Fed: Texas Manufacturing Activity Increases but at a Slower Pace

From the Kansas City Fed: Growth in Tenth District manufacturing activity moderated somewhat in April

Even with slower expansion, these reports were fairly solid. Here is a graph comparing the regional Fed surveys to the ISM manufacturing survey.

The New York and Philly Fed surveys are averaged together (dashed green, through April), and averaged five Fed surveys (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

The regional surveys suggest the ISM manufacturing index will in the mid-to-high 50s range (fairly strong expansion). The ISM index for April will be released on Monday, May 2nd.

• Other Economic Stories ...
• A few takeaways from Bernanke Press Briefing
• LPS: Mortgage Delinquency Rates declined in March, Foreclosure pipeline "Bloated"
• HVS: Homeowner and Rental Vacancy Rates
• Restaurant Performance Index increases in March
• Consumer Sentiment increases slightly in April compared to March
• Personal Income and Outlays Report for March
• Unofficial Problem Bank list at 978 Institutions

Best wishes to all!

by Calculated Risk on 4/30/2011 08:03:00 AM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Apr 29, 2011.

Changes and comments from surferdude808:

The FDIC got back to closing banks this and released its enforcement actions for March 2011, which contributed to many changes to the Unofficial Problem Bank List. In total, there were six removals and 14 additions this week. After these changes, the list includes 984 institutions with assets of $422.1 billion, compared to 976 institutions with assets of $422.2 billion last week.

Among the removals are two action terminations AmericanWest Bank, Spokane, WA ($1.6 billion Ticker: AWBCQ); and Bank of Franklin, Meadville, MS ($95 million). Of the five failures this week, only four were on the list -- The Park Avenue Bank, Valdosta, GA ($953 million Ticker: PABK); Community Central Bank, Mount Clemens, MI ($476 million Ticker: CCBD); First National Bank of Central Florida, Winter Park, FL ($352 million); and Cortez Community Bank, Brooksville, FL ($72 million Ticker: COTZ).

Most notable among the 14 additions are Artisans' Bank, Wilmington, DE ($643 million); Arthur State Bank, Union, SC ($636 million); The Business Bank, Appleton, WI ($357 million); The Pueblo Bank and Trust Company, Pueblo, CO ($333 million); and Ojai Community Bank, Ojai, CA ($124 million Ticker: OJCB).

A number of Prompt Corrective Action orders were released this week to Bank of Choice, Greeley, CO ($1.2 billion); Oxford Bank, Oxford, MI ($285 million); Summit Bank, Burlington, WA ($147 million); Coastal Bank, Cocoa Beach, FL ($133 million); Bank of Shorewood, Shorewood, IL ($125 million); and Signature Bank, Windsor, CO ($73 million). The FDIC terminated the PCA order against Prosper Bank, Prosper, TX ($69 million).

Comparing names and locations of institutions on the Unofficial Problem Bank List with the FDIC's structure database resulted in 15 name changes and 16 city changes. In these instances, the FDIC certificate number is unchanged. However, should anyone not be able to locate an institution from a previous week's list drop us a note and we will get back to you on where that institutions has gone.

There may be some good news when looking at the monthly numbers. The list declined by one institution at the end of April 2011 to 984 from 985 at the end of March 2011. This is the smallest monthly change since the list was first published in August 2009 with the next smallest being an increase of two institutions in December 2009. For the month, there were 27 additions and 28 removals including 11 failures, 10 unassisted mergers, and 7 action terminations. For the past 21 months, on average, there have been about 46 additions, 12 failures, 3 unassisted mergers, and 4 action terminations. During April 2010, the slowdown in additions and the increase in unassisted mergers (namely multi-bank holding company subsidiary combinations) contributed to the net decline.

by Calculated Risk on 4/29/2011 10:57:00 PM

Jim was just assigned this REO - in a pretty nice neighborhood - but it is a real "stinker". I looked at an REO in the early '80s with a similar issue, but this one has been sitting closed up and vacant for 30 months. Oh my ...

Earlier:
• Consumer Sentiment increases slightly in April compared to March
• Personal Income and Outlays Report for March
• Restaurant Performance Index increases in March
• Q1 2011 Details: Investment in Office, Mall, and Lodging, Residential Components
• LPS: Mortgage Delinquency Rates declined in March, Foreclosure pipeline "Bloated"

by Calculated Risk on 4/29/2011 07:20:00 PM

Shotgun's signal sounds
Five finance fatalities
Bereaving bankers.
by Soylent Green is People
From the FDIC: Premier American Bank, National Association, Miami, Florida, Acquires All the Deposits of Two Florida Banks, First National Bank of Central Florida, Winter Park and Cortez Community Bank, Brooksville

As of December 31, 2010, First National Bank of Central Florida had total assets of $352.0 million and total deposits of $312.1 million; and Cortez Community Bank had total assets of $70.9 million and total deposits of $61.4 million. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for First National Bank of Central Florida will be $42.9 million; and for Cortez Community Bank, $18.6 million. ... The closings are the 35th and 36th FDIC-insured institutions to fail in the nation so far this year

From the FDIC: Bank of the Ozarks, Little Rock, Arkansas, Acquires All the Deposits of Two Georgia Banks, First Choice Community Bank, Dallas and The Park Avenue Bank, Valdosta

As of December 31, 2010, First Choice Community Bank had total assets of $308.5 million and total deposits of $310.0 million; and The Park Avenue Bank had total assets of $953.3 million and total deposits of $827.7 million. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for First Choice Community Bank will be $92.4 million; and for The Park Avenue Bank, $306.1 million. ... The closings are the 37th and 38th FDIC-insured institutions to fail in the nation so far this year

From the FDIC: Talmer Bank & Trust, Troy, Michigan, Assumes All of the Deposits of Community Central Bank, Mount Clemens, Michigan

As of December 31, 2010, Community Central Bank had approximately $476.3 million in total assets and $385.4 million in total deposits ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $183.2 million. ... Community Central Bank is the 39th FDIC-insured institution to fail in the nation this year

by Calculated Risk on 4/29/2011 04:55:00 PM

LPS Applied Analytics released their March Mortgage Performance data. From LPS:

• Delinquencies ended the quarter 12% lower than the end of last year, over 500,000 loans have left the delinquent pool over the last three months.
• New problem loan rates are at a three year low as fewer loans are going bad. At the same time, seasonal trends have helped support a large increase in monthly cure rates.
• March typically sees large seasonal declines in new delinquency rates, though this year was the second largest on record.
• Modification activity also contributes to the improved landscape with almost a quarter of 90+ delinquencies from last year now current on their payments.
• The foreclosure pipeline is still bloated with overhang at every level:

– There are almost twice as many loans deteriorating greater than 90+ days delinquent vs. starting foreclosure.
– There are almost three times the number foreclosure starts vs. foreclosure sales.
– 90+ and foreclosure inventory levels are almost 45 times monthly foreclosure sales.

• Origination activity has dropped off in early 2011 and due to much stricter underwriting, recent vintages have been performing exceptionally well.

Click on graph for larger image in graph gallery.

This graph provided by LPS Applied Analytics shows the percent delinquent and percent in foreclosure.

The percent in the foreclosure process has been trending up because of the foreclosure issues.

According to LPS, 7.78% of mortgages are delinquent (down from 8.80% in February), and a record 4.21% are in the foreclosure process (up from 4.15% in February) for a total of 11.93%. It breaks down as:

• 2.12 million loans less than 90 days delinquent.
• 1.99 million loans 90+ days delinquent.
• 2.22 million loans in foreclosure process.

For a total of 6.33 million loans delinquent or in foreclosure.

The second graph shows the break down of foreclosures by days delinquent.

"31% of loans in foreclosure have not made a payment in over 2 years." So about one third of the 2.22 million loans in the foreclosure process haven't made a payment in over 2 years.

The decline in the delinquency rate is partially seasonal, but the sharp decline is a positive. A key problem is all those homes in the foreclosure process. As LPS notes: "Delinquencies have dropped to about 1.8 times the 1995-2005 average, foreclosure inventories are 8 times historical “norms”." There were only 94,780 foreclosure sales in March and 270,681 foreclosure starts - so the foreclosure inventory just keeps growing.