by Calculated Risk on 9/26/2011 10:21:00 PM

To help keep track ...
• There is a vote on Tuesday in Greece concerning the new property tax around 12 PM ET (there will be protests too). I think this also includes some cuts in public sector too.

• Prime Minister George Papandreou will be in Germany on Tuesday for a meeting with Chancellor Angela Merkel.

• The "troika" inspectors (EU-IMF-ECB) will not return until the new legislation is passed.

• The EU Finance Ministers meet on Monday, October 3rd, and there is very little time for the inspectors to complete their work and still allow the Finance Ministers to vote on the release of the next loan installment. Greece needs the disbursement by mid-October to meet their obligations through the end of the year.

• On Thursday, the German Parliament will vote on increasing the European Financial Stability Facility (EFSF) according to the agreement reached on July 21st.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 07:35:00 PM

Alejandro Lazo at the LA Times wrote today: New home sales stuck at the bottom in August

"This year is shaping up to be the worst year on record for new home sales," [Patrick Newport, U.S. economist with IHS Global Insight] wrote in a note.

The Census Bureau started tracking New Home sales in 1963, and the record low was 412,000 in 1982 - until that record was broken in 2009 - and then again in 2010 - and it looks another new record in 2011.

Here is a table of the last ten years - remember that sales in 2009 and 2010 were boosted by the tax credit.

New Home Sales
Year	Total	Total through August
2000	877	608
2001	908	644
2002	973	670
2003	1,086	759
2004	1,203	841
2005	1,283	906
2006	1,051	756
2007	776	577
2008	485	365
2009	375	261
2010	323	231
2011	3031	211
1Current 2011 Pace

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 03:55:00 PM

From CNBC: Officials Working on a Sovereign Debt TARP for Europe?

European officials are working on a detailed plan aimed at shoring up European bank stability, according to an official who spoke with CNBC’s Steve Liesman.

The plan appears to have a lot of moving parts. It would involve money from the European Financial Stability Facility (EFSF), a bailout vehicle created in 2010 to alleviate the sovereign debt crisis in Europe, to capitalize a special purpose vehicle that would be created by the European Investment Bank, a bank owned by the member states of the European Union.

More details at the article.

The Greek 2 year yield was up to 71%. The Greek 1 year yield is at 138%.

The Portuguese 2 year yield is up to 18.2% and the Irish 2 year yield was down to 8.8%.

The Italian 10 year yield was up slightly to 5.6%.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 12:09:00 PM

On New Home sales: Since new home sales are reported when contracts are signed, and consumer sentiment fell off a cliff in August following the debt ceiling debate, I thought we might see an even large decline for August new home sales. This was still a weak report - the 16th month in a row with sales around 300 thousand SAAR - but I thought it might even be worse.

• Dallas Fed: Texas Manufacturing Activity Picks Up

Texas factory activity increased in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 1.1 to 5.9, suggesting growth picked up this month after stalling in August.

Most other measures of current manufacturing conditions also indicated growth in September. The new orders index edged down from 4.8 to 3.6 this month, suggesting order volumes continued to increase, but at a slightly decelerated pace. The shipments index rose from 6.7 to 9.4, reaching its highest level since March. The capacity utilization index remained in negative territory in September but rose from –2.8 to –1.3.

Perceptions of general business conditions worsened in September. The general business activity index remained negative for the fifth month in a row and fell from –11.4 to –14.4; ten percent of manufacturers perceived an increase in activity this month, while one quarter noted a decrease. The company outlook index fell from 7.2 in August to a near-zero reading in September. Still, the great majority of respondents said their outlooks were unchanged or improved from last month.

Labor market indicators reflected higher labor demand growth. The employment index came in at 13.4, up notably from 5.4 in August. One quarter of manufacturers reported hiring new workers, while 12 percent reported layoffs. The hours worked index moved back into positive territory in September, suggesting average workweeks lengthened.

Some improvement. There will be two more regional manufacturing surveys released this week and the ISM survey next week.

• Distressing Gap: The following graph shows existing home sales (left axis) and new home sales (right axis) through August. 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 flood of distressed sales 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.

Click on graph for larger image in graph gallery.

I expect this gap to close over the next few years once the number of distressed sales starts to decline.

Note: 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. Also the National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers and I expect 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 "distressing gap" will remain.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 10:00:00 AM

The Census Bureau reports New Home Sales in August were at a seasonally adjusted annual rate (SAAR) of 295 thousand. This was down from a revised 302 thousand in July (revised up from 298 thousand).

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 August 2011 were at a seasonally adjusted annual rate of 295,000 ... This is 2.3 percent (±13.9%) below the revised July rate of 302,000, but is 6.1 percent (±18.8%) above the August 2010 estimate of 278,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

Months of supply increased slightly to 6.6 in August. The all time record was 12.1 months of supply in January 2009. This is still higher than normal (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of August was 162,000. This represents a supply of 6.6 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 was at 60,000 units in August. 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 August 2011 (red column), 26 thousand new homes were sold (NSA). The record low for August was 23 thousand in 2010 (following the expiration of the homebuyer tax credit). The high for August was 110 thousand in 2005.

This was at the consensus forecast of 295 thousand, and was not far above the record low for the month of August set last year. New home sales have averaged only 300 thousand SAAR over the 16 months since the expiration of the tax credit ... moving sideways at a very low level.

by Calculated Risk on 9/26/2011 08:30:00 AM

This is a composite index from the Chicago Fed: Index shows economic activity weakened in August

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index decreased to –0.43 in August from +0.02 in July. Contributions from three of the four broad categories of indicators that make up the index declined from July, and three of the four were negative in August.
...
The index’s three-month moving average, CFNAI-MA3, ticked down to –0.28 in August from –0.27 in July. August’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend.

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

Click on graph for larger image in graph gallery.

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.

This index suggests the economy was still growing in August, but below trend.

Weekend:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/25/2011 08:36:00 PM

The clock is ticking ...

From Bloomberg: ‘Barrier’ Around Greece Needed: Merkel

German Chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states ...

“We have to be in a position to react,” Merkel said. “We have to be able to put up a barrier.” Even so, “I don’t rule out at all that at some point we will have the question whether one can do an insolvency of states just like with banks.”

Merkel rejected Greece leaving the euro area, saying that “we can’t force it, but I don’t believe in that in any case” ... “Maybe Greece leaves, the next country leaves and then the next country after that,” she said. “They would speculate against all the countries.” ...

Merkel suggested that Greece may be able to get the next tranche of bailout aid, after a team of officials from the IMF, the ECB and the European Commission assess the Greek government’s progress ... Merkel is due to host Greek Prime Minister George Papandreou for talks in Berlin on Sept. 27, two days before German lawmakers vote on the enhanced rescue fund...

From the NY Times: Investors Ask if Anything Can Save Greece From Default

Under intense pressure from the United States, euro zone leaders spent the weekend in Washington working to craft a rescue plan to bolster sickly banks and buy the bonds of weak countries like Italy. But past efforts to bring an end to the debt crisis in Europe — including a second, €109 billion rescue plan for Greece forged by Europe and the International Monetary Fund in July — have failed to stand up. Investors remain skeptical that another plan will be any different.
...
With Greek government debt trading on the open market below 40 cents on the dollar, it is quickly approaching what debt experts call the recovery rate — the price investors would get for their bonds if the country officially defaulted.

In effect, that means investors have given up.

I'm not sure what the barrier will be, but just about everyone is now accepting that Greece will default (except a few Greek politicians). The question remains when - and what happens after they default.

by Calculated Risk on 9/25/2011 04:14:00 PM

From Reuters: U.S. gasoline prices slide; more to come-survey

The average price for a gallon of gasoline in the United States tumbled 12.23 cents in the past two weeks and appeared poised to drop even more as crude oil prices weaken, the nationwide Lundberg survey showed on Sunday.

The national average price was $3.5446 on Sept. 23, down from $3.67 two weeks ago ...

Gasoline prices jumped from about $3.10 per gallon in early February to over $3.50 per gallon in early March as Brent crude oil prices increased from about $100 per barrel to over $120 per barrel. (WTI increased from around $85 per barrel to over $110 per barrel early this year).

Since oil prices have declined back to the early February levels (Bloomberg: WTI is at $80 per barrel and Brent is at $104), gasoline prices will probably decline too.

Note: This graph show oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Yesterday:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/25/2011 02:01:00 PM

I haven't updated this graph for some time ...

There have been 395 bank failures in this cycle (starting in 2007):

FDIC Bank Failures by Year
2007	3
2008	25
2009	140
2010	157
20111	73
Total	395
1Through Sept 23, 2011.

This graph shows the cumulative bank failures by week in 2008, 2009, 2010 and 2011.

The FDIC has slowed down recently, and it appears the FDIC will close around 100 banks this year.

There are still quite a few problem banks, so there are probably quite a few banks failures to come.

by Calculated Risk on 9/25/2011 09:23:00 AM

A little Sunday morning speculation ...

From the Telegraph: Multi-trillion plan to save the eurozone being prepared

German and French authorities have begun work on a three-pronged strategy behind the scenes amid escalating fears that the eurozone’s sovereign debt crisis is spiralling out of control.
...
According to sources, progress has been made at the G20 meeting in Washington ... the world’s leading economies set themselves a six-week deadline to resolve the crisis – to unveil a solution by the G20 summit in Cannes on November 4.
...
First, Europe’s banks would have to be recapitalised with many tens of billions of euros to reassure markets that a Greek or Portuguese default would not precipitate a systemic financial crisis. ... Officials are confident that some banks could raise the funds privately, but if they are unable they would either be recapitalised by the state or by the European Financial Stability Facility (EFSF) ...

The second leg of the plan is to bolster the EFSF. Economists have estimated it would need about Eu2 trillion of firepower to meet Italy and Spain’s financing needs in the event that the two countries were shut out of the markets. Officials are working on a way to leverage the EFSF through the European Central Bank to reach the target.

The complex deal would see the EFSF provide a loss-bearing “equity” tranche of any bail-out fund and the ECB the rest in protected “debt”.
...
As quid pro quo for an enhanced bail-out, the Germans are understood to be demanding a managed default by Greece but for the country to remain within the eurozone.

Earlier:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd