by Calculated Risk on 1/21/2012 01:15:00 PM

Earlier:
• Summary for Week Ending January 20th

The key U.S. economic report for the coming week is the Q4 advance GDP report to be released on Friday. Also New Home sales will be released on Thursday.

The Fed's FOMC holds a two day meeting on Tuesday and Wednesday, and Fed Chairman Ben Bernanke will hold a press conference following the FOMC announcement on Wednesday. The FOMC will release participants' projections of the appropriate target federal funds rate along with the usual quarterly economic projections.

On Tuesday, President Obama will present the State of the Union address. This might include mention of several housing initiatives.

----- Monday, Jan 23rd -----
No economic releases scheduled.

----- Tuesday, Jan 24th -----
10:00 AM: Richmond Fed Survey of Manufacturing Activity for January. The consensus is for an increase to 6 for this survey from 3 in December (above zero is expansion).

10:00 AM: Regional and State Employment and Unemployment (Monthly) for December 2011

9:00 PM: State of the Union Address. President Obama will probably mention some housing policy initiatives such as the new HARP program (refinance activity will increase in March), an REO to rental program for Fannie and Freddie, and possibly the long rumored mortgage settlement agreement.

----- Wednesday, Jan 25th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index was especially weak last year, although it has increased a little recently.

10:00 AM: FHFA House Price Index for November 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

10:00 AM: Pending Home Sales Index for December. The consensus is for a 1.0% decrease in the index.

12:30PM: FOMC Meeting Announcement. No changes are expected to interest rates. The key change will be the release of Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:15 PM: Fed Chairman Ben Bernanke holds a press briefing following the FOMC announcement.

----- Thursday, Jan 26th -----
8:30 AM: The initial weekly unemployment claims report will be released.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased last week to 379,000.

The consensus is for an increase to 370,000 from 352,000 last week.

8:30 AM: Durable Goods Orders for December from the Census Bureau. The consensus is for a 2.0% increase in durable goods orders.

8:30 AM ET: Chicago Fed National Activity Index (December). This is a composite index of other data.

10:00 AM ET: New Home Sales for December from the Census Bureau.

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

The consensus is for a slight increase in sales to 320 thousand Seasonally Adjusted Annual Rate (SAAR) in December from 315 thousand in November. The consensus might be a little low based on the homebuilder confidence survey.

10:00 AM: Conference Board Leading Indicators for December. The consensus is for a 0.7% increase in this index.

11:00 AM: Kansas City Fed regional Manufacturing Survey for January. This survey was at -4 in December (contraction).

----- Friday, Jan 27th -----
8:30 AM: Q4 GDP (advance release). This is the advance release from the BEA. The consensus is that real GDP increased 3.0% annualized in Q4.

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years.

The Red column is the forecast for Q3 GDP.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for January). The consensus is for no change from the preliminary reading of 74.0.

by Calculated Risk on 1/21/2012 08:11:00 AM

The economic data last week wasn't strong, but it was mildly encouraging. Although housing starts declined in December, the decline was due to the volatile multifamily sector - in fact single family housing starts were at the highest level of the year. This followed an increase in the homebuilder confidence index; the builders are still depressed, but not quite as pessimistic as before.

The existing home sales report showed a sharp decline in inventory - an important story for housing. Economist Tom Lawler commented:

[O]ne of the more startling trends is the sharp decline in the estimated number of existing homes for sale. ... While the argument some make that the declining inventory trend in part reflects discouraged would-be sellers from taking their home off the market until “better times” arrive has some merit, it would be inane to dismiss completely the sharp decline in inventories – just as it was inane to dismiss the explosive jump in inventories in 2006 and 2007.

One other reason for the drop in listings is the sharp decline in REO listings from the end of 2010 to the end of 2011. While the foreclosure/robo-signing mess resulted in a significant decline in bank repossessions in 2011 compared to 2010, there wasn’t any corresponding slowdown in REO sales. ... As a result, REO inventories probably fell by close to 150,000. This, of course, would only explain a modest part of the huge drop in listings last year, but it was a factor.

In addition, anecdotal evidence indicates that a decent share of investors who have purchase REO – and the investor share of purchase is significant – have purchased properties not for a “quick flip,” but as a rental investment. As a result, fewer properties purchased by investors have quickly come back on the market than was the case several years ago.

There was good news on initial weekly unemployment claims too. The DOL reported initial weekly claims declined to 352,000 - the lowest level since April 2008. And two regional manufacturing surveys showed expansion in January. Also the Architecture Billings Index was positive for the 2nd consecutive month (a leading indicator for commercial real estate). All and all, the US economic reports were mildly encouraging last week.

Here is a summary in graphs:

• Housing Starts declined in December

Click on graph for larger image.

Total housing starts were at 657 thousand (SAAR) in December, down 4.1% from the November rate of 685 thousand (SAAR). Most of the increase this year has been for multi-family starts, but single family starts have been increasing recently too.

Single-family starts increased 4.4% to 470 thousand in December - the highest level in 2011, and the highest since the expiration of the tax credit.

This was below expectations of 680 thousand starts in December, although the decline in December was related to the volatile multifamily sector.
All Housing Graphs
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply

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

Sales in December 2011 (4.61 million SAAR) were 5.0% higher than last month, and were 3.6% above the December 2010 rate.

According to the NAR, inventory decreased to 2.38 million in December from 2.62 million in November. This is the lowest level of inventory since March 2005.

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

Inventory decreased 21.2% year-over-year in December from December 2010. This is the tenth consecutive month with a YoY decrease in inventory.

Months of supply decreased to 6.2 months in December, down from 7.2 months in November. This is still a little higher than normal.
All current Existing Home Sales graphs
• Industrial Production increased 0.4% in December, Capacity Utilization increased

From the Fed: Industrial production and Capacity Utilization

This graph shows Capacity Utilization. This series is up 10.8 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.1% is still 2.3 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

This graph shows industrial production since 1967.

Industrial production increased in December to 95.3, and previous months were revised up slightly.

The consensus was for a 0.5% increase in Industrial Production in December, and for an increase to 78.1% for Capacity Utilization. This was close to consensus.
All current manufacturing graphs
• AIA: Architecture Billings Index indicated expansion in December

From AIA: Architecture Billings Index Positive for Second Straight Month

This graph shows the Architecture Billings Index since 1996. The index was unchanged at 52.0 in December. Anything above 50 indicates expansion in demand for architects' services.

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 suggests further declines in CRE investment in early 2012, but perhaps stabilizing later in 2012.
All current Commercial Real Estate graphs
• NAHB Builder Confidence index increased in January

From the NAHB: Builder Confidence Rises Fourth Consecutive Time in January

The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased in January to 25 from 21 in December. Any number under 50 indicates that more builders view sales conditions as poor than good.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the January release for the HMI and the November data for starts.

Both confidence and housing starts had been moving sideways at a very depressed level for several years - but confidence has been moving up. This is still very low, but this is the highest level since June 2007.
All Housing Graphs
• Weekly Initial Unemployment Claims declined to 352,000

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 to 379,000.

The 4-week moving average is well below 400,000.

This is the lowest level for weekly claims since April 2008.
All current Employment Graphs

• Regional Fed Surveys show expansion in January

From the Philly Fed: January 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged up slightly from a revised reading of 6.8 in December to 7.3 in January.

From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that manufacturing activity expanded in New York State in January. The general business conditions index climbed five points to 13.5.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through January. The ISM and total Fed surveys are through December.

The average of the Empire State and Philly Fed surveys increased again in January, and is at the highest level since early 2011.
All current manufacturing graphs
• Key Measures of Inflation moderated in December

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.5%, and core CPI rose 2.2%. Core PCE is for November and increased 1.7% year-over-year.

On a monthly basis, the median Consumer Price Index increased 2.9% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 1.5% annualized, and core CPI increased 1.8% annualized.

These measures show inflation has moderated.

• Other Economic Stories ...
• Housing: Record Low Total Completions in 2011
• Lawler: Housing Forecast for 2012
• LA area Port Traffic increases slightly year-over-year in December
• Residential Remodeling Index declines seasonally in November

by Calculated Risk on 1/20/2012 08:05:00 PM

From the Federal Reserve: Federal Reserve releases templates for reporting FOMC participants' projections of the appropriate target federal funds rate

The Federal Reserve on Friday released blank templates showing the format of the two charts it will use on January 25 to report Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate. It also released a draft of an explanatory note that will accompany the projections.

The first chart, which will have shaded bars when released on January 25, will show FOMC participants’ projections for the timing of the initial increase in the target federal funds rate. The second chart, which will have dots representing policymakers’ individual projections when released on January 25, will show participants’ views of the appropriate path of the federal funds rate over the next several years and in the longer run.

From Luca Di Leo and Jon Hilsenrath at the WSJ: Fed Details How It Will Release Rate Forecasts

One of the new charts is a bar chart showing in which year officials expect to see the first short-term interest rate increase, with options ranging from 2012 all the way out to 2016. ... It was striking that the Fed charts go all the way out to 2016 — suggesting that some officials don’t see rate hikes for many more years.

These projections will be released next Wednesday as part of the usually quarterly economic projections.

Earlier:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 1/20/2012 06:11:00 PM

What's that crashing sound?
Houston, we have a problem.
Eagle has landed
by Soylent Green is People
From the FDIC: Capital Bank, National Association, Rockville, Maryland, Assumes All of the Deposits of American Eagle Savings Bank, Boothwyn, Pennsylvania

As of September 30, 2011, American Eagle Savings Bank had approximately $19.6 million in total assets and $17.7 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3.2 million. ... American Eagle Savings Bank is the third FDIC-insured institution to fail in the nation this year, and the first in Pennsylvania.

That makes 3 today so far. The FDIC is back to work.

by Calculated Risk on 1/20/2012 05:08:00 PM

New year, same pattern.
Florida, Georgian failures
Wash, then rinse, repeat
by Soylent Green is People
From the FDIC: CenterState Bank of Florida, National Association, Winter Haven, Florida, Assumes All of the Deposits of Central Florida State Bank, Belleview, Florida

As of September 30, 2011, Central Florida State Bank had approximately $79.1 million in total assets and $77.7 million in total deposits ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $24.4 million. ... Central Florida State Bank is the first FDIC-insured institution to fail in the nation this year, and the first in Florida.

From the FDIC: Hamilton State Bank, Hoschton, Georgia, Assumes All of the Deposits of the First State Bank, Stockbridge, Georgia

As of September 30, 2011, The First State Bank had approximately $536.9 million in total assets and $527.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $216.2 million. ... The First State Bank is the second FDIC-insured institution to fail in the nation this year, and the first in Georgia.

And so it begins in 2012.

by Calculated Risk on 1/20/2012 03:35:00 PM

From HotelNewsNow.com: STR: US results for week ending 14 January

The U.S. hotel industry experienced increases in all three key performance metrics during the week of 8-14 January 2012, according to data from STR.

In year-over-year comparisons for the week, occupancy was up 4.9 percent to 52.1 percent, average daily rate increased 5.6 percent to US$102.99 and revenue per available room was up 10.8 percent to US$53.65.

This is the weak season for hotel occupancy, but this is a fairly strong improvement over the same period last year. Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average.

Click on graph for larger image.

The red line is for 2012, yellow is for 2011, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels).

Hotels have seen a solid start to 2012. The 4-week average of the occupancy rate is back to normal.

Looking forward, February and March are the next key period - that is when business travel usually picks up.

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

Earlier:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 1/20/2012 12:35:00 PM

The NAR reported inventory fell to 2.38 million in December. This is down 21.2% from December 2010, and this is about 16% below the inventory level in December 2005 (2005 was when inventory started increasing sharply). Inventory is about 7% above the level in December 2004. This decline in inventory was a significant story in 2011.

The following graph shows inventory by month since 2004. In 2004 (black line), inventory was fairly flat and declined at the end of the year. In 2005 (dark blue line), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red) inventory is at the lowest level since 2004. Inventory is still elevated - especially with the much lower sales rate - but lower inventory levels put less downward pressure on house prices (of course the level of distressed properties is still very high, and there is a significant shadow inventory).

Note that inventory usually starts increasing in February and March, and peaks in July and August. The seasonal increase in inventory will be something to watch this spring and summer.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2011.

Sales NSA are slightly above December 2009 and December 2010, but sales are far below the bubble years of 2005 and 2006.

The level of sales is still elevated due to investor buying. The NAR noted:

All-cash sales accounted for 31 percent of purchases in December, up from 28 percent in November and 29 percent in December 2010. Investors account for the bulk of cash transactions.

Investors purchased 21 percent of homes in December, up from 19 percent in November and 20 percent in December 2010.

Earlier:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales graphs

by Calculated Risk on 1/20/2012 10:00:00 AM

The NAR reports: December Existing-Home Sales Show Uptrend

The latest monthly data shows total existing-home sales rose 5.0 percent to a seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November, and are 3.6 percent higher than the 4.45 million-unit level in December 2010.
...
Total housing inventory at the end of December dropped 9.2 percent to 2.38 million existing homes available for sale, which represents a 6.2-month supply at the current sales pace, down from a 7.2-month supply in November.

Click on graph for larger image.

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

Sales in December 2011 (4.61 million SAAR) were 5.0% higher than last month, and were 3.6% above the December 2010 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 2.38 million in December from 2.62 million in November. This is the lowest level of inventory since March 2005.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 21.2% year-over-year in December from December 2010. This is the tenth consecutive month with a YoY decrease in inventory.

Months of supply decreased to 6.2 months in December, down from 7.2 months in November. This is still a little higher than normal.

These sales numbers were right at the Tom Lawler's estimate of 4.64 million.

All current Existing Home Sales graphs

by Calculated Risk on 1/20/2012 09:01:00 AM

Landon Thomas at the NY Times DealBook has some details: Greece Inches Toward a Deal With Its Bondholders

[A] compromise seems to be at hand, with the Greeks close to locking in an interest rate just below 4 percent on the new bonds, according to officials involved in the negotiations. ... In a concession to creditors, the coupon is expected to escalate beyond 4 percent over time, linked to the growth of the Greek economy.

Assuming all goes according to plan, investors would be offered the opportunity to exchange their old bonds for new ones carrying the agreed-upon terms in early to mid-February.

Bankers say that the creditors believe 50 to 60 percent of private sector bond holders might accept the proposal ... The challenge for Greece and the creditor group is to persuade investors on the fence to join in the deal in order to reach a figure of about 75 percent.

With a 75 percent participation rate, Greece could well be in a position to take advantage of the collective-action clauses that are set to be attached to the Greek law bonds, forcing the terms of the agreement on all bondholders.

And from the AthensNews: Debt swap talks to continue in the evening

The government will continue debt swap negotiations with private sector bondholders at around 7.30pm, Finance Minister Evangelos Venizelos said after concluding a first round of talks with Institute of International Finance (IIF) chief Charles Dallara.
...
Investors have also bridled at the government’s threat to enforce losses if not enough bondholders sign up to the deal.

by Calculated Risk on 1/19/2012 10:35:00 PM

It sounds like they need a deal in the next few days.

From Reuters: Greece, Creditors Move Closer to Deal in Race Against Time

Greece and its private bondholders resume debt swap talks on Friday amid signs they are inching closer to a long-awaited deal ... A large chunk of the bond swap must be agreed by noon on Friday and formalized before Monday's meeting of euro zone finance ministers, [Finance Minister Evangelos Venizelos] has said.

Adding to the pressure, officials from the "troika" of foreign lenders are due to begin meetings with the Greek government on Friday to discuss reforms and plans to finalize that bailout package.

"Now is the crucial moment in the final battle for the debt swap and the crucial moment in the final and definitive battle for the new bailout," Venizelos told parliament. "Now, now! Now is the time to negotiate for the sake of the country."

Earlier:
• Housing Starts declined in December
• Housing: Record Low Total Completions in 2011
• Weekly Initial Unemployment Claims decline to 352,000
• Key Measures of Inflation moderate in December
• Philly Fed: "Regional manufacturing activity continued to expand at a moderate pace in January"