by Calculated Risk on 2/27/2012 09:19:00 PM

This was released earlier today. These high frequency surveys are useful because they provide a glimpse of what was happening just a week or two ago - as opposed to other data that is released with a long lag.

From the Dallas Fed: Texas Manufacturing Expansion Strengthens

Texas factory activity continued to increase in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.8 to 11.2, suggesting a pickup in the pace of growth.

Other measures of current manufacturing conditions also indicated expansion in February. The new orders index was positive for a second month in a row but fell from 9.5 to 5.8. Similarly, the shipments index moved down from 6.1 to 4.2. Capacity utilization increased further in February; the index edged up from 8.5 to 10.
...
The general business activity index rose to 17.8, its highest reading since November 2010.
...
Labor market indicators reflected a sharp increase in hiring and longer workweeks. The employment index jumped to 25.2, its highest level since the beginning of 2006.
...
Prices and wages increased in February. The raw materials price index was 25.2, little changed from January. The finished goods price index climbed from 9 to 16.2, suggesting selling prices rose at a faster pace.

All of the regional surveys were stronger in February than in January; the last regional survey, from the Richmond Fed, will be released tomorrow.

by Calculated Risk on 2/27/2012 05:02:00 PM

From Bloomberg: U.S. Refinancing Program Garners ‘Tremendous Borrower Interest,’ FHFA Says

A program designed to help homeowners who have lost equity in their properties has generated “tremendous borrower interest,” said Edward J. DeMarco, acting director of the Federal Housing Finance Agency.

DeMarco made his comments in written testimony prepared for delivery tomorrow to the Senate Banking Committee.

The key to the new HARP program is the elimination of the representations and warranties on the original loan for the lenders. If the lenders can get borrowers to refinance (only loans owned or guaranteed by Fannie and Freddie), the lenders will no longer be responsible if the original loan defaults. This is important for the banks (these are well seasoned loans, so it makes sense for Fannie and Freddie too).

The elimination of Reps and warrants for the original loans applies to Desktop Underwriter® (DU) and that will not be updated until sometime in March. The lenders and servicers know which loans are 1) owned or guaranteed by Fannie and Freddie, and 2) qualify for HARP. The lenders are very motivated to get borrowers to refinance ... and the borrowers will be very motivated to get much lower mortgage rates. So it should be no surprise that there is "tremendous borrower interest"!

by Calculated Risk on 2/27/2012 03:26:00 PM

From the FHFA: FHFA Announces Pilot REO Property Sales in Hardest-Hit Areas

The Federal Housing Finance Agency (FHFA) today announced the first pilot transaction under the Real Estate-Owned (REO) Initiative, targeted to hardest-hit metropolitan areas — Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida.

With this next step, prequalified investors will be able to submit applications to demonstrate their financial capacity, experience and specific plans for purchasing pools of Fannie Mae foreclosed properties with the requirement to rent the purchased properties for a specified number of years.

Here is an over view of the properties being offered. The offer is for 2,490 Fannie Mae properties with a total of 2,854 units (some properties are 2, 3 and 4-units).

Click on graph for larger image.

What is surprising is that most of these units are already rented (85% of the units are rented) and almost 60% of the units on term leases (the rest are month-to-month).

The original idea behind the REO-to-rental program was to sell vacant REO to investors and only in certain areas. These investors would agree to rent the properties for a certain period, and that would reduce the number of vacant units on the market (or coming on the market). This offer doesn't seem to match that goal.

Fannie already has a program to keep tenants in place if they foreclose on a rented property - and this sounds like Fannie is selling some of these tenant-in-place properties.

by Calculated Risk on 2/27/2012 02:03:00 PM

Yesterday I listed some key events in Europe this week and over the next couple of months (list repeated below). The German Bundestag voted overwhelmingly today for the Greek Bailout.

From the WSJ: German Lawmakers Endorse Greek Bailout

Of 591 valid votes cast in the Bundestag, or lower house of Parliament, 496 lawmakers were in favor of the bailout, while 90 were against. Five lawmakers abstained.

Chancellor Angela Merkel now has a mandate from Parliament to give her approval of the €130 billion ($174.8 bililon) aid package at a meeting of European Union leaders in Brussels this week.

Feb 27th: Germany's Bundestag votes on Greek Bailout deal (done).
Feb 29th: ECB three year Long Term Refinancing Operation (LTRO)
Feb 29th: Finland lawmakers vote on Greek Bailout deal.

March 1st and 2nd: EU leaders meet in Brussels.
March 8th: €200bn private sector bond swap is scheduled. From the Financial Times Alphaville: A special invitation from the Hellenic Republic ... "The invitation will expire at 9:00 P.M. (C.E.T.) on 8 March 2012, unless extended, re-opened, amended or terminated ..."
March 8th: ECB holds rate meeting
March 12th: Euro-area finance ministers meet in Brussels
March 20th: €14.4bn of Greek bonds scheduled to mature.
March 30th: Euro-area finance ministers meet in Copenhagen.

Late April: Proposed date for Greek general election.
April 22nd: France election.

by Calculated Risk on 2/27/2012 11:30:00 AM

From the NY Fed: Delinquent Debt Shrinks while Real Estate Debt Continues to Fall

Aggregate consumer debt fell $126 billion to $11.53 trillion in the fourth quarter of 2011 according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, a 1.1 percent decrease from the $11.66 trillion reported in the prior quarter’s findings.
...
Mortgage and home equity lines of credit (HELOC) balances fell a combined $146 billion, a sign that consumers continue to reduce housing related debt.

After a mild uptick in the third quarter, total household delinquency rates resumed their downward trend in the fourth quarter. The report finds that $1.12 trillion of consumer debt (or 9.8 percent of outstanding debt) is currently delinquent, with $824 billion seriously delinquent (at least 90 days late). Meanwhile about 2.2 percent of mortgage balances transitioned into delinquency during the fourth quarter, resuming the recent trend of reductions in this measure. However, delinquency rates remain elevated compared to historical figures.

"While we continue to see improvements in the delinquent balances and delinquency transition rates this quarter, there has been a noticeable decrease in the rate of improvement compared to 2009-2010," said Andrew Haughwout, vice president and economist at the New York Fed. "Overall it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels."

Here is the Q4 report: Quarterly Report on Household Debt and Credit. Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased slightly in Q4. From the NY Fed:

Aggregate consumer debt fell slightly in the fourth quarter. As of December 31, 2011, total consumer indebtedness was $11.53 trillion, a reduction of $126 billion (1.1%) from its September 30, 2011 level. Mortgage balances shown on consumer credit reports fell again ($134 billion or 1.6%) during the quarter; home equity lines of credit (HELOC) balances fell by $12 billion (1.9%). Household mortgage and HELOC indebtedness are now 11.0% and 11.7%, respectively, below their peaks. Consumer indebtedness excluding mortgage and HELOC balances again rose slightly ($20 billion or about 0.8%) in the quarter. Consumers’ non-real estate indebtedness now stands at $2.635 trillion. Student loan indebtedness rose slightly, to $867 billion.

The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red). The percent of seriously delinquent loans will probably decline quicker now that the mortgage servicer settlement has been reached.

From the NY Fed:

As of December 31, 9.8% of outstanding debt was in some stage of delinquency, compared to 10.0% on September 30. About $1.12 trillion of consumer debt is currently delinquent, with $824 billion seriously delinquent (at least 90 days late or “severely derogatory”).
...
About 2.2% of current mortgage balances transitioned into delinquency during 2011Q4, reinstating the recent trend of reductions in this measure which had been temporarily reversed in 2011Q3. The rate of transition from early (30-60 days) into serious (90 days or more) delinquency also fell slightly, to 28.8%. This reduction in delinquency transitions was accompanied by an improved cure rate: 27.2% of mortgage balances in early delinquency became “current” during the fourth quarter.

There are a number of credit graphs at the NY Fed site.

by Calculated Risk on 2/27/2012 10:07:00 AM

From the NAR: January Pending Home Sales Rise, Market on Uptrend

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.0 percent to 97.0 in January from a downwardly revised 95.1 in December and is 8.0 percent higher than January 2011 when it was 89.8. The data reflects contracts but not closings.

The January index is the highest since April 2010 when it reached 111.3 as buyers were rushing to take advantage of the home buyer tax credit.

December was revised down from 96.6, so most of the 2% increase was due to the downward revision. Without the downward revision, this was below the consensus of a 1.5% increase.

Contract signings usually lead sales by about 45 to 60 days, so this is for sales in February and March.

by Calculated Risk on 2/27/2012 08:55:00 AM

I guess we can call this the "consensus" forecast for housing starts, from the NABE: NABE Outlook February 2012

Housing starts are expected to increase 19 percent in 2012. The economists surveyed expect housing starts to reach 700,000 units in 2012, up from 610,000 in 2011 and an upward revision from the November forecast. The forecast for 2013 shows continued improvement, with housing starts reaching 850,000 units. Correspondingly, real residential investment is forecast to increase 6.6 percent in 2012, slightly higher than the 4.3 percent predicted in November, and then strengthen further, rising 10 percent in 2013. The projection for home prices in 2012 was lowered slightly from a projected increase in the FHFA index of 0.9 percent (Q4/Q4) in the November survey to home prices remaining unchanged in the February survey. In 2013 home prices are expected to increase slightly more than 2 percent.

Here was housing economist Tom Lawler's forecast for 2012.

The following table shows several forecasts for 2012:

Some Housing Forecasts for 2012 (000s)
	New Home Sales	Single Family Starts	Total Starts
Consensus (NABE)			700
Merrill Lynch	330		713
Fannie Mae	336	473	704
Wells Fargo	350	457	690
John Burns	359		717
NAHB	360	501	709
Tom Lawler	365	515	740
Moody's	530	687
2011 Actual	304	431	609

by Calculated Risk on 2/26/2012 09:23:00 PM

• For fun I've added a monthly question contest on the right sidebar. It takes a Facebook login right now. The contest has two parts: 1) every day, before 9:30 AM ET, you can enter whether you think the S&P 500 will be up or down that day, and 2) I'll ask some economic predictions (for March 1st, I'm asking: Will light vehicle sales increase in February compared to January?)

Contestants receive 1 point for each correct answer (either stocks or economic predictions). At the end of the month, starting in March, I'll list the leaders in a post on the blog. For February, I'm the leader (just a few friends entered). Hey, play along and beat CR!

• iPad layout. Based on feedback, I've switched the iPad layout back to the standard blog layout. For those who liked the touch layout, use this URL touch.calculatedriskblog.com

• RSS Feed: For those interested, here is the RSS feed for Calculatedrisk.

• on Twitter @calculatedrisk (My family friend Sasha Cohen, Olympic skater, economics student at Columbia and future hedge fund manager is on twitter @SashaCohenNYC)

Join the contest - beat CR!

Yesterday:
• Summary for Week ending February 24th
• Schedule for Week of February 26th

by Calculated Risk on 2/26/2012 07:17:00 PM

This will be another busy week in Europe. Germany and Finland will vote on the new Greek bailout, the ECB will conduct the second LTRO, and EU leaders will meet in Brussels at the end of the week.

Feb 27th: Germany's Bundestag votes on Greek Bailout deal.
Feb 29th: ECB three year Long Term Refinancing Operation (LTRO)
Feb 29th: Finland lawmakers vote on Greek Bailout deal.

March 1st and 2nd: EU leaders meet in Brussels.
March 8th: €200bn private sector bond swap is scheduled. From the Financial Times Alphaville: A special invitation from the Hellenic Republic ... "The invitation will expire at 9:00 P.M. (C.E.T.) on 8 March 2012, unless extended, re-opened, amended or terminated ..."
March 8th: ECB holds rate meeting
March 12th: Euro-area finance ministers meet in Brussels
March 20th: €14.4bn of Greek bonds scheduled to mature.
March 30th: Euro-area finance ministers meet in Copenhagen.

Late April: Proposed date for Greek general election.
April 22nd: France election.

Yesterday:
• Summary for Week ending February 24th
• Schedule for Week of February 26th

by Calculated Risk on 2/26/2012 02:03:00 PM

Last week the Census Bureau released the placements of manufactured homes in December and for all of 2011. Placements were at 3.4 thousand in December, and at a record low of 46.0 thousand for all of 2011.

Although the manufactured home data only goes back to 1980, it is pretty clear that total housing completions (single and multi-family) and manufactured home placements were at record low levels since at least the early '60s. Here is a table of the worst years on record:

Worst Years for Housing Completions and Placements
Year	Total Completions (000s)
2011	631.2
2010	701.6
2009	848.9
2008	1,200.2
1982	1,239.4
1991	1,265.3

Unfortunately there is no timely count of household formation, so it is hard to tell how quickly the excess supply of housing is being absorbed.

Note: Household formation is a function of changes in population, and also of changes in household size. During the '70s, the baby boomers started moving out of their parents' homes, and there was a dramatic decrease in the number of persons per household and that led to a huge demand for apartments. We can't directly compare the level of total completions in the '00s to the '70s or '80s - we need to know the number of households being formed.

Click on graph for larger image.

This graph shows total housing completions and placements since 1980. The net additional to the housing stock is less because of demolitions and destruction of housing units.

Although we don't know the exact number, it is pretty clear that there are more households being formed than housing units completed last year - and the excess supply is being absorbed.

Yesterday:
• Summary for Week ending February 24th
• Schedule for Week of February 26th