by Calculated Risk on 9/17/2012 09:16:00 PM

First a re-mention: Michael Pettis wrote an interesting article about supply and demand for commodities: By 2015 hard commodity prices will have collapsed

On house prices, Redfin released their "real time" home price tracker today for August: Home Prices Hit Two-Year High in August, Up 5% From 2011

Following is a summary of key metrics across 19 major metropolitan markets:

• Home prices in August increased 4.9% year over year, and were flat month over month (+0.1%).
• The number of homes for sale declined 28.5% from August 2011 to August 2012, and by 4.5% since July.
...
Home prices will no doubt decline a bit into the winter (as they do every year) ... All signs point to continued modest year-over-year price gains through the end of the year, more or less in line with inflation in most markets.

The decline in inventory is a huge story. It is possible that the NAR will report on Wednesday that months-of-supply for existing homes declined to around 6.0 months for August. This will be the lowest months-of-supply for August since 2005. Last year, in August 2011, there were 8.2 months-of-supply.

On Tuesday:
• At 10:00 AM ET, 10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 38, up from 37 in August. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.

by Calculated Risk on 9/17/2012 04:57:00 PM

From economist Tom Lawler:

While I’m missing reports from some key areas of the country, what I’ve seen so far suggest to me that existing home sales as measured by the National Association of Realtors increased significantly on a seasonally adjusted basis last month. Right now my “best guess” is that the NAR’s existing home sales estimate for August will come in at a seasonally adjusted annual rate of about 4.87 million, up 8.9% from July’s pace, and up 10.4% from last August’s pace. Such a gain would be way above the “consensus” forecast of a SAAR of 4.55 million, but is consistent with the local realtor/MLS reports I’ve seen so far.

If indeed the NAR reports such a bounce, this summer’s “pattern of surprises” will be reminiscent of last summer’s. Below is a table showing (1) the “consensus” forecast for existing home sales for last June, July, and August (as measured the NAR; of course the “preliminary” data have been revised a boatload, including the benchmark and seasonal revisions) right before the NAR’s release; (2) the “actual” preliminary sales pace released by the NAR; and (3) the LEHC forecast for that release.

Existing Home Sales "Surprises" Last Summer (SAAR, millions)
Sales for:	Released on:	Consensus	Actual on Release Date	LEHC Forecast before release
Jun-11	7/20/2011	4.9	4.77	4.71
Jul-11	8/18/2011	4.92	4.67	4.69
Aug-11	9/21/2011	4.75	5.03	4.92
Jun-12	7/19/2012	4.65	4.37	4.56
Jul-12	8/22/2012	4.51	4.47	4.47
Aug-12	9/19/2012	4.55		4.87

CR Note: This is "as released" by the NAR. The NAR revised sales down significantly last year with the benchmark revision.

Last June and July, of course, existing home sales came in well south of “expectations,” and this was “picked up” by my regional tracking ahead of the NAR’s release.

This June existing home sales also came in well south of consensus, though this was only partially captured by my regional tracking. Somewhat surprisingly, the “consensus” forecast for July adjusted down after June’s surprise by more this year than last, though the still “disappointing” July sales figures were captured well by regional tracking.

Last August, of course, existing home sales rebounded by a boatload more than consensus, and a good chunk of this rebound was captured by my regional tracking.

Another “similarity” is that in both years June and July sales were surprisingly weak given the NAR’s Pending Home Sales Index.

CR Note: The NAR is scheduled to release the existing home sales report this Wednesday, Sept 19th at 10 AM ET. The preliminary consensus is for sales of 4.55 million SAAR in August.

by Calculated Risk on 9/17/2012 02:55:00 PM

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for August. LA area ports handle about 40% of the nation's container port traffic.

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, both inbound and outbound traffic are down slightly compared to the 12 months ending in July.

In general, inbound and outbound traffic has been moving sideways recently.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

For the month of August, loaded outbound traffic was down 4% compared to August 2011, and loaded inbound traffic was down 1% compared to August 2011.

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday - so imports might increase over the next couple of months, but probably not by much.

This suggests trade with Asia might be down slightly in August.

by Calculated Risk on 9/17/2012 11:38:00 AM

In addition to Case-Shiller, CoreLogic, and LPS, I'm also watching the FNC, Zillow and other house price indexes.

FNC released their July index data today. FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.8% in July compared to June (Composite 100 index). The other RPIs (10-MSA, 20-MSA, 30-MSA) increased between 0.8% and 0.9% in July. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

Since this index is NSA, the month-to-month changes will probably turn negative later this year. However this is the first month-to-month increase for the month of July since 2006.

The year-over-year trends continued to show improvement in July, with the 100-MSA composite up 0.6% compared to July 2011. This is the first year-over-year increase in the FNC index since year-over-year prices started declining in early 2007 (over five years ago).

Click on graph for larger image.

This graph is based on the FNC index (four composites) through July 2012. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Some of the month-to-month gain is seasonal since this index is NSA. The key is the indexes are now showing a year-over-year increase in July.

The July Case-Shiller index will be released next week on Tuesday, September 25th.

by Calculated Risk on 9/17/2012 08:41:00 AM

From MarketWatch: Empire State index hits nearly two-year low

The Empire State index decreased to negative 10.4 in September from negative 5.9 in August, according to the manufacturing survey released by the New York Federal Reserve. It is the lowest reading since November 2010.

The new-orders index worsened to negative 14.0 in September from negative 5.5 in August.

One bright spot in the report was an increase in a key barometer of future activity that asks manufacturers about expectations six months ahead. The forward-looking index rose to 27.2 in September from 15.2 in August.

The index of the number of employees fell sharply in September but remained slightly above negative territory at 4.3.

The number of employees fell from 16.47 in August to 4.3 in September. This was significantly below expectations of a reading of minus 2.0.

Manufacturing remains a weak spot for the US economy.

by Calculated Risk on 9/16/2012 09:55:00 PM

This could slow down the QE3 mortgage transmission mechanism, from the Financial Times: QE3 hit by mortgage processing delays

“In the very near term [QE3] has virtually no transfer mechanism whatsoever to the customer,” said one executive at a leading lender, who requested anonymity. “Originators are massively backlogged in terms of origination volumes.”
Excerpt with permission

The Asian markets are mixed tonight, with the Shanghai down 0.3% and the Hang Seng up 0.3%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P future are down almost 5 points, and the DOW futures down 32 points.

Oil prices are moving up WTI futures are at $99.00 and Brent is at $117.44 per barrel.

On Monday:
• At 8:30 AM ET, the NY Fed will release the Empire State Manufacturing Survey for September. The consensus is for a reading of minus 2.0, up from minus 5.8 in August (below zero is contraction).

Yesterday:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

Three more questions this week for the September economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 9/16/2012 01:29:00 PM

From Paul Krugman: How Could QE Work?

[A]t this point it’s not at all clear that we have an overhang of excess housing capacity; we might even have a shortfall.

And we’re seeing a modest housing recovery starting ...
...
This means that we actually can hope that the Fed’s new policy will boost housing as well as operating through other channels, and therefore that it can act more like conventional monetary policy in fostering recovery.

That said, I’m still skeptical about whether monetary policy alone can come close to doing enough — a skepticism shared by Ben Bernanke:

So looking at all the different channels of effect, we think it does have impact on the economy, it will have impact on the labor market but as again, the way I would describe it is a meaningful effect, a significant effect but not a panacea, not a solution for the whole issue.

We still need fiscal policy. But it’s good to see the Fed doing more.

This is similar to the argument I made last weekend:

[O]ne of the key transmission channels for monetary policy is through residential investment and mortgages. The previous rounds of QE (and "twist") have lowered mortgage rates and allowed homeowners with excellent credit and income to refinance. However this channel has been limited ...

As residential investment recovers, and house prices increase (or at least stabilize), this channel will probably become more effective.

Last month I summarized some of The economic impact of a slight increase in house prices. This includes mortgage lenders and appraisers becoming more confident in the mortgage and housing markets. I think that is starting to happen, and I think QE might have more traction now through the housing channel.

Note: Krugman's comment on "overhang of excess housing" is very important. Although there isn't good timely data on household formation and the housing stock, I do think most of the excess supply has been absorbed.

For another view on QE3, see Jim Hamilton's: Effects of QE3

I think the correct interpretation of QE3 is that the Fed has unambiguously signaled that it's not going to re-run the Japanese experiment to see what happens when the central bank stands by and watches wages and prices fall even while unemployment remains very high. The Fed can and will keep U.S. inflation from falling much below 2%, and that may help a little. Investors should expect that, and not a whole lot more.

And for those who think commodity prices will soar, I suggest Michael Pettis' analysis of supply and demand: By 2015 hard commodity prices will have collapsed

Yesterday:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

by Calculated Risk on 9/16/2012 10:00:00 AM

According to housingtracker, median asking prices are up 2.1% year-over-year in early September. We can't read too much into this increase because these are just asking prices, and median prices can be distorted by the mix. As an example, the median asking price might have increased just because there are fewer low priced foreclosures listed for sale.

Note: The Trulia asking price index is adjusted for both mix and seasonality, but the housingtracker data is just the median, the 25th percentile and 75th percentile - and is impacted by both changes in the mix and seasonality.

But with those caveats, here is a graph of asking prices compared to the year-over-year change in the Case-Shiller composite 20 index.

Click on graph for larger image.

The Case-Shiller index is in red. The brief period in 2010 with a year-over-year increase in the repeat sales index was related to the housing tax credit.

Also note that the 25th percentile took the biggest hit (that was probably the flood of low end foreclosures on the market).

Now the year-over-year change in median asking prices has been positive for ten consecutive months. We have to be careful about the mix (fewer foreclosures on the market), but this suggests year-over-year selling prices will stay positive.

On seasonality, asking prices peaked in June and are down slightly over the last three months. That is a reminder that the Not Seasonally Adjusted repeat sales indexes will show month-to-month declines later this year - and the focus will be on the year-over-year change.

Yesterday:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

by Calculated Risk on 9/15/2012 07:07:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Sept 14, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

There were two removals and one addition to the Unofficial Problem Bank List, which leaves it standing at 886 institutions with assets of $330.5 billion. A year ago, the list held 984 institutions with assets of $402.4 billion.

The failed Truman Bank, St. Louis, MO ($282 million) and Alliant Bank, Sedgwick, KS, which merged out of existence on an unassisted basis. Added this week was The State Bank of Geneva, Geneva, IL ($84 million). Next week, we anticipate the OCC will release its actions through mid-August 2012.

CR Note: The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

When the list was increasing, the official and "unofficial" counts were about the same. Now with the number of problem banks declining, the unofficial list is lagging the official list. This probably means regulators are changing the CAMELS rating on some banks before terminating the formal enforcement actions.

Earlier:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

by Calculated Risk on 9/15/2012 01:10:00 PM

Earlier:
• Summary for Week Ending Sept 14th

There are three key housing reports to be released this week: September homebuilder confidence on Tuesday, and August housing starts and August Existing Home sales, both on Wednesday.

For manufacturing, the September NY Fed (Empire state) and Philly Fed surveys will be released this week.

Also, for data nerds, the Fed's Q2 Flow of Funds report, and the Census Bureau's 2011 American Community Survey will be released.

----- Monday, Sept 17th----- 8:30 AM: NY Fed Empire Manufacturing Survey for September. The consensus is for a reading of minus 2.0, up from minus 5.8 in August (above zero is expansion).

----- Tuesday, Sept 18th ----- 10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 38, up from 37 in August. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.

----- Wednesday, Sept 19th ----- 7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

8:30 AM: Housing Starts for August.

Total housing starts were at 746,000 (SAAR) in July, down 1.1% from the revised June rate of 754,000 (SAAR).

The consensus is for total housing starts to increase to 768,000 (SAAR) in August, up from 746,000 in July.

10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR).

The consensus is for sales of 4.55 million on seasonally adjusted annual rate (SAAR) basis. Sales in July 2012 were 4.47 million SAAR.

A key will be inventory and months-of-supply.

During the day: The AIA's Architecture Billings Index for August (a leading indicator for commercial real estate).

----- Thursday, Sept 20th ----- 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 373 thousand from 382 thousand.

9:00 AM: The Markit US PMI Manufacturing Index Flash. This is a new release and might provide hints about the ISM PMI for September. The consensus is for a reading of 51.5, down from 51.9 in August.

10:00 AM: Philly Fed Survey for September. The consensus is for a reading of minus 4.0, up from minus 7.1 last month (above zero indicates expansion).

10:00 AM: Conference Board Leading Indicators for September. The consensus is no change in this index.

12:00 PM: Q2 Flow of Funds Accounts from the Federal Reserve.

Note: On Thursday, the Census Bureau will release the 2011 American Community Survey estimates.

----- Friday, Sept 21st ----- 10:00 AM: Regional and State Employment and Unemployment (Monthly) for August 2012