by Calculated Risk on 10/12/2012 01:32:00 PM

An interesting article from David Keohane at Alphaville: A Grexit delayed if not deniedCiti are pushing that fateful day back:

We have held the view, since May 2012, that a Greek exit from the euro area (“Grexit”) in the next 12 to 18 months is a high-probability event (90%) which we assume, for the sake of argument, would happen on January 1 2013. We are now cutting the probability of Grexit over the next 12-18 months to 60% and judge that this event will probably happen later than we previously thought, most likely in 1H 2014.

It’s all about German politics, something we have gone over before and won’t do again now. ... But essentially, everything is pointing to a slower evolution of this crisis with both Spain and Greece edging towards decisions rather than careening.

There is much more in the article.

Note: I'm at the Zillow housing forum in San Francisco. The first panel just concluded "Is it a good time to buy in California?". The consensus was yes, but mortgage / housing analyst Mark Hanson thought there was a new bubble developing in some areas like Phoenix (at the low end), and that the current improvement was just a "stimulus high" and that there would be a hangover to follow.

by Calculated Risk on 10/12/2012 09:55:00 AM

• JPMorgan's Jamie Dimon on housing:

Importantly, we believe the housing market has turned the corner. In our Mortgage Banking business, we were encouraged that credit trends continued to modestly improve, and, as a result, the Firm reduced the related loan loss reserves by $900 million. Despite this improvement, the absolute level of charge-offs remains elevated. We also expect to see high default-related expense for a while longer.

• The Reuter's/University of Michigan's Consumer sentiment index (preliminary for October) increased to 83.1. This is the highest level since 2007.  The consensus was for sentiment to be unchanged at 78.3. (I'll post a graph later after I return from housing forum).

by Calculated Risk on 10/12/2012 08:30:00 AM

From the BLS:

The Producer Price Index for finished goods rose 1.1 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods advanced 1.7 percent in August and moved up 0.3 percent in July. At the earlier stages of processing, prices received by manufacturers of intermediate goods rose 1.5 percent in September, and the crude goods index advanced 2.8 percent. On an unadjusted basis, prices for finished goods climbed 2.1 percent for the 12 months ended September 2012, the largest rise since a 2.8-percent increase for the 12 months ended March 2012.
...
Finished energy: Prices for finished energy goods advanced 4.7 percent in September after rising 6.4 percent in August. A 9.8-percent jump in the gasoline index accounted for over eighty percent of the September increase. Advances in the indexes for diesel fuel and residential natural gas also contributed to the rise in finished energy goods prices.
...
Finished core: Prices for finished goods less foods and energy were unchanged in September after rising 0.2 percent a month earlier.

The PPI is very volatile and is impacted by energy prices. Note the core PPI was unchanged. CPI will be released next Tuesday.

by Calculated Risk on 10/11/2012 06:54:00 PM

Note: I'm in San Francisco attending the Zillow real estate forum. Best to all.

From Jim Hamilton at Econbrowser: Governor Brown solves California's gas price problem

California has separate gasoline requirements from the rest of the nation, and also requires a different, more-expensive fuel for summer sales relative to winter. Because refiners don't want to be stuck holding the summer blend through the winter, inventories of summer blend are intentionally low this time of year. That creates a problem when two of the main refineries producing the California summer blend get knocked out, as we just observed.
...
But two important developments have changed the picture. First, the Torrance refinery was back in operation by Friday. Second, on Sunday Governor Jerry Brown (D-CA) directed the California Air Resources Board to allow use right now of the winter blend instead of waiting as usual until the first of November, a move that the Board has implemented. This allows existing stocks of the winter fuel to be sold to add to the supply of the summer blend. ...

Several reporters have asked me what economic effects this episode may have. My answer is they should be pretty limited-- I'm expecting the retail price to come down almost as quickly and dramatically as it went up.

On Friday:
• At 8:30 AM, the Producer Price Index for September will be released. The consensus is for a 0.8% increase in producer prices (0.2% increase in core).

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for October) will be released. The consensus is for sentiment to be unchanged at 78.3.


Another question for the October economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 10/11/2012 02:35:00 PM

From Redfin: Home Prices Dip Slightly from August to September, Still Up 5% from 2011 in Redfin Real-Time Home Price Tracker

Redfin today released its Real-Time Home Price Tracker for September 2012, showing an annual price gain of 5 percent across 19 major U.S. markets. From August to September, prices declined just 0.8% percent, which is a smaller decline than is typical at this time of year.
...
Inventory still low: The number of homes for sale declined 29.3% from September 2011 to September 2012, and by 4.3% since August.

Homes selling quickly: The percentage of listings that sold within 14 days of their debut held steady in September at 27%.

Home sales up year-over-year, down since August: Home sales increased 4% from last year, and fell 17% since August—a typical seasonal decline.

"September is usually the month that real estate goes on sale, like Christmas toys in January," said Redfin CEO Glenn Kelman. "Whatever didn't sell in the summer gets marked down for a September closing. This September, we saw only a modest decline in prices, with inventory still dropping and demand fairly steady. In the most volatile markets, including Southern California, Phoenix and Las Vegas, we continued to see big price gains."

This house price index is based on prices per sq ft. This is a reminder that prices will decline month-to-month in the fall and winter on the Case-Shiller and CoreLogic Not Seasonally Adjusted (NSA) indexes - and it will be important to watch the year-over-year change. Right now I'm guessing the CoreLogic index will report negative month-to-month price changes for August or September, and Case-Shiller for September or October.

The reported 29.3% year-over-year decrease in inventory is similar to other sources and is a key driver for the year-over-year price increase.

by Calculated Risk on 10/11/2012 11:08:00 AM

From RealtyTrac: Foreclosure Activity Drops to 5-Year Low in September

RealtyTrac® ... today released its U.S. Foreclosure Market Report™ for September and the third quarter of 2012, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 180,427 U.S. properties in September, a decrease of 7 percent from the previous month and down 16 percent from September 2011. September’s total was the lowest U.S. total since July 2007.
...
“We’ve been waiting for the other foreclosure shoe to drop since late 2010, when questionable foreclosure practices slowed activity to a crawl in many areas, but that other shoe is instead being carefully lowered to the floor and therefore making little noise in the housing market — at least at a national level,” said Daren Blomquist, vice president at RealtyTrac. “Make no mistake, however, the other shoe is dropping quite loudly in certain states, primarily those where foreclosure activity was held back the most last year.

Click on graph for larger image.

This graph from RealtyTrac shows foreclosure activity for the last three years.

Some of the decline in foreclosure activity this year is related to the increased emphasis on short sales and modifications.

More from the press release:

“Meanwhile, several states where the foreclosure flow was not so dammed up last year could see a roller-coaster pattern in foreclosure activity going forward because of recent legislation or court rulings that substantively change the rules to properly foreclose,” Blomquist added. “A backlog of delayed foreclosures will likely build up in those states as lenders adjust to the new rules, with many of those delayed foreclosures eventually hitting down the road.”

The national decrease in September and the third quarter was driven mostly by sizable decreases in the non-judicial foreclosure states such as California, Georgia, Texas, Arizona and Michigan.

Several judicial foreclosure states — including Florida, Illinois, Ohio, New Jersey and New York — continued to buck the national trend, registering substantial year-over-year increases in foreclosure activity in September and the third quarter.

The second graph from RealtyTrac shows the percent change for the largest states. Judicial states, like New Jersey, are seeing an increase in activity (they are backed up for years), but non-judicial states like California are seeing less foreclosure activity.

by Calculated Risk on 10/11/2012 09:08:00 AM

The Department of Commerce reported:

[T]otal August exports of $181.3 billion and imports of $225.5 billion resulted in a goods and services deficit of $44.2 billion, up from $42.5 billion in July, revised. August exports were $1.9 billion less than July exports of $183.2 billion. August imports were $0.2 billion less than July imports of $225.7 billion.

June was revised from $42.0 billion. The trade deficit was larger than the consensus forecast of $44.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through July 2012.

Click on graph for larger image.

Both exports and imports decreased in August. It appears that the global economic weakness is impacting both exports and imports.

Exports are 9% above the pre-recession peak and up 2% compared to August 2011; imports are 3% below the pre-recession peak, and up about 1% compared to August 2011.

The second graph shows the U.S. trade deficit, with and without petroleum, through August.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $94.36 in August, up slightly from $93.83 per barrel in July. Import oil prices will probably increase further in September. The trade deficit with China decreased slightly to $28.7 billion in August, down from $29.0 billion in August 2011. Still, most of the trade deficit is due to oil and China.

The trade deficit with the euro area was $9.7 billion in August, up from $7.8 billion in August 2011.

by Calculated Risk on 10/11/2012 08:30:00 AM

The DOL reports:

In the week ending October 6, the advance figure for seasonally adjusted initial claims was 339,000, a decrease of 30,000 from the previous week's revised figure of 369,000. The 4-week moving average was 364,000, a decrease of 11,500 from the previous week's revised average of 375,500.

The previous week was revised up from 367,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.



Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined sharply to 364,000. This is just above the cycle low for the 4-week average of 363,000 in March.

Weekly claims were lower than the consensus forecast of 370,000.



And here is a long term graph of weekly claims:

Mostly moving sideways this year, but starting to decline again recently.

All current Employment Graphs

by Calculated Risk on 10/10/2012 09:56:00 PM

From the Financial Times Alphaville: S&P downgrades Spain

On Oct. 10, 2012, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the Kingdom of Spain to ‘BBB-’ from ‘BBB+’. At the same time, we lowered the short-term sovereign credit rating to ‘A-3′ from A-2′. The outlook on the long-term rating is negative.

Alphaville has the entire S&P press release.

And from the LA Times: Gasoline prices fall for first time in a week, barely

Motorists in the state paid an average of $4.666 for a gallon of regular gasoline Wednesday, down half a cent overnight, according to AAA's daily survey of fuel prices.

On Oct. 1, the day Exxon Mobil Corp.'s Torrance refinery went out of service temporarily because of a power outage, the average was $4.168. The average leaped to record levels, peaking Monday at $4.671, or 50 cents higher than a week earlier.

Ouch!

On Thursday:
• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 370 thousand from 367 thousand.

• Also at 8:30 AM, the Trade Balance report for August will be released by the Census Bureau. The consensus is for the U.S. trade deficit to increase to $44.0 billion in August, up from from $42.0 billion in July. Export activity to Europe will be closely watched due to economic weakness.

• Also at 8:30 AM, Import and Export Prices for September will be released. The consensus is a for a 0.7% increase in import prices.

• At 10:00 AM, Fed Governor Jeremy Stein will speak, "Evaluating Large-Scale Asset Purchases", At the Brookings Institution Discussion, Washington, D.C.


Another question for the October economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 10/10/2012 05:50:00 PM

From CoStar: CoStar Commercial Repeat Sale Indices (CCRSI) Post Strongest Gains Since Downturn, But Uncertainty Looms as Market Fundamentals Soften

The two broadest measures of aggregate pricing for commercial properties within the CCRSI — the U.S. Value-Weighted Composite Index and the U.S. Equal-Weighted Composite Index — each posted significant gains in August 2012.

The U.S. Value-Weighted Composite Index, which weights each repeat-sale by transaction size or value and therefore is heavily influenced by larger transactions, reached its highest level since early 2009. It has now improved by a cumulative 34.1% since the start of 2010, reflecting strong investor demand for primary gateway metro areas and institutional-grade multifamily assets that have been at the forefront of the pricing recovery for commercial property.

The rate of improvement in the U.S. Equal-Weighted Composite Index, which weights each repeat-sale equally and therefore reflects the influence of the more numerous smaller transactions, has accelerated. The 7.6% year-over–year increase of the Equal-Weighted Composite Index in August 2012 was the largest such gain since August 2006. Despite the increase, cumulative gains in the Equal-Weighted Index have lagged behind those in the Value-Weighted Index, reflecting a slower rate of recovery of tenant demand in the General Commercial segment.

Aggregate net absorption of available space for three major property types—office, retail, and industrial—slowed during the third quarter of 2012 to less than one third of levels in the second quarter of 2012 and less than half of that in the first quarter of this year. The slowdown in leasing activity stems mainly from negative absorption in the General Commercial segment. Should this drawback in tenant demand be sustained by further macroeconomic weakness, near-term transaction volume and pricing could suffer.

The percentage of commercial property selling at distressed prices in August 2012 was the lowest since mid-2009.

Click on graph for larger image.

This graph from CoStar shows the Value-Weighted and Equal-Weighted indexes. As CoStar noted, the Value-Weighted index is up 34.1% from the bottom (showing the demand for higher end properties), however the Equal-Weighted index is only up 8.2% from the bottom.

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.