by Calculated Risk on 10/17/2012 07:03:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. This is the highest Purchase Index observed in the survey since early June 2012.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.57 percent from 3.56 percent, with points increasing to 0.44 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
emphasis added

Click on graph for larger image.

This graph shows the MBA mortgage purchase index. The purchase index is up about 8 over the last four weeks and is at the highest level since June.

But even with the recent increase, the purchase index has mostly moved sideways for the last 2 1/2 years.

by Calculated Risk on 10/16/2012 09:05:00 PM

An update from economists Carmen Reinhart and Kenneth Rogoff at Bloomberg: Sorry, U.S. Recoveries Really Aren’t Different

Five years after the onset of the 2007 subprime financial crisis, U.S. gross domestic product per capita remains below its initial level. Unemployment, though down from its peak, is still about 8 percent. Rather than the V- shaped recovery that is typical of most postwar recessions, this one has exhibited slow and halting growth.

This disappointing performance shouldn’t be surprising. We have presented evidence that recessions associated with systemic banking crises tend to be deep and protracted and that this pattern is evident across both history and countries. Subsequent academic research using different approaches and samples has found similar results.
...
Recently, however, a few op-ed writers have argued that, in fact, the U.S. is “different” and that international comparisons aren’t relevant because of profound institutional differences from one country to another. ... We have not publicly supported or privately advised either campaign. We well appreciate that during elections, academic economists sometimes become advocates. It is entirely reasonable for a scholar, in that role, to try to argue that a candidate has a better economic program that will benefit the country in the future. But when it comes to assessing U.S. financial history, the license for advocacy becomes more limited, and we have to take issue with gross misinterpretations of the facts.

Ouch!

And their conclusion:

The most recent U.S. crisis appears to fit the more general pattern of a recovery from severe financial crisis that is more protracted than with a normal recession or milder forms of financial distress. There is certainly little evidence to suggest that this time was worse. Indeed, if one compares U.S. output per capita and employment performance with those of other countries that suffered systemic financial crises in 2007-08, the U.S. performance is better than average.

On Wednesday:
• At 7:00 AM, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 8:30 AM, Housing Starts for September will be released. The consensus is for total housing starts to increase to 765,000 (SAAR) in September, up from 750,000 in August.


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

by Calculated Risk on 10/16/2012 06:49:00 PM

From the FHFA:

The Federal Housing Finance Agency (FHFA) today released its August Refinance Report, which shows that Fannie Mae and Freddie Mac loans refinanced through the Home Affordable Refinance Program (HARP) accounted for nearly one-quarter of all refinances in August. Nearly 99,000 homeowners refinanced their mortgage in August through the HARP program with more than 618,000 loans refinanced since the beginning of this year. This continues the strong pace of HARP refinancing with the program on target to reach a million borrowers in 2012.
...
In August, borrowers with loan-to-value (LTV) ratios greater than 105 percent continued to account for more than half the volume of HARP loans as HARP enhancements were fully implemented in the second quarter of 2012.

In August, nearly 18 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which help build equity faster.

In August, HARP refinances represented nearly half or more of total refinances in states hard-hit by the housing downturn – Nevada, Arizona and Florida –compared with 24 percent of total refinances nationwide.

Also in August, HARP refinances for borrowers with LTV ratios greater than 105 percent accounted for more than 70 percent of HARP volume in Nevada, Arizona and Florida and more than 60 percent of the HARP refinances in Idaho and California.

Just wait until the September and October reports are released (when rates declined sharply)!

Note: the automated system wasn't released until the end of March - and there were some issues with that system - so HARP refinances didn't really pickup until sometime in Q2. Now they are on pace for 1 million refinances this year.

These "underwater" borrowers are current (most took out loans 5 to 7 years ago), and they will probably stay current with the lower interest rate.

This table shows the number of HARP refinances by LTV through August of this year compared to all of 2011. Clearly there has been a sharp increase in activity.

HARP Activity
	2012, Through August	All of 2011	Since Inception
Total HARP	618,217	400,024	1,640,068
LTV >80% to 105%	361,697	340,033	1,292,932
LTV >105% to 125%	138,050	59,991	228,666
LTV >125%	118,470	0	118,470

by Calculated Risk on 10/16/2012 05:04:00 PM

From economist Tom Lawler:

While I’m missing reports from several key areas of the country, realtor/MLS data I’ve seen so far suggest to me that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 4.70 million in September, down 2.5% from August’s pace but up 9.8% from last September’s pace. At first glance the unadjusted reports suggest a much steeper slowdown in September sales than the above numbers suggest, as YOY sales growth in September was significantly lower than in August in most (though not all markets), and the number of areas seeing a decline in sales from a year ago increased noticeably. This September, however, there were two fewer business days than last September, and this September’s seasonal factor will be materially lower than last September’s (meaning the YOY increase in seasonally adjusted sales will be materially higher than the YOY increase in unadjusted sales).

On the inventory front, there is little doubt that there were fewer homes listed for sale nationally at the end of September than at the end of August. How that will translate into the NAR’s inventory estimate, however, is unclear. Based on very limited historical data comparing the NAR’s numbers (which are “consistently” derived only going back to 2007), to other sources of home listings, I “gueestimate” that the NAR will report a monthly decline in the inventory of existing homes for sale of about 3.2% in September, which would be inventories down about 17.6% from last September.

On the median home sales price front, the NAR’s estimates of late have significantly exceeded my estimates using a “weighted-sales” approach, but my “best guess” is that the NAR will report that the national median existing home sales price in September was up about 10.4% from last September.

CR Note: Based on Lawler's estimates, the NAR will report inventory around 2.39 million units for September, and months-of-supply will be around 6.1 months (unchanged from August). This will be the lowest level of inventory for September since 2004. The consensus is the NAR will report sales of 4.75 million on Friday.

by Calculated Risk on 10/16/2012 01:42:00 PM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.6% annualized rate) in September. The 16% trimmed-mean Consumer Price Index increased 0.2% (2.6% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.6% (7.1% annualized rate) in September. The CPI less food and energy increased 0.1% (1.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for September here.

Click on graph for larger image.

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 1.9%, and core CPI rose 2.0%. Core PCE is for August and increased 1.6% year-over-year.

On a monthly basis, two of these measure were above the Fed's target; trimmed-mean CPI was at 2.6% annualized, median CPI was at 2.6% annualized. However core CPI increased 1.8% annualized, and core PCE for August increased 1.3% annualized. These measures suggest inflation is close to the Fed's target of 2% on a year-over-year basis.

The Fed's focus will probably be on core PCE and core CPI, and both are at or below the Fed's target (year-over-year and on a monthly basis).   

by Calculated Risk on 10/16/2012 12:25:00 PM

From Realtor.com: September 2012 Real Estate Data

The total US for-sale inventory of single family homes, condos, townhomes and co-ops remained at historic lows, with 1.8 million units for sale in September 2012, down -17.77% compared to a year ago.

The median age of inventory was down -11.21% compared to one year ago.

For sale inventories declined on a year-over-year basis in 143 of the 146 markets tracked by Realtor.com. Fifty two cities saw year-over-year declines greater than 20%.

On a month-over-month basis, inventory declined in 126 of 146 markets.

I expect to see smaller year-over-year declines going forward simply because inventory is already very low.

The NAR is scheduled to report September existing home sales and inventory on Friday. The key number in the NAR report will be inventory, and inventory will be down sharply year-over-year again in September.

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

The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased 1 point in October to 41. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Edges Higher in October

Builder confidence in the market for newly built, single-family homes edged slightly higher for a sixth consecutive month in October, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The latest, one-point gain brings the index to 41, its strongest level since June of 2006.

“The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” explained NAHB Chief Economist David Crowe. “These are the complicating factors that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor.”
...
Following substantial increases in the previous month, the HMI components measuring current sales conditions and sales prospects for the next six months each remained unchanged in October at 42 and 51, respectively. Meanwhile, the component measuring traffic of prospective buyers increased 5 points to 35, its highest level since April of 2006.

Builder confidence continued to improve in three out of four regions in October. Looking at three-month moving averages, the HMI gained two points in the Midwest and West to 42 and 44, respectively, and three points in the South, to 39. A three-month moving average for the Northeast’s HMI held unchanged at 29.

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the October release for the HMI and the August data for starts (September housing starts will be released tomorrow). This was at the consensus estimate of a reading of 41.

Housing Investment and Construction Graphs

by Calculated Risk on 10/16/2012 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production rose 0.4 percent in September after having fallen 1.4 percent in August. For the third quarter as a whole, industrial production declined at an annual rate of 0.4 percent. Manufacturing output increased 0.2 percent in September but moved down at an annual rate of 0.9 percent in the third quarter. Production at mines advanced 0.9 percent in September, and the output of utilities moved up 1.5 percent. Roughly 0.3 percentage point of the decline in overall industrial production in August reflected the effect of precautionary idling of production in late August along the Gulf of Mexico in anticipation of Hurricane Isaac, and part of the rise in September is a result of the subsequent resumption of activity at idled facilities. At 97.0 percent of its 2007 average, total industrial production in September was 2.8 percent above its year-earlier level. Capacity utilization for total industry moved up 0.3 percentage point to 78.3 percent, a rate 2.0 percentage points below its long-run (1972--2011) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.5 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.3% is still 2.0 percentage points below its average from 1972 to 2010 and below the pre-recession level of 80.6% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in September to 97.0. This is 16% above the recession low, but still 3.7% below the pre-recession peak.

The consensus was for Industrial Production to increase 0.2% in September, and for Capacity Utilization to increase to 78.3%. IP was slightly above expectations (some bounce back from shut downs related to Hurricane Isaac) and Capacity Utilization was at expectations. Overall Industrial Production has moved sideways this year.

All current manufacturing graphs

by Calculated Risk on 10/16/2012 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.0 percent before seasonal adjustment. For the second month in a row, the substantial increase in the all items index was mostly the result of an increase in the gasoline index, which rose 7.0 percent in September after increasing 9.0 percent in August.
...
The index for all items less food and energy rose 0.1 percent for the third month in a row.

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was above the consensus forecast of a 0.5% increase for CPI, and below the consensus for a 0.2% increase in core CPI.

The increase in CPI was mostly due to the sharp increase in gasoline prices.

Cost-Of-Living Adjustment (COLA): The BLS reported CPI-W increased to 2281.84 in September, for a Q3 average of 226.936. In Q3 2011, CPI-W average 223.33. The annual Social Security Cost-Of-Living Adjustment will be 1.66% (will be rounded).

by Calculated Risk on 10/15/2012 08:54:00 PM

From the WSJ: Proposal Would Give Banks Protection in Cases Involving Top-Quality Mortgages

The proposal for the first time would establish a basic national standard for loans, known as a "qualified mortgage."

As part of its deliberation, the Consumer Financial Protection Bureau is considering providing a full legal shield for high-quality loans that qualify, mandating that judges rule in lenders' favor if consumers contest foreclosures, these people say.

For a smaller category of loans that still meet the "qualified mortgage" guidelines but carry higher interest rates—a group similar to "subprime loans"—lenders would receive fewer protections. In those cases, consumers could argue in court that lenders should have known that they couldn't afford the mortgage.

On Tuesday:
• At 8:30 AM ET, the Consumer Price Index for September will be released. The consensus is for CPI to increase 0.5% in September and for core CPI to increase 0.2%. This release will determine the Cost-of-living-adjustment for Social Security. Currently I expect COLA to be around 1.6%.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for September. The consensus is for Industrial Production to increase 0.2% in September, and for Capacity Utilization to increase to 78.3%.

• At 10:00 AM, the October NAHB homebuilder survey will be released. The consensus is for a reading of 41, up from 40 in September. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.  This index bottomed at 8 in January 2009, and was at or below 22 for over 4 1/2 years.


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