by Calculated Risk on 10/31/2012 02:30:00 PM

From the Federal Reserve: The October 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices

In the October survey, small fractions of domestic banks, on net, reported easing standards for business lending and some categories of consumer lending over the past three months. Respondents reported little change in residential real estate lending standards on balance. Significant fractions of banks reported a strengthening of demand for commercial real estate loans, residential mortgages, and auto loans, on balance, while demand for most other types of loans was about unchanged.
...
Within consumer lending, modest fractions of respondents continued to report an easing of standards on credit card and auto loans; respondents indicated that their standards on other types of consumer loans were about unchanged.
...
Special questions on lending to and competition from European banks. The October survey also included questions about European banking institutions and their affiliates that have been asked on several recent surveys. Respondents to the domestic and foreign survey again reported that their lending standards to European banks and their affiliates had tightened over the past three months, but the fractions of respondents indicating that they had tightened standards declined significantly between the July and October surveys, on net. As in the July survey, domestic banks reported that they had experienced little change in demand for loans from European banks and their affiliates and subsidiaries.

Of the respondents that indicated that their banks compete with European banks for their business, a slight majority reported that they had experienced a decrease in competition from European banks over the past three months, but the decrease did not appreciably boost business at their banks. A smaller but significant fraction of respondents indicated that a decrease in competition from European banks had increased business at their banks to some extent.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

This graph shows the change in demand for CRE (commercial real estate) loans.

Increasing demand and some easing in standards suggests some increase in CRE activity.

The second graph shows the change in demand for residential mortgages. Note the break in the graph - in recent years, the Fed has asked about demand for different types of mortgages.

The survey also has some discussion on Europe. Whereas domestic banks are easing standards slightly and seeing an increase in demand, they are tightening standards for lending to European banks.

by Calculated Risk on 10/31/2012 12:42:00 PM

From CoreLogic: CoreLogic® Reports 57,000 Completed Foreclosures in September

CoreLogic ... today released its National Foreclosure Report for September that provides monthly data on completed U.S. foreclosures and the overall foreclosure inventory. According to the report, there were 57,000 completed foreclosures in the U.S. in September 2012, down from 83,000 in September 2011 and 59,000 in August 2012. Prior to the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month between 2000 and 2006. Completed foreclosures are an indication of the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 3.9 million completed foreclosures across the country.

Approximately 1.4 million homes, or 3.3 percent of all homes with a mortgage, were in the national foreclosure inventory as of September 2012 compared to 1.5 million, or 3.5 percent, in September 2011. Month-over-month, the national foreclosure inventory was down 1.1 percent from August 2012 to September 2012. The foreclosure inventory is the share of all mortgaged homes in any stage of the foreclosure process.

“The continuing downward trend in foreclosures along with a gradual clearing of the shadow inventory are signs of stabilization and improvement in the housing market,” said Anand Nallathambi, president and CEO of CoreLogic. “Increasingly improving market conditions and industry and government policy are allowing distressed homeowners to pursue refinancing, loan modifications or short sales rather than foreclosures.”
...
“Homes lost to foreclosure in September 2012 are down 50 percent since the peak month in September 2010 and 22 percent less than the beginning of the year,” said Mark Fleming, chief economist for CoreLogic. “While there is significant progress to be made before returning to pre-crisis levels, the trend is in the right direction as short sales, up 27 percent year over year in August, continue to gain popularity.”

Note: The foreclosure inventory reported by CoreLogic is lower than the number reported by LPS of 3.87% of mortgages or 1.9 million in foreclosure.

Many observers expected a "surge" in foreclosures this year, but that hasn't happened. However there are still a large number of properties in the foreclosure inventory in some states:

The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: Florida (11.5 percent), New Jersey (7.3 percent), New York (5.3 percent), Illinois (5.2 percent) and Nevada (4.9 percent).

by Calculated Risk on 10/31/2012 09:53:00 AM

From the Chicago ISM:

October 2012: The Chicago Purchasing Managers reported October's Chicago Business Barometer idled, up just 0.2 to a still contractionary 49.9.

Business Activity measures reflected weakness in five of seven indexes, most notably as the rate of expansion in Production and Employment slowed while New Orders stalled near neutral and Order Backlogs remained in contraction.

EMPLOYMENT: 33 month low;

INVENTORIES: slipped into contraction;

PRICES PAID: inflation slowed a bit;

New orders improved slightly from 47.4 to 50.6 in October. Employment was at 50.3, down from 52.0 in September.

This was below expectations of a reading of 51.0.

by Calculated Risk on 10/31/2012 07:03:00 AM

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

The Refinance Index decreased 6 percent from the previous week to the lowest level since the end of August. The seasonally adjusted Purchase Index increased 1 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.65 percent from 3.63 percent, with points decreasing to 0.39 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The refinance index has declined for four straight weeks, but is still at a high level.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index. The purchase index has been mostly moving sideways over the last two years.

This index is not indicating a pickup in purchase activity.

by Calculated Risk on 10/30/2012 08:20:00 PM

US Markets will be open on Wednesday. Currently S&P 500 futures are up slightly.

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

• At 9:45 AM, the Chicago Purchasing Managers Index for October will be released. The consensus is for an increase to 51.0, up from 49.7 in September.

• Weather delayed: The October National Multi Housing Council (NMHC) Quarterly Apartment Survey will be released either Wednesday or Thursday. This is a key survey for apartment vacancy rates and rents.

• Weather delayed: The October 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.


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

Earlier on House Prices:
• Case-Shiller: House Prices increased 2.0% year-over-year in August
• House Price Comments, Real House Prices, Price-to-Rent Ratio
• All Current House Price Graphs

by Calculated Risk on 10/30/2012 05:23:00 PM

The Census Bureau released the Housing Vacancies and Homeownership report for Q3 2012 this morning.

This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. However, based on the initial evaluation, it appears the vacancy rates are too high.

It might show the trend, but I wouldn't rely on the absolute numbers. My understanding is the Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply, or rely on the homeownership rate, except as a guide to the trend.

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate was unchanged from Q2 at 65.5%, and down from 66.3% in Q3 2011.

I'd put more weight on the decennial Census numbers and that suggests the actual homeownership rate is probably in the 64% to 65% range.

The HVS homeowner vacancy rate declined to 1.9% from 2.1% in Q2. This is the lowest level since 2005 for this report.

The homeowner vacancy rate has peaked and is now declining, although it isn't really clear what this means. Are these homes becoming rentals? Anyway - once again - this probably shows that the trend is down, but I wouldn't rely on the absolute numbers.

The rental vacancy rate was unchanged from Q2 at 8.6%, and down from 9.8% in Q3 2011.

I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the overall trend in the rental vacancy rate - and Reis reported that the rental vacancy rate has fallen to the lowest level since 2001.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey. Unfortunately many analysts still use this survey to estimate the excess vacant supply. However this does suggest that the housing vacancy rates have declined sharply.

Earlier on House Prices:
• Case-Shiller: House Prices increased 2.0% year-over-year in August
• House Price Comments, Real House Prices, Price-to-Rent Ratio
• All Current House Price Graphs

by Calculated Risk on 10/30/2012 02:58:00 PM

The Not Seasonally Adjusted (NSA) house price indexes will show month-to-month declines soon. I expect the CoreLogic index to show month-to-month declines in the September report, and the Case-Shiller Composite 20 (NSA) to decline month-to-month in October. This will not be a sign of impending doom - or another collapse in house prices - it is just the normal seasonal pattern.

Even in normal times house prices tend to be stronger in the spring and early summer, then in the fall and winter. Currently there is a stronger than normal seasonal pattern because conventional sales are following the normal pattern (more sales in the spring and summer), but distressed sales (foreclosures and short sales) happen all year. So distressed sales have a larger negative impact on prices in the fall and winter.

In the coming months, the key will be to watch the year-over-year change in house prices and to compare to the NSA lows in early 2012. I think house prices have already bottomed, and will be up slightly year-over-year when prices reach the usual seasonal bottom in early 2013.

Click on graph for larger image.

This graph shows the month-to-month change in the CoreLogic and NSA Case-Shiller Composite 20 index over the last several years (both through August). Right now it looks like CoreLogic will turn negative in the September report (CoreLogic is 3 month weighted average, with the most recent month weighted the most). Case-Shiller NSA will probably turn negative month-to-month in the October report (also a three month average, but not weighted).

The second graph shows the seasonal factors for the Case-Shiller composite 20 index. The factors started to change near the peak of the bubble, and really increased during the bust. (I was one of several people to question this change in the seasonal factor - and this lead to Case-Shiller reporting the NSA numbers).

It appears the seasonal factor has stopped increasing, and I expect that over the next several years, the seasonal factors will slowly move back towards the previous levels.

by Calculated Risk on 10/30/2012 11:41:00 AM

Case-Shiller reported the third consecutive year-over-year (YoY) gain in their house price indexes since 2010 - and the increase back in 2010 was related to the housing tax credit. Excluding the tax credit, the previous YoY increase was back in 2006. The YoY increase in August suggests that house prices probably bottomed earlier this year (the YoY change lags the turning point for prices).

The following table shows the year-over-year increase since the beginning of the year.

Case-Shiller Composite 20 Index
Month	YoY Change
Jan-12	-3.9%
Feb-12	-3.5%
Mar-12	-2.5%
Apr-12	-1.7%
May-12	-0.5%
Jun-12	0.6%
Jul-12	1.1%
Aug-12	2.0%
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13

On a not seasonally adjusted basis (NSA), house prices will probably start to decline month-to-month in October. But I think prices will remain above the post-bubble lows set earlier this year.

Here is another update to a few graphs: Case-Shiller, CoreLogic and others report nominal house prices, and it is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio. Real prices, and the price-to-rent ratio, are back to late 1999 to 2000 levels depending on the index.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q2 2012), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through August) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q1 2003 levels (and also back up to Q4 2010), and the Case-Shiller Composite 20 Index (SA) is back to August 2003 levels, and the CoreLogic index (NSA) is back to December 2003.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to mid-1999 levels, the Composite 20 index is back to June 2000, and the CoreLogic index back to February 2001.

In real terms, most of the appreciation early in the last decade is gone.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to Q3 1999 levels, the Composite 20 index is back to June 2000 levels, and the CoreLogic index is back to February 2001.

In real terms - and as a price-to-rent ratio - prices are mostly back to 1999 or early 2000 levels.

All Current House Price Graphs

by Calculated Risk on 10/30/2012 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for July (a 3 month average of June, July and August).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports NSA, I use the SA data.

From S&P: Home Prices Continued to Rise in August 2012 According to the S&P/Case-Shiller Home Price Indices

Data through August 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed average home prices increased by 0.9% for both the 10- and 20-City Composites in August versus July 2012. Nineteen of the 20 cities and both Composites posted positive monthly gains in August; Seattle was the only exception where prices declined 0.1% over the month.

The 10- and 20-City Composites recorded annual returns of +1.3% and +2.0% in August 2012 – an improvement over the +0.6% and +1.2% respective annual rates posted for July 2012. Eighteen of the 20 cities and both Composites posted better annual returns in August compared to July 2012. Annual returns for Dallas remained unchanged at +3.6% and Chicago saw its annual return worsen from -1.0% in July to 1.6% in August 2012.
...
“Home prices continued climbing across the country in August,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “Nineteen of the 20 cities and both Composites showed monthly gains in August. Seventeen cities and both Composites posted positive annual returns in August 2012. In 18 cities and both Composites annual rates improved in August versus July. Dallas’ rate remained unchanged at +3.6% and Chicago worsened slightly from a -1.0% annual rate in July to a -1.6% annual rate in August.

“Phoenix continues to lead the home price recovery. It recorded its fourth consecutive month of double-digit positive annual returns with a +18.8% rate for August. Atlanta posted a -6.1% annual rate, however this is significantly better than the nine consecutive months of double-digit declines it posted from October 2011 through June 2012. Las Vegas’ annual rate finally moved to positive territory with a +0.9% annual rate of change in August 2012, its first since January 2007.

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 31.5% from the peak, and up 0.4% in August (SA). The Composite 10 is up 4.0% from the post bubble low set in March (SA).

The Composite 20 index is off 30.92% from the peak, and up 0.5% (SA) in August. The Composite 20 is up 4.4% from the post-bubble low set in March (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 1.3% compared to August 2011.

The Composite 20 SA is up 2.0% compared to August 2011. This was the third consecutive month with a year-over-year gain since 2010 (when the tax credit boosted prices temporarily).

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 19 of the 20 Case-Shiller cities in August seasonally adjusted (also 19 of 20 cities increased NSA). Prices in Las Vegas are off 59.5% from the peak, and prices in Dallas only off 5.8% from the peak. Note that the red column (cumulative decline through August 2012) is above previous declines for all cities.

This was about at the consensus forecast and the recent change to a year-over-year increase is a significant story. I'll have more on prices later.

by Calculated Risk on 10/29/2012 07:10:00 PM

NOTE: US Markets will remain closed on Tuesday due to severe weather in the New York area. Stay safe!

Here is the preliminary tide level data for The Battery, NY (raw data not checked yet) . Apparently the record level is 11.2 feet. This gauge is currently showing 11.07 feet, and high tide is in about 2 hours. Ouch.

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for August is expected to be released. Although this is the August report, it is really a 3 month average of June, July and August. The consensus is for a 1.9% year-over-year increase in the Composite 20 prices (NSA) for August.

• At 10:00 AM, the Conference Board's consumer confidence index for October is expected to be released. The consensus is for an increase to 74.0 from 70.3 last month.

• Also at 10:00, Q3 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. However, based on the initial evaluation, it appears the vacancy rates are too high. The Census Bureau is looking into the differences between the HVS, the ACS, and the decennial Census, and until the issues are resolved, this survey probably shouldn't be used to estimate the excess vacant housing supply.


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