by Calculated Risk on 12/17/2012 07:32:00 PM

Ezra Klein at the WaPo WonkBlog wrote earlier today: A ‘fiscal cliff’ deal is near: Here are the details

Boehner offered to let tax rates rise for income over $1 million. The White House wanted to let tax rates rise for income over $250,000. The compromise will likely be somewhere in between. More revenue will come from limiting deductions, likely using some variant of the White House’s oft-proposed, oft-rejected idea for limiting itemized deductions to 28 percent. The total revenue raised by the two policies will likely be a bit north of $1 trillion. ...

On the spending side, the Democrats’ headline concession will be accepting chained-CPI, which is to say, accepting a cut to Social Security benefits.

Chained CPI is a relatively new series (started in 2002), and measures inflation at a slightly lower rate than CPI or CPI-W - and over time this would add up both for Social Security payments and also for revenue (tax brackets would increase slower using chained CPI than using currently).

From the BLS: Frequently Asked Questions about the Chained Consumer Price Index for All Urban Consumers (C-CPI-U)

Click on graph for larger image in graph gallery.

The graph shows the year-over-year change in headline CPI, CPI-W, and chained CPI.

There isn't much difference on a year-over-year basis, but notice the blue line is mostly below the other two all the time. Those small differences add up over time as the following table shows.

This table shows the 10 year change in each measure (from Nov 2002 to Nov 2012) and the annualized change over that period. If we were using chained CPI instead of CPI-W over the last 10 years, Social Security benefits would be about 3.6% lower than they are now.

	10 Year Increase	Annualized
CPI (headline)	27.0%	2.42%
CPI-W (current)	27.7%	2.48%
CPI (chained)	24.1%	2.19%

by Calculated Risk on 12/17/2012 04:26:00 PM

From economist Tom Lawler:

While most areas have experienced a significant decline in the foreclosure share (as well as the overall “distressed-sales” share of home sales this year, it’s sorta interesting to note that the all-cash share of homes purchases has not fallen, at least in areas where data on financing are available. E.g., here is a table showing the “all-cash” share of home purchases this November compared to last November in selected markets. All data are based on realtor association/MLS reports, save for the Southern California, which are Dataquick’s tabulations based on property/mortgage records. Also shown are the foreclosure and short-sales shares of home sales. Note that for Sothern California the foreclosure and short-sales shares are share of resales, while the all-cash share is the share of total sales. Note also that I don’t have the foreclosure and short sales shares for the Baltimore and DC metro areas, but only for the whole area covered by MRIS. However, the Baltimore and DC metro areas account for about 77% of total home sales through MRIS, so ...

While in most of these areas the foreclosure sales share of resales in November was down considerably from last November, as was the overall “distressed” sales shares, the all-cash-financed share of home sales was actually higher this November than last November in many areas, and in other areas it was little changed from a year ago. Most analysts (and realtors) believe that investors make up a substantial share of all-cash purchases. Given that the all-cash share of purchases is flat to higher while the foreclosure share of purchases is down considerably, it appears as if investors have considerably increased their purchases of non-foreclosure properties over the last year.

	All Cash Share		Foreclosure Share		Short-Sales Share
	Nov-12	Nov-11	Nov-12	Nov-11	Nov-12	Nov-11
Las Vegas	52.7%	48.2%	10.7%	46.0%	41.2%	26.8%
Phoenix	43.2%	45.4%	12.9%	29.8%	23.2%	29.6%
Sacramento	37.1%	27.4%	11.5%	34.3%	36.1%	29.8%
Orlando	54.0%	49.9%	20.9%	22.8%	29.0%	37.2%
Baltimore Metro	23.8%	23.8%
DC Metro	18.8%	20.4%
MRIS (Mid Atl)			8.7%	14.2%	11.9%	13.7%
Toledo	40.9%	38.2%
Southern CA	33.0%	29.5%	15.3%	31.6%	26.3%	24.9%

by Calculated Risk on 12/17/2012 01:42:00 PM

Towards the end of each year I collect some housing forecasts for the following year. Here was a summary of forecasts for 2012. Right now it looks like new home sales will be around 365 thousand this year, and total starts around 750 thousand or so.

Here is one without details, from Hui Shan, Sven Jari Stehn, Jan Hatzius at Goldman Sachs:

We project housing starts to continue to rise, reaching an annual rate of 1.0 million by the end of 2013 and 1.5 million by the end of 2016.

The table below shows several forecasts for 2013. 

From Fannie Mae: Housing Forecast: November 2012

From NAHB: Housing and Interest Rate Forecast, 11/29/2012 (excel)

I'll add some more forecasts soon:

Some Housing Forecasts for 2013
	New Home Sales (000s)	Single Family Starts (000s)	Total Starts (000s)	CS House Prices
Fannie Mae	452	659	936	1.6%1
NAHB	447	641	910
Wells Fargo	460	680	990	2.6%
Merrill Lynch	466		976	2.6%
2012 Estimate	365	525	750	6.0%
1FHFA Purchase-Only Index

by Calculated Risk on 12/17/2012 11:51:00 AM

Note: Clerical workers at the ports of Long Beach and Los Angeles went on strike starting Nov 27th and ending Dec 5th. The strike impacted port traffic for November, but traffic is expected to bounce back in December. The strike happened after the holiday shipping period, so the slowdown isn't expected to impact holiday related shopping.

I've been following port traffic for some time. Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for November. LA area ports handle about 40% of the nation's container port traffic. Some of the LA traffic was routed to other ports, so this data might not be very useful this month.

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).

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 October.

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

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

For the month of November, loaded outbound traffic was down 7.5% compared to November 2011, and loaded inbound traffic was down 3% compared to November 2011.

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, so some decline in November was expected.

by Calculated Risk on 12/17/2012 08:40:00 AM

From the NY Fed: Empire State Manufacturing Survey

The December 2012 Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to decline at a modest pace. The general business conditions index was negative for a fifth consecutive month, falling three points to -8.1. The new orders index dropped to -3.7, while the shipments index declined six points to 8.8. At 16.1, the prices paid index indicated that input prices continued to rise at a moderate pace, while the prices received index fell five points to 1.1, suggesting that selling prices were flat. Employment indexes pointed to weaker labor market conditions, with the indexes for both number of employees and the average workweek registering values below zero for a second consecutive month. Indexes for the six-month outlook were generally higher than last month, although the level of optimism remained at a level well below that seen earlier this year.
...
The index for number of employees rose five points to -9.7, while the average workweek index declined three points to -10.8.
emphasis added

The general business condition index declined from -5.22 in November to -8.1 in December - the fifth consecutive negative reading. This was another weak manufacturing index and below expectations of a reading of 0.0.

by Calculated Risk on 12/16/2012 08:47:00 PM

On Monday, at 8:30 AM ET, the NY Fed will release the Empire State Manufacturing Survey for December. The consensus is for a reading of 0, up from minus 5.2 in November (below zero is contraction).

Weekend:
• Summary for Week Ending Dec 14th
• Schedule for Week of Dec 16th

The Asian markets are mixed tonight, with the Nikkei up 1.5% following the election of the new government: Japan’s new government to get aggressive

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 7 and DOW futures are up 60.

Oil prices still moving sideways with WTI futures at $86.88 per barrel and Brent at $108.23 per barrel. Gasoline prices are now near the low for the year.

Here is a graph from Gasbuddy.com showing the roller coaster ride for gasoline prices. If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

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

by Calculated Risk on 12/16/2012 03:38:00 PM

From Catherine Rampell at the NY Times: Economic Forecast Is Sunnier, but Washington Casts a Big Shadow

Economists see a number of sources of underlying strength in the economy, but for the growth to gain traction, they say, political leaders need to avoid the broad tax increases and spending cuts now being debated.

The nascent housing rebound, the natural gas boom, record profit margins, a friendlier credit market for small businesses, along with pent-up demand for autos and other big purchases, could in combination unleash growth and hiring that the economy needs.

“Underneath all the shenanigans in Washington, there’s a lot of strengthening,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
...
Estimates for the last quarter of 2012 are hovering around an unusually weak 1 percent annualized rate.

That dismal pace is driven partly by drags from Europe’s recession and China’s slowdown; partly by companies readjusting after potentially overstocking their back-room shelves in the third quarter; and largely by worries about the so-called fiscal cliff of spending cuts and tax increases set for early 2013.

There are some clear positives for 2013, especially from housing and less drag from state and local governments (Rampell didn't mention this, but I did on Friday). I expect the rate of growth to pickup next year, but I wouldn't get too excited.

Obviously there is going to be some more austerity in the US at the Federal level next year, and we need some reasonable resolution to the "fiscal cliff". My expectation is that relief from the Alternative Minimum Tax (AMT) will be extended, the tax cuts for low to middle income families will be extended, and that most, but not all, of the defense spending cuts will be reversed (aka "sequestration"). However I think the payroll tax cut will probably not be extended, and tax rates on high income earners will increase a few percentage points to the Clinton era levels. There are also many more details that will need to be worked out - like Mortgage Debt Relief Act for short sellers, extending emergency unemployment benefits, and the Medicare "Doc Fix".

A few obvious points on the "fiscal cliff": 1) It is about the deficit shrinking too quickly next year, 2) there is no "drop dead" date (the sites with countdown times are embarrassing themselves), and 3) entitlements are not part of the "cliff" (although some changes might be part of an agreement).

by Calculated Risk on 12/16/2012 11:19:00 AM

Economist Tom Lawler sent me the table below of short sales and foreclosures for a few selected cities in November. Keep this table in mind when the NAR releases existing home sales on Thursday.

The NAR headline number will probably be around 5 million SAAR, but there are other signs of significant change in the housing market. First, inventory has declined sharply, and there is very little inventory in many areas. Second, it appears that the share of conventional sales in certain markets has increased significantly (these are normal sales - not foreclosures or short sales). Both the decline in inventory, and the increase in conventional sales, are signs of moving towards a more normal housing market.

Look at the right two columns in the table below (Total "Distressed" Share for Nov 2012 compared to Nov 2011). In every area that reports distressed sales, the share of distressed sales is down year-over-year - and down significantly in most areas. The NAR will release some distressed sales measurements Thursday from an unscientific survey of Realtors - and I have little confidence in the survey results - but these local reports suggest distressed sales have fallen sharply in many areas.

Last month, CoreLogic sent me their data on distressed and conventional sales showing the percent of distressed sales falling.  If we use the NAR estimate for sales, and CoreLogic's estimate of distressed share, conventional sales are now back up to around 3.8 million SAAR. The NAR reported total sales were up 10.9% year-over-year in October, but using this method, conventional sales were up almost 18% year-over-year.

Also there has been a decline in foreclosure sales just about everywhere. Look at the middle two columns comparing foreclosure sales for Nov 2012 to Nov 2011. Foreclosure sales have declined in all these areas, and some of the declines have been stunning (the Nevada sales were impacted by a new foreclosure law).  There will probably be an increase in foreclosure sales in some judicial states late this year and in 2013, but overall foreclosures will probably be down next year.

Also there has been a shift from foreclosures to short sales. In most areas, short sales now far out number foreclosures, although Minneapolis is still an exception with more foreclosures than short sales. Note: This shift to short sales could reverse if the Mortgage Debt Relief Act is not extended.

Imagine that the number of total sales doesn't change over the next year - some people would argue that is "bad" news and the housing market isn't recovering. But also imagine that the share of distressed sales declines 20%, and conventional sales increase to make up the difference. That would be a positive sign - and that is what appears to be happening.

Table from Tom Lawler:

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-Nov	11-Nov	12-Nov	11-Nov	12-Nov	11-Nov
Las Vegas	41.2%	26.8%	10.7%	46.0%	51.9%	72.8%
Reno	41.0%	36.0%	9.0%	35.0%	50.0%	71.0%
Phoenix	23.2%	29.6%	12.9%	29.8%	36.1%	59.4%
Sacramento	36.1%	29.8%	11.5%	34.3%	47.6%	64.1%
Minneapolis	11.2%	13.8%	24.6%	34.8%	35.8%	48.7%
Mid-Atlantic (MRIS)	11.9%	13.7%	8.7%	14.2%	20.6%	27.9%
California (DQ)*	26.3%	24.9%	16.9%	32.9%	43.2%	57.8%
Hampton Roads VA					28.3%	33.0%
Northeast Florida					42.2%	48.0%
Chicago					43.0%	43.1%
Charlotte					13.3%	18.3%
Spokane			9.2%	22.4%
Memphis*			24.3%	31.3%
Birmingham AL			26.5%	34.5%
*share of existing home sales, based on property records

by Calculated Risk on 12/15/2012 08:55:00 PM

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

FNC released their October index data last night. FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.4% from September to October.

From FNC: Home Prices Up 0.4% in October; Year-Over-Year Growth Acceleration Continues

Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC 100-MSA composite index shows that home prices nationally were up 0.4% in October. This was the eighth consecutive month that prices moved higher, leading to a total appreciation rate of 5.1% year to date. The year-over-year growth has accelerated rapidly since first turning positive four months ago. Foreclosures as a percentage of total home sales were 17.6% in October, down from 26.7% at the beginning of the year or 23.5% a year ago.

The year-over-year trends continued to show improvement in October, with the 100-MSA composite up 3.7% compared to October 2011. The FNC index turned positive on a year-over-year basis in July - that was 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 October 2012. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

The key is the indexes are now showing a year-over-year increase indicating prices probably bottomed early this year.

The October Case-Shiller index will be released on Wednesday, Dec 26th.

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

by Calculated Risk on 12/15/2012 06:20:00 PM

Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The number of unofficial problem banks grew steadily and peaked at 1,002 institutions on June 10, 2011. The list has been declining since then.

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

Here is the unofficial problem bank list for Dec 14, 2012.

Changes and comments from surferdude808:

Similar to last week, the only changes this week to the Unofficial Problem Bank list were removals. In all, there were four removals, which leaves the list at 845 institutions with assets of $312.9 billion. A year ago, the list held 974 institutions with assets of $398.3 billion.

Oasis Bank, SSB, Houston, TX ($77 million) left the list through an unassisted merger and actions were terminated against WaterStone Bank, SSB, Wauwatosa, WI ($1.7 billion Ticker: WSBF); Essex Bank, Tappahannock, VA ($1.1 billion Ticker: BTC); and Northwestern Bank, Chippewa Falls, WI ($366 million). The failure tonight -- Community Bank of the Ozarks, Sunrise Beach, MO -- was not on the Unofficial Problem Bank List as an enforcement action could not be located on the FDIC website.

Next week, several changes should occur as the OCC will release its actions through mid-November 2012.

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