by Calculated Risk on 2/18/2013 12:23:00 PM

Some interesting data from FNC: Foreclosure price discounts drop to pre-crisis levels

Though home foreclosures continue to be a challenge in many hard-hit markets, a report released this week by mortgage technology company FNC indicates the ongoing housing recovery should continue for the long haul.

According to FNC’s Foreclosure Market Report, foreclosure prices have bottomed out in recent months and the foreclosure market has stabilized while underlying home values are rising. Foreclosure prices are at a 10-year low (when the sizes of foreclosed homes are factored in).

This trend of a rising underlying market accompanied by stabilizing foreclosure prices is the first encouraging development in the housing recession, according to FNC Senior Research Economist, Dr. Yanling Mayer.

“The fact that we are seeing a combination of rising home prices and a bottoming out of foreclosure prices is a very good sign the housing recovery is taking hold,” Mayer said. “This is the very first time in the long housing recession that the two are happening at the same time.”

Click on graph for larger image.

More from FNC:

FNC’s report shows that foreclosure price discounts, which compare a foreclosed home’s estimated market value to its final sales price, have dropped to pre-mortgage crisis levels at about 12.2% in Q4 2012. At the height of the mortgage crisis in 2008 and 2009, foreclosed homes were typically sold at more than 25% below their estimated market value. Additionally, the report indicates that the typical size of foreclosed homes is also approaching pre-crisis levels.

“If you look at the period of short-lived recovery under the first-time homebuyer tax credits, the foreclosure market was still in the midst of rapid deterioration with the influx of delinquent mortgages,” Mayer said. “This time, we are witnessing an entirely different development in the foreclosure market.”

Another sign that the housing market is recovering (although the percent of distressed sales - foreclosures and short sales - is still very high).

by Calculated Risk on 2/18/2013 09:42:00 AM

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 January. LA area ports handle about 40% of the nation's container port traffic.

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, inbound traffic was up slightly in January, and outbound traffic down slightly, compared to the rolling 12 months ending in December.

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

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

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March.

For the month of January, loaded outbound traffic was up slightly compared to January 2012, and loaded inbound traffic was up 4% compared to January 2012.

This suggest a slight increase in the trade deficit with Asia for January.

by Calculated Risk on 2/17/2013 02:26:00 PM

By request, here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

These graphs show that some major indicators are still significantly below the pre-recession peaks.

Click on graph for larger image.

This graph is for real GDP through Q4 2012.

Real GDP returned to the pre-recession peak in Q4 2011, and hit new post-recession highs for four consecutive quarters until dipping slightly in Q4 2012 (Q4 GDP will probably be revised up).

At the worst point - in Q2 2009 - real GDP was off 4.7% from the 2007 peak.

Real GDP has performed better than other indicators ...

This graph shows real personal income less transfer payments as a percent of the previous peak through the December report.

This measure was off 11.2% at the trough in October 2009.

Real personal income less transfer payments returned to the pre-recession peak in December, but that was due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013.   Without that distortion, real personal income less transfer payments would probably still be 2.5% or so below the previous peak.

The third graph is for industrial production through January 2013.

Industrial production was off over 17% at the trough in June 2009, and has been one of the stronger performing sectors during the recovery.

However industrial production is still 2.1% below the pre-recession peak.  This indicator will probably return to the pre-recession peak in 2013.

The final graph is for employment and is through January 2013.  This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

Payroll employment is still 2.3% below the pre-recession peak.

All of these indicators collapsed in 2008 and early 2009, and only real GDP is back to the pre-recession peak (personal income was due to a one time increase in income and will be back below the pre-recession peak in January). At the current pace of improvement, industrial production will be back to the pre-recession peak later this year, personal income less transfer payments late in 2013, and employment in late 2014.

by Calculated Risk on 2/17/2013 10:28:00 AM

Southern California's "Inland Empire" was one of epicenters of the housing bust. Now the area is recovering ...

From Alejandro Lazo at the LA Times: Inland Empire housing is more affordable but still out of reach

Bill Sepe has gotten used to rejection.

The 28-year-old Rancho Cucamonga native has put in nearly 200 unsuccessful offers since August on Inland Empire homes, varying from typical suburban ranches to classic craftsman homes.

All this anguish comes in pursuit of a modest home in the exurb of San Bernardino County, the epicenter of the Southern California housing crash. Plummeting values here sparked a vicious wave of foreclosures.
...
The repeated rejections come despite Sepe's solid qualifications: a stable job as a cell tower technician and a pre-approved home loan. He watches as houses hit the market, then get scooped up within an hour. ...

The Inland Empire has gone from bust to boom with a vigor few could have predicted, mirroring Western regions such as Phoenix and Las Vegas. Surging demand has tightened inventory ... That's great for the real estate industry and helps the local economy. ...

In the Inland Empire's darkest hour, nearly one of five borrowers was behind on a home loan. Foreclosed properties made up more than two-thirds of sales. Work on half-built subdivisions stopped dead, with as construction jobs drying up and the unemployment rate soaring. Last year the city of San Bernardino declared bankruptcy.
...
But a turnaround is well underway, thanks in part to deep-pocketed investors snapping up bargains with cash. The housing supply is now so tight that it's common for home shoppers to put in 20 or 30 offers before securing a house, real estate agents say.
...
For real estate professionals, the turnaround is like a downpour after years of drought.

"There is optimism here for the first time in eight years," said Paul Herrera, government affairs director for the Inland Valleys Assn. of Realtors. "For the first time since 2005, we are thinking that next year will be better than this year."

Click on graph for larger image.

This graph shows the unemployment rate for the Inland Empire (using MSA: Riverside, San Bernardino, Ontario), and also the number of construction jobs as a percent of total employment.

The unemployment rate is falling, but still very high 10.9% (down from 15.0% in 2010). And construction employment is still near the lows. But the area is recovering.

by Calculated Risk on 2/16/2013 04:30:00 PM

Here is the unofficial problem bank list for Feb 15, 2013.

Changes and comments from surferdude808:

Many changes were made to the Unofficial Problem Bank List this week with a failure and the OCC releasing its enforcement action through mid-January 2013. In all, there were 10 removals and three additions that leave the list at 812 institutions with assets of $303 billion. A year ago, the list held 956 institutions with assets of $389.6 billion.

The three additions this week were Acacia Federal Savings Bank, Falls Church, VA ($911 million); The Baraboo National Bank, Baraboo, WI ($739 million); and Commonwealth Bank, FSB, Mount Sterling, KY ($21 million).

The OCC terminated actions against Inter National Bank, McAllen, TX ($2.2 billion); The Kishacoquillas Valley National Bank of Belleville, Belleville, PA ($564 million Ticker: KISB); The First National Bank of Elk River, Elk River, MN ($248 million); Noble Bank & Trust, N.A., Anniston, AL ($169 million); Frontier Bank, Rock Rapids, IA ($151 million); International City Bank, National Association, Long Beach, CA ($144 million); First National Bank of Decatur County, Bainbridge, GA ($111 million); Neighborhood National Bank, Alexandria, MN ($48 million); and The Farmers and Merchants National Bank of Hatton, Hatton, ND ($26 million).

The other removal was the failed Covenant Bank, Chicago, IL ($60 million), which was the third failure this year. Covenant Bank was quite costly to shutter as the FDIC cost estimate is $21.8 million or about 37 percent of the failed bank's assets. The last failure in Chicago, Second Federal Savings and Loan Association of Chicago, in July 2012, was also quite expensive with an estimated cost of 40.3 percent of assets. Excluding Washington Mutual, failure costs have averaged an estimated 24.8 percent of failed assets for the 467 closings since 2008. Prior to the crisis, resolution costs were around 12 percent. Thus, the losses in this crisis are well above historical experience, which suggests the banking regulators did not effectively curb risk taking before the bursting of the bubble and that insolvent institutions have not been closed in a timely manner.

Late in the day on Friday, eyes were focused on New Mexico to see if the state banking department would declare Sunrise Bank of Albuquerque, Albuquerque, NM ($52 million) insolvent as it needed a $1 million capital infusion by 5:30 p.m. According to a media report by SNL Securities, Sunrise's parent, Capitol Bancorp, asked a federal bankruptcy judge to approve a secured loan from unnamed investors that could be used to recapitalize the bank. Capitol Bancorp controls 11 banks on the Unofficial Problem Bank List, of which eight also operating under a Prompt Corrective Action order. In its filing, Capitol Bancorp intimated that a failure of its New Mexico unit would have dire consequences as it could trigger a cross guaranty liability of more than $10 million the FDIC could assess across the other controlled bank units, which could lead to a collapse of the entire company. Capitol Bancorp has agreed to sell its New Mexico bank to Westar Bancorp, but the buyer has not been able to secure the necessary regulatory approvals to consummate the transaction. The FDIC has provided Capitol Bancorp much latitude by issuing at least 16 cross guaranty liability waivers to previously controlled banking units the company has sold as part of its recapitalization efforts. As of 11 p.m. east coast, it has been radio silence as there is no update if the capital made it to the New Mexico unit or if the deadline has been extended. We will continue to monitor and provide updates on Capitol Bancorp. Should a unit fail and if the cross guaranty liability is applied, it could make for a busy night for the FDIC as it is unlikely the units would be purchased by a single buyer given their size and geographic dispersion.

Earlier:
• Summary for Week Ending Feb 15th
• Schedule for Week of Feb 17th

by Calculated Risk on 2/16/2013 01:11:00 PM

The Industrial Production release was a reporting challenge this week. Expectations were for production to increase 0.1% in January, but the Federal Reserve reported a 0.1% decrease. At first glance, this appears to be disappointing, however production for November and December were revised up significantly, and total production in January was actually above expectations. Here are a few details ...

First, Industrial Production is an index that is set to 100 for a base year, currently 2007. Production in December was originally reported as 98.1 (98.1% of 2007 production). Production in January was reported at 98.6 (98.6% of 2007 levels - yes, production is still below the pre-recession levels). That would have been a 0.5% increase, well above expectations. However production in December was revised up to 98.7, so production in January showed a slight decline.

This is a reminder that we need to look at more than one month of data and that headlines can be a little misleading. Overall - with revisions - the industrial production report was solid.

The key report for the week was January retail sales. This showed an increase of only 0.1% in January indicating sluggish retail sales growth. Retail sales are probably being impacted by the payroll tax increase. Two internal WalMart memo leaked this week suggest the largest US retailer is seeing weak sales, see from Bloomberg: Wal-Mart Executives Sweat Slow February Start in E-Mails. A couple of emails:

"In case you haven’t seen a sales report these days, February MTD sales are a total disaster," Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. "The worst start to a month I have seen in my ~7 years with the company."
...
"Have you ever had one of those weeks where your best- prepared plans weren’t good enough to accomplish everything you set out to do?" [Cameron Geiger, senior vice president of Wal-Mart U.S. Replenishment] asked in a Feb. 1 e-mail to executives. "Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?"

This is probably an impact of the payroll tax increase.

And here is a summary of last week in graphs:

• Retail Sales increased 0.1% in January

Click on graph for larger image.

On a monthly basis, retail sales increased 0.1% from December to January (seasonally adjusted), and sales were up 4.7% from January 2012. Sales for December were unrevised at a 0.5% gain.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

This was at the consensus forecast of a 0.1% increase, and might indicate some slowdown in retail spending growth related to the payroll tax increase.

• Fed: Industrial Production declined 0.1% in January

This graph shows Capacity Utilization. The capacity utilization rate for total industry decreased in January to 79.1 percent. This series is up 12.2 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 79.1% is still 1.1 percentage points below its average from 1972 to 2010 and below the pre-recession level of 80.6% in December 2007.   Note: December 2012 was revised up from 78.8%.

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

The second graph shows industrial production since 1967.

Industrial production decreased in January to 98.6  (December 2012 was revised up from 98.1). This is 18.2% above the recession low, but still 2.1% below the pre-recession peak.

The monthly change for both Industrial Production and Capacity Utilization were slightly below expectations, however the previous months were revised up significantly.

• Weekly Initial Unemployment Claims decline to 341,000

"In the week ending February 9, the advance figure for seasonally adjusted initial claims was 341,000, a decrease of 27,000 from the previous week's revised figure of 368,000."

The previous week was revised up from 366,000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 352,500.

Weekly claims were below the 360,000 consensus forecast, and the 4-week average is close to the lowest level since early 2008.

• BLS: Job Openings "little changed" in December

This graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in December to 3.617 million, down from 3.790 million in November. The number of job openings (yellow) has generally been trending up, but openings are only up 2% year-over-year compared to December 2011.

Quits decreased slightly in December, and quits are up 7% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Not much changes month-to-month in this report, but the trend suggests a gradually improving labor market.

• Preliminary February Consumer Sentiment increases to 76.3

The preliminary Reuters / University of Michigan consumer sentiment index for February increased to 76.3 from the January reading of 73.8.

This was slightly above the consensus forecast of 75.0, but still very low. There are a number of factors that impact sentiment including unemployment, gasoline prices and, for 2013, the payroll tax increase and the default threat from Congress. People will slowly adjust to the payroll tax increase, and the threat of default is now behind us ... and sentiment has improved a little.

by Calculated Risk on 2/16/2013 08:53:00 AM

Note: I'll post a summary for last week later today.

There are three key housing reports that will be released this week: January housing starts on Wednesday, January Existing home sales on Thursday, and the homebuilder confidence survey on Tuesday.

Other key releases include the Q4 MBA National Mortgage Delinquency Survey on Thursday, and the FOMC minutes of the January meeting on Wednesday.

For manufacturing, the February Philly Fed survey will be released this week.

For prices, CPI and PPI for January will be released.

----- Monday, Feb 18th -----
All US markets are closed in observance of the President's Day holiday.

----- Tuesday, Feb 19th -----
10:00 AM: The February NAHB homebuilder survey. The consensus is for a reading of 48, up from 47 in January. Although this index has been increasing sharply, any number below 50 still indicates that more builders view sales conditions as poor than good.

----- Wednesday, Feb 20th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Housing Starts for January.

Total housing starts were at 954 thousand (SAAR) in December, up 12.1% from the revised November rate of 851 thousand (SAAR). Single-family starts increased to 616 thousand in December.

The consensus is for total housing starts to decrease to 914 thousand (SAAR) in January, down from 954 thousand in December.

8:30 AM: Producer Price Index for January. The consensus is for a 0.3% increase in producer prices (0.2% increase in core).

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

2:00 PM: FOMC Minutes for January 29-30, 2013. 

----- Thursday, Feb 21st -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 359 thousand from 341 thousand last week.

8:30 AM: Consumer Price Index for January. The consensus is for a 0.1% increase in CPI in January and for core CPI to increase 0.2%.

9:00 AM: The Markit US PMI Manufacturing Index Flash. The consensus is for a decrease to 55.5 from 56.1 in January.

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

The consensus is for sales of 4.90 million on seasonally adjusted annual rate (SAAR) basis. Sales in December 2012 were 4.94 million SAAR.

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

10:00 AM: the Philly Fed manufacturing survey for February. The consensus is for a reading of 1.1, up from minus 5.8 last month (above zero indicates expansion).

10:00 AM: Conference Board Leading Indicators for January. The consensus is for a 0.3% increase in this index.

During the day: The MBA's National Mortgage Delinquency Survey for Q4.

----- Friday, Feb 22nd -----
No releases scheduled.

by Calculated Risk on 2/15/2013 09:07:00 PM

The rate of bank failures has slowed significantly, and most of the recent failures have been pretty small banks.  But here is a Friday tradition ...

From the FDIC: Liberty Bank and Trust Company, New Orleans, Louisiana, Assumes All of the Deposits of Covenant Bank, Chicago, Illinois

As of December 31, 2012, Covenant Bank had approximately $58.4 million in total assets and $54.2 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $21.8 million. ... Covenant Bank is the 3rd FDIC-insured institution to fail in the nation this year, and the first in Illinois.

by Calculated Risk on 2/15/2013 07:13:00 PM

Economist Tom Lawler sent me this updated table (below) of short sales and foreclosures for several selected cities and areas in January. 

Look at the right two columns in the table below (Total "Distressed" Share for Jan 2013 compared to Jan 2012). In every area that reports distressed sales, the share of distressed sales is down year-over-year - and down significantly in many areas. 

Also there has been a decline in foreclosure sales just about everywhere. Look at the middle two columns comparing foreclosure sales for Jan 2013 to Jan 2012. Foreclosure sales have declined in almost all of these areas (Orlando is an exception), and some of the declines have been stunning (the Nevada sales were impacted by a new foreclosure law). 

Also there has been a shift from foreclosures to short sales. In most areas, short sales now out number foreclosures (Minneapolis and Orlando are exceptions).

Overall this is moving in the right direction, although some areas are lagging behind.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	13-Jan	12-Jan	13-Jan	12-Jan	13-Jan	12-Jan
Las Vegas	36.2%	28.1%	12.5%	45.5%	48.7%	73.6%
Reno	41.0%	37.0%	10.0%	40.0%	51.0%	77.0%
Phoenix	17.6%	29.8%	16.2%	27.9%	33.8%	57.7%
Sacramento	30.3%	32.1%	14.2%	34.5%	44.5%	66.6%
Minneapolis	10.6%	16.2%	32.3%	39.0%	42.9%	55.2%
Mid-Atlantic (MRIS)	13.1%	16.4%	12.7%	16.9%	25.8%	33.3%
Orlando	23.7%	37.6%	26.7%	26.2%	50.4%	63.7%
California (DQ)*	26.1%	27.0%	18.7%	34.3%	44.8%	61.3%
Bay Area CA (DQ)*	23.3%	28.1%	14.4%	27.2%	37.7%	55.3%
So. California (DQ)*	25.9%	27.2%	15.0%	32.6%	40.9%	59.8%
Hampton Roads					34.9%	37.2%
Chicago					49.0%	52.0%
Charlotte					18.1%	21.0%
Metro Detroit			36.3%	54.5%
Memphis*			25.9%	36.6%
Birmingham AL			30.2%	38.2%
*share of existing home sales, based on property records

by Calculated Risk on 2/15/2013 03:28:00 PM

From economist Tom Lawler:

Below is a summary of some selected stats from nine large publicly-traded home builders.

While not shown below, the combined order backlog of these builders on December 31, 2012 was 28,455, up 55.8% from the end of 2011.

As I’ve noted before, comparing these builder results with the Census Bureau’s estimate of overall US new home sales is tricky; first, Census deals with sales cancellations differently from home builder results, and second, there appear to be differences between when builders “book” a sales order and when Census “counts” a sale.

While I only have data for the above builders back to Q2/2009, the limited data suggest that reported builder sales “lead” the Census home sales data. At the bottom is a chart showing Census new home sales data and a two-quarter average of the above builders’ net orders data (shown in index form).

	Net Orders			Settlements			Average Closing Price
Qtr. Ended:	Dec 2012	Dec 2011	% Chg	Dec 2012	Dec 2011	% Chg	Dec 2012	Dec 2011	% Chg
D.R. Horton	5,259	3,794	38.6%	5,182	4,118	25.8%	$236,067	$214,740	9.9%
PulteGroup	3,926	3,084	27.3%	5,154	4,303	19.8%	$287,000	$271,000	5.9%
NVR	2,625	2,158	21.6%	2,788	2,391	16.6%	$331,900	$304,600	9.0%
The Ryland Group	1,502	915	64.2%	1,578	1,040	51.7%	$270,000	$254,000	6.3%
Beazer Homes	932	724	28.7%	1,038	867	19.7%	$235,500	$215,500	9.3%
Standard Pacific	983	615	59.8%	973	782	24.4%	$388,000	$374,000	3.7%
Meritage Homes	1,094	749	46.1%	1,240	894	38.7%	$294,000	$275,000	6.9%
MDC Holdings	869	523	66.2%	1,221	792	54.2%	$318,700	$291,300	9.4%
M/I Homes	673	505	33.3%	887	667	33.0%	$273,000	$257,000	6.2%
Total	17,863	13,067	36.7%	20,061	15,854	26.5%	$282,723	$263,035	7.5%

Click on graph for larger image.

The chart suggests that Census’ industry estimates and these nine builders’ net orders moved pretty closely together from 2009 through early 2012. Over the last three quarters, however, these nine builders’ net orders showed considerably more strength that Census’ estimates in the last three quarters of 2012, with the “gap” widening throughout the year. This suggests either that large builders’ share of the new SF home market increased last year, though it also suggests that Census’ new home sales estimate for the last quarter of 2012 may be revised upward.