by Calculated Risk on 2/24/2013 10:23:00 AM

Some interesting details on institutional buyers from the Newsobserver.com: California billionaire bets on rentals with Wake home-buying spree (ht Sebastian)

[C]ompanies have raised billions from pension funds, private equity firms and other institutional investors to fuel their buying sprees. To date, these companies have focused their attention mainly on markets with large inventories of distressed homes, particularly in Arizona, Florida, Nevada and California.

What’s noteworthy about American Homes 4 Rent’s buying binge in Wake County [North Carolina] is that it isn’t just targeting distressed properties, or even existing homes. About a third of its purchases have been new homes acquired directly from homebuilders.
...
Institutional investors have invested at least $5.4 billion for purchase of single-family rentals nationwide during the past 18 months, according to Barclays, and an additional $8 billion is expected to be invested within the next couple of years. American Homes 4 Rent’s buying spree is being financed in part by a $600 million investment from the Alaska Permanent Fund, a $45 billion fund that invests royalties the state collects from oil companies.

American Homes 4 Rent is targeting homes with about 2,000 square feet that are less than 15 years old and are located in neighborhoods with better-than-average schools. The company paid around $65 to $75 per square foot for the first 1,500 homes it acquired, according to the meeting minutes, and it expects vacancy rates of 5 percent or less in its portfolio.

American Homes 4 Rent hopes to charge monthly rents equal to about 1 percent of the purchase price, and provide returns of about 6.5 percent a year to the Alaska Permanent Fund, according to the board’s meeting minutes. In three to seven years, if the housing market recovers, the portfolio could be sold or be converted into a publicly traded real estate investment trust ...
emphasis added

There is much more in the article. It is interesting that the institutional investors are moving beyond distressed properties, and even buying new homes in some areas.

Yesterday:
• Summary for Week Ending Feb 22nd
• Schedule for Week of Feb 24th

by Calculated Risk on 2/23/2013 06:50:00 PM

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by -2.9% (-7.0 billion vehicle miles) for December 2012 as compared with December 2011. Travel for the month is estimated to be 236.3 billion vehicle miles.

Cumulative Travel for 2012 changed by +0.3% (9.1 billion vehicle miles). The Cumulative estimate for the year is 2,938.5 billion vehicle miles of travel.

The following graph shows the rolling 12 month total vehicle miles driven.

Traffic was down in all regions, and down 4.6% in the Northeast. The rolling 12 month total is still moving sideways.

Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 61 months - over 5 years - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

Gasoline prices were up in December compared to December 2011. In December 2012, gasoline averaged of $3.38 per gallon according to the EIA. In 2011, prices in December averaged $3.33 per gallon. 

However, as I've mentioned before, gasoline prices are just part of the story.  The lack of growth in miles driven over the last 5 years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take several more years before we see a new peak in miles driven. Maybe when we are all riding in self-driving electric cars!

by Calculated Risk on 2/23/2013 01:11:00 PM

Earlier:
• Summary for Week Ending Feb 22nd

This will be a very busy week for economic data. The key reports are the January New Home sales report on Tuesday, the January Personal Income and Outlays report on Friday, and the second estimate of Q4 GDP on Thursday.

Other key reports include Case-Shiller house prices for December on Tuesday, the ISM manufacturing index on Friday, and auto sales also on Friday.

Fed Chairman Ben Bernanke will deliver the Semiannual Monetary Policy Report to the Senate on Tuesday, and to the House on Wednesday.

----- Monday, Feb 25th -----
8:30 AM ET: Chicago Fed National Activity Index for January. This is a composite index of other data.

10:30 AM: Dallas Fed Manufacturing Survey for February. The consensus is a decrease to 4.0 from 5.5 in January (above zero is expansion).

----- Tuesday, Feb 26th -----
9:00 AM: FHFA House Price Index for December 2012. This was original a GSE only repeat sales, however there is also an expanded index that deserves more attention. The consensus is for a 0.7% increase in house prices.

9:00 AM: S&P/Case-Shiller House Price Index for December. Although this is the December report, it is really a 3 month average of October, November and December.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through November 2012 (the Composite 20 was started in January 2000).

The consensus is for a 6.8% year-over-year increase in the Composite 20 index (NSA) for December. The Zillow forecast is for the Composite 20 to increase 6.7% year-over-year, and for prices to increase 0.7% month-to-month seasonally adjusted.

10:00 AM: New Home Sales for January from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the December sales rate.

The consensus is for an increase in sales to 381 thousand Seasonally Adjusted Annual Rate (SAAR) in January from 369 thousand in December.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for February. The consensus is for a a reading of minus 3 for this survey, up from minus 12 in January (Below zero is contraction).

10:00 AM: Conference Board's consumer confidence index for February. The consensus is for the index to increase to 61.0.

10:00 AM: Fed Chairman Ben S. Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

----- Wednesday, Feb 27th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Durable Goods Orders for January from the Census Bureau. The consensus is for a 4.0% decrease in durable goods orders.

10:00 AM ET: Pending Home Sales Index for January. The consensus is for a 3.0% increase in the index.

10:00 AM: Fed Chairman Ben S. Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

----- Thursday, Feb 28th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 360 thousand from 362 thousand last week.

8:30 AM: Q4 GDP (second estimate). This is the second estimate of GDP from the BEA. The consensus is that real GDP increased 0.5% annualized in Q4, revised up from a negative 0.1% in the advance report.

9:45 AM: Chicago Purchasing Managers Index for February. The consensus is for a decrease to 55.0, down from 55.6 in January.

11:00 AM: Kansas City Fed regional Manufacturing Survey for February.

11:00 AM: The Federal Reserve Bank of New York will release the Q4 2012 Quarterly Report on Household Debt and Credit

----- Friday, Mar 1st -----
8:30 AM ET: Personal Income and Outlays for January. The consensus is for a 2.1% decrease in personal income in January (following the surge in December due to some people taking income early to avoid higher taxes), and for 0.2% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for February). The consensus is for a reading of 76.0.

10:00 AM ET: ISM Manufacturing Index for February.

Here is a long term graph of the ISM manufacturing index. The ISM manufacturing index indicated expansion in January at 53.1% (dashed line). The employment index was at 54.0%, and the new orders index was at 53.3%. The consensus is for PMI to be decline to 52.8%. (above 50 is expansion).

10:00 AM: Construction Spending for January. The consensus is for a 0.6% increase in construction spending.

All day: Light vehicle sales for February. The consensus is for light vehicle sales to be at 15.2 million SAAR in February (Seasonally Adjusted Annual Rate) down from 15.3 SAAR in January.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the January sales rate. 

by Calculated Risk on 2/23/2013 10:30:00 AM

Here is a summary of last week in graphs:

• Housing Starts decreased to 890 thousand SAAR in January, Single Family Starts Increased

Click on graph for larger image.

From the Census Bureau: "Privately-owned housing starts in January were at a seasonally adjusted annual rate of 890,000. This is 8.5 percent below the revised December estimate of 973,000, but is 23.6 percent above the January 2012 rate of 720,000.

Single-family housing starts in January were at a rate of 613,000; this is 0.8 percent above the revised December figure of 608,000. The January rate for units in buildings with five units or more was 260,000."

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased sharply in January.

Single-family starts (blue) increased to 613,000 thousand in January and are at the highest level since 2008.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that housing starts have been increasing lately after moving sideways for about two years and a half years.

Total starts are up about 86% from the bottom start rate, and single family starts are up about 74 percent from the post-bubble low.

This was below expectations of 914 thousand starts in January due to the sharp decrease in the volatile multi-family sector. Starts in January were up 23.6% from January 2012.

All Housing Investment and Construction Graphs
• Existing Home Sales in January: 4.92 million SAAR, 4.2 months of supply

The NAR reported: January Existing-Home Sales Hold with Steady Price Gains, Seller’s Market Developing

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in January 2013 (4.92 million SAAR) were 0.4% higher than last month, and were 9.1% above the January 2012 rate.

According to the NAR, inventory declined to 1.74 million in January down from 1.83 million in December. This is the lowest level of inventory since December 1999. Inventory is not seasonally adjusted, and usually inventory decreases from the seasonal high in mid-summer to the seasonal lows in December and January.

The next graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 25.3% year-over-year in January from January 2012. This is the 23rd consecutive month with a YoY decrease in inventory.

Months of supply declined to 4.2 months in January, the lowest level since April 2005.

This was at expectations of sales of 4.94 million. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing.

All current Existing Home Sales graphs
• MBA: "Mortgage Delinquency and Foreclosure Rates Finished 2012 Down Sharply"

From the MBA: Mortgage Delinquency and Foreclosure Rates Finished 2012 Down Sharply

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent decreased to 3.04% from 3.25% in Q3. This is just below 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket decreased to 1.16% in Q4, from 1.19% in Q3.

The 90 day bucket decreased to 2.89% from 2.96%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 3.74% from 4.07% and is now at the lowest level since 2008.

This graph is from the MBA and shows the percent of loans in the foreclosure process by state. Posted with permission.

The top states are Florida (12.15% in foreclosure down from 13.04% in Q3), New Jersey (8.85% down from 8.87%), New York (6.34% down from 6.46%), Illinois (6.33% down from 6.83%), and Nevada (the only non-judicial state in the top 13 at 5.87% down from 5.93%).

As Fratantoni noted, California (2.06% down from 2.63%) and Arizona (2.02% down from 2.51%) are now well below the national average by every measure.

• Key Measures show low inflation in January

This graph shows the year-over-year change for four key measures of inflation: trimmed-mean CPI, median CPI, CPI less food and energy, and core PCE prices. On a year-over-year basis, the median CPI rose 2.1%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.9%. Core PCE is for December and increased 1.4% year-over-year.

On a monthly basis, median CPI was at 2.6% annualized, trimmed-mean CPI was at 2.2% annualized, and core CPI increased 3.1% annualized. Also core PCE for December increased 0.2% annualized.

The inflation report for February will be released on March 15th, a few days before the next Fed meeting.  But with this low level of inflation and the current high level of unemployment, I expect the Fed will keep the "pedal to the metal" at the meeting of March 19th and 20th.

• Weekly Initial Unemployment Claims increased to 362,000

The DOL reports:

In the week ending February 16, the advance figure for seasonally adjusted initial claims was 362,000, an increase of 20,000 from the previous week's revised figure of 342,000. The 4-week moving average was 360,750, an increase of 8,000 from the previous week's revised average of 352,750.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 360,750 - the highest 4-week average since the first week of January.

Weekly claims were above the 359,000 consensus forecast.

• AIA: "Strong Surge for Architecture Billings Index"

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Strong Surge for Architecture Billings Index

This graph shows the Architecture Billings Index since 1996. The index was at 54.2 in January, up from 51.2 in December. Anything above 50 indicates expansion in demand for architects' services.

Every building sector is now expanding and new project inquiries are strongly positive. Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This suggests some increase in CRE investment in 2013.

by Calculated Risk on 2/22/2013 09:07:00 PM

Here is the unofficial problem bank list for Feb 22, 2013.

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

Changes and comments from surferdude808:

The FDIC released its enforcement action activity through January 2013, which led to several changes to the Unofficial Problem Bank List. In all, there were five removals and two additions that leave the list at 809 institutions with assets of $302.8 billion. A year ago, the list held 960 institutions with assets of $389.7 billion. Year-over-year, the institution count has declined by almost 16 percent was assets are down by about 22 percent. During February 2013, the list declined by a net 15 institutions after five additions, one failure, three unassisted mergers, and 16 action terminations. Assets fell by $6.2 billion, but not by enough to get under $300 billion.

The FDIC terminated actions against Westbound Bank, Katy, TX ($143 million); New Market Bank, Elko New Market, MN ($85 million); and Cambridge State Bank, Cambridge, WI ($75 million). Unassisted mergers led to the exit of Community Bank of Central Wisconsin, Colby, WI ($91 million) and Bank 360, Beresford, SD ($40 million). The FDIC terminated a Prompt Corrective Action order against Rocky Mountain Bank & Trust, Florence, CO that was issued on May 26, 2010; however, the action was not on the UPBL as it cannot be found on the FDIC's website.

The two additions this week were Commerce Bank of Arizona, Tucson, AZ ($229 million Ticker: CBOF) and Key Community Bank, Inver Grove Heights, MN ($52 million).

Last week, we discussed the potential failure of Capitol Bancorp's banking unit in New Mexico given a deadline for a $1 million capital infusion. Yesterday, SNL Securities reported that a $1 million capital infusion was made by five outside investors and two insiders. The unnamed outside investors received a 14.8 percent stake in Capitol National Bank for $850 thousand. The Reid family, Chairman and CEO Joseph Reid and Corporate President Cristin Reid, provided $172 thousand of the infused capital. The combined stake of the Reid's in Capitol National Bank is now about 2.2 percent. Thus, the on-going saga of Capitol Bancorp continues.

CR 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.

by Calculated Risk on 2/22/2013 04:05:00 PM

This is a minor indicator that I follow. This index has been very strong following the dip in October due to Hurricane Sandy.

From ATA: ATA Truck Tonnage Index Posts Best Ever January

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 2.9% in January after jumping 2.4% in December. ... Tonnage has surged at least 2.4% every month since November, gaining a total of 9.1% over that period. As a result, the SA index equaled 125.2 (2000=100) in January versus 121.7 in December. January’s index was the highest on record. Compared with January 2012, the SA index was up a robust 6.5%, the best year-over-year result since December 2011.

“The trucking industry started 2013 with a bang, reflected in the best January tonnage report in five years,” ATA Chief Economist Bob Costello said. “While I believe that the overall economy will be sluggish in the first quarter, trucking likely benefited in January from an inventory destocking that transpired late last year, thus boosting volumes more than normal early this year as businesses replenish those lean inventories.”
emphasis added

Note from ATA:

Trucking serves as a barometer of the U.S. economy, representing 67% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.2 billion tons of freight in 2011. Motor carriers collected $603.9 billion, or 80.9% of total revenue earned by all transport modes.

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is fairly noisy, but is up solid year-over-year.

by Calculated Risk on 2/22/2013 01:58:00 PM

The Case-Shiller house price indexes will be released next week. I like to check the Zillow forecasts; they have been pretty close.

Zillow Forecast: December Case-Shiller Composite-20 Expected to Show 6.7% Increase from One Year Ago

[W]e predict that next month’s Case-Shiller data (December 2012) will show that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) increased 6.7 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) increased 5.7 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from November to December will be 0.7 percent for the 20-City Composite and 0.6 percent for the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for December will not be released until Tuesday, February 26th, almost two months after the end of 2012.

The December Case-Shiller numbers are forecast to come in stronger than many economists expect. The last few months have hinted at a strong close to 2012, but part of this strength is due to the weak December 2011 numbers to which December’s numbers are compared. ... To forecast the Case-Shiller indices we use past data from Case-Shiller, as well as the Zillow Home Value Index (ZHVI), which is available more than a month in advance of Case-Shiller numbers, paired with foreclosure re-sale numbers, which we also have available more than a month prior to Case-Shiller numbers. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices.

Right now it looks like Case-Shiller will be up over 6% in 2012 (through the December / Q4 reports to be released in February).

Note: Zillow also released their January index yesterday: January Annual Home Value Increase Is Largest Since Summer 2006

Zillow’s January Real Estate Market Reports, released today, show that national home values rose 0.7% from December to January to $158,100. January 2013 marks the 15th consecutive month of home value appreciation. On a year-over-year basis, home values were up 6.2% from January 2012 – a rate of annual appreciation [for Zillow index] we haven’t seen since July 2006 (when the rate was 7.5%), before the peak of the housing bubble.

		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Dec 2011	149.59	149.77	136.60	136.84
Case-Shiller (last month)	Nov 2012	158.28	157.33	145.82	144.99
Zillow December Forecast	YoY	5.7%	5.7%	6.7%	6.7%
	MoM	-0.1%	0.6%	0.0%	0.7%
Zillow Forecasts1		158.1	158.3	145.8	146.0
Current Post Bubble Low		146.46	149.44	134.07	136.74
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		8.0%	5.9%	8.7%	6.8%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 2/22/2013 01:00:00 PM

Just thinking out loud ... one of my ten economic questions for 2013 was: Will Housing inventory bottom in 2013?. My guess was active inventory would bottom in 2013, "probably in January". At the least, I expected that the rate of year-over-year decline would "slow sharply".

This could still be correct. The NAR reported yesterday that listed inventory fell to 1.74 million units in January, the lowest level since December 1999. This was down 25.3 percent from January 2012.

Note: Inventory will increase seasonally over the next few months (this happens every year), and this is why I'm tracking the weekly inventory data.

Click on graph for larger image.

This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Look at that year-over-year decline (blue line).  Inventory has been falling sharply on a year-over-year basis for some time.   With the low level of inventory, both in absolute numbers and as a month-of-supply, and the recent price increases in some areas, it would some likely more inventory would come on the market.

But what if this is incorrect?  Just imagine if inventory falls another 25% by January 2014. That would be the lowest level of inventory in decades.  At the current sales rate, the months-of-supply would fall to 3.2 months. I just don't see that happening. So, it seems likely that at least the rate of inventory decline will slow.

My view has been that if prices increase enough, then some of the potential sellers will come off the fence, and some underwater homeowners would be able to sell. Zillow just reported that 2 Million Homeowners Freed From Negative Equity in 2012; 1 Million More to Come in 2013

Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent at the end of the fourth quarter, according to Zillow’s fourth quarter Negative Equity Report.

The falling negative equity rate is good news for struggling homeowners and is largely attributable to a 5.9 percent bump in home values nationwide last year to a median Zillow Home Value Index of $157,400 (when home values rise, negative equity falls). At the end of 2011, 31.1 percent of homeowners with a mortgage were underwater, or more than 15.7 million people.

So some of these people can sell now.

I need to think about this, but if inventory keeps falling sharply, we might see stronger house price gains in 2013 than originally expected - and maybe more new homes on the market (although some builders are lot constrained this year). This will be an interesting issue all year.

by Calculated Risk on 2/22/2013 09:16:00 AM

Joseph Cotterill at the FT Alphaville blog linked to a post on lumber prices last night: Listen to Lumber. The post included a graph on lumber prices over the last few months, and showed a fairly sharp decline in future prices recently. The author wrote:

Over the past few years, the strength in lumber proved to be a leading indicator for the bullish action we had seen in the homebuilders and, frankly, all housing related stocks.

This week, though, lumber has sold “limit down” ...

I have no comment on housing stocks, but I suspect this decline is either just "noise" following a large price increase, or more supply coming back on the market (remember many mills closed during the housing bust, and I suspect some are coming back online). Back in 2010, after the end of the housing tax credit, I noted that lumber prices collapsed. But the dynamics were different (that was obviously tax credit related and not a real recovery).

Click on graph for larger image in graph gallery.

This graph puts the recent decline in context. This graph shows two measures of lumber prices: 1) from Random Lengths through last week (via NAHB), and 2) CME futures (through today).

The recent decline in CME futures hardly shows up.

by Calculated Risk on 2/21/2013 06:41:00 PM

This morning I posted a graph of mortgage delinquencies by "bucket". The graph I posted did not include Q4 2012 (I've updated the previous post). Here is the correct graph showing the improvement in Q4:

Click on graph for larger image in graph gallery.

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent decreased to 3.04% from 3.25% in Q3. This is just below 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket decreased to 1.16% in Q4, from 1.19% in Q3.

The 90 day bucket decreased to 2.89% from 2.96%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 3.74% from 4.07% and is now at the lowest level since 2008.

Here was the MBA press release: Mortgage Delinquency and Foreclosure Rates Finished 2012 Down Sharply

And an earlier post on the conference call: Q4 MBA National Delinquency Survey Comments