by Calculated Risk on 3/07/2013 03:15:00 PM

Analyst Ivy Zelman was one of the few to correctly call both the top and bottom for housing (Tom Lawler and your humble blogger were also correct). Today, on CNBC, Zelman made several very positive comments on housing:

"I think we are in Nirvana for housing."

"I'm probably the most bullish I've ever been fundamentally [on housing], and I'm dating myself, but I've been around for over 20 years and I've seen a lot of ups and downs".

[We are in] "the first or second inning of the fundamental recovery that could be five to ten years in duration ..."

"I think home prices could go up for four to six years in duration ..."

CR Note: Obviously I'm also very positive on housing. And I'm positive on the overall economy too -  and a key reason is, historically, housing is the best leading indicator for the economy.  In the Business Insider interview late last year, I said: "I’m not a roaring bull, but looking forward, this is the best shape we’ve been in since ’97". Obviously the economy is still sluggish, and the unemployment rate is very high at 7.9%, but I was looking forward - and housing is one of the key reasons The future's so bright, I gotta wear shades.

by Calculated Risk on 3/07/2013 12:43:00 PM

The Federal Reserve released the Q4 2012 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth increased in Q4 compared to Q3 2012, and is up 9% from Q4 2011. Net worth peaked at $67.4 trillion in Q3 2007, and then net worth fell to $51.4 trillion in Q1 2009 (a loss of $16 trillion). Household net worth was at $66.1 trillion in Q4 2012 (up $14.7 trillion from the trough, but still down $1.3 trillion from the peak).

The Fed estimated that the value of household real estate increased $447 billion to $17.6 trillion in Q4 2012. The value of household real estate is still $5.0 trillion below the peak.

Click on graph for larger image.

This is the Households and Nonprofit net worth as a percent of GDP.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

This ratio was relatively stable (or increasing gradually) for almost 50 years, and then we saw the stock market and housing bubbles. The ratio has been trending up and increased again in Q4.

This graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q4 2012, household percent equity (of household real estate) was at 46.6% - up from Q3, and the highest since Q1 2008. This was because of both an increase in house prices in Q4 (the Fed uses CoreLogic) and a reduction in mortgage debt.

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 52+ million households with mortgages have far less than 46.6% equity - and millions have negative equity.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.

Mortgage debt declined by $6 billion in Q4. Mortgage debt has now declined by $1.2 trillion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).  It appears the rate of decline is slowing.

The value of real estate, as a percent of GDP, was up in Q4 (as house prices increased), but is just above the lows of the last 30 years. However household mortgage debt, as a percent of GDP, is still historically very high, suggesting still more deleveraging ahead for certain households.

by Calculated Risk on 3/07/2013 10:31:00 AM

LPS released their Mortgage Monitor report for January today. According to LPS, 7.03% of mortgages were delinquent in January, down from 7.17% in December, and down from 7.67% in January 2012.

LPS reports that 3.41% of mortgages were in the foreclosure process, down from 3.44% in December, and down from 4.23% in January 2012.

This gives a total of 10.44% delinquent or in foreclosure. It breaks down as:

• 1,974,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,531,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,703,000 loans in foreclosure process.

For a total of ​​5,208,000 loans delinquent or in foreclosure in January. This is down from 6,082,000 in January 2012.

This following graph from LPS shows Foreclosure Starts and Foreclosure Sales.

Click on graph for larger image.

From LPS:

The January Mortgage Monitor report released by Lender Processing Services found significant differences continue in foreclosure pipelines between states with judicial and non-judicial foreclosure processes. Though both foreclosure starts and sales rates have been relatively volatile at the national level due to the effects of regional processes and compliance issues, the foreclosure inventory in judicial states remains three times that of non-judicial states. However, according to LPS Applied Analytics Senior Vice President Herb Blecher, even this now-familiar judicial/non-judicial dichotomy is not as clearly defined as it once was.

“On average,” Blecher said, “pipeline ratios – the rate at which states are currently working through their existing backlog of loans either in foreclosure or serious delinquency – are almost twice as high in judicial states than non-judicial states. At today’s rate of foreclosure sales, it will take 62 months to clear the inventory in judicial states as compared to 32 months in non-judicial states. A few judicial states – New York and New Jersey in particular – have such extreme backlogs that their problem-loan pipelines would take decades to clear if nothing were to change.

“More recently, certain non-judicial states, such as Massachusetts and Nevada, have enacted ‘judicial-like’ legislative and/or legal actions which have greatly extended their pipeline ratios. Nevada’s ‘time to clear’ has extended from 27 months in January 2012 to 57 months as of January 2013. The change in Massachusetts has been even more pronounced. Since June of last year, its pipeline ratio has gone from 75 to 171 months. As California’s recently enacted Homeowner’s Bill of Rights is closely modeled on the Nevada legislation, we’ll be watching that state closely over the coming months to gauge its impact, as well.”

The second graph from LPS shows new problem loans by vintage.

Even after all these years, most of the problem are still from the "bubble" years.  Recent vintage loans are performing well. For recovery, the key is to clear the backlog of non-performing loans from the bubble years.   Making non-judicial states "judicial-like" is extending the pipelines and slowing the recovery.

CR Note: Several years ago I argued many foreclosures were a tragedy, but it was not a tragedy for someone to "lose their home" if they put no money down or if they had borrowed all the equity from their home. Unfortunately policymakers never recognized that distinction, and are still implementing policies to slow the foreclosure process.

There is much more in the mortgage monitor.

by Calculated Risk on 3/07/2013 08:58:00 AM

The Department of Commerce reported:

[T]otal January exports of $184.5 billion and imports of $228.9 billion resulted in a goods and services deficit of $44.4 billion, up from $38.1 billion in December, revised. January exports were $2.2 billion less than December exports of $186.6 billion. January imports were $4.1 billion more than December imports of $224.8 billion.

The trade deficit was above the consensus forecast of $43.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through January 2013.

Click on graph for larger image.

Exports decreased in January, and imports increased (most of the increase was petroleum).

Exports are 11% above the pre-recession peak and up 3.3% compared to January 2012; imports are near the pre-recession peak, and down 1% compared to January 2012.

The second graph shows the U.S. trade deficit, with and without petroleum, through January.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The increase in the trade deficit in January was mostly due to an increase in the volume of petroleum imports.

Oil averaged $94.08 per barrel in January, down slightly from $95.16 in December. 

The trade deficit with China increased to $27.8 billion in January, up from $26.0 billion in January 2012. Most of the trade deficit is still due to oil and China.

The trade deficit with the euro area was $7.7 billion in January, up slightly from $7.6 billion in January 2012.

by Calculated Risk on 3/07/2013 08:30:00 AM

The DOL reports:

In the week ending March 2, the advance figure for seasonally adjusted initial claims was 340,000, a decrease of 7,000 from the previous week's revised figure of 347,000. The 4-week moving average was 348,750, a decrease of 7,000 from the previous week's revised average of 355,750.

The previous week was revised up from 344,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 348,750 - this is the lowest level since March 2008.

Weekly claims were below the 355,000 consensus forecast. Note: Claims might increase soon due to the "sequestration" budget cuts.

by Calculated Risk on 3/06/2013 08:45:00 PM

With housing for sale inventory still low, I expect to see some upward revisions to 2013 house price forecasts. The consensus is for prices to increase about 3% this year. From Merrill Lynch tonight:

Paying homage to home prices. Our mortgage strategists and economists provide an upbeat assessment of the January CoreLogic release that showed US home prices rising nearly 10% annually (Jan-Jan). That leaves "substantial upside risk to our 2013 HPA forecast of 4.7%".

Thursday economic releases:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 355 thousand from 344 thousand last week. This is pre "sequester", and unemployment claims might increase soon.

• Also at 8:30 AM, Trade Balance report for January from the Census Bureau. The consensus is for the U.S. trade deficit to increase to $43.0 billion in January from $38.5 billion in December.

• At 12:00 PM, Q4 Flow of Funds Accounts of the United States from the Federal Reserve will be released.

• At 3:00 PM, Consumer Credit for January from the Federal Reserve. The consensus is for credit to increase $15.0 billion in January.

by Calculated Risk on 3/06/2013 06:20:00 PM

Imagine going six months without a manufactured crisis?  Maybe it will happen. I expect the Senate will restore some of the sequestration cuts, but this sounds like a little progress.

From the NY Times: Moving First on Budget, House Passes Funding Bill

The House on Wednesday easily passed legislation to keep the government financed through September, raising pressure on the Senate to quickly follow suit before the current financing runs out on March 27.

The House bill gives military and veterans programs some breathing room under the automatic spending cuts that took effect on Friday by increasing financing for Pentagon priorities.

But domestic programs are left largely unprotected from cuts of up to 11 percent under the so-called sequestration.

Senator Barbara Mikulski of Maryland ... said she would demand the kind of changes the House afforded military programs for at least some of the domestic side of the spending bill. That way Congress can prioritize programs that lift economic growth now, like transportation and infrastructure, and strengthen future economic growth through science and technology, even within the strictures of across-the-board cuts.
...
Senator Mitch McConnell of Kentucky, the Republican leader, said Republican leaders in the House and Senate accepted that Senate Democrats would want to put their mark on the spending plan. He was still sanguine that a final measure would reach President Obama in time for Congress’s two-week spring recess, set to begin on March 23.

by Calculated Risk on 3/06/2013 02:00:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Kansas City and based on information collected on or before February 22, 2013"

Reports from the twelve Federal Reserve Districts indicated that economic activity generally expanded at a modest to moderate pace since the previous Beige Book. ...

Most Districts reported expansion in consumer spending, although retail sales slowed in several Districts. Automobile sales were strong or solid most Districts, and tourism strengthened in a number of Districts. The demand for services was generally positive across Districts, most notably for technology and logistics firms. ... Many Districts noted rising gasoline prices and fiscal policy as having a negative effect on consumer sales, and contacts in the Boston, New York, and Minneapolis Districts said severe weather depressed sales somewhat.

And on real estate:

Residential real estate activity continued to strengthen in most Districts, although the pace of growth varied. Contacts in the Boston, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts noted strong growth in home sales, while New York and Chicago reported slight improvements. A realtor in the Richmond District indicated that low interest rates continued to motivate home buyers, and potential buyers in the Philadelphia District expressed greater confidence, including entry-level purchasers who had been increasingly opting to rent since mid-summer. Contacts in the Cleveland and Atlanta Districts said sales were higher than a year ago. Home construction increased in most Districts, with the exception of the Kansas City District where it was reported as unchanged. Several Districts noted ongoing strength in multifamily construction, although contacts in the Atlanta and Cleveland Districts mentioned continued financing difficulties for builders. Home prices edged higher in the majority of Districts, with lower inventories generally cited as the primary cause. Richmond and Atlanta Realtors observed multiple offers on many homes. Philadelphia real estate contacts continued to report low-end home prices as firm or rising slightly, while high-end home prices were still falling. Inventories declined in nearly all Districts, with Realtors in several Districts concerned about the impact on future sales volume.

Overall commercial real estate conditions were mixed or slightly improved in most Districts.

This suggests sluggish growth overall, with some negative impact from "fiscal policy" ... and with mostly "strong" growth for residential real estate.

by Calculated Risk on 3/06/2013 10:47:00 AM

From the American Bankruptcy Institute: February Bankruptcy Filings Decrease 21 Percent from Previous Year, Commercial Filings Fall 29 Percent

Total bankruptcy filings in the United States decreased 21 percent in February over last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 82,285 in February 2013, down from the February 2012 total of 104,537. Consumer filings declined 21 percent to 78,611 from the February 2012 consumer filing total of 99,378.
...
“The post-recession trends of reduced consumer spending, low interest rates and tighter lending standards continue to be reflected in fewer bankruptcy filings,” said ABI Executive Director Samuel J. Gerdano. “As these trends persist, expect bankruptcy filings to continue to decline in 2013.”

Personal bankruptcy filings peaked in 2010 at 1.54 million (highest since the bankruptcy law change in 2005). Filings declined to 1.22 million last year, and will probably be just over 1 million this year - the lowest level since 2008. Note: Even in good economic years, there are around 800 thousand personal bankruptcy filings.

This is another indicator of less economic stress.

by Calculated Risk on 3/06/2013 08:19:00 AM

From ADP:

Private sector employment increased by 198,000 jobs from January to February, according to the February, according to the January ADP National Employment Report®, which is produced by ADP® ... in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The January 2013 report, which reported job gains of 192,000, was revised upward by 23,000 to 215,000 jobs.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market remains sturdy in the face of significant fiscal headwinds. Businesses are adding to payrolls more strongly at the start of 2013 with gains across all industries and business sizes. Tax increases and government spending cuts don’t appear to be affecting the job market.”

This was above the consensus forecast for 173,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 171,000 payroll jobs in February, on a seasonally adjusted (SA) basis.

Note: ADP hasn't been very useful in predicting the BLS report.