by Calculated Risk on 3/22/2013 09:05:00 PM

From the NY Times: Cyprus Passes Parts of Bailout Bill, but Delays Vote on Tax

Lawmakers took steps late Friday to revise a formula for obtaining a bailout of Cyprus’s banks but faced strong signals that the plan would not pass muster with international lenders.

The Parliament put off until later this weekend a vote on a crucial new proposal that would confiscate 22 to 25 percent of uninsured deposits above 100,000 euros through a new tax on account holders in one of the nation’s most troubled banks.

There will be additional votes tomorrow, and a meeting with the Eurogroup on Sunday.

From the WSJ: Cyprus Adopts Bank Overhaul Plan

[T]he Parliament in Nicosia passed two key bills that would allow it to close down its second largest bank, Popular Bank of Cyprus, and aggressively curtail the free flow of money on the island. The bank restructuring law would see depositors in Popular Bank, also known as Laiki Bank, to lose as much as 40% of their savings above €100,000 ... As details of the latest plan emerged late Friday, there were signs that the country may be forced to also resolve Bank of Cyprus, its biggest lender. ...

[T]he government in Nicosia had proposed to levy a 20% tax on depositors with more than €100,000 in their accounts in Bank of Cyprus. The government hoped that would allow them to protect the lender ... But senior European finance-ministry officials in a call Friday evening expressed doubts that the plan would raise enough money to ring fence the lender ...

Additional resources:

The Telegraph: Cyprus bail-out: live

The CyprusMail: Cyprus Crisis Update, Friday March 22nd

by Calculated Risk on 3/22/2013 05:50:00 PM

The Department of Transportation (DOT) reported:

Based on preliminary reports from the State Highway Agencies, travel during January 2013 on all roads and streets in the nation changed by +0.5 percent (1.2 billion vehicle miles) resulting in estimated travel for the month at 226.9 billion vehicle-miles.

This total includes 71.6 billion vehicle-miles on rural roads and 155.3 billion vehicle-miles on urban roads and streets.

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

Traffic was up slightly in all regions. 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 62 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 down in January compared to January 2012. In January 2013, gasoline averaged of $3.39 per gallon according to the EIA. In 2012, prices in January averaged $3.44 per gallon.   However prices spiked in February, and that will probably impact miles driven in the next monthly report.

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. 

by Calculated Risk on 3/22/2013 02:57:00 PM

From economist Tom Lawler:

The National Association of Realtors estimated that existing home sales ran at a seasonally adjusted annual rate of 4.98 million in February, up 0.8% from January’s upwardly-revised (to 4.94 million from 4.92 million, though unadjusted sales were not revised) pace. While the NAR’s estimate was slightly below consensus, it was above my estimate based on regional tracking – mainly, it appears, because of a “most strange” surge in condo/co-op sales in the South not reflected in local realtor reports.

The NAR estimated that existing SF home sales ran at a SAAR of 4.36 million in February, down 0.3% from January’s pace – an estimate that seems broadly consistent with regional realtor/MLS reports. In sharp contrast, the NAR estimated that existing condo/co-op sales ran at a SAAR of 620,000, up 8.8% from January’s pace – with condo/co-op sales on the South purportedly up 20.8% on a seasonally adjusted basis on the month, and up 29.4% on an unadjusted basis from last February’s pace. This gain seems especially suspect given that Florida Realtors (formerly the Florida Association of Realtors) reported that existing condo and townhome sales by realtors in Florida (the “condo capital” of the South) in February were up only 7.0% from last February’s pace! Quite frankly, the NAR’s estimates for existing condo/co-op sales don’t “smell” right.

Below is a table showing historical estimates of regional existing condo/co-op sales from the NAR, expressed as a seasonally adjusted annual rate. Note all the periods where seasonally adjusted sales in a region were exactly the same for at least three consecutive months.

As the table indicates, seasonally-adjusted sales show periods of remarkable stability in all four regions – partly, of course, because the NAR rounds seasonally adjusted sales to the nearest 10,000 (and unadjusted sales to the nearest thousand), which seems like “excessive” rounding. E.g., if “unrounded” condo/co-op sales on a seasonally adjusted annual rate basis in the Midwest went from 45,100 to 54,500 -- a 20.8% jump – sales rounded to the nearest 10,000 would show sales as being flat!). Conversely, if unrounded SAAR sales went from 54,500 to 55,100 – 1.1% increase – SAAR sales rounded to the nearest 10,000 would jump from 50,000 to 60,000, a 20% gain! According to the NAR, existing condo/co-op sales in the Midwest ran at a SAAR of 50,000 in ten of the 12 months of 2011.

When the NAR released its “rebenchmarking” of existing home last year, there were “astonishingly” big revisions in regional sales of existing condos and co-ops – suggesting either issues with the rebenchmarking, some serious issues with its previous methodology or both.

NAR estimates for existing condo/co-op sales only go back to 1999, and it first published monthly estimates in 2005.

Year	Month	Northeast	Midwest	South	West
2010	Jan	100,000	60,000	200,000	130,000
	Feb	110,000	70,000	210,000	140,000
	Mar	110,000	50,000	200,000	140,000
	Apr	130,000	60,000	210,000	140,000
	May	100,000	60,000	230,000	150,000
	Jun	100,000	60,000	210,000	130,000
	Jul	80,000	40,000	170,000	100,000
	Aug	90,000	40,000	190,000	110,000
	Sept	80,000	40,000	190,000	110,000
	Oct	90,000	50,000	180,000	110,000
	Nov	90,000	50,000	210,000	110,000
	Dec	100,000	50,000	220,000	130,000
2011	Jan	100,000	60,000	250,000	150,000
	Feb	100,000	50,000	210,000	130,000
	Mar	90,000	50,000	240,000	130,000
	Apr	80,000	50,000	220,000	130,000
	May	110,000	50,000	200,000	120,000
	Jun	100,000	50,000	190,000	120,000
	Jul	70,000	50,000	210,000	110,000
	Aug	120,000	50,000	200,000	130,000
	Sept	100,000	50,000	210,000	130,000
	Oct	80,000	50,000	210,000	130,000
	Nov	70,000	60,000	210,000	120,000
	Dec	100,000	50,000	200,000	130,000
2012	Jan	100,000	60,000	210,000	140,000
	Feb	100,000	60,000	220,000	130,000
	Mar	100,000	60,000	210,000	130,000
	Apr	110,000	60,000	210,000	130,000
	May	100,000	60,000	220,000	130,000
	Jun	90,000	60,000	220,000	110,000
	Jul	100,000	60,000	220,000	130,000
	Aug	110,000	70,000	240,000	130,000
	Sept	110,000	70,000	250,000	130,000
	Oct	110,000	70,000	250,000	130,000
	Nov	110,000	80,000	280,000	130,000
	Dec	110,000	70,000	250,000	140,000
2013	Jan	110,000	80,000	240,000	140,000
	Feb p	110,000	80,000	290,000	140,000

by Calculated Risk on 3/22/2013 11:20:00 AM

It is after 5 PM in Cyprus and Parliament is expected to vote soon ... on something.

From the Telegraph: Cyprus bail-out: live

[H]ere's what we think that proposal might look like, based on reports and rumours from journalists on the ground.

Laiki Bank - the island's second largest lender - is wound down. Depositors' first €100,000 are hived into the Bank of Cyprus. Everything else is put into a bad bank, and sold off, likely at a 20pc to 40pc discount. ... According to information on the spread of deposits, a 9.46pc levy - lower than the 9.9pc proposed in the Eurogroup's original plan - on deposits over €100,000 would do the trick.

Under such an arrangement, the biggest losers would be those with deposits over €100,000 in Laiki Bank, who could be charged a 9.46pc levy and have any deposit over €100,000 swallowed into the 'bad bank' and sold off at a discount, losing as much as 40pc of its value. ...

Does this mean the Bank of Cyprus is safe? For now, yes. But as we have seen from the draft banking bill, the government wants to give the Cypriot central bank powers to restructure any bank as it sees necessary- the ominous "any other measure" clause that blogger Yiannis Mouzakis helpfully translated from the Greek.

Not to mention the draconian capital controls included in the draft bill, among which are compulsory renewal of all time savings deposits upon maturity, conversion of current accounts to time deposits, ban or restrictions on non cash transactions.

And from the CyprusMail: Cyprus Crisis Update, Friday March 22nd

A solution to Cyprus’ bailout crisis within the framework set down by the European Union may be possible within "the next few hours", the ruling DISY deputy leader Averof Neophytou said.

"There is cautious optimism that in the next few hours we may be able to reach an agreed platform so parliament can approve these specific measures which will be consistent with the approach, the framework and the targets agreed at the last Eurogroup," Neophytou told reporters.

by Calculated Risk on 3/22/2013 09:28:00 AM

Another update on hotels from HotelNewsNow.com: STR: US results for week ending 16 March

In year-over-year comparisons, occupancy was up 1.4 percent to 66.6 percent, average daily rate rose 4.5 percent to US$112.05 and revenue per available room increased 5.9 percent to US$74.66.

The 4-week average of the occupancy rate is close to normal levels.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2013, yellow is for 2012, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels.

The occupancy rate will increase seasonal over the next few weeks and then move sideways until summer vacation travel starts. This occupancy rate has improved from the same period last year - and is close to pre-recession levels.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 3/21/2013 10:15:00 PM

Two more articles:

From the NY Times: Mood Darkens in Cyprus as Deadline Is Set for Bailout

President Nicos Anastasiades presented Parliament on Thursday with a plan that scrapped a controversial tax on bank deposits.
...
The central bank said the new package included “consolidation measures” to enable Cyprus Popular Bank, also known as Laiki Bank, to continue operating.

As the country’s most troubled lender, it would be reorganized by placing underperforming loans and questionable assets into a so-called bad bank and transferring healthy assets to the Bank of Cyprus, the nation’s largest financial institution. ...

But the central bank warned that if Parliament failed to pass the measure, “Laiki will default immediately, causing major consequences to its employees and its clients.”

Lawmakers will also vote on restrictions on taking cash out of banks and out of the country, known as capital controls, when the banks reopen. ...

The central bank said on Thursday that Cyprus had until Monday to reach an agreement ... the group of 17 finance ministers whose countries use the euro issued a statement declaring themselves “conditionally satisfied” with most of the new proposal, which the so-called troika of lenders ... is to assess on Friday after the Parliament vote.
emphasis added

From the WSJ: Clock Ticks on Cyprus

Cyprus ... readied a plan that would restructure its second-largest lender and enforce unprecedented restrictions on financial transactions.

The proposals, if they take effect, would allow authorities to restrict noncash transactions, curtail check cashing, limit withdrawals and even convert checking accounts into fixed-term deposits when banks reopen. ...

Parliament is set to debate the measures on Friday. If Cyprus can't pass them, it could find itself with little choice but to leave the euro zone ...

by Calculated Risk on 3/21/2013 06:13:00 PM

From the WSJ: Amid Housing Recovery, Humble Plywood Shines Anew

Growing demand and tight supplies have pushed up plywood prices by 45% in the past year, and U.S. producers are scrambling to get back up to speed after slashing output of the basic construction material during the housing bust.

Georgia-Pacific, the largest U.S. producer of plywood, will announce Friday it plans to invest about $400 million over the next three years to boost softwood plywood and lumber capacity by 20%.
...
With demand rising, the composite price for structural panels, which includes plywood and other wood products, jumped to $511 per thousand square feet on March 15 this year, up 45% from $351 in mid-March a year ago, according to Random Lengths, a Eugene, Ore., wood-products market reporting service.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices (not plywood): 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Lumber prices are now at 2004 and 2005 levels.  Demand is far below the levels during the housing bubble, but supply has fallen sharply too.

by Calculated Risk on 3/21/2013 04:06:00 PM

A few articles on Cyprus:

First, the deadline from the ECB: Governing Council decision on Emergency Liquidity Assistance requested by the Central Bank of Cyprus

The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013.

Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.

From the Financial Times: Cyprus targets big depositors in bank plan

Cyprus announced plans on Thursday to overhaul the island’s banking industry, including forcing big depositors to accept losses on their accounts ... “The banking system needs restructuring otherwise it will go bankrupt and it needs to be done immediately,” said Panicos Demetriades, governor of the Central Bank of Cyprus. Deposits up to €100,000 would be guaranteed and bank jobs would be safeguarded, he added.
Excerpt with permission

From Alphaville: Taxi for Laiki

And live updates from the Telegraph: Cyprus bail-out: live

by Calculated Risk on 3/21/2013 01:57:00 PM

Catching up ... earlier from the Philly Fed: March Manufacturing Survey

Manufacturers responding to the March Business Outlook Survey reported slight increases in business activity this month. Indicators for general activity and new orders increased notably, following negative readings over the previous two months. Indicators for shipments and employment remained positive and improved slightly this month. Changes in the surveyʹs broad indicators of future activity were mixed but continued to reflect general optimism about growth over the next six months.

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of -12.5 in February to 2.0 this month ... The new orders index increased from a reading of -7.8 in February to 0.5, its first positive reading in three months.

The employment index increased from 0.9 in February to 2.7 this month, its second consecutive positive reading.
emphasis added

Last week, the Empire State manufacturing survey also indicated expansion in March.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through March. The ISM and total Fed surveys are through February.

The average of the Empire State and Philly Fed surveys increased in March, and is back above zero.   This suggests the ISM manufacturing index will show further expansion in March.

by Calculated Risk on 3/21/2013 11:25:00 AM

The NAR reported total sales were up 10.2% from February 2012, but conventional sales are probably up closer to 25% from February 2012, and distressed sales down.  The NAR reported (from a survey):

Distressed homes - foreclosures and short sales - accounted for 25 percent of February sales, up from 23 percent in January but down from 34 percent in February 2012.

Although this survey isn't perfect, if total sales were up 10.2% from February 2012, and distressed sales declined from 34% of total sales to 25%, this suggests conventional sales were up sharply year-over-year - a good sign. However some of this increase is investor buying, although the NAR is reporting investors are buying about the same percentage as a year ago:

Investors, who account for most cash sales, purchased 22 percent of homes in February, up from 19 percent in January; they were 23 percent in February 2012.

Of course inventory is the key number in the NAR report.  The NAR reported inventory increased to 1.94 million units in February, up from 1.77 million in January.  Some of this increase was seasonal, and this is still a very low level of inventory - but this might be an early hint that the inventory contraction is ending.

Still inventory is down sharply year-over-year; down 19.2% from February 2012.  But this is the smallest year-over-year decline since 2011.    

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

Click on graph for larger image.

This graph shows inventory for February since 2001. In 2005 inventory kept rising all year - and that was a clear sign that the housing bubble was ending.  Inventory was very high from 2006 through 2011, and started declining in 2012.  This was the lowest level of inventory for the month of February since 2001.

The months-of-supply increased to 4.7 months (still very low).  Since months-of-supply uses Not Seasonally Adjusted (NSA) inventory, and Seasonally Adjusted (SA) sales, I expect months-of-supply to continue to increase for the next few months.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA in February (red column) are  above the sales for for 2008 through 2012, but below the bubble years of 2005 and 2006. 

Note that February is usually the second weakest month of the year and sales typically increase in March and peak in the summer.

The bottom line is this was a solid report. Conventional sales have increased sharply, although some of this is investor buying. And inventory is low, but we might be seeing an early sign that the inventory contraction is ending.

Earlier:
• Existing Home Sales in February: 4.98 million SAAR, 4.7 months of supply