by Calculated Risk on 7/13/2013 05:54:00 PM

It takes time to ramp up, and it appears the home builders are getting ready for more sales in Orange County ... from Alejandro Lazo at the LA Times: O.C.'s Rancho Mission Viejo reflects rebound of housing market

New construction across the region has taken off this year. Builders began work on some 2,944 homes during the first three months of the year throughout Ventura, Los Angeles, Orange, Riverside and San Bernardino counties.

That's a 7% increase from the previous quarter and nearly double the pace from the 1,513 homes started during the first three months of 2012, according to Metrostudy.

... the "village" of Sendero in south Orange County offers a pristine view of the new building boom. ... The development — which will total about a thousand new homes on 690 acres when finished — shows the degree to which big builders are confident that real estate has stabilized.

Sendero is the first leg of a project that has been long in the works, called Rancho Mission Viejo. Developers expect 14,000 homes will go up in this massive, master-planned community over the next two decades.
...
Other big home developments are in the works. Luxury builder Toll Bros. last year snapped up a big chunk of land in south Orange County and is partnering with Shea Homes to construct more than 2,000 homes and apartments.

Building is underway on what will total 726 single-family homes and detached condominium units in Pavilion Park, the first part of the Great Park Neighborhoods development in Irvine.

by Calculated Risk on 7/13/2013 10:31:00 AM

A key report this week will be June retail sales to be released on Monday.  There are two key housing reports that will be released this week, housing starts on Wednesday, and the homebuilder confidence survey on Tuesday.

Fed Chairman Ben Bernanke will provide his semiannual Monetary Policy Report and testimony to the House and Senate this week.

For manufacturing, the June Industrial Production survey, and the July NY Fed (Empire State) and Philly Fed surveys will be released this week. 

For prices, CPI will be released on Tuesday.

----- Monday, July 15th -----
8:30 AM ET: Retail sales for June will be released.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales are up 27.1% from the bottom, and now 11.4% above the pre-recession peak (not inflation adjusted)

The consensus is for retail sales to increase 0.8% in June, and to increase 0.5% ex-autos.

8:30 AM: NY Fed Empire Manufacturing Survey for July. The consensus is for a reading of 5.0, down from 7.8 in June (above zero is expansion).

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for May.  The consensus is for no change in inventories.

----- Tuesday, July 16th -----
8:30 AM: Consumer Price Index for June. The consensus is for a 0.4% increase in CPI in June and for core CPI to increase 0.2%.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for June.

This graph shows industrial production since 1967.

The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 77.7%.

10:00 AM ET: The July NAHB homebuilder survey. The consensus is for a reading of 52, the same as in June. Any number below 50 indicates that more builders view sales conditions as good than poor.

----- Wednesday, July 17th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Housing Starts for June.

Total housing starts were at 914 thousand (SAAR) in May. Single family starts were at 599 thousand SAAR in May.

The consensus is for total housing starts to increase to 951 thousand (SAAR) in June.

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

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, July 18th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an decrease to 344 thousand from 360 thousand last week.

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

10:00 AM: the Philly Fed manufacturing survey for June. The consensus is for a reading of 9.0, down from 12.5 last month (above zero indicates expansion).

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

----- Friday, July 19th -----
10:00 AM: Regional and State Employment and Unemployment (Monthly) for June 2013

by Calculated Risk on 7/13/2013 08:05:00 AM

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

Here is the unofficial problem bank list for July 12, 2013.

Changes and comments from surferdude808:

Very quiet week for the Unofficial Problem Bank List with no closures, mergers or new actions to report. The only change was the Federal Reserve terminating an action against Buckeye Community Bank, Lorain, OH ($150 million). After removal, the list holds 742 institutions with assets of $271.3 billion. A year ago, the list held 912 institutions with assets of $352.9 billion. Next Friday, we anticipate for the OCC to release its actions through mid-June 2013.

Note on the unofficial list:

Because the FDIC does not publish the official list, a proxy or unofficial list can be developed by reviewing press releases and published formal enforcement actions issued by the three federal banking regulators, reviewing SEC filings, or through media reports and company announcements describing that the bank is under a formal enforcement action. For the most part, the official problem bank list is comprised of banks with a safety & soundness CAMELS composite rating of 4 or 5 (the banking regulators use the FFIEC rating system known as CAMELS, which stands for the components that receive a rating including Capital adequacy, Asset quality, Management quality, Earnings strength, Liquidity strength, and Sensitivity to market risk. A composite rating is assigned from the components, but it does not result from a simple average of the components. The composite and component rating scale is from 1 to 5, with 1 being the strongest). Customarily, a banking regulator will only issue a safety & soundness formal enforcement when a bank has a composite CAMELS rating of 4 or 5, which reflects an unsafe & unsound financial condition that if not corrected could result in failure. There is high positive correlation between banks with a safety & soundness composite rating of 4 or worse and those listed on the official list. For example, many safety & soundness enforcement actions state in their preamble that an unsafe & sound condition exists, which is the reason for action issuance.

Since 1991, the banking regulators have statutorily been required to publish formal enforcement actions. For many reasons, the banking regulators have a general discomfort publishing any information on open banks especially formal enforcement actions, so not much energy is expended on their part ensuring the completeness of information in the public domain or making its retrieval simple. Given the difficulty for easy retrieval of all banks operating under a safety & soundness formal enforcement action, the unofficial list fills this void as a matter of public interest.

All of the banks on the unofficial list have received a safety & soundness formal enforcement action by a federal banking regulator or there is other information in the public domain such as an SEC filing, media release, or company statement that describe the bank being issued such an action. No confidential or non-public information supports any bank listed and a hypertext link to the public information is provided in the spreadsheet listing. The publishers make every effort to ensure the accuracy of the unofficial list and welcome all feedback and any credible information to support removal of any bank listed erroneously.

by Calculated Risk on 7/12/2013 08:48:00 PM

Cardiff Garcia writes at Alphaville (with some quotes from analysts): US housing’s resilience

The Q2 results from Wells Fargo and JP Morgan have again raised the issue of declining mortgage refinancings (if rates stay elevated), along with spurring more general worries about the housing market.
...
From a macro perspective, refinancings certainly help, but not as much as housing construction activity ...

This is a good excuse to excerpt from a post I wrote over a year ago: Home Sales Reports: What Matters

The key number in the existing home sales report is not sales, but inventory. It is visible inventory that impacts prices (although the "shadow" inventory will keep prices from rising).

When we look at sales for existing homes, the focus should be on the composition between conventional and distressed. Total sales are probably close to the normal level of turnover, but the composition of sales is far from normal - sales are still heavily distressed sales. Over time, existing home sales will probably settle around 5 million per year, but the percentage of distressed sales will eventually decline. Those looking at the number of existing home sales for a recovery in housing are looking at the wrong number. Look at inventory and the percent of conventional sales.

However, for the new home sales report, the key number is sales! An increase in sales adds to both GDP and employment (completed inventory is at record lows, so any increase in sales will translate to more single family starts).

It might be hard to believe, but earlier this year [in 2012] there was a debate on whether housing had bottomed. That debate is over - clearly new home sales have bottomed – and the debate is now about the strength of the recovery.

The composition of existing home sales has moved to more and more conventional sales - a good sign (I wrote the post above over a year ago).

As Garcia notes, the key for housing is construction activity (new home sales and housing starts) and I expect activity to continue to increase.

I wouldn't be surprised to see a decline in existing home sales as investor buying slows (and distressed sales slow). Some people will see that as a sign of weakness for "housing". They will be wrong.

by Calculated Risk on 7/12/2013 04:27:00 PM

Economist Tom Lawler sent me the table below of short sales, foreclosures and cash buyers for several selected cities in June. Lawler writes:

Note that in Phoenix, not only was the distressed sales share down sharply from a year ago, but also that the all-cash share of home sales – while still abnormally high – was also down significantly from a year ago. Overall sales were down 9.9% from last June, and it appears as if “investor” buying might be slowing down a bit.

Vegas’ distressed sales share last month was also down significantly from last June, but the all-cash share was actually up slightly. Overall sales were down 7.7% from last June. Investors still appear to be a dominant force in Vegas, while owner-occupant buying still appears weak.

From CR: Look at the two columns in the table for Total "Distressed" Share. In every area that has reported distressed sales so far, 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 in all of these cities.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Jun-13	Jun-12	Jun-13	Jun-12	Jun-13	Jun-12	Jun-13	Jun-12
Las Vegas	31.0%	34.2%	9.0%	27.8%	40.0%	62.0%	55.3%	54.0%
Reno	24.0%	37.0%	6.0%	21.0%	30.0%	58.0%
Phoenix	12.7%	32.8%	8.7%	14.1%	21.5%	46.8%	37.5%	46.9%
Sacramento	23.2%	31.0%	7.5%	19.7%	30.7%	50.7%	29.9%	33.4%
Minneapolis	6.0%	9.6%	15.7%	25.1%	21.7%	34.6%
Mid-Atlantic	7.6%	10.2%	6.3%	8.7%	13.9%	18.9%	15.9%	16.5%
Hampton Roads					22.8%	28.8%
Northeast Florida					35.6%	39.9%
Memphis*			18.2%	29.6%
Birmingham AL			19.4%	26.4%
Springfield IL			12.0%	9.2%
Tucson							32.8%	34.9%
Omaha							14.9%	14.4%
Toledo							28.1%	33.0%
Des Moines							17.5%	18.9%
*share of existing home sales, based on property records

by Calculated Risk on 7/12/2013 01:40:00 PM

From housing economist Tom Lawler:

Based on the limited number of local realtor/MLS reports I’ve seen so far, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 4.99 million in June, down 3.7% from May’s pace. While sales results varied massively across the country, there were several areas where YOY sales slowed by much more than “seasonals/day-counts” would have suggested. Note that I usually wait until I have a larger “sample” of regional reports, and I’ll update my estimate early next week.

On the inventory front, most but not all reports showed a monthly gain in listings in June, and just looking at listings data one would expect that national home-sales inventories in June [increased] by about a little more than 2%. Taking into account differences over time in NAR estimates vs. listings data, however, I’d estimate that the NAR estimate of the number of existing homes for sale in June will be unchanged from May, which would imply a YOY decline of 6.3%.

CR Note: The NAR is scheduled to report June existing home sales on Monday, July 22nd.

Based on Tom's estimates, this would put inventory at around 2.2 million for June, and months-of-supply around 5.3 (up from 5.1 months in May). This would still be a very low level of inventory - probably the lowest for May since 2002 or so - but a 6.3% year-over-year decline in inventory would be the smallest year-over-year decline since early 2011 (when inventory started to decline sharply).  Note: In May, inventory was down 10.1% compared to May 2012.   These smaller year-over-year declines suggest inventory bottomed earlier this year.

by Calculated Risk on 7/12/2013 10:05:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for July decreased slightly to 83.9 from the final June reading of 84.1.

This was below the consensus forecast of 84.1. Sentiment has generally been improving following the recession - with plenty of ups and downs - and one big spike down when Congress threatened to "not pay the bills" in 2011.  Note: Congress is starting to make threats again, luckily this only happens in non-election years.

by Calculated Risk on 7/12/2013 08:47:00 AM

A few excerpts from the JPMorgan investor presentation (Q2 results):

Mortgage Production pretax income of $582mm, down $349mm YoY, reflecting lower margins and higher expense, partially offset by higher volumes and lower repurchase losses

Mortgage originations of $49.0B, up 12% YoY and down 7% QoQ

Purchase originations of $17.4B, up 50% YoY and 44% QoQ
...
If charge-offs and delinquencies continue to trend down, there will be continued reserve reductions

Realized repurchase losses may be offset by reserve reductions based on current trends

If primary mortgage rates remain at or above current levels, refinance volumes and margins will be under pressure and Mortgage Production profitability will be challenged
emphasis added

Click on graph for larger image.

This graph is from the JPMorgan presentation this morning. The good news is mortgage delinquencies are trending down, and purchases originations are up sharply year-over-year.

However the refinance volumes and margins will probably fall off a cliff in Q3.

by Calculated Risk on 7/11/2013 11:38:00 PM

From Merrill Lynch:

It would be nice to be a fly on the wall the September FOMC meeting. There is now a strong consensus that QE tapering is inevitable in September. At that meeting the FOMC will be updating its forecasts. Hence, if they do taper, the Fed may have to explain why they are doing it despite the downward revisions in their forecast. That could be quite a tapering tap dance. This is one reason we expect the Fed to delay tapering to December.

It is clear tapering is coming soon, but I also think the Fed will wait until the December meeting.  I could change my mind based on incoming data.

Thursday:
• At 8:30 AM ET, the Producer Price Index for June. The consensus is for a 0.5% increase in producer prices (0.2% increase in core).

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for July). The consensus is for a reading of 84.1 unchanged from June.

by Calculated Risk on 7/11/2013 05:46:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (conventional, REOs, and short sales). Note: I used Sacramento because the data was available!

For a long time, not much changed. But over the last 2 years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market, although some of this is due to investor buying.  Other distressed markets are showing similar improvement.

Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In June 2013, 26.5% of all resales (single family homes) were distressed sales. This was down from 29.1% last month, and down from 54.2% in June 2012. This is the lowest percentage of distressed sales - and therefore the highest percentage of conventional sales - since the association started tracking the data.

The percentage of REOs was at 7.4%, and the percentage of short sales decreased to 19.0%. (the lowest percentage for short sales since August 2009).

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales recently (blue). 

Active Listing Inventory for single family homes increased 18.3% year-over-year in June.  This is the second consecutive month with a year-over-year increase in inventory - the first two months in two years - and suggests inventory probably bottomed in Sacramento. 

Cash buyers accounted for 29.9% of all sales, down from 33.6% last month (frequently investors).

Total sales were down 12% from June 2012, but conventional sales were up 30% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increasing.

We are seeing a similar pattern in other distressed areas, with a move to more conventional sales, and a shift from REO to short sales.  

Possibly the most important number in the release this month was the year-over-year increase in active inventory.  This suggests price increases will slow in Sacramento, and I expect to see a similar pattern in other areas.