by Calculated Risk on 8/20/2013 11:13:00 AM

From Zillow: Housing Conversation Turns to the Future as Market Turns in Another Strong Month in July

The national housing market recovery proved it is on firm ground in July, as home values rose 6 percent year-over-year to a Zillow Home Value Index of $161,600, the first time home values have appreciated at an annual pace of 6 percent or higher since August 2006.

July marked the 14th straight month of annual home value appreciation, according to the July Zillow Real Estate Market Reports. Home values were up 0.4 percent in July compared with June. ...

“After three straight months of annual home value appreciation above 5 percent, the U.S. housing market recovery has proven it is on very sound footing. We have entered a new phase in the recovery when we can begin to turn away from ugly recent history and turn toward what the housing market of the future will look like and how it will act. ...” said Zillow Chief Economist Dr. Stan Humphries. ...

For the 12-month period from July 2013 to July 2014, U.S. home values are expected to rise another 4.8 percent to approximately $169,308, according to the Zillow Home Value Forecast.

The Zillow data is for July.

The Case-Shiller house price indexes for June will be released Tuesday, August 27th.   Zillow has argued that the Case-Shiller numbers overstate the recent price increases: "The Case-Shiller indices are giving an inflated sense of national home value appreciation because they are biased toward the large, coastal metros currently seeing such enormous home value gains, and because they include foreclosure resales."

Also Zillow has started forecasting the Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.  NOTE: Here is a repeat of the table I posted a few weeks ago:

Zillow Predicts Another 12% Annual Increase in Case-Shiller Indices for June. The following table shows the Zillow forecast for the June Case-Shiller index.

Zillow June Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	June 2012	154.94	154.07	142.37	141.37
Case-Shiller (last month)	May 2013	169.69	170.62	156.14	157.01
Zillow Forecast	YoY	12.0%	12.0%	12.1%	12.1%
	MoM	2.2%	1.2%	2.3%	1.1%
Zillow Forecasts1		173.5	172.6	159.7	158.6
Current Post Bubble Low		146.46	149.61	134.07	136.85
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		18.4%	15.4%	19.1%	15.9%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 8/20/2013 08:46:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth in July again below average

The Chicago Fed National Activity Index (CFNAI) edged up to –0.15 in July from –0.23 in June.

The index’s three-month moving average, CFNAI-MA3, increased to –0.15 in July from –0.24 in June, marking its fifth consecutive reading below zero. July’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was below the historical trend in July (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 8/19/2013 08:45:00 PM

The NAR is scheduled to report July existing home sales on Wednesday. The consensus is for sales of 5.13 million on seasonally adjusted annual rate (SAAR) basis. However economist Tom Lawler is estimating the NAR will report a July sales rate of 5.33 million.  So it is likely that the NAR will report above consensus sales.

However I wouldn't read too much into an above consensus report.  I suspect some people pushed to close in July before their mortgage rate "lock" expired, and my very early guess is existing home sales will decline in August.

Of course what really matters in the NAR report is inventory and months-of-supply.  It is mostly visible inventory that impacts prices, and it appears inventory bottomed earlier this year.

Watching inventory during the bubble helped me call the top of the housing market.   And watching inventory decline helped me call the bottom for prices (see Feb 2012: The Housing Bottom is Here), and now inventory is suggesting price increases will slow.   Below is a table of the year-over-year change in inventory since January 2012.  Notice that the year-over-year change will probably turn positive soon.  Inventory is still very low, but this will be a key change to watch.

Year-over-year Change in Inventory
	YoY % Change
Jan-12	-19.9%
Feb-12	-20.3%
Mar-12	-23.4%
Apr-12	-21.9%
May-12	-21.1%
Jun-12	-25.0%
Jul-12	-23.8%
Aug-12	-20.5%
Sep-12	-25.2%
Oct-12	-23.0%
Nov-12	-24.0%
Dec-12	-21.1%
Jan-13	-24.0%
Feb-13	-20.8%
Mar-13	-16.8%
Apr-13	-14.0%
May-13	-13.0%
Jun-13	-7.6%
Jul-13

Tuesday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for July will be released. This is a composite index of other data.

by Calculated Risk on 8/19/2013 05:20:00 PM

Weekly Update: One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'm tracking inventory weekly in 2013. 

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for June).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory increased more than the normal seasonal pattern, and finished the year up 7%. However in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

So far in 2013, inventory is up 21.7%, and there might be some further increases over the next few weeks.  It is important to remember that inventory is still very low, and is down 5.7% from the same week last year according to Housing Tracker.  

This strongly suggests inventory bottomed early this year.   I expect inventory to be up year-over-year very soon (maybe in September), and I also expect the seasonal decline to be less than usual at the end of the year.  This increase in inventory also means price increases will slow.

by Calculated Risk on 8/19/2013 01:10:00 PM

Fast FT has an excerpt from a Deutsche Bank research note: US jobless claims hold signs for the second half

So far, rises in wages and salaries have barely been able to outpace the combined effect of inflation and the higher payroll tax introduced at the start of the year.

Deutsche expects that could change:

If the recent four-week average (332,000) on claims is sustained over the entirety of the third quarter, this should be consistent with an acceleration in wages and salary income toward 5.7% by yearend—which would significantly outpace the drag from inflation and the payroll tax

excerpt with permission

The following graph is from the research note. This shows that the year-over-year change in weekly unemployment claims (inverted) typically leads wage growth. However, I think wage growth will remain sluggish with the high unemployment rate.

by Calculated Risk on 8/19/2013 10:16:00 AM

From the BLS: Jobless rates up in 28 states, down in 8 in July; payroll jobs up in 32 states, down in 17

Regional and state unemployment rates were little changed in July. Twenty-eight states and the District of Columbia had unemployment rate increases, 8 states had decreases, and 14 states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada had the highest unemployment rate among the states in July, 9.5 percent. The next highest rate was in Illinois, 9.2 percent. North Dakota continued to have the lowest jobless rate, 3.0 percent.

Click on graph for larger image in graph gallery.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement - Michigan and Nevada have seen the largest declines and many other states have seen significant declines (California, Florida and more).

The states are ranked by the highest current unemployment rate. No state has double digit unemployment and the unemployment rate is at or above 9% in only two states: Nevada and Illinois, and Mississippi.  This is the fewest states with 9% unemployment since 2008.

The second graph shows the number of states with unemployment rates above certain levels since January 2006. At the worst of the employment recession, there were 9 states with an unemployment rate above 11% (red).

Currently only two states have an unemployment rate above 9% (purple), seventeen states above 8% (light blue), and 28 states above 7% (blue).

by Calculated Risk on 8/18/2013 07:57:00 PM

From Carolyn Said at the San Francisco Chronicle: Bay Area rental pendulum swings to condos

Some condominium complexes opened at the worst possible time - in the depths of the real estate downturn when home buyers were few and far between. They coped by becoming for-rent apartment buildings instead. But now, as the housing recovery accelerates, several East Bay and South Bay developments are switching back to for-sale condos.
...
For instance, the 125-unit Broadway Grand in Oakland, developed by Signature Properties, first opened as a condo complex, sold 17 units, and then switched to rentals as the market tanked ... Last year it went condo again, and now has sold all but 11 of its units.

Similarly, the Skyline in San Jose with 121 units is now switching to condos after opening as rentals during the downturn. In Emeryville, the 424-unit Bridgewater is switching from rentals to condos. The current phase II, which started in June with 174 homes ranging from $185,000 to $450,000, is finding a receptive audience, said Alan Mark, president of the Mark Co., which is marketing the complex.

The conversion of these condo projects to apartments was an interesting story during the housing bust (and a way to take excess "for sale" inventory off the market) - and now they are converting back to condos (taking advantage of the lack of "for sale" inventory). This is similar to a story by Cale Ottens at the LA Times last week: Condo conversions inch up in Los Angeles. 

by Calculated Risk on 8/18/2013 03:11:00 PM

Another update on hotels from HotelNewsNow.com: STR: US results for week ending 10 August

In year-over-year comparisons, occupancy rose 1.9 percent to 72.7 percent, average daily rate increased 4.8 percent to US$112.48 and revenue per available room grew 6.8 percent to US$81.74.

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.

Through August 10th, the 4-week average of the occupancy rate is slightly higher than the same period last year and is tracking the pre-recession levels.  This is probably the high for the 4-week average of the occupancy rate.  The occupancy rate will decrease over the next several weeks as the summer travel season ends - however, overall, this has been a decent year for the hotel industry.

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

by Calculated Risk on 8/18/2013 09:45:00 AM

Last week I posted an animation of the age and distribution of the U.S. population over time. The animations used actual data from 1900 to 2010, and Census Bureau projection from 2015 through 2060.

I mentioned that the ratio of total Americans in the prime working age will be about the same in 2060 as in 1900. The graph below shows the percent of population in the prime working age from 1900 to 2060 (I used two definitions of prime working age "25 to 54" and "25 to 59". Over time, the prime working age has expanded to included the "55 to 59" age group (red line).

Of course in the 1900s, the non-prime working age was mostly children, and in the 2000s, the non-prime working age will be more evenly split between children and the elderly. This table shows the percent of the population under 25, 25 to 54, and over 55.

Percent of U.S. Population by Age selected Decades
	1900	2000	2060
Under 25 Years Old	54.0%	35.3%	29.6%
Percent 25 to 54 Years Old	36.6%	43.6%	37.3%
Percent 55+ Years Old	9.4%	21.1%	33.1%

Click on graph for larger image.
The blue line is the percent of the total population in the 25 to 54 age group. The red line is for 25 to 60.

The prime working age has shifted over time. In 1900, the prime working age probably included the 20 to 24 age group, and maybe even many people in the 16 to 19 age group. By 2060, the prime working age may expand to 25 to 64.

by Calculated Risk on 8/17/2013 01:41:00 PM

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

Here is the unofficial problem bank list for August 16, 2013.

Changes and comments from surferdude808:

The OCC was busy this past month mostly terminating a number of enforcement actions. They were responsible for five of the seven terminations this week and the sole addition. After these changes, the Unofficial Problem Bank List holds 717 institutions with assets of $253.9 billion. A year ago, the list held 899 institutions with assets of $347.5 billion.

Actions were terminated against Citizens Union Bank of Shelbyville, Shelbyville, KY ($547 million); First Federal Savings and Loan Association of McMinnville, McMinnville, OR ($352 million); First National Bank of the Rockies, Grand Junction, CO ($318 million); Bank of Virginia, Midlothian, VA ($230 million Ticker: BOVA); Franklin Community Bank, National Association, Rocky Mount, VA ($179 million); The First National Bank of Polk County, Cedartown, GA ($156 million Ticker: SCSG); and Ripley Federal Savings Bank, Ripley, OH ($67 million).

The addition this week was Ponce de Leon Federal Bank, Bronx, NY ($760 million).

There is no news to pass along on Capitol Bancorp, Ltd. and the remaining banks they control. Next week the FDIC may release industry quarterly performance for the second quarter and the Official Problem Bank figures. At the first quarter release, the difference between the official and unofficial count was 149 but it has been narrowing after peaking at 185 a year ago. This quarter, it is estimated the difference has narrowed further to around 135. With there being two more Fridays in the month, it is likely the FDIC will wait until the second Friday to release their enforcement action activity through July 2013.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now back down to 717.