by Calculated Risk on 10/15/2013 08:36:00 AM

From the NY Fed: Empire State Manufacturing Survey

The October 2013 Empire State Manufacturing Survey indicates that business conditions held steady for New York manufacturers. The general business conditions index fell 5 points to 1.5. The new orders index rose five points to 7.8 ...

Labor market conditions were also steady, with the index for number of employees falling four points to 3.6 and the average workweek index inching up to 3.6. Indexes for the six month outlook continued to convey a strong degree of optimism about future business conditions. The future general business conditions index held near last month’s year-and-a-half high, at 40.8. The indexes for expected new orders and expected shipments also remained at strong levels.
emphasis added

This is the first of the regional surveys for October.  The general business conditions index was below the consensus forecast of a reading of 7.0, but shows continued modest expansion.

by Calculated Risk on 10/14/2013 09:31:00 PM

From the NY Times: Senators Near Fiscal Deal, but the House Is Uncertain

Senate leaders neared the completion Monday night of a bipartisan deal to raise the debt ceiling and end the government shutdown ... Negotiators talked into the evening as senators from both parties coalesced around a plan that would lift the debt limit through Feb. 7, pass a resolution to finance the government through Jan. 15 and conclude formal discussions on a long-term tax and spending plan no later than Dec. 13 ...

As they drafted their deal, Senate negotiators in both parties were hoping that House Republican leaders would have no choice but to let a bipartisan agreement come to a vote, even if it could pass only with votes from Democrats and a minority of the Republican majority.

Unfortunately this is the reference week for the BLS - the week the data is gathered for the October employment report -so the data might not be gathered with the government still shutdown.

Tuesday:
• At 8:30 AM ET, the NY Fed Empire State Manufacturing Survey for October will be released. The consensus is for a reading of 7.0, up from 6.3 in September (above zero is expansion).

by Calculated Risk on 10/14/2013 05:46:00 PM

From Nick Timiraos at the WSJ: Home Sales, Prices Slowing in Bust-and-Boom Markets

The sharp home-price rally in some of the hardest-hit housing markets is likely to fade in the coming months amid a pullback in investor purchases and steady increases in the number of homes listed for sale.
...
The rally began in early 2012 after investors aggressively bought up cheap foreclosed homes that can be rehabbed and flipped to end users or rented out to those who aren’t ready or able to buy, clearing an overhang of distressed properties. Meanwhile, many traditional buyers couldn’t sell their properties because they owed more than their homes were worth, keeping inventories very lean. As home prices warmed up and interest rates fell to rock-bottom levels, traditional buyers got in on the game, releasing pent-up demand.

Now, housing data is showing that the brakes could soon hit such sharp gains

Timiraos presents some data for Phoenix, Sacramento and Las Vegas. The increase in inventory, and decline in all-cash buyers in these areas is something Tom Lawler has been tracking too. This suggests price increases in these areas should slow.

by Calculated Risk on 10/14/2013 03:13:00 PM

Here is another weekly update on housing inventory: 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 August).  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).

Click on graph for larger image.

This graph shows the Housing Tracker reported weekly inventory for the 54 metro areas for 2010, 2011, 2012 and 2013.

In 2011 and 2012, inventory only increased slightly early in the year and then declined significantly through the end of each year.

Inventory in 2013 is increasing, although still 1.0% below the same week in 2012.

This strongly suggests inventory bottomed early this year, and I expect inventory to be up year-over-year very soon, and I also expect the seasonal decline to be less than usual at the end of the year.  Inventory is still very low, but this increase in inventory should slow house price increases.

by Calculated Risk on 10/14/2013 12:10:00 PM

This is what I'd like to see (and many other analysts and economists would too):

• Eliminate the "debt ceiling". It is superfluous. As former Fed Chairman Alan Greenspan and others have said, the "debt ceiling" is just arithmetic. We have approved expenditures. We have revenue. The shortfall is borrowed. If we don't get rid of the debt ceiling, increase the level through 2014.

• Pass a Continuing Resolution (CR) for fiscal 2014 that reduces the impact of the sequester. As Republican advisor Mark Zandi said last week:

As part of any budget deal, lawmakers should reverse the sequester. The second year of budget sequestration will likely have greater consequences than the first, affecting many government programs in ways that nearly all agree are not desirable. A sizable share of the sequestration cuts to date has involved one-off adjustments, but future cuts will have to come from lasting reductions in operational budgets.

• In the long run (not this decade), the US will be challenged by health care costs.  This requires some adjustments to both spending and revenue.  As Mark Zandi said last week:

It would of course also be desirable for lawmakers to address the nation’s long-term fiscal challenges. ... Both cuts in government spending and increases in tax revenues will be necessary to reasonably solve these long-term fiscal problems.

As I noted last week, perhaps another super-committee with long term consequences if the committee fails (not more short term cuts like the sequester). The consequences should be distasteful to both parties - and both cut spending and raise revenue in the long term so there is some motivation for the committee to reach agreement.

• It is important to note that the deficit is declining, and declining rapidly. Over the next few years (the short run), the deficit will not be a problem (great news!), as long as the economy continues to grow (government shutdowns and threats to not "pay the bills" hurt the short run).

Final comment: It is sad, but predictable, that this shutdown and threat to not "pay-the-bills" is happening now.  As Goldman Sachs chief economist Jan Hatzius wrote in April:

The federal budget deficit is shrinking rapidly. ... [T]here is still a great deal of room for the economic recovery to reduce the deficit for cyclical reasons. ... In our view, the most important implication from the reduction in the budget deficit for the near-term economic outlook is reduced pressure for further fiscal retrenchment.

In another year, the House will have lost the short term deficit as an argument (actually for those paying attention, the short term deficit is no longer a serious concern). However this doesn't mean we shouldn't pay attention to the long term issues, and maybe we could find some common ground on moving forward on those issues - without hurting the short term.

by Calculated Risk on 10/14/2013 08:48:00 AM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

Below is another update to the long term graph of the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 32.5% from the peak, and is still declining (down 3.7% year-over-year). The number of salesperson's licenses has fallen to May 2004 levels.

Brokers' licenses are only off 8.3% and have only fallen to late 2006 levels - but are still slowly declining (down 1.3% year-over-year).

Click on graph for larger image.

So far there is no sign of a new bubble in real estate agents!

by Calculated Risk on 10/13/2013 08:43:00 PM

From MarketWatch: Shutdown puts health of economy on ice

Some economists figure the dispute will only shave a few ticks off growth in the fourth quarter, which began at the start of October. Others see a deeper impact owing to the hesitancy of consumers and businesses to spend in the midst of yet another episode of political brinkmanship.

The scarcity of economic data also makes it harder for the Federal Reserve to figure out its next step.

Total damage has to be in the billions already ... where do we send the bill?

Weekend:
• Schedule for Week of October 13th

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 13 and DOW futures are down 101 (fair value).

Oil prices are down with WTI futures at $101.55 per barrel and Brent at $111.03 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.37 per gallon.  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 10/13/2013 05:02:00 PM

From Kasie Hunt of NBC News:

Senate is adjourned until 2 p.m. Monday.

From John Harwood of CNBC:

Aide: Senate D leaders optimistic of deal after "productive" Reid-McConnell talk. Haggling over length of CR/debt hike but expect to resolve

Currently the Democrats want a shorter deal (like 6 weeks) for both a continuing resolution (CR) and to pay-the-bills (aka raise "debt ceiling").    The reason for a shorter deal is the Democrats are concerned about sequestration cuts in the Budget Control Act of 2011 (BCA) that will take effect in 2014.  

by Calculated Risk on 10/13/2013 09:46:00 AM

From Roger Vincent at the LA Times: Southern California office rental market improves slightly

Office vacancy in Los Angeles, Orange, Riverside and San Bernardino counties was 17.5% at the end of the third quarter, Cushman & Wakefield said, down from 18.4% a year earlier. Landlords asked for average monthly rents of $2.33 per square foot, an increase of 5 cents from the same period last year.
...
"I don't see a significant demand for additional office space and increasing rents in coming quarters," [broker David Kutzer of Newmark Grubb Knight Frank] said. "We're not turning the corner to what we consider really healthy markets, and we're nowhere near the low vacancy that will result in new construction of office space."

This is an important point - the vacancy rate for office buildings is slowly declining, however it is not close to the level that will lead to significant more investment (important for employment and GDP).

Note: Reis reported the national office vacancy rate (large cities) declined in Q3 to 16.9% from 17.0% in Q2. I'd post a graph comparing the office vacancy rate and private fixed investment in offices, but the data for office investment is currently not available due to the government shutdown.

by Calculated Risk on 10/12/2013 03:07:00 PM

From California State Controller: Bottom Line: What the Numbers Mean

State coffers welcomed a jump in revenues in September that offset shortfalls in the prior two months. With spending holding in line with estimates, California ended the first quarter of its fiscal year on track with estimates contained in the 2013-14 Budget Act.

September saw total revenues move past expectations by $427 million, or 5.3%. Personal income taxes, which are California’s dominant revenue source, lurched past monthly projections by 9.5%. ... Retail sales tax receipts also beat budget estimates by close to double digits in September, as California consumers resumed shopping with the support of more jobs, higher home prices, and a rising stock market.
...
California has completed the first leg of the fiscal year with a good pace. Both revenues and state spending have stayed close within their designated lanes, almost exactly matching estimates contained in the 2013-14 Budget Act. Revenue collections could be challenged in the coming months by any negative developments related to jobs, interest rates, stock prices, and home values. Spending will be impacted by demands for education, health care, social services, and other line items. Decisions or a stalemate in Washington related to defense outlays, research funds, Medicare, and other federal programs could ripple back to California in major ways.
emphasis added

The 4+ year drag from the cutbacks at the state and local governments levels are mostly over.  However the Federal government shutdown could start negatively impacting state budgets soon.  Just as the states are starting to recover ... the House pulls the football away.