by Calculated Risk on 11/04/2013 10:01:00 PM

Tuesday:
• At 10:0 AM ET, the ISM non-Manufacturing Index for October. The consensus is for a reading of 54.5, up slightly from 54.4 in September. Note: Above 50 indicates expansion, below 50 contraction.

• Also at 10:00 AM, the Trulia Price Rent Monitors for October. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

• Also at 10:00 AM, the Q3 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to report on the homeownership rate, and the homeowner and rental vacancy rates. However, this report doesn't track with other measures (like the decennial Census and the ACS).

by Calculated Risk on 11/04/2013 06:49:00 PM

Here is another weekly update on housing inventory ... for the third consecutive week, housing inventory is up year-over-year.  This suggests inventory bottomed early this year.

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 September).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years.

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 now above the same week in 2012 (red is 2013, blue is 2012).

We can be pretty confident that inventory bottomed early this year, and I expect the seasonal decline to be less than usual at the end of the year - so the year-over-year change will continue to increase. 

Inventory is still very low, but this increase in inventory should slow house price increases.

by Calculated Risk on 11/04/2013 02:00:00 PM

From the Federal Reserve: The October 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices

The October 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. Domestic banks, on balance, reported having eased their lending standards and having experienced little change in loan demand, on average, over the past three months. The survey contained two sets of special questions. Motivated by the increase in long-term interest rates since the spring, the first set of questions asked banks to describe whether they had experienced changes in the volume of applications for residential mortgages and whether they had changed lending policies for new home-purchase loans. The second set of questions examined the standards and terms on subprime auto loans over the past 12 months. This summary is based on the responses from 73 domestic banks and 22 U.S. branches and agencies of foreign banks.

Regarding loans to businesses, the October survey results generally indicated that banks eased their lending policies for commercial and industrial (C&I) loans and experienced little change in demand for such loans over the past three months.2 All domestic banks that eased their C&I lending policies cited increased competition for such loans as an important reason for having done so. ...

The survey results also indicated that banks, on average, did not substantially change standards or terms on lending to households. Modest net fractions of respondents reported having eased standards on prime residential mortgage loans, with a few large banks indicating they had eased standards on those loans.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

This graph shows the change in lending standards and for CRE (commercial real estate) loans.

Banks are loosening their standards for CRE loans, and for various categories of CRE (right half of graph).

The second graph shows the change in demand for CRE loans.

Banks are seeing a pickup in demand for all categories of CRE.

This suggests (along with the Architecture Billing Index) that we will see an increase in commercial real estate development in the near future.

by Calculated Risk on 11/04/2013 11:28:00 AM

St Louis Fed President James Bullard was on CNBC this morning. He made a few key points:

1) Inflation is too low, and Bullard would like to see "tangible evidence" that inflation is moving back towards the Fed's goal of 2%. (Note: This was one of the four points I mentioned yesterday for the Fed to start tapering in December).

2) Bullard thinks the Fed should mostly ignore the "bickering in Washington".  From MarketWatch:

“It looks like they will be bickering in Washington for a long time to come. So I don’t think we can afford to wait until the political waters are completely calm before we decide to make a decision,” Bullard said.

My view is the FOMC will be more inclined to taper if the budget conference committee reaches an agreement by December 13th.

3) Bullard says the October employment report will be "hard to interpret". I think we will see a sharp increase in the unemployment rate, but any increase related to the government shutdown should be unwound in the November report - so I don't think anyone will panic if the unemployment rate jumps from 7.2% to say 7.5% (since there was an obvious reason).    Payroll growth will probably be lower in October too.

by Calculated Risk on 11/04/2013 08:15:00 AM

LPS released their Mortgage Monitor report for September today. According to LPS, 6.46% of mortgages were delinquent in September, up from 6.20% in August. LPS reports that 2.63% of mortgages were in the foreclosure process, down from 3.86% in September 2012.

This gives a total of 9.03% delinquent or in foreclosure. It breaks down as:

• 1,935,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,331,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,328,000 loans in foreclosure process.

For a total of ​​4,593,000 loans delinquent or in foreclosure in September. This is down from 5,640,000 in September 2012.

Click on graph for larger image.

This graph from LPS shows percent of loans delinquent and in the foreclosure process over time.

From LPS:

• Delinquencies increased, but in-line with seasonal pattern

• Foreclosure inventories continue to improve with first time foreclosure starts at multi-year lows

Delinquencies and foreclosures are still high, but moving down - and might be back to normal levels in a couple of years.



The second graph from LPS shows new problem loans. There are seriously delinquent loans that were current 6 months ago. This is good news going forward (although the lenders are still working through the backlog, especially in judicial foreclosure states).

There is much more in the mortgage monitor.

by Calculated Risk on 11/03/2013 08:42:00 PM

Monday:
• Early, the LPS September Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for both August and September. The consensus is for a 0.3% increase in August orders, and a 1.7% increase in September orders.

• At 2:00 PM, the October 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve. This might show some slight loosening in lending standards.

Weekend:
• Schedule for Week of November 3rd

• Will the Fed "Taper" in December?

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up slightly and DOW futures are up 15 (fair value).

Oil prices are down with WTI futures at $94.60 per barrel and Brent at $105.90 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.26 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 11/03/2013 05:40:00 PM

Every year I track seasonal retail hiring for hints about holiday retail sales.  At the bottom of this post is a graph showing the correlation between seasonal hiring and retail sales.

First, here is the NRF forecast for this year: NRF Forecasts Marginal Sales Gains This Holiday Season

NRF expects sales in the months of November and December to marginally increase 3.9 percent to $602.1 billion, over 2012’s actual 3.5 percent holiday season sales growth. The forecast is higher than the 10-year average holiday sales growth of 3.3 percent.

According to NRF, retailers are expected to hire between 720,000 and 780,000 seasonal workers this holiday season, in line with the actual 720,500 they hired in 2012, which was a 13 percent year-over-year increase from 2011.

Note: NRF defines retail sales as including discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive dealers, gas stations, and restaurants.

Here is a graph of retail hiring for previous years based on the BLS employment report:

Click on graph for larger image.

This graph shows the historical net retail jobs added for October, November and December by year.

Retailers hired about 750 thousand seasonal workers last year (using BLS data, Not Seasonally Adjusted).  The NRF is expecting retail hiring at about the same rate this year.

The scatter graph is for the years 1993 through 2012 and compares October retail hiring with the real increase (inflation adjusted) for retail sales (Q4 over previous Q4).

In general October hiring is a pretty good indicator of seasonal sales. R-square is 0.72 for this small sample. Note: This uses retail sales in Q4, and excludes autos, gasoline and restaurants.

This suggests retailers would normally have hired around 150 thousand seasonal employees in October.  However this year, with the shutdown, this relationship might not be as useful (we might have to wait for the November data).

by Calculated Risk on 11/03/2013 09:05:00 AM

The consensus seems to be that the FOMC will wait until 2014 to start to taper QE purchases. As an example, from Michael Hanson at Merrill Lynch:

The thresholds to taper are not as high as some think, but we see a relatively low chance that the data will be strong enough to allow tapering in time for the holidays.
...
[T]he Fed needs to see the economy move toward the “tolerable twos” to taper: growth in the upper-2% range, closer to job gains of 200,000 per month, and inflation converging (even if slowly) toward the 2% target. That is a heavy burden by the December meeting, but if the post-shutdown data rebound, January remains possible — as do the next several meetings afterwards. And as we have said before, time will tell.

And analysts at Nomura have put the odds of a "taper" in December at just 15%, and they view March 2014 as the most likely meeting for the FOMC to start reducing asset purchases.

So what would it take for the FOMC to taper in December?

First we have to remember the FOMC was close to tapering in September. From the September FOMC statement:

Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.

Although not mentioned in the FOMC statement, at the September press conference Fed Chairman Ben Bernanke suggested that one of the reasons the Fed didn't taper was that they wanted to see the results of the budget negotiations.   Now those "negotiations" are behinds us (for now), and although the government shutdown was expensive and dumb, at least there wasn't any additional fiscal restraint added.

Here is what I think it would take to taper at the meeting of December 17th and 18th.

1) The unemployment rate probably increased sharply in October (due to the shutdown), but the impact of the shutdown will be reversed in the November report that will be released on Friday December 6th.  If the unemployment rate declines back to 7.2% or so in November (the September rate), then the FOMC might taper.

2) As Merrill's Hanson noted, the FOMC would probably also be looking to see employment growth close to 200,000 in the November report.   If the year-over-year change in employment is still around 2.2 million for November, the FOMC might taper.

3) The FOMC is also concerned that inflation is too low. From the October FOMC statement:

The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.

The PCE price index for October will be released on December 5th (the September PCE index will be released this week).  If PCE prices are moving back towards 2%, the FOMC might taper.  Note: CPI for November will be released on December 17th and might influence the decision.

4) On fiscal policy, the budget conference committee is scheduled to present an agreement on December 13th (just before the FOMC meeting).  The committee is expected to play "small ball", so it is possible an agreement will be reached.  If a reasonable agreement is reached (hopefully reduce the impact of the sequester in 2014), then the FOMC might be more inclined to taper.  If it appears that the House might shutdown the government again, the FOMC will be inclined to wait.

There are many key releases right at the beginning of December, and we know the Fed is "data dependent".  So here is what the FOMC would like to see to start tapering: 1) the unemployment rate fall to 7.2% in the November report, 2) Employment up about 2.2 million year-over-year in November, 3) inflation increasing toward 2% target, and 4) some sort of fiscal agreement by Dec 13th.  All possible.

by Calculated Risk on 11/02/2013 11:06:00 AM

The key reports this week are Q3 GDP on Thursday, and the October employment report on Friday. 

Other key reports include the ISM service index on Tuesday, and the October Personal Income and Outlays report on Friday.

The Fed's October Senior Loan Officer Survey will be released on Monday.

----- Monday, November 4th -----
Early: The LPS September Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for both August and September. The consensus is for a 0.3% increase in August orders, and a 1.7% increase in September orders.

2:00 PM ET: The October 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.  This might show some slight loosening in lending standards.

----- Tuesday, November 5th-----
10:00 AM: ISM non-Manufacturing Index for October. The consensus is for a reading of 54.5, up slightly from 54.4 in September. Note: Above 50 indicates expansion, below 50 contraction.

10:00 AM: Trulia Price Rent Monitors for October. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

10:00 AM: Q3 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to report on the homeownership rate, and the homeowner and rental vacancy rates. However, this report doesn't track with other measures (like the decennial Census and the ACS).

----- Wednesday, November 6th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Conference Board Leading Indicators for September. The consensus is for a 0.7% increase in this index.

----- Thursday, November 7th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 335 thousand from 340 thousand last week.

8:30 AM: Q3 GDP (advance estimate). This is the advance estimate of Q3 GDP from the BEA. The consensus is that real GDP increased 2.0% annualized in Q3.

3:00 PM: Consumer Credit for September from the Federal Reserve. The consensus is for credit to increase $12.0 billion in September.

----- Friday, November 8th -----
8:30 AM: Employment Report for October. The consensus is for an increase of 120,000 non-farm payroll jobs in October, down from the 148,000 non-farm payroll jobs added in September.

The consensus is for the unemployment rate to increase to 7.3% in October, although the rate could spike higher to 7.4% or 7.5% due to the government shutdown based on the BLS method.  Any sharp increase in the unemployment rate due to the shutdown should be reversed in the November report.

The following graph shows the percentage of payroll jobs lost during post WWII recessions through September.

The economy has added 7.6 million private sector jobs since employment bottomed in February 2010 (7.0 million total jobs added including all the public sector layoffs).

There are still 1.3 million fewer private sector jobs now than when the recession started in 2007.

8:30 AM ET: Personal Income and Outlays for October. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for November). The consensus is for a reading of 75.0, up from 73.2 in October.

by Calculated Risk on 11/02/2013 08:15:00 AM

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

Here is the unofficial problem bank list for November 1, 2013.

Changes and comments from surferdude808:

Other than an unusual bank closing on Wednesday, the week was fairly routine for the Unofficial Problem Bank list with seven other removals. After the removals, the list holds 662 institutions with assets of $229.4 billion. A year ago, the list had 861 institutions with assets of $328.4 billion.

This Wednesday, the state of Florida and the FDIC closed Bank of Jackson County, Graceville, FL ($25 million). Apparently, the bank's board of directors had made a legal filing delaying the closing. An appeal period lapsed on Wednesday, which allowed the closing to proceed.

Actions were terminated against Hudson Valley Bank, National Association, Stamford, CT ($2.98 billion Ticker: HVB); Advantage Bank, Cambridge, OH ($756 million Ticker: CAFI); and First Community Bank, Glasgow, MT ($231 million).

Four banks found merger partners including Security Savings Bank, SSB, Southport, NC ($220 million); Diamond Bank, FSB, Schaumburg, IL ($164 million); United Commerce Bank, Bloomington, IN ($128 million); and Bank of Indiana, National Association, Dana, IN ($91 million).

There is nothing new to pass along on Capitol Bancorp, Ltd.