by Calculated Risk on 12/04/2013 08:30:00 AM

The Department of Commerce reported this morning:

[T]otal October exports of $192.7 billion and imports of $233.3 billion resulted in a goods and services deficit of $40.6 billion, down from $43.0 billion in September, revised. October exports were $3.4 billion more than September exports of $189.3 billion. October imports were $1.0 billion more than September imports of $232.3 billion.

The trade deficit was close to the consensus forecast of $40.2 billion.

The first graph shows the monthly U.S. exports and imports in dollars through October 2013.

Click on graph for larger image.

Both imports and exports increased in October.  

Exports are 16% above the pre-recession peak and up 5% compared to October 2012; imports are just above the pre-recession peak, and up about 4% compared to October 2012. 

The second graph shows the U.S. trade deficit, with and without petroleum, through October.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $99.96 in October, down from $102.00 in September, and up slightly from $99.76 in October 2012.  Prices will probably decline further in November.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China decreased to $28.9 billion in October, down from $29.4 billion in October 2012.  A majority of the trade deficit is related to China.

Overall it appears trade is picking up a little again.

by Calculated Risk on 12/04/2013 08:19:00 AM

From ADP:

Private sector employment increased by 215,000 jobs from October to November, according to the November ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Mark Zandi, chief economist of Moody’s Analytics, said, "The job market remained surprisingly resilient to the government shutdown and brinkmanship over the treasury debt limit. Employers across all industries and company sizes looked through the political battle in Washington. If anything, job growth appears to be picking up.”

This was above the consensus forecast for 185,000 private sector jobs added in the ADP report. 

Note: ADP hasn't been very useful in predicting the BLS report on a monthly basis. The BLS report for November will be released on Friday.

by Calculated Risk on 12/04/2013 07:03:00 AM

First, an interesting article from Shayndi Raice at the WSJ: Smaller Mortgage Lenders Lead Field

As of the third quarter, smaller mortgage players held a 60% market share of the U.S. origination market, up from 39% in 2009, according to industry publication Inside Mortgage Finance.
...
The midsize and smaller players have grown despite tightening their underwriting standards, much like larger banks have since the financial crisis. But the smaller banks' capital rules aren't as stringent as those that make mortgages a costly enterprise for the biggest firms.

This shift in market share has possible implications for the MBA purchase index. Back in 2007, the MBA index started to increase - and some observers like Alan Greenspan thought this meant the housing bust was over. I pointed out back then that the index was being distorted by a shift from smaller lenders to larger lenders (the smaller lenders were going out of business). The MBA index includes many lenders, but is skewed towards the larger lenders.

Now the index is probably understating the activity in the market - because there is a market shift from large lenders to smaller lenders.

From the MBA: Mortgage Applications Fall During Holiday-Shortened Week

Mortgage applications decreased 12.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 29, 2013. This week’s results include an adjustment for the Thanksgiving holiday. ...

The Refinance Index decreased 18 percent from the previous week and is at its lowest level since the week ending September 6, 2013. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.51 percent from 4.48 percent, with points increasing to 0.38 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down sharply - and down 69% from the levels in early May.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 8% from a year ago.

by Calculated Risk on 12/03/2013 07:50:00 PM

From Cardiff Garcia at FT Alphaville: ISM vs the hard data

Two recent notes emphasise that the impressive recent ISM manufacturing readings in the US are probably as much about expectations of future performance as about what has already happened.
...
Tom Porcelli of RBC Capital Markets highlights the point that ISM is normally a leading indicator for the hard data:

ISM new orders has historically led the 3-month run rate of capex shipments by about one full quarter. Bottom line: the ISM data continue to flag an acceleration in capex growth near term.

Another hint that economic growth will increase in 2014.

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 185,000 payroll jobs added in November, up from 130,000 in October.

• At 8:30 AM, the Trade Balance report for October from the Census Bureau. The consensus is for the U.S. trade deficit to decrease to $40.2 billion in October from $41.8 billion in September.

• At 10:00 AM, the New Home Sales for September and October from the Census Bureau. The consensus is for an increase in sales to 425 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 421 thousand in August.

• Also at 10:00 AM, the ISM non-Manufacturing Index for November. The consensus is for a reading of 55.5, up from 55.4 in October. Note: Above 50 indicates expansion, below 50 contraction.

• Also at 10:00 AM, the Trulia Price Rent Monitors for November. 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.

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

by Calculated Risk on 12/03/2013 04:17:00 PM

From housing economist Tom Lawler:

The overall SF REO inventory appears to have declined again last quarter, though the pace of decline slowed. Both Fannie and Freddie reported slight increases last quarter, reflecting modest increases in acquisitions (mainly in judicial foreclosure states) and declines in dispositions in part reflecting “market conditions. FHA’s SF REO inventory, in contrast, declined last quarter following increases in the previous two quarters.

REO inventory both held by private-label securities and at FDIC-insured institutions also fell last quarter, though at a slower pace than the previous few quarters. (Note: I get my PLS inventory estimates from Barclays Capital, but only have data through August. For FDIC-insured institutions, I assume that the average carrying value is 50% higher than that at Fannie and Freddie).

Click on graph for larger image.

CR Note: This is most, but not all, of the lender owner foreclosure inventory, aka "Real Estate Owned" (REO).  There is also REO for the VA, and some other non-FDIC insured institutions - but this is probably close to 90% of all REOs.

by Calculated Risk on 12/03/2013 02:03:00 PM

Based on an estimate from AutoData, light vehicle sales were at a 16.41 million SAAR in November. That is up 7.6% from November 2012, and up 8.3% from the sales rate last month.  Some of the sales in November might be a bounce back from the weakness in October related to the government shutdown.

This was above the consensus forecast of 15.7 million SAAR (seasonally adjusted annual rate).

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for November (red, light vehicle sales of 16.41 million SAAR from AutoData).


Click on graph for larger image.

This was the highest sales rate since February 2007, and was probably due to some bounce back buying following the government shutdown.

The growth rate will probably slow in 2013 - compared to the previous three years - but this will still be another solid year for the auto industry.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and are still a key driver of the recovery.    Looking forward, growth will slow for auto sales.  If sales average the recent pace for the entire year, total sales will be up almost 9% from 2012, not quite double digit but still strong.

by Calculated Risk on 12/03/2013 11:06:00 AM

The FHA has stopped releasing REO inventory as part of their monthly report, however they provided me the most recent data today (for October).

In their Q3 SEC filing, Fannie reported their Real Estate Owned (REO) increased to 100,941 single family properties, up from 96,920 at the end of Q2.  Freddie reported their REO increased to 47,119 in Q3, up from 44,623 at the end of Q2.

The FHA reported their REO decreased to 32,226 (as of October), down from 41,838 in Q2.  This reverses a recent trend of increasing REO inventory at the FHA.

The combined Real Estate Owned (REO) for Fannie, Freddie and the FHA declined to 180,286, down from 183,381 at the end of Q2 2013. The peak for the combined REO of the F's was 295,307 in Q4 2010.

This following graph shows the REO inventory for Fannie, Freddie and the FHA.

Click on graph for larger image.

This is only a portion of the total REO. There is also REO for private-label MBS, FDIC-insured institutions, VA and more. REO has been declining for those categories too.

Although REO was up for Fannie and Freddie in Q3 from Q2, REO decreased for the FHA - and overall REO was down for the twelfth consecutive quarter.

by Calculated Risk on 12/03/2013 08:58:00 AM

Notes: This CoreLogic House Price Index report is for October. The recent Case-Shiller index release was for September. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports Home Prices Increased by Less Than 1 Percent Month Over Month in October

On a month-over-month basis, including distressed sales, home prices increased by only 0.2 percent in October 2013 compared to September 2013. Year over year, home prices nationwide, including distressed sales, increased 12.5 percent in October 2013 compared to October 2012. This change represents the 20th consecutive monthly year-over-year increase in home prices nationally.

Excluding distressed sales, home prices increased 0.4 percent month over month in October 2013 compared to September 2013. On a year-over-year basis, excluding distressed sales, home prices increased by 11 percent in October 2013 compared to October 2012. Distressed sales include short sales and real-estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that November 2013 home prices, including distressed sales, are expected to remain at the same level month over month as October 2013, with a projected increase of 12.2 percent on a year-over-year basis from November 2012.

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.2% in October, and is up 12.5% over the last year.  This index is not seasonally adjusted, and the month-to-month changes will be smaller for next several months.

The index is off 17.5% from the peak - and is up 22.9% from the post-bubble low set in February 2012.

The second graph is from CoreLogic. The year-over-year comparison has been positive for twenty consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

This is the largest year-over-year increase since 2006.

I expect the year-over-year price increases to slow in the coming months.

by Calculated Risk on 12/02/2013 08:45:00 PM

From Joe Weisenthal at Business Insider: Here's Wall Street's Big Idea For 2014

[I]t's clear what the big idea for 2014 is: The final return to a normal non-crisis environment and the search for growth.

This theme was stated with the most flair by Japanese investment bank Nomura, which titled its 2014 outlook the "End Of The End Of The World." ...

Morgan Stanley's outlook for 2014 incorporate similar ideas. They lay out 5 big things that need to happen for sustained global growth, and what's key is that each pillar is region specific and not crisis related. ...

Meanwhile, Citi's top economist Willem Buiter goes so far as to call 2014 a potentially "revolutionary" year for the global economy, precisely because of the end of the age of crisis.

Yet what is revolutionary about 2014 is that the likelihood of severe downside tail events, which could paralyze the global economy, seems to have diminished significantly (though not disappeared). Granted, the euro-area is still work in progress, China presents meaningful question marks, Congressional gridlock in the US could still throw sand in the federal fiscal wheels and geopolitics can always surprise. But, enough progress has been made that all of these issues seem less threatening today than 12 months ago.

It is fun to make out of consensus calls, but I also think growth will pickup in 2014.

Tuesday:
• All Day: Light vehicle sales for November. The consensus is for light vehicle sales to increase to 15.7 million SAAR in November (Seasonally Adjusted Annual Rate) from 15.2 million SAAR in October.

by Calculated Risk on 12/02/2013 04:38:00 PM

Here is another weekly update on housing inventory ... for the seventh consecutive week, housing inventory is up year-over-year.  This suggests inventory bottomed early 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 October).  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 1.7% above the same week in 2012 (red is 2013, blue is 2012).

We can be pretty confident that inventory bottomed early this year.  Inventory is still very low, but this increase in inventory should slow house price increases.  One of the key questions for 2014 will be: How much will inventory increase?  I'll post some thoughts on inventory at the end of the year.