by Calculated Risk on 2/01/2014 11:15:00 AM

This will be a busy week for economic data with several key reports including the January employment report on Friday.

Other key reports include the ISM manufacturing index on Monday, January vehicle sales also on Monday, the ISM service index on Wednesday, and the December trade deficit report on Thursday.

----- Monday, February 3rd -----
All day: Light vehicle sales for January. The consensus is for light vehicle sales to increase to 15.7 million SAAR in January (Seasonally Adjusted Annual Rate) from 15.3 million SAAR in December.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

9:00 AM ET: The Markit US PMI Manufacturing Index for January.  The consensus is for a decrease to 53.9 from 55.0 in December.

10:00 AM ET: ISM Manufacturing Index for January. The consensus is for a decrease to 56.0 from 57.0 in December.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in December at 57.0%. The employment index was at 56.9%, and the new orders index was at 64.2%.

10:00 AM: Construction Spending for December. The consensus is for no change in construction spending.

----- Tuesday, February 4th -----
10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is for a 1.8% decrease in December orders.

10:00 AM: The Congressional Budget Office will release its annual Budget and Economic Outlook. The report will include updated economic and budget projections spanning the period from 2014 to 2024.

----- Wednesday, February 5th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 238,000 in December.  

10:00 AM: ISM non-Manufacturing Index for January. The consensus is for a reading of 53.9, up from 53.0 in December. Note: Above 50 indicates expansion, below 50 contraction.

----- Thursday, February 6th -----
Early: Trulia Price Rent Monitors for January. 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.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 337 thousand from 348 thousand.

8:30 AM: Trade Balance report for December from the Census Bureau.

Imports decreased, and exports increased in November.

The consensus is for the U.S. trade deficit to increase to $36.0 billion in December from $34.3 billion in November.

----- Friday, February 7th -----
8:30 AM: Employment Report for January. The consensus is for an increase of 181,000 non-farm payroll jobs in January, up from the 74,000 non-farm payroll jobs added in December.

The consensus is for the unemployment rate to be unchanged at 6.7% in January. 

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

The economy has added 8.2 million private sector jobs since employment bottomed in February 2010 (7.6 million total jobs added including all the public sector layoffs).

There are still almost 640 thousand fewer private sector jobs now than when the recession started in 2007.

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

by Calculated Risk on 2/01/2014 08:11:00 AM

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

Here is the unofficial problem bank list for January 31, 2014.

Changes and comments from surferdude808:

The FDIC released its enforcement action activity through year-end 2013, which contributed to many changes to the Unofficial Problem Bank List. For the week, there were 10 removals and one addition that leave the list at 590 institutions with assets of $195.4 billion. A year ago, the list held 822 institutions with assets of $308 billion. During the month, the list declined by a net of 29 institutions and assets dropped by $18.1 billion. This was the largest net monthly decline in the number of institutions and assets since the list was first published. While the 19 action terminations during the month were above average, there are well below the monthly high of 25 terminations during April 2012. Thus, mergers, failures, and voluntary liquidations contributed to the 31 removals during the month.

Syringa Bank, Boise, ID ($34 million Ticker: SGBP) failed this week making it the second failure in Idaho since the on-set of the Great Recession. This is third consecutive week for a failure, which has not occurred since late October/early November 2012. Midwest Federal Savings and Loan Association of St Joseph, Saint Joseph, MO ($33 million Ticker: SJBA) found a merger partner to exit the list.

Actions were terminated against Falcon International Bank, Laredo, TX ($817 million); Community West Bank, National Association, Goleta, CA ($532 million); BankCherokee, Saint Paul, MN ($262 million); Sanibel Captiva Community Bank, Sanibel, FL ($228 million); Columbia Bank, Lake City, FL ($190 million); Peoples Bank, Clifton, TN ($135 million); Sunrise Bank, Cocoa Beach, FL ($107 million); Woodland Bank, Deer River, MN ($66 million); and Farmers State Bank of Sublette, Sublette, IL ($43 million).

The sole addition this week is Vantage Point Bank, Horsham, PA ($75 million).

Over the next two weeks, we expect for there to be only a few changes to the list as the OCC will likely not release an update until February 21st. By the end of the month, the FDIC should release fourth quarter industry results and provide an update to the official figures.

Enjoy the Super Bowl or at least the advertisements should your favorite fail to win.

by Calculated Risk on 1/31/2014 08:46:00 PM

From the FDIC: Sunwest Bank, Irvine, California, Assumes All of the Deposits of Syringa Bank, Boise Idaho

As of September 30, 2013, Syringa Bank had approximately $153.4 million in total assets and $145.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $4.5 million. ... Syringa Bank is the 3rd FDIC-insured institution to fail in the nation this year, and the first in Idaho.

Still closing banks, just fewer this year ... and this was a pretty small hit to the DIF.

by Calculated Risk on 1/31/2014 05:21:00 PM

A new paper from Reinhart and Rogoff: Recovery from Financial Crisis: Evidence from 100 Episodes. Excerpt:

Examining the evolution of real per capita GDP around 100 systemic banking crises reveals that a significant part of the costs of these crises lies in the protracted and halting nature of the recovery. On average it takes about eight years to reach the pre-crisis level of income; the median is about 6 ½ years. Five to six years after the onset of the current crisis only Germany and the US (out of 12 systemic crisis cases) have reached their 2007-2008 peaks in per capita income. In a sample that covers 63 crises in advanced economies and 37 in larger emerging markets, more than forty percent of the post-crisis episodes experienced double dips. The analysis summarized here adds another dimension to an observation we have been emphasizing on the basis of our earlier work—namely, that the subprime crisis is not an anomaly in the context of the pre-WWII era. Postwar business cycles are not the right comparator for the severe crises that have swept advanced economies in recent years.
...
Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging-market counterparts. The current phase of the official policy approach is predicated on the assumption that growth, financial stability and debt sustainability can be achieved through a mix of austerity and forbearance (and some reform). The claim is that advanced countries do not need to resort to the more eclectic policies of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. Now entering the sixth or seventh year (depending on the country) of crisis, output remains well below its pre-crisis peak in ten of the twelve crisis countries. The gap with potential output is even greater. Delays in accepting that desperate times call for desperate measures keeps raising the odds that, as documented here, this crisis may in the end surpass in severity the depression of the 1930s in a large number of countries.
emphasis added

The policies of austerity in Europe have failed miserably and many countries there are experiencing a worse slump than during the Depression (austerity in the US has held back the recovery too, but at least there was a little stimulus in 2009, and monetary policy was accommodative). As Reinhart and Rogoff note, higher inflation in Europe (and the US) would help.

by Calculated Risk on 1/31/2014 01:48:00 PM

From HotelNewsNow.com: STR: US results for week ending 25 January

The U.S. hotel industry posted positive results in the three key performance measurements during the week of 19-25 January 2014, according to data from STR.

In year-over-year measurements, the industry’s occupancy increased 2.4 percent to 55.2 percent. Average daily rate rose 3.0 percent to finish the week at US$109.59. Revenue per available room for the week was up 5.5 percent to finish at US$60.54.
emphasis added

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 2014 and black is for 2009 - the worst year since the Great Depression for hotels.


Through January 25th, the 4-week average of the occupancy rate is slightly higher than the same period last year and is tracking at pre-recession levels.   

This is expected to be another solid year for the hotel industry. In response to the improved metrics, the AIA expects hotel construction to increase significantly in 2014: Nonresidential Building Activity Projected to Accelerate in 2014

Led by the hotel ... the commercial sector looks to see the biggest gains in construction spending, with demand for institutional projects increasing at a more moderate level.
...
“Since the overall economy is stabilizing, there should be a significant improvement in the outlook for the construction industry that has been recovering at a slow and steady pace the last two years,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “At a more granular level, the surging housing market, growing commercial property values, and declining office and retail vacancies are all contributing to what is expected to amount to a much greater spending on nonresidential building projects.”

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

by Calculated Risk on 1/31/2014 11:32:00 AM

The Census Bureau released the Housing Vacancies and Homeownership report for Q4 2013 this morning.

This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate,except as a guide to the trend.

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate decreased to 65.2% in Q4, from 65.3% in Q3.

I'd put more weight on the decennial Census numbers and that suggests the actual homeownership rate is probably in the 64% to 65% range - and given changing demographics, the homeownership rate is probably close to a bottom.

The HVS homeowner vacancy increased to 2.1% in Q4. 

It isn't really clear what this means. Are these homes becoming rentals?

Once again - this probably shows that the general trend is down, but I wouldn't rely on the absolute numbers.

The rental vacancy rate decreased slightly in Q4 to 8.2% from 8.3% in Q3.

I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the rental vacancy rate - and Reis reported that the rental vacancy rate is at the lowest level since 2001 - and might be close to a bottom.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey. Unfortunately many analysts still use this survey to estimate the excess vacant supply. However this does suggest that most of the bubble excess is behind us.

by Calculated Risk on 1/31/2014 09:55:00 AM

Click on graph for larger image.

• The final Reuters / University of Michigan consumer sentiment index for January decreased to 81.2 from the December reading of 82.5, but up from the preliminary January reading of 80.4.

This was just above the consensus forecast of 81.0. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011, and another smaller spike down last October and November due to the government shutdown.

I expect to see sentiment at post-recession highs very soon.

• From the Chicago ISM:

January 2014:

The Chicago Business Barometer softened to 59.6 in January from a revised 60.8 in December, the third consecutive monthly fall following October’s jump to the highest since March 2011. In spite of January’s slower rate of expansion, the Barometer remained firm and consistent with the recent pick-up in GDP.
...
Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “Business activity continued to ease in January but remained at a relatively high level. Production and New Orders remained firm, and while Employment fell back into contraction, this doesn‘t appear to be indicative of current demand conditions.”

“There have been concerns that putting the brakes on monetary easing could damage business. Most respondents, though, thought that the Federal Reserve’s decision to begin tapering their bond purchases in December would not have a significant impact on their business”, he added

This was close to the consensus estimate of 59.5.

by Calculated Risk on 1/31/2014 08:30:00 AM

The BEA released the Personal Income and Outlays report for December:

Personal income increased $2.3 billion, or less than 0.1 percent ... in December according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $44.1 billion, or 0.4 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.2 percent in December, compared with an increase of 0.6 percent in November. ... PCE price index -- The price index for PCE increased 0.2 percent in December, compared with an increase of less than 0.1 percent in November. The PCE price index, excluding food and energy, increased 0.1 percent in December, the same increase as in November.
...
Personal saving -- DPI less personal outlays -- was $495.2 billion in December, compared with $541.0 billion in November. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 3.9 percent in December, compared with 4.3 percent in November.

A key point is that the PCE price index was only up 1.1% year-over-year (1.2% for core PCE).   PCE increased at a 2.5% in December, but core PCE only increased at a 1.1% annualized rate in December (Well below the Fed's target).

by Calculated Risk on 1/30/2014 08:43:00 PM

Jed Kolko, writing at Economix, explains why the "headship rate" is more important than the homeownership rate: Why the Homeownership Rate Is Misleading

At this stage of the housing recovery, the falling homeownership rate turns out to be misleading. In fact, for young adults, who were hit especially hard in the recession and housing crisis, the decline in their homeownership rate might paradoxically be a sign of improvement.
...
When the homeownership rate steers us wrong, the “headship rate” ... can come to the rescue. It’s the percent of adults who head a household. Put another way, it is the ratio of households to adults. If there are 200 million adults living in 100 million households, the headship rate is 50 percent. A higher headship rate means fewer adults, on average, per household. Over the longer term, demographics explain shifts in the headship rate (and in labor force participation, for that matter). An aging population, for instance, typically increases the headship rate because older adults are more likely to head their household than younger adults are because many young adults live in their parents’ home or with housemates.
...
In fact, the headship rate is the key to how much the housing recovery contributes to economic growth. The headship rate and the population determine the total number of households, so a rise in the headship rate means more new households, all else equal.
...
Headship is poised to increase. Young adults still living with their parents won’t do so forever, and the Current Population Survey headship rate in 2013 – even with its recent rise — is still below its 20-year average. That will prompt more new construction.

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

• At 9:45 AM, the Chicago Purchasing Managers Index for January. The consensus is for an increase to 59.5, up from 59.1 in December.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for January). The consensus is for a reading of 81.0, up from the preliminary reading of 80.4, and down from the December reading of 82.5.

• At 10:00 AM ET, Q4 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 1/30/2014 07:35:00 PM

From economist Tom Lawler:

Below is a summary table of some stats from large publicly-traded builders who have reported results for last quarter. Note that for the six builders in the table, “home sales” based on net orders in 2013 were up 5.7% from 2012, while “home sales” defined as closed sales were up 20.1% on the year.

The combination of higher mortgage rates and unusually aggressive home price increases in many parts of the country led to a substantial dip in new home contract signings in the second half of last year.

Most builders expressed considerable optimism about the prospects for home sales in 2014, and are planning accordingly, and most increased significantly their land/lot positions over the last year or two. Most builders also reported gross margins in the last quarter of 2013 that were at or near seven year highs. The combination of elevated land/lot positions and elevated margins suggests that any slower-than-expected pace of home sales would likely lead to little or no home price growth in 2014.

Builder results reported so far suggest that Census’ new home sales estimates for the fourth quarter of 2013 are likely to be revised downward.

M/I Homes reported that net home orders in the quarter ended December 31, 2013 totaled 793, up 17.8% from the comparable quarter of 2012. M/I’s average community county last quarter was up 16.9% from a year earlier. The company’s sales cancellation rate, expressed as a % of gross orders, was 19% last quarter, down from 21% a year ago. Home deliveries totaled 1,120 last quarter, up 26.3% from the comparable quarter of 2012, at an average sales price of $292,000, up $273,000 from a year ago. The company’s order backlog at the end of 2013 was 1,280, up 32.6% from the end of 2012.

M/I Homes has moved aggressively to increase market share over the last year, by increasing its “geographic footprint” and substantially increasing its land/lot holdings. At the end of 2012 the company owned or controlled 19,831 lots, up 39.6% from the end of 2012 and up 91.5% from the end of 2011.

PulteGroup reported that net home orders in the quarter ended December 31, 2013 totaled 3,214, down 18.1% from the comparable quarter of 2012. Home deliveries last quarter totaled 4,964, down 3.7% from the comparable quarter of 2012, at an average sales price of $325,000, up 13.2% from a year ago. The company’s order backlog at the end of 2013 was 5,772, down 10.6% from the end of 2012.

Pulte has been “de-leveraging” and focusing on “value creation” and cost control, meaning that the company has focused on profitability at the expense of market share (and has virtually eliminated its “spec” business). Pulte said that last quarter’s gross margin was its highest since 2005. On its conference call an official said that net orders were “flat” in December relative to November (orders normally fall MOM in December), and said that the company “liked what we’ve seen” so far in January. Pulte noted that it planned to increase its “land spend” in 2014.

On the home price front, Pulte noted that the YOY increase in average home prices was 6% for its Centex division, which focuses on first-time buyers, 13% for its Pulte division, which focuses on move-up buyers, and 11% for its Del Webb division, which focuses on the “active adult” market.

The Ryland Group reported that net home orders (including discontinued operations) in the quarter ended December 31, 2013 totaled 1,428, down 4.9% from the comparable quarter. The company’s community count at the end of 2013 was up 21,8% from a year earlier. Ryland’s sales cancellation rate, expressed as a % of gross orders, was 20.0% last quarter, up from 17.9% a year ago. Sales per community were down about 19% from a year ago. Home deliveries last quarter totaled 2,178, up 38% from the comparable quarter of 2012, at an average sales price of $314,000, up 16.3% from a year earlier. The company’s order backlog at the end of December was 2,626, up 9.5% from the end of 2012. Ryland owned or controlled 38,770 lots (including jvs) at the end of December, up 35.5% from the end of 2012 and up 76.9% from the end of 2012. Ryland’s orders last quarter were “disappointing” given its sharp increase in community count and appeared to reflect slower buying in response to the company’s aggressive price hikes, particularly in the West and Southeast.

In slides that went along with its earnings conference call, Ryland said it plans to increase its active community count in 2014 “in excess” of 20%.

Beazer Homes reported that net home orders in the quarter ended December 31, 2013 totaled 895, down 4.0% from the comparable quarter of 2012. Beazer’s average community count last quarter was down 8.6% from a year ago. The company’s sales cancellation rate, expressed as a % of gross orders, ws 21.8% last quarter, down 26.4% from a year earlier. Home deliveries last quarter totaled 1,038, unchanged from the comparable quarter of 2012, at an average sales price of $279,500, up 18.6% from a year ago. The company’s order backlog at the end of 2013 was 1,750, down 3.7% from the end of 2012.

Beazer owned or controlled 28,978 lots at the end of 2013, up 15.4% from the end of 2012. Beazer’s “land spend” increased significantly beginning last spring, but the “conversion” to active communities has been slower than hoped for. In slides that went along with its earnings conference call, Beazer said that it expected its average community count in the quarter ending September 30, 2014 to be up by about 16% from the latest quarter.

Meritage Homes, MDC Holdings, and Standard Pacific Corp. are scheduled to release their quarterly results next week (February 5th.)

	Net Orders			Settlements			Average Closing Price
Qtr. Ended:	12/13	12/12	% Chg	12/13	12/12	% Chg	12/13	12/12	% Chg
D.R. Horton	5,454	5,259	3.7%	6,188	5,182	19.4%	$263,542	$236,067	11.6%
PulteGroup	3,214	3,926	-18.1%	4,964	5,154	-3.7%	$325,000	$287,000	13.2%
NVR	2,631	2,625	0.2%	3,342	2,788	19.9%	$365,300	$331,900	10.1%
The Ryland Group	1,428	1,502	-4.9%	2,178	1,578	38.0%	$314,000	$270,000	16.3%
Beazer Homes	895	932	-4.0%	1,038	1,038	0.0%	$279,300	$235,500	18.6%
M/I Homes	793	673	17.8%	1,120	887	26.3%	$292,000	$273,000	7.0%

	Net Orders			Settlements			Average Closing Price
Calendar Year	'13	'12	% Chg	'13	'12	% Chg	'13	'12	% Chg
D.R. Horton	25,315	22,513	12.4%	25,161	19,954	26.1%	$255,646	$228,395	11.9%
PulteGroup	17,080	19,039	-10.3%	17,766	16,505	7.6%	$305,000	$276,000	10.5%
NVR	11,800	10,954	7.7%	11,834	9,843	20.2%	$349,043	$317,073	10.1%
The Ryland Group	7,263	5,781	25.6%	7,035	4,897	43.7%	$296,000	$262,000	13.0%
Beazer Homes	4,989	5,111	-2.4%	5,056	4,603	9.8%	$262,004	$229,126	14.3%
M/I Homes	3,787	3,020	25.4%	3,472	2,765	25.6%	$286,000	$264,000	8.3%
Total	70,234	66,418	5.7%	70,324	58,567	20.1%	$289,824	$261,263	10.9%