by Calculated Risk on 4/07/2014 04:14:00 PM

Here is another weekly update on housing inventory ...

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

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for February).  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, 2013 and 2014.

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

In 2013 (Blue), inventory increased for most of the year before declining seasonally during the holidays.  Inventory in 2013 finished up 2.7% YoY.

Inventory in 2014 (Red) is now 7.7% above the same week in 2013.

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

Note: One of the key questions for 2014 will be: How much will inventory increase?  My guess is inventory will be up 10% to 15% year-over-year by the end of 2014 (inventory would still be below normal).

by Calculated Risk on 4/07/2014 02:59:00 PM

From housing economist Tom Lawler:

ARMLS reported that residential home sales by realtors in the Greater Phoenix, Arizona area totaled 6,712 in March, down 17.7% from last March’s pace. Lender-owned properties were 6.9% of last month’s sales, down from 11.6% last March, while last month’s short-sales share was 5.1%, down from 15.1% a year ago. All-cash transactions were 33.1% of last month’s sales, down from 41.5% last March. Active listings in March totaled 29,939, up 0.9% from February and up 44.4% from a year ago. The median home sales price last month was $187,000, up 11.6% from last March. Last month’s sales were the lowest for a March since 2008.

Residential Home Sales, Greater Phoenix Area, ARMLS
	Mar-11	Mar-12	Mar-13	Mar-14
Number of Sales by Type
Lender owned	4,589	1,872	948	462
Short sales	1,889	2,275	1,233	339
"Non-distressed" sales	3,455	4,722	5,972	5,911
Total sales	9,933	8,869	8,153	6,712
Share of Sales by Type (and All-Cash Share)
Lender owned	46.2%	21.1%	11.6%	6.9%
Short sales	19.0%	25.7%	15.1%	5.1%
Non-distressed	34.8%	53.2%	73.2%	88.1%
All-cash	49.8%	47.6%	41.5%	33.1%

Click on graph for larger image.

This graph from Tom Lawler shows the active inventory in the Phoenix area. As Tom noted, listings are way up - but also way below the "bust" years.

by Calculated Risk on 4/07/2014 12:12:00 PM

Here is something I like to look at every month.

These diffusion indexes are a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.

From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

Click on graph for larger image.

The BLS diffusion index for total private employment was at 58.5 in March, down from 59.1 in February.

For manufacturing, the diffusion index decreased to 50.0, down from 51.9 in March.

Job growth was fairly widespread for private employment in March.

by Calculated Risk on 4/07/2014 08:29:00 AM

Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division) released their Mortgage Monitor report for February today. According to LPS, 5.97% of mortgages were delinquent in February, down from 6.27% in January. BKFS reports that 2.22% of mortgages were in the foreclosure process, down from 3.38% in February 2013.

This gives a total of 8.17% delinquent or in foreclosure. It breaks down as:

• 1,749,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,242,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,115,000 loans in foreclosure process.

For a total of ​​4,106,000 loans delinquent or in foreclosure in February. This is down from 5,104,000 in February 2013.

Click on graph for larger image.

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

Delinquencies and foreclosures are moving down - and might be back to normal levels in a couple of years.  BKFS reports: "Delinquencies are below 6% for the first time since ‘08; foreclosures down 34% in the last year"

The second graph from BKFS shows the credit score distribution for all mortgage originations. From Herb Blecher, senior vice president of Black Knight’s Data and Analytics division:

“Credit standards have shown little sign of easing -- only about 30 percent of 2013 loans went to borrowers with credit scores below 720 -- which indicates that significant opportunity to expand mortgage origination activity is available, if risk appetites allow."
emphasis added

There is much more in the mortgage monitor.

by Calculated Risk on 4/06/2014 09:46:00 PM

Monday:
• Early: The Black Knight February Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

• At 3:00 PM, Consumer Credit for February from the Federal Reserve.

Weekend:
• Schedule for Week of April 6th

• WSJ Employment Graph ignores Demographics, Needs Correction

• Research: Labor Force Participation Rate

• Labor Force Participation Rate Update

• Possible Reasons for the Decline in Prime-Working Age Men Labor Force Participation

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

Oil prices are mixed with WTI futures at $100.85 per barrel and Brent at $106.01 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.55 per gallon (up sharply over the last two months and about the same level as a year ago).  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 4/06/2014 06:42:00 PM

An interesting topic is why there has been a steady decline in the labor force participation rate for prime-working age men (ages 25 to 54).

In the previous post I wrote: "The participation rate for [prime-working age] men decreased from the high 90s decades ago, to 88.5% in March. This is just above the lowest level recorded for prime working age men. This declining participation is a long term trend, and the result of inherited wealth - OK, just joking - the reasons for this decline in working age men participation are varied and need more research, however some analysts incorrectly blame this trend solely on more social benefits."

First here is a repeat of the of the graph I posted earlier today:

Click on graph for larger image.

This graph shows the changes in the participation rates for men and women and combined since 1960 (in the 25 to 54 age group - the prime working years).

The participation rate for women increased significantly from the mid 30s to the mid 70s and then flattened out. 

The decline in the participation rate for prime-working age men is a long term trend.

The second graph shows just prime-working age men (Note the change in scale from the previous graph to better show the trend).

The dashed line is the trend from 1960 through 2007 (trend line does not include the recent recession - economic weakness has pushed down the participation rate below trend recently).

So why the long term decline? Here are some possible reasons:

1) Cultural changes. As a larger percentage of women entered the labor force (pink line in first graph), this allowed men some more options, such as: a) take some time off between jobs, b) go back to school to improve skills or be able to change careers, c) be a "Mr. Mom".   There used to be stigma for men not working - or ego problems with women being the prime "bread winner" - but over time that stigma has lessened.  Even though the percentage of prime-working age women in the labor force is now declining slowly, I think the cultural changes are still the main driver for the decline in the participation rate for men.

2) Demographics.  It is possible that the changing ethnicity of the prime working-age population is contributing to the decline in the participation rate for prime-working age men.  This is unclear from the top level data (We'd need data by ethnicity, sex, and age group).

3) Underground Economy.  It is also possible that the underground economy (cash economy) is growing, and some of these men are actually working "off the books" for cash.

4) Increased benefits for disability and illness.  Note: Everyone opposes fraud, but that is probably only a small problem.  Overall most Americans would consider it good news that people with serious illnesses or disabilities receive benefits - even if that has contributed a little to the decline in the participation rate.

5) Inheritance and lower estate taxes.  Although the impact has probably been small, the decline in the participation rate for working-age men has tracked the decline in the inheritance tax over the last 50 years.  I'm guessing there are more working-age men not working today because they are living off their inheritance.

I'm sure there are other possible reasons too.  It is important to understand - that for whatever reason - this decline in participation for prime working-age men is one of the drivers of the overall decline in participation (the two main drivers are a large cohort moving into retirement, and more young people staying in school).

by Calculated Risk on 4/06/2014 12:12:00 PM

A key point: A significant decline in the participation rate had been expected, and probably half or more of the recent decline in the participation rate was due to changing demographics (and long term trends), as opposed to economic weakness.

A few key long terms trends include:
• A decline in participation for those in the 16 to 24 age groups. This is mostly due to higher enrollment rate in school (see the graph at Get the Lead Out Update). This is great news for the future and is possibly related to removing lead from the environment (see from Brad Plumer at the WaPo: Study: Getting rid of lead does wonders for school performance)

• There is a general long term trend of declining participation for those in the key working years (25 to 54). See the second graph below.

• There has been an increase in participation among older age groups. This is probably a combination of financial need (not good news) and many workers staying healthy or engaged in less strenuous jobs. 

Of course, even though the participation rate is increasing for older age groups, there are more people moving into those groups so the overall participation rate falls. 

As an example, the participation rate for those in the "55 to 59" group has increased from 68.4% twenty years ago, to 71.6% now.  And the participation rate for those in the "60 to 64" age group has increased from 44.7% to 55.9% over the same period.  However, even though the participation rate for each age group has been increasing, when people move from the "55 to 59" age group to the "60 to 64" group, their participation rate falls (from 71.6% to 55.9%).  And right now a large cohort is moving into these older age groups, and that is pushing down the overall participation rate.

Here is an update to a few graphs I've posted before.

Click on graph for larger image.

Here is a repeat of the graph I posted Friday showing the participation rate and employment-to-population ratio.

The Labor Force Participation Rate increased to 63.2% in March (blue line).  This is down slightly from 63.3% in March 2013.

This is the percentage of the working age population (16 and over, Civilian noninstitutional population¹) in the labor force.

Here is a look at some of the long term trends (updating graphs through March 2014):

This graph shows the changes in the participation rates for men and women since 1960 (in the 25 to 54 age group - the prime working years).

The participation rate for women increased significantly from the mid 30s to the mid 70s and then flattened out.  The participation rate for women in March was 74.2%.

Note that the trend for prime working age women was down BEFORE the recession.  This might be because of changing values, economic situations, or demographics (as an example, the cultural norms for some recent immigrant groups is for the women to work at home).

The participation rate for men decreased from the high 90s decades ago, to 88.5% in March. This is just above the lowest level recorded for prime working age men.   This declining participation is a long term trend, and the result of inherited wealth - OK, just joking - the reasons for this decline in working age men participation are varied and need more research, however some analysts incorrectly blame this trend solely on more social benefits.

This graph shows that participation rates for several key age groups.

There are a few key long term trends:
• The participation rate for the '16 to 19' age group has been falling for some time (red).  This is directly related to more education.

• The participation rate for the 'over 55' age group was been rising since the mid '90s (purple), and has started to decline recently.  Now that the leading edge of the baby boomers are over 65, the 'over 55' participation will decline.

• The participation rate for the '20 to 24' age group fell recently too (more education before joining the labor force).  This appears to have stabilized.

The last graph shows the participation rate for several over 55 age groups. The red line is the '55 and over' total seasonally adjusted. All of the other age groups are Not Seasonally Adjusted (NSA).

The participation rate is generally trending up for all older age groups.

The '55 and over' participation rate is starting to decline as the oldest baby boomers move into even older age groups.


¹ From the BLS: "Civilian noninstitutional population (Current Population Survey) Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces."

by Calculated Risk on 4/05/2014 06:51:00 PM

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

Here is the unofficial problem bank list for April 4, 2014.

Changes and comments from surferdude808:

Surprisingly there were a number of changes to the Unofficial Problem Bank List in between updates from the FDIC and OCC. In all, there were six removals and one addition that leave the list at 533 institutions with $171.9 billion in assets. A year ago, the list held 790 institutions with assets of $290.0 billion.

Actions were terminated against AnchorBank, fsb, Madison, WI ($2.1 billion Ticker: ABCW); Flagler Bank, West Palm Beach, FL ($154 million); and Albina Community Bank, Portland, OR ($134 million Ticker: ACBC). Merger partners were found by Central Virginia Bank, Powhatan, VA ($347 million Ticker: CVBK); The Village Bank, Saint George, UT ($125 million); and First State Bank of Miami, Texas, Miami, TX ($38 million). The addition this week is International Bank of Chicago, Chicago, IL ($480 million).

by Calculated Risk on 4/05/2014 03:07:00 PM

Projecting the labor force participation rate is very complicated. There are many conflicting trends that must be considered ...

For those interested in the numbers, I recommend this recent article from BLS economist Mitra Toossi: Labor force projections to 2022: the labor force participation rate continues to fall

The U.S. civilian labor force—the number of people working or looking for work—has gone through substantial changes in its size and demographic composition over the last half of the 20th century. During the 1970s and 1980s, the labor force grew vigorously as women’s labor force participation rates surged and the baby-boom generation entered the labor market. However, the dynamic demographic, economic, and social forces that once spurred the level, growth, and composition of the labor force have changed and are now damping labor force growth. The labor force participation rate of women, which peaked in 1999, has been on a declining trend. In addition, instead of entering the labor force, baby boomers are retiring in large numbers and exiting the workforce. Once again, the baby-boom generation has become a generator of change, this time in its retirement. Moreover, the jobless recovery of the 2001 recession, coupled with the severe economic impact of the 2007–2009 recession, caused disruptions in the labor market. In the first 12 years of the 21st century, the growth of the population has slowed and labor force participation rates generally have declined. As a result, labor force growth also has slowed. The Bureau of Labor Statistics (BLS) projects that the next 10 years will bring about an aging labor force that is growing slowly, a declining overall labor force participation rate, and more diversity in the racial and ethnic composition of the labor force.

The U.S. labor force is projected to reach 163.5 million in 2022. The labor force is anticipated to grow by 8.5 million, an annual growth rate of 0.5 percent, over the 2012–2022 period. The growth in the labor force during 2012–2022 is projected to be smaller than in the previous 10-year period, 2002–2012, when the labor force grew by 10.1 million, a 0.7-percent annual growth rate.

There are a number of tables in the article showing the trends for various cohorts. An excellent resource!

by Calculated Risk on 4/05/2014 01:34:00 PM

I've been reading several articles on the March employment report this morning, and I have to comment on the graph below.

From the WSJ: U.S. Reaches a Milestone on Lost Jobs

Private-sector payrolls hit a record 116.09 million, passing the peak set in January 2008, but they are far below where they would be if the labor market's trajectory weren't interrupted. And government jobs remain well short of their high point.

And the article had the following graph for private employment:

To create this graph, the WSJ used the ratio of private employment in January 2008 (115.977 million) to the total civilian noninstitutional population. The dashed line assumes that this ratio stayed constant since January 2008 - and seems to suggest that there should be 7.2 million more private sector jobs today.

This is nonsense.  This ignores the decline in the participation rate due to demographics. I've been discussing the decline in the participation rate for several years, and this has attracted significant attention recently.

To review: the participation rate has declined for both demographic and cyclical reasons. There are several key demographics trends, the two most obvious being the large cohort (baby boomers) moving into lower participation age (over 55), and the long term trend of more younger people (16 to 24) staying in school.  The cyclical decline is due to the lingering effects of the housing bust and financial crisis on the labor market.  There is an ongoing discussion about how much of the decline has been due to demographics, and how due to the effects of the great recession.  I think more than half is demographics (other research suggests about half, some suggests less).

If we just looked at demographics, the civilian noninstitutional population for the prime working age group (25 to 54) has declined by 1.5 million people since Jan 2008!  So ignoring the young and the old, we'd expect fewer workers today - not more.  That would be incorrect too since many people continue to work past 55 (and many young Americans still work).

Here is a table of some of the demographic changes over the last 6 years:

Changing Demographics, Civilian noninstitutional population, Jan 2008 to Mar 2014 (000s)
	16 to 24	25 to 54	55+
Jan-08	37,480	125,916	69,320
Mar-14	38,858	124,406	82,287
Change	1,378	-1,510	12,967

1) There are now more people in the 16 to 24 age group (with a declining participation rate because more people are staying in school).  This pulls down the overall participation rate.

2) There are fewer people in the prime working age group.

3) There are many more people in the older age group. Note: Demographics gets complicated. The participation rate is increasing for older age groups, but the participation rate for each cohort is declining as they move into older age groups.

The bottom line is this WSJ graph is nonsense - and bad enough that the WSJ should remove it from the article.