by Calculated Risk on 11/27/2014 08:02:00 PM

The automakers will report November vehicle sales on Tuesday, December 2nd. Sales in October were at 16.35 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in November might be at or above 17 million SAAR.

Note:  There were 25 selling days in November this year compared to 26 last year.

Here are a few forecasts:

From WardsAuto: Forecast: SAAR Could Reach 17 Million for Second Time in Four Months

A WardsAuto forecast calls for U.S. light-vehicle sales to reach a 17 million-unit seasonally adjusted annual rate for just the second time since 2006, after crossing that threshold most recently in August, when deliveries equated to a 17.4 million SAAR. The WardsAuto report is calling for 1.29 million light vehicles to be delivered over 25 selling days. The resulting daily sales rate of 51,461 units represents an 8.1% improvement over same-month year-ago (over 26 days) and a 9.1% month-to-month gain on October (27 days), slightly ahead of an average 6% October-November gain over the past three years. The 17 million-unit SAAR would be significantly higher than the 16.3 million recorded year-to-date through October, and would help bring 2014 sales in line with WardsAuto’s full year forecast of 16.4 million units.

From J.D. Power: New-Vehicle Retail Sales On Pace for 1.1 Million, the Strongest November Since 2001

New-vehicle retail sales in November 2014 are projected to come in at 1.1 million units, a 5.5 percent increase on a selling-day adjusted basis, compared with November 2013 (November 2014 has one fewer selling day than November 2013).
...
“The industry continues to demonstrate strong sales growth, which is exceptional considering that November is currently on pace to record the highest average customer-facing transaction prices ever,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. [Total forecast 16.5 million SAAR]

From Kelley Blue Book: New-Vehicle Sales To Rise 2.2 Percent In November On Black Friday Deals, According To Kelley Blue Book

In November 2014, new light-vehicle sales, including fleet, are expected to hit 1,270,000 units, up 2.2 percent from November 2013, and down 0.6 percent from October 2014. The seasonally adjusted annual rate (SAAR) for November 2014 is estimated to be 16.8 million, up from 16.2 million in November 2013, and up from 16.3 million in October 2014.

From TrueCar: TrueCar Forecasts 17 Million SAAR in November as Early Black Friday Events Prime the Market

TrueCar, Inc. ... forecasts the pace of auto sales in November accelerated to a seasonally adjusted annualized rate ("SAAR") of 17 million new units with the early launch of Black Friday sales campaigns.

New light vehicle sales in the U.S. (including fleet) are expected to reach 1,296,700 units for the month, up 4.1 percent from a year ago. On a daily selling rate (DSR) basis, with one less selling day this November, deliveries are expected to rise 8.2 percent. ... Best November since 2001

Another strong month for auto sales, and 2014 should be the best year since 2006.

by Calculated Risk on 11/27/2014 12:48:00 PM

From the WSJ: OPEC Leaves Production Target Unchanged

The Organization of the Petroleum Exporting Countries said its 12 members, who collectively pump around one-third of the world’s oil, would comply with its current production ceiling of 30 million barrels a day. That would involve a supply cut of around 300,000 barrels a day based on the cartel’s output in October, according to the group’s own data.
...
The oil producer group’s decision led to a further sharp selloff in major global oil benchmarks, with U.S. markets closed for the Thanksgiving holiday. Brent crude fell about 6% to below $73, a four-year low, while the West Texas Intermediate benchmark was down 3.2% to $71.36 a barrel.

Click on graph for larger image

This graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).

According to Bloomberg, WTI has fallen over 4% today to $69.40 per barrel, and Brent to $72.97.

Prices are off over 35% from the peak for the year, and if this price decline holds, there should be further declines in gasoline prices over the next couple of weeks.  Gasoline futures are down about 10 cents per gallon.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $2.80 per gallon (down about 45 cents from 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 11/27/2014 11:16:00 AM

Each year since 2003, Merriam-Webster has listed the Words of the Year mostly based on the frequency that each word was looked up that year.

Some years the "words of the year" have been relevant to Calculated Risk, as an example, in 2004 the word of the year was "blog" (CR was started in January 2005 partly because I was wondering what a "blog" was).  In 2008, the word of the year was "bailout", and in 2010 the word was "austerity".

For fun, here are a few suggestions for "word of the year" related to the blog since 2004 (I'm sure others will have better suggestions):

2004: Blog (Merriam-Webster)

2005: Bubble.  This was the peak year for the housing bubble (activity peaked in 2005, although prices peaked in early 2006).  Writing about the housing bubble was the main topic on the blog in 2005.

2006: Bust.  This was when the housing bust started.

2007: Subprime or Recession. It was 2007 that "subprime" started to be used by the general public. An alternative would be "recession" since the Great Recession started in December 2007, and a key topic on the blog all year was when the recession would start. Other words could be: delinquency, Alt-A, and NINJA (No income, jobs or asset loans).

2008: Bailout (Merriam-Webster).  Three alternatives could be "Financial Crisis", "TARP" and "foreclosure".

2009: Stimulus. An alternative could be "deflation".

2010: Austerity (Merriam-Webster).  Unfortunately austerity could be the "word of the year" for several years.

2011: Default.  This was the year Congress threatened to default on paying the bills.

2012: Short Sale.  This was probably the year that short sales peaked.  This was the year house prices bottomed (but I couldn't think of a "word")

2013: Shutdown.  In 2013, Congress shut down the government.

2014: Employment.  In May 2014, employment surpassed the pre-recession peak, and 2014 will be the best year for employment since the '90s.

2015: Wages (Just being hopeful - maybe 2015 will be the year that real wages start to increase)

Happy Thanksgiving to all!

by Calculated Risk on 11/26/2014 08:21:00 PM

Fannie Mae reported yesterday that the Single-Family Serious Delinquency rate declined in October to 1.92% from 1.96% in September. The serious delinquency rate is down from 2.48% in October 2013, and this is the lowest level since October 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier this week, Freddie Mac reported that the Single-Family serious delinquency rate declined in October to 1.91% from 1.96% in September. Freddie's rate is down from 2.48% in September 2013, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.56 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in 2016 - although the rate of decline has slowed recently.

Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be close to normal in late 2016.

by Calculated Risk on 11/26/2014 03:47:00 PM

The Case-Shiller house price indexes for September were released yesterday. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: Oct. 2014 Case-Shiller Prediction: Expect the Slowdown to Continue

The September S&P/Case-Shiller (SPCS) data out [yesterday] showed more slowing in the housing market, with annual growth in the 20-city index falling 0.7 percentage points from August’s pace to 4.9 percent in September. This is the first time annual appreciation for the 20-city index has been below 5 percent since October 2012. The national index was up 4.8 percent on an annual basis in September.

Our current forecast for October SPCS data indicates further slowing, with the annual increase in the 20-City Composite Home Price Index falling to 4.3 percent.

The non-seasonally adjusted (NSA) 20-City index was flat from August to September, and we expect it to decrease 0.4 percent in October. We also expect a monthly decline for the 10-City Composite Index, which is projected to fall 0.4 percent from September to October (NSA).

All forecasts are shown in the table below. These forecasts are based on the September SPCS data release and the October 2014 Zillow Home Value Index (ZHVI), released Nov. 20. Officially, the SPCS Composite Home Price Indices for October will not be released until Tuesday, Dec. 30.

So the Case-Shiller index will probably show a lower year-over-year gain in October than in September (4.9% year-over-year for the Composite 20 in September, 4.8% year-over-year for the National Index).

Zillow October 2014 Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	October 2013	180.29	178.20	165.90	164.01
Case-Shiller (last month)	September 2014	188.68	184.84	173.72	170.19
Zillow Forecast	YoY	4.2%	4.2%	4.3%	4.3%
	MoM	-0.4%	0.2%	-0.4%	0.2%
Zillow Forecasts1		187.9	185.4	173.0	170.8
Current Post Bubble Low		146.45	149.87	134.07	137.05
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		28.3%	23.7%	29.1%	24.6%
Bubble Peak		226.29	226.87	206.52	206.61
Date of Bubble Peak		Jun-06	Apr-06	Jul-06	Apr-06
Below Bubble Peak		17.0%	18.3%	16.2%	17.3%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 11/26/2014 12:24:00 PM

The new home sales report for October was below expectations at 458 thousand on a seasonally adjusted annual rate basis (SAAR).

Also, sales for the previous three months (July, August and September), were revised down.

Sales this year are significantly below expectations, however, based on the low level of sales, more lots coming available, and demographics, it seems likely sales will continue to increase over the next several years.

Earlier: New Home Sales at 458,000 Annual Rate in October

The Census Bureau reported that new home sales this year, through October, were 371,000, Not seasonally adjusted (NSA). That is up 1% from 367,000 during the same period of 2013 (NSA). Not much of a gain from last year.  Right now it looks like sales will barely be up this year.

Sales were up 1.8% year-over-year in October.

Click on graph for larger image.

This graph shows new home sales for 2013 and 2014 by month (Seasonally Adjusted Annual Rate).

The year-over-year gain will be small in Q4, but I expect sales to be up for the quarter and for the year.

And here is another update to the "distressing gap" graph that I first started posting several years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through September 2014. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to mostly move sideways (distressed sales will continue to decline and be somewhat offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 11/26/2014 10:00:00 AM

The Census Bureau reports New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 458 thousand.

September sales were revised down from 467 thousand to 455 thousand, and August sales were revised down from 466 thousand to 453 thousand.

"Sales of new single-family houses in October 2014 were at a seasonally adjusted annual rate of 458,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.7 percent above the revised September rate of 455,000 and is 1.8 percent above the October 2013 estimate of 450,000."

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the previous two years, new home sales are still close to the bottom for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply increased in October to 5.6 months from 5.5 months in September.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of October was 212,000. This represents a supply of 5.6 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In October 2014 (red column), 37 thousand new homes were sold (NSA). Last year 36 thousand homes were sold in October.  This was the best October since 2007.

The high for October was 105 thousand in 2005, and the low for October was 23 thousand in 2010.

This was below expectations of 470,000 sales in October, and there were downward revisions to sales in July, August and September.

I'll have more later today.

by Calculated Risk on 11/26/2014 08:48:00 AM

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

Personal income increased $32.9 billion, or 0.2 percent ... in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $27.3 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.2 percent in October, in contrast to a decrease of less than 0.1 percent in September. ... The price index for PCE increased 0.1 percent in October, the same increase as in September. The PCE price index, excluding food and energy, increased 0.2 percent in October, compared with an increase of 0.1 percent in September.

The following graph shows real Personal Consumption Expenditures (PCE) through October 2014 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was lower than expected,  Also the increase in PCE was below the 0.3% consensus, however that consensus was prior to the upward revisions to August and September PCE in the GDP report.  It looks like PCE is off to a decent start to Q4.

On inflation: The PCE price index increased 1.4 percent year-over-year, and at a 0.7% annualized rate in October. The core PCE price index (excluding food and energy) increased 1.6 percent year-over-year in October, and at a 2.2% annualized rate in October.

by Calculated Risk on 11/26/2014 08:30:00 AM

The DOL reported:

In the week ending November 22, the advance figure for seasonally adjusted initial claims was 313,000, an increase of 21,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 291,000 to 292,000. The 4-week moving average was 294,000, an increase of 6,250 from the previous week's revised average. The previous week's average was revised up by 250 from 287,500 to 287,750.

There were no special factors impacting this week's initial claims

The previous week was revised up to 292,000

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 294,000.

This was higher than the consensus forecast of 288,000, but the level suggests few layoffs.

by Calculated Risk on 11/25/2014 08:12:00 PM

Earlier the FDIC released the Quarterly Banking Profile for Q3 today.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $38.7 billion in the third quarter of 2014, up $2.6 billion (7.3 percent) from earnings of $36.1 billion the industry reported a year earlier. The increase in earnings was mainly attributable to a $7.8 billion (4.8 percent) increase in net operating revenue (the sum of net interest income and total noninterest income), the biggest since the fourth quarter of 2009. ...

The number of "problem banks" fell for the 14th consecutive quarter. The number of banks on the FDIC's "Problem List" declined from 354 to 329 during the quarter, the lowest since the 305 in the first quarter of 2009. The number of "problem" banks now is 63 percent below the post-crisis high of 888 at the end of the first quarter of 2011. Two FDIC-insured institutions failed in the third quarter, compared to six in the third quarter of 2013.

The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance (the net worth of the Fund) rose to a record $54.3 billion as of September 30 from $51.1 billion at the end of June. The Fund balance increased primarily due to assessment income, recoveries from litigation settlements, and receivership asset recoveries that exceeded estimates.

Wednesday:
• At 7:00 AM ET, (This might be delayed due to the holiday) the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 288 thousand from 291 thousand last week.

• Also at 8:30 AM, Durable Goods Orders for October from the Census Bureau. The consensus is for a 0.5% decrease in durable goods orders.

• Also at 8:30 AM, Personal Income and Outlays for October. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:55 AM, Reuter's/University of Michigan's Consumer sentiment index (final for November). The consensus is for a reading of 90.0, up from the preliminary reading of 89.4, and up from the October reading of 86.9.

• At 10:00 AM, the New Home Sales for October from the Census Bureau. The consensus is for an increase in sales to 470 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 467 thousand in September.

• Also at 10:00 AM, Pending Home Sales Index for October. The consensus is for a 0.6% increase in the index.