RSS Feed by Calculated Risk on 1/17/2015 12:15:00 PM
Saturday, January 17, 2015
Schedule for Week of January 18, 2015
The key economic reports this week are December housing starts on Wednesday, and existing home sales on Friday.
All US markets will be closed in observance of Martin Luther King, Jr. Day
10:00 AM: The January NAHB homebuilder survey. The consensus is for a reading of 58, up from 57 in December. Any number above 50 indicates that more builders view sales conditions as good than poor.
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:30 AM: Housing Starts for December. Total housing starts were at 1.028 million (SAAR) in November. Single family starts were at 677 thousand SAAR in November.
The consensus is for total housing starts to increase to 1.040 million (SAAR) in December.
During the day: The AIA's Architecture Billings Index for December (a leading indicator for commercial real estate).
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 300 thousand from 316 thousand.
9:00 AM: FHFA House Price Index for November 2014. This was originally a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.3% increase.
11:00 AM: the Kansas City Fed manufacturing survey for January.
10:00 AM: Existing Home Sales for December from the National Association of Realtors (NAR). The consensus is for sales of 5.05 million on seasonally adjusted annual rate (SAAR) basis. Sales in November were at a 4.93 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.15 million SAAR.
A key will be the reported year-over-year increase in inventory of homes for sale.
Unofficial Problem Bank list declines to 392 Institutions
by Calculated Risk on 1/17/2015 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 Jan 16, 2015.
Changes and comments from surferdude808:
A bank failure and the OCC releasing an anticipated update on its recent enforcement action activities led to several changes to the Unofficial Problem Bank List. This week there were eight removals and one addition that leave the list at 392 institutions with assets of $122.8 billion. A year ago, the list held 605 institutions with $199.8 billion in assets.CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now back down to 392 - almost full circle!
First Federal Savings Bank of Elizabethtown, Elizabethtown, KY ($754 million) and Bank of Coral Gables, Coral Gables, FL ($103 million) found merger partners to make their way off the list. The OCC terminated actions against The Bank of Maine, Portland, ME ($790 million); The First National Bank of Talladega, Talladega, AL ($389 million); Universal Bank, West Covina, CA ($321 million); Atlantic National Bank, Brunswick, GA ($142 million); and Clay County Savings Bank, Liberty, MO ($87 million).
First National Bank of Crestview Crestview, FL ($80 million) was the first bank failure in 2015. It is the 72nd failure of a Florida-based institution since the on-set of the Great Recession in 2008. With 88, only Georgia has more failed institutions.
The OCC issued a new action against First National Bank, Waupaca, WI ($778 million).
Next week will likely see fewer changes to the list.
Friday, January 16, 2015
1st Bank Failure of 2015: First National Bank of Crestview, Crestview, Florida
by Calculated Risk on 1/16/2015 07:51:00 PM
And it begins ... from the FDIC: First NBC Bank, New Orleans, Louisiana, Assumes All of the Deposits of First National Bank of Crestview, Crestview, Florida
As of September 30, 2014, First National Bank of Crestview had approximately $79.7 million in total assets and $78.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $4.4 million. ... First National Bank of Crestview is the 1st FDIC-insured institution to fail in the nation this year. The last FDIC-insured institution closed in the state was Valley Bank, Fort Lauderdale, on June 20, 2014.The FDIC closed 18 banks last year, down from 24 closures in 2013 and 51 in 2012. Failures peaked at 157 in 2010.
Lawler: “Surprise” Warnings on Margins/Effective Prices Whacks Home Builder Stocks
by Calculated Risk on 1/16/2015 04:05:00 PM
From housing economist Tom Lawler:
While two major home builders this week reported ‘ok” (KB Home) to better than consensus (Lennar) operating results for the quarter ended November 30, 2014, both home builders “stunned” many investors by warning that weaker than anticipated demand and “diminished” pricing power in several markets across the country had resulted in increased sales incentives and in some markets modest price reductions – developments which, when combined with continued increases in labor and material costs, would result in lower margins in FY 2015 compared to FY 2014. I say that many investors were “stunned” because home builder stocks took a savage beating this week, especially the stock of KB Home, whose ‘margin warning” was the most surprising.
| KB Home | ||||||
|---|---|---|---|---|---|---|
| Housing Units | Average Price | |||||
| Qtr. Ended: | 11/30/2014 | 11/30/2013 | % Change | 11/30/2014 | 11/30/2013 | % Change |
| Net Orders | 1,706 | 1,556 | 9.6% | $344,500 | $309,600 | 11.3% |
| Deliveries | 2,229 | 2,038 | 9.4% | $351,500 | $301,100 | 16.7% |
| Backlog (EOQ) | 2,909 | 2,557 | 13.8% | $314,200 | $266,900 | 17.7% |
| Net Orders/Community | 7.97 | 8.19 | -2.7% | |||
| Lennar Corporation | ||||||
|---|---|---|---|---|---|---|
| Housing Units | Average Price | |||||
| Qtr. Ended: | 11/30/2014 | 11/30/2013 | % Change | 11/30/2014 | 11/30/2013 | % Change |
| Net Orders | 5,492 | 4,498 | 22.1% | $325,000 | $320,000 | 1.6% |
| Deliveries | 6,950 | 5,650 | 23.0% | $329,000 | $308,000 | 6.8% |
| Backlog (EOQ) | 5,832 | 4,806 | 21.3% | $339,000 | $337,000 | 0.6% |
| Net Orders/Community | 9 | 8.7 | 3.4% | |||
In terms of unit sales guidance, KB Home said that it expected its community count to increase by 15-20% over the next year, and that it expected its order pace to track the increase in its community count. Lennar said that it expects home deliveries in FY 2015 to be between 12% and 14% above deliveries in FY 2014.
While most competent housing analysts had expected diminished price increases and increased sales incentives at most home builders in 2014 and 2015 following the surprising sharp price increases in 2013, the majority of housing analysts and investors had no such expectation. In the latter part of 2012 and the first half of 2013 many builders experienced a significant and unexpected increase in demand that outpaced their ability to finish homes (partly related to “supply-channel” issues), and in response many builders hiked prices substantially in order to keep demand on pace with their ability to produce homes. As builders’ ability to increase production increased in 2014, however, few builders responded by paring back prices or increasing incentives, and as a result overall unit sales lagged expectations. Another key factor in 2014 that kept demand below expectations was mortgage credit conditions – many analysts and builders had expected mortgage credit to be significantly less restrictive in 2014, but that was not the case for most of the year. Indeed, by some “metrics” mortgage credit was actually a bit “tighter” in the first half of 2014 than in 2013, in part reflecting lenders’ “adjustments” to the January implementation of the CFPB QM rules as well as its new servicing rules.
Yet another factor that appeared to contribute to lower than consensus new home sales last year was that many (though not all builders) were not very aggressive in opening and marketing communities designed for the “typical” first-time buyer (as opposed to the “high income/strong credit first-time and trade-up buyer), which generally have lower price points, fewer amenities, and lower margins than communities targeted to the “trade-up” buyers. The notion that new SF home building could start to return to “normal” levels while at the same time the elevated home sizes, prices, and margins would remain the same seemed silly, and in hindsight it was.
While the notion that builder margins will on average be lower in 2015 than the “higher than sustainable” levels in 2014 seems quite reasonable and was quite predictable, by the same token the outlook for improved sales volumes at lower margins/price points has improved. Obviously, of course, mortgage interest rates have come down; the FHA lowered its annual insurance premium by 50 bp; and it appears as if an increasing number of mortgage lenders have eased mortgage credit conditions/credit overlays in recent months. In addition, the overall US economy has continued to improve, as has the labor market – though more in terms of jobs than in terms of income growth, highlighting the need for lower price points for homes targeted for potential first-time buyers.
emphasis added
Key Measures Show Low Inflation in December
by Calculated Risk on 1/16/2015 01:22:00 PM
The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in December. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.Note: The Cleveland Fed has the median CPI details for December here. Motor fuel declined at a 69% annualized rate in December, following a 55% annualized rate decline in November, and a 31% annualized rate decline in October!
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.4% (-4.4% annualized rate) in December. The CPI less food and energy was unchanged (0.0% annualized rate) on a seasonally adjusted basis.
Click on graph for larger image.This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.8%, and the CPI less food and energy rose 1.6%. Core PCE is for November and increased 1.4% year-over-year.
On a monthly basis, median CPI was at 2.1% annualized, trimmed-mean CPI was at 1.2% annualized, and core CPI was unchanged annualized.
On a year-over-year basis these measures suggest inflation remains below the Fed's target of 2% (median CPI is close to 2%).
Lawler: Preliminary Table of Distressed Sales and Cash buyers for Selected Cities in December
by Calculated Risk on 1/16/2015 11:46:00 AM
Economist Tom Lawler sent me the preliminary table below of short sales, foreclosures and cash buyers for a few selected cities in December.
On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales.
Short sales are down in these areas (except Sacramento).
Foreclosures are up in a few areas (working through the logjam).
The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.
| Short Sales Share | Foreclosure Sales Share | Total "Distressed" Share | All Cash Share | |||||
|---|---|---|---|---|---|---|---|---|
| Dec-14 | Dec-13 | Dec-14 | Dec-13 | Dec-14 | Dec-13 | Dec-14 | Dec-13 | |
| Las Vegas | 10.0% | 20.7% | 8.0% | 8.5% | 18.0% | 29.2% | 34.1% | 44.4% |
| Reno** | 8.0% | 24.0% | 5.0% | 4.0% | 13.0% | 28.0% | ||
| Phoenix | 29.2% | 32.9% | ||||||
| Sacramento | 6.2% | 6.1% | 7.1% | 5.4% | 13.3% | 11.5% | 15.4%** | 19.5%** |
| Minneapolis | 3.7% | 5.5% | 12.6% | 17.1% | 16.3% | 22.7% | ||
| Mid-Atlantic | 4.9% | 8.0% | 11.2% | 9.3% | 16.1% | 17.3% | 20.3% | 19.3% |
| Orlando | 4.8% | 13.5% | 26.7% | 19.1% | 31.5% | 32.7% | 40.0% | 45.0% |
| Bay Area CA* | 4.0% | 7.9% | 3.7% | 4.6% | 7.7% | 12.5% | 19.0% | 23.5% |
| So. California* | 6.2% | 10.2% | 5.0% | 5.8% | 11.2% | 16.0% | 23.8% | 28.8% |
| Hampton Roads | 21.5% | 29.1% | ||||||
| Northeast Florida | 30.6% | 37.9% | ||||||
| Toledo | 37.9% | 36.5% | ||||||
| Tucson | 28.7% | 32.3% | ||||||
| Des Moines | 20.3% | 23.1% | ||||||
| Georgia*** | 25.5% | N/A | ||||||
| Omaha | 20.5% | 23.9% | ||||||
| Memphis* | 15.0% | 21.0% | ||||||
| *share of existing home sales, based on property records **Single Family Only ***GAMLS | ||||||||
Preliminary January Consumer Sentiment increases to 98.2
by Calculated Risk on 1/16/2015 10:01:00 AM
Click on graph for larger image.
The preliminary Reuters / University of Michigan consumer sentiment index for January was at 98.2, up from 93.6 in December.
This was above the consensus forecast of 94. Lower gasoline prices and a stronger economy are probably the reasons for the sharp increase.
Fed: Industrial Production decreased 0.1% in December
by Calculated Risk on 1/16/2015 09:15:00 AM
From the Fed: Industrial production and Capacity Utilization
Industrial production decreased 0.1 percent in December after rising 1.3 percent in November. The decrease in December reflected a sharp drop in the output of utilities, as warmer-than-usual temperatures reduced demand for heating; excluding utilities, industrial production rose 0.7 percent. Manufacturing posted a gain of 0.3 percent for its fourth consecutive monthly increase. The index for mining increased 2.2 percent after falling in the previous two months. At 106.5 percent of its 2007 average, total industrial production in December was 4.9 percent above its level of a year earlier. For the fourth quarter of 2014 as a whole, industrial production advanced at an annual rate of 5.6 percent, with widespread gains among the major market and industry groups. Capacity utilization for the industrial sector decreased 0.3 percentage point in December to 79.7 percent, a rate that is 0.4 percentage point below its long-run (1972–2013) average.
emphasis added
Click on graph for larger image.This graph shows Capacity Utilization. This series is up 12.7 percentage points from the record low set in June 2009 (the series starts in 1967).
Capacity utilization at 79.7% is 0.4% below the average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.
Note: y-axis doesn't start at zero to better show the change.
The second graph shows industrial production since 1967.Industrial production decreased 0.1% in December to 106.5. This is 27.2% above the recession low, and 5.7% above the pre-recession peak.
This was slightly below expectations.
BLS: CPI decreased 0.4% in December, Core CPI Unchanged
by Calculated Risk on 1/16/2015 08:30:00 AM
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.4 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.8 percent before seasonal adjustment.I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was at the consensus forecast of a 0.4% decrease for CPI, and below the forecast of a 0.1% increase in core CPI.
The gasoline index continued to fall sharply, declining 9.4 percent and leading to the decrease in the seasonally adjusted all items index. The fuel oil index also fell sharply, and the energy index posted its largest one-month decline since December 2008, although the indexes for natural gas and for electricity both increased. The food index, in contrast, rose 0.3 percent, its largest increase since September.
The index for all items less food and energy was unchanged in December, following a 0.2 percent increase in October and a 0.1 percent rise in November. This was only the second time since 2010 that it did not increase.
emphasis added
Thursday, January 15, 2015
Friday: CPI, Industrial Production, Consumer Sentiment
by Calculated Risk on 1/15/2015 08:33:00 PM
From Freddie Mac: Mortgage Rates Decline for Third Consecutive Week
Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates falling for the third consecutive week as bond yields continued to drop despite a strong employment report. Averaging 3.66 percent, the 30-year fixed-rate mortgage is at its lowest level since the week ending May 23, 2013 when it averaged 3.59 percent. This also marks the first time the 15-year fixed rate mortgage has fallen below 3 percent since the week ending May 30, 2013.Friday:
30-year fixed-rate mortgage (FRM) averaged 3.66 percent with an average 0.6 point for the week ending January 15, 2014, down from last week when it averaged 3.73 percent. A year ago at this time, the 30-year FRM averaged 4.41 percent.
emphasis added
• At 8:30 AM ET, the Consumer Price Index for December. The consensus is for a 0.4% decrease in CPI, and for core CPI to increase 0.1%.
• At 9:15 AM, the The Fed will release Industrial Production and Capacity Utilization for December. The consensus is for no change in Industrial Production, and for Capacity Utilization to decrease to 80.0%.
• At 9:55 AM, the University of Michigan's Consumer sentiment index (preliminary for January). The consensus is for a reading of 94.1, up from 93.6 in December.
