by Calculated Risk on 8/25/2013 11:29:00 AM

Here are two graphs I haven't updated for about a year.

As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in July 2013 was $257,200; the average sales price was $322,700."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales. With fewer foreclosures now, it appears the builders are moving to slightly higher price points.

The second graph shows the percent of new home sales by price. At the peak of the housing bubble, almost 40% of new homes were sold for more than $300K - and over 20% were sold for over $400K.

The percent of home over $300K declined to 20% in January 2009. Now it has rebounded to around 38%. And less than 12% were under $150K.

Earlier on New Home Sales:
• New Home Sales decline sharply to 394,000 Annual Rate in July
• Comments on New Home Sales

by Calculated Risk on 8/24/2013 01:11:00 PM

The key reports this week are Case-Shiller house prices for June on Tuesday, the second estimate of Q2 GDP on Thursday, and the July Personal Income and Outlays report on Friday.

For manufacturing, the Dallas and Richmond regional manufacturing surveys for August will be released this week.

----- Monday, August 26th -----
8:30 AM: Durable Goods Orders for July from the Census Bureau. The consensus is for a 4.0% declined in durable goods orders.

10:30 AM: Dallas Fed Manufacturing Survey for August. The consensus is a reading of 4.5, up from 4.4 in July (above zero is expansion).

----- Tuesday, August 27th -----
9:00 AM: S&P/Case-Shiller House Price Index for June. Although this is the June report, it is really a 3 month average of April, May, and June.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through May 2012 (the Composite 20 was started in January 2000).

The consensus is for a 12.2% year-over-year increase in the Composite 20 index (NSA) for June. The Zillow forecast is for the Composite 20 to increase 12.1% year-over-year, and for prices to increase 1.1% month-to-month seasonally adjusted.

10:00 AM: Conference Board's consumer confidence index for August. The consensus is for the index to decrease to 78.0 from 80.3.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August. The consensus is for a reading of 0 for this survey, up from minus 11 in July (Above zero is expansion).

----- Wednesday, August 28th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM ET: Pending Home Sales Index for July. The consensus is for a 1.0% decrease in the index.

----- Thursday, August 29th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 330 thousand from 336 thousand last week.

8:30 AM: Q2 GDP (second estimate). This is the second estimate of Q2 GDP from the BEA. The consensus is that real GDP increased 2.2% annualized in Q2, revised up from the advance estimate of 1.7% in Q2.

----- Friday, August 30th -----
8:30 AM ET: Personal Income and Outlays for July. The consensus is for a 0.2% increase in personal income in June, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for August. The consensus is for an increase to 53.0, up from 52.3 in July.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for July). The consensus is for a reading of 80.0.

by Calculated Risk on 8/24/2013 08:40:00 AM

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

Here is the unofficial problem bank list for August 23, 2013.

Changes and comments from surferdude808:

This week all we got was two bank closures from the FDIC as they did not release second quarter industry results or its enforcement actions through July. The closings and one other removal lower the count of the Unofficial Problem Bank List to 714 institutions with assets of $253.1 billion. A year ago, the list held 898 institutions with assets of $346.7 billion.

The OCC terminated the action against Paragon National Bank, Memphis, TN ($260 million Ticker: PGNN). After being issued a Prompt Corrective Action order effective June 11, 2013, Community South Bank, Parsons, TN ($387 million) failed today.

The other closing was a bank controlled by Capitol Bancorp Ltd. (Ticker: CBCRQ), Sunrise Bank of Arizona, Phoenix, AZ ($202 million). This is the sixth bank controlled by Capitol Bancorp to fail. After controlling more than 50 banks at its peak, Capitol is down to an interest in seven banks. The failures have cost the FDIC insurance fund an estimated $48 million. On August 16, the FDIC in a bankruptcy court filing countered the company's allegations that it improperly denied issuing cross-guaranty waivers that could have prevented their sale to avoid failure. According to an SNL Securities report (FDIC continues to consider Capitol Bancorp cross-guaranty waivers as complexity mounts ), the FDIC argued that the company's desire to depose FDIC officials and obtain documents on four closures was "inappropriate" or "would accomplish nothing." With this closing and the mounting costs to the insurance fund, it probably becomes more difficult for the company to negotiate the sale of its remaining units before their failure or seizure under cross-guaranty.

Next week, we anticipate the FDIC will release its enforcement actions through July and the aggregate Official Problem Bank figures as of June.

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 down to 714.

by Calculated Risk on 8/23/2013 07:32:00 PM

From the FDIC: First Fidelity Bank, National Association, Oklahoma City, Oklahoma, Assumes All of the Deposits of Sunrise Bank of Arizona, Phoenix, Arizona

As of June 30, 2013, Sunrise Bank of Arizona had approximately $202.2 million in total assets and $196.9 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $17.0 million. ... Sunrise Bank of Arizona is the 20th FDIC-insured institution to fail in the nation this year, and the third in Arizona.

Sunset in the desert ... and two in one day ... a few years ago that would have been a slow Friday.

by Calculated Risk on 8/23/2013 06:38:00 PM

From the FDIC: CB&S Bank, Inc. Russellville, Alabama, Assumes All of the Deposits of Community South Bank, Parsons, Tennessee

As of June 30, 2013, Community South Bank had approximately $386.9 million in total assets and $377.7 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $72.5 million. ... Community South Bank is the 19th FDIC-insured institution to fail in the nation this year, and the second in Tennessee.

The number of bank failures has really slowed down. It looks like there will be around 25 to 30 failures this year; the lowest since 2008 when there were 25 failures. 

by Calculated Risk on 8/23/2013 04:46:00 PM

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by -0.4% (-0.9 billion vehicle miles) for June 2013 as compared with June 2012. Travel for the month is estimated to be 258.1 billion vehicle miles.

The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways.


Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 67 months - over 5 1/2 years - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

Gasoline prices were up in June compared to June 2012. In June 2013, gasoline averaged of $3.69 per gallon according to the EIA. In 2012, prices in June averaged $3.60 per gallon.  Gasoline prices were up even more year-over-year in July, so I expect miles driven to be down more year-over-year in July.   However prices were down year-over-year in August, so miles might be up.

As we've discussed, gasoline prices are just part of the story.  The lack of growth in miles driven over the last 5+ years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take several more years before we see a new peak in miles driven. 

by Calculated Risk on 8/23/2013 02:50:00 PM

It seems like yesterday that I wrote 4% 30 Year Mortgage Rates? (it was a few months ago in May).

Now there is some discussion of 5% 30 year mortgage rates. Here is what mortgage banker Lou Barnes wrote today:

Release of the Fed’s July 31 meeting minutes on Wednesday collapsed the last courage in the bond market, 10-year T-notes to 2.90% and low-down, low-fee mortgages to 5.00%. The minutes were incomprehensible, but their failure to pull back from taper of QE3 means that it is still a “go.”

This morning Treasury short-sellers so pleased with themselves got clobbered by word that new home sales had fainted 13.4% in July, and June was revised down by 8%. The 10-year briefly to 2.81%. New home sales are measured by new contracts written, thus these June-July results are the first since mortgage rates jumped 1% from May to June. Correlation is not cause ... some of the weakness is due to a shortage of inventory in turn caused by a shortage of credit to developers and builders.

Barnes is talking about "low-down, low-fee" 30 year mortgages hitting 5%, but his comment made me wonder at what 10 year Treasury yield, mortgage rates in the Freddie Mac survey would probably rise to 5%?

Here is an update to a graph that shows the relationship between the monthly 10 year Treasury Yield and 30 year mortgage rates from the Freddie Mac survey.

Click on graph for larger image.

Currently the 10 year Treasury yield is 2.82% and 30 year mortgage rates are at 4.58% (according to Freddie Mac). Based on the relationship from the graph, the 30 year mortgage rate (Freddie Mac survey) would be around 5% when 10-year Treasury yields are around 3.33%.

Note: The yellow marker is the current (last week) relationship.

¹ Long term readers will remember the quote about "neutron loans" from mortgage banker Lou Barnes in 2007:

“All of the old-timers knew that subprime mortgages were what we called neutron loans — they killed the people and left the houses,” said Louis S. Barnes, 58, a partner at Boulder West, a mortgage banking firm in Lafayette, Colo.

by Calculated Risk on 8/23/2013 11:20:00 AM

Three key comments:

1. This is just one month of data (I note this whenever we see a weak or strong sales report). There is plenty of month-to-month noise for new home sales and frequent large revisions.

2. The downward revisions to previous months were expected (In the weekly schedule I wrote: "Based on the homebuilder reports, there will probably be some downward revisions to sales for previous months."). But these revisions do suggest the housing recovery was not as strong as previously thought.

3. Important: Any impact from rising mortgage rates would show up in the New Home sales report before the existing home sales report. New home sales are counted when contracts are signed, and existing home sales when the transactions are closed - so the timing is different. For existing home sales, I think there was a push to close before the mortgage interest rate lock expired - so closed existing home sales in July were strong - and I expect a decline in existing home sales in August.

For New Home sales, I expect some buyers were shocked by the increase in rates - and they held off signing a contract in July.  But this doesn't mean the housing recovery is over - far from it.  In fact I think the housing recovery (starts / new home sales) has just begun. 

Earlier: New Home Sales decline sharply to 394,000 Annual Rate in July

Looking at the first seven months of 2013, there has been a significant increase in sales this year.  The Census Bureau reported that there were 271 new homes sold in the first half of 2013, up 21.5% from the 223 thousand sold during the same period in 2012. This was the highest sales for the first seven months of the year since 2008.

And even though there has been a large increase in the sales rate, sales are just above the lows for previous recessions. This suggests significant upside over the next few years.  Based on estimates of household formation and demographics, I expect sales to increase to 750 to 800 thousand over the next several years - substantially higher than the current sales rate.

And here is another update to the "distressing gap" graph that I first started posting over four 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.

Click on graph for larger image.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through June 2013. 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. The flood of distressed sales kept existing home sales elevated, and depressed new home sales since builders weren't able to compete with the low prices of all the foreclosed properties.

I don't expect much of an increase in existing home sales (distressed sales will slowly decline and be offset by more conventional sales). But I do expect this gap to continue to 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 8/23/2013 10:00:00 AM

The Census Bureau reports New Home Sales in July were at a seasonally adjusted annual rate (SAAR) of 394 thousand. This was down from 455 thousand SAAR in June (June sales were revised down from 497 thousand).

April sales were revised down from 453 thousand to 446 thousand, and May sales were revised down from 459 thousand to 439 thousand. 

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

"Sales of new single-family houses in July 2013 were at a seasonally adjusted annual rate of 394,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 13.4 percent below the revised June rate of 455,000, but is 6.8 percent above the July 2012 estimate of 369,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

The months of supply increased in July to 5.2 months from 4.3 months in June.

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 July was 171,000. This represents a supply of 5.2 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.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is near the record low. The combined total of completed and under construction is increasing, but still very low.

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

In July 2013 (red column), 35 thousand new homes were sold (NSA). Last year 33 thousand homes were sold in July. The high for July was 117 thousand in 2005, and the low for July was 26 thousand in 2010.



This was well below expectations of 487,000 sales in July, and a very weak report.  I'll have more later today.

by Calculated Risk on 8/23/2013 08:26:00 AM

Note: the presented papers are usually posted to the Kansas City Fed's site fairly quickly. On twitter.

2013 Economic Symposium: Global Dimensions of Unconventional Monetary Policy. Times listed on program are Mountain Standard Time.

Friday Aug 23rd

Chair: Stanley Fischer, former Governor, Bank of Israel

8:00 AM: “The Natural Rate of Interest, Financial Crises and the Zero Lower Bound,” presented by Robert E. Hall, Stanford University, Discussant: Hyun Song Shin, professor, Princeton University

9:00 AM" “The Transmission of Unconventional Monetary Policy” presented by Arvind Krishnamurthy, Northwestern University Discussant: Anil Kashyap, professor, University of Chicago

10:25 AM: Panel on Monetary Policy Options and Tools. Panelists: Augustin Carstens, Governor, Bank of Mexico, David Daokui Li, professor, Tsinghua University, Frank Smets, Director General of Directorate General Research, European Central Bank

12:15 PM: Luncheon Address by Christine Lagarde, Managing Director, International Monetary Fund

Saturday Aug 24th

Chair: Janet Yellen, vice chair, Board of Governors of the Federal Reserve System

8:00 AM: “Global Liquidity” presented by Jean-Pierre Landau, fellow, Sciences Po, Discussant: Claudio Borio, Bank of International Settlements

9:00 AM: “Cross-Border Capital Flows” presented by Helene Rey, professor, London Business School, Discussant: Terrence Checki, executive vice president, New York Fed

10:25 AM: Overview Panel. Panelists: Charles Bean, deputy governor, Bank of England, Haruhiko Kuroda, governor, Bank of Japan