by Calculated Risk on 9/24/2013 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for July ("July" is a 3 month average of May, June and July prices).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Steadily Rise in July 2013 According to the S&P/Case-Shiller Home Price Indices

Data through July 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices ... showed increases of 1.9% and 1.8% from June for the 10- and 20-City Composites. For at least four months in a row, all 20 cities showed monthly gains. Phoenix posted 22 consecutive months of positive returns. Although home prices in all the cities increased, 15 cities and both Composites saw these monthly rates decelerate in July versus June.

Over the last 12 months, prices rose 12.3% and 12.4% as measured by the 10- and 20-City Composites. ...

“Home prices gains are holding their 12% annual rate of gain established by the two Composite indices in April,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The Southwest continues to lead the housing recovery. Las Vegas home prices are up 27.5% year-over-year; in California, San Francisco, Los Angeles and San Diego are up 24.8%, 20.8% and 20.4% respectively. However, all remain far below their peak levels.

“Since April 2013, all 20 cities are up month to month; however, the monthly rates of price gains have declined. More cities are experiencing slow gains each month than the previous month, suggesting that the rate of increase may have peaked."

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 23.7% from the peak, and up 0.7% in July (SA). The Composite 10 is up 15.7% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 23.0% from the peak, and up 0.6% (SA) in July. The Composite 20 is up 16.3% from the post-bubble low set in Jan 2012 (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 12.2% compared to July 2012.

The Composite 20 SA is up 12.4% compared to July 2012. This was the fourteenth consecutive month with a year-over-year gain and it appears the YoY change might be starting to slow.

Prices increased (SA) in 18 of the 20 Case-Shiller cities in July seasonally adjusted. (20 of 20 increased NSA) Prices in Las Vegas are off 50.1% from the peak, and prices in Denver and Dallas are at new highs.

This was at the consensus forecast for a 12.4% YoY increase. I'll have more on prices later.

by Calculated Risk on 9/23/2013 09:31:00 PM

Annie Lowery writes at the NY Times: Shutdown vs. Default: The Relative Impact

At the moment, Congress is figuring out how to avoid two forms of chaos of its own making: a government shutdown and a public default.

The former might happen when the continuing resolution financing the federal government expires on Sept. 30. The latter might happen when the Treasury runs out of room under its statutory debt ceiling. That day — often called the X-date — is likely to come around Oct. 15.

Lowery discussed the costs of both. Basically a shutdown will be inconvenient (for econbloggers because of the lack of data) and will probably cost a few billion dollars (dumb, but manageable). But failing to pay the bills could be very expensive:

There is no real comparison between the cost of a shutdown and the cost of a breach in the debt ceiling.

The two shutdowns of the Clinton years — a six-day shutdown in 1995 and a 21-day shutdown between 1995 and 1996 — cost about $1.4 billion. A more complete accounting suggests that is on the low side.
...
In contrast, a breach of the debt ceiling ... might cost hundreds of billions, perhaps more.

Tuesday:
• 9:00 AM ET, the S&P/Case-Shiller House Price Index for July. Although this is the July report, it is really a 3 month average for closings in May, June and July. The consensus is for a 12.4% year-over-year increase in the Composite 20 index (NSA).

• Also at 9:00 AM, the FHFA House Price Index for July 2013. The consensus is for a 0.7% increase.

• 10:00 AM, the Conference Board's consumer confidence index for September. The consensus is for the index to decrease to 80.0 from 81.5.

• Also at 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for September. The consensus is for a reading of 10.5 for this survey, down from 14 in August (Above zero is expansion).

by Calculated Risk on 9/23/2013 05:25:00 PM

Here is another weekly update on housing inventory: One of key questions for 2013 is Will Housing inventory bottom this year? Since this is a very important question, I'm tracking inventory weekly in 2013. 

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

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for August).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory increased more than the normal seasonal pattern, and finished the year up 7%. However in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

So far in 2013, inventory is up 21.8%.  There might be some further increases over the next few weeks, but then inventory should start declining seasonally.  

It is important to remember that inventory is still very low, and is down 2.7% from the same week last year according to Housing Tracker.

The second graph shows the Housing Tracker reported weekly inventory for the 54 metro areas for 2012 and 2013.

Inventory in 2013 is still 2.7% below the same week in 2012, but the inventory level is getting close to last year.

This strongly suggests inventory bottomed early this year, and I expect inventory to be up year-over-year very soon, and I also expect the seasonal decline to be less than usual at the end of the year.  This increase in inventory should slow house price increases.

by Calculated Risk on 9/23/2013 03:33:00 PM

From economist Tom Lawler:

Zillow reported that its “National” Home Value Index for August was up 0.4% from July, and was up 6.6% from last August. Zillow’s HVI is a “hedonic” index, regional and national HVIs are median home value measures (or unit-weighted by the housing stock for which Zillow has “Zestimate”), “monthly” HVIs are three-month moving averages, and the HVIs are seasonally adjusted. Zillow also does not use foreclosure resales in constructing its HVIs.

CR Note: Here is the Zillow release: U.S. Home Values Continue to Surge in August; Pace Expected to Slow as Summer Season Ends

Home values continued their rapid rise in August, climbing 6.6 percent year-over-year to a Zillow Home Value Index of $162,100, the largest annual gain since July 2006. However, signs are emerging that the pace of home value appreciation is beginning to slow in the face of rising mortgage interest rates and increased supply.

National home values have risen or remained flat month-over-month for almost two years, but August marked the third consecutive month in which monthly home values rose more slowly than the month prior. After the pace of monthly home value appreciation peaked for the year at 0.9 percent in May, monthly home value growth slowed to 0.7 percent in June, 0.6 percent in July and 0.4 percent in August.

Of the 382 metro areas for which Zillow releases a HVI to the public, 324 showed a YOY increase in August.

Recently Mark Fleming of CoreLogic and Stan Humphries of Zillow gave presentations on each firm’s home price indexes at a “Lunchtime Data Talk” (“Home Price Indexes: Appreciating the Differences”) at the Urban Institute. The presentation covered index construction, as well as the main differences between a hedonic imputation index, like the Zillow Home Value Index, and a repeat sales index, like the CoreLogic Home Price Index, and slides are available here. A video of the presentation is available here.


Video streaming by Ustream

by Calculated Risk on 9/23/2013 01:37:00 PM

The Department of Transportation (DOT) reported:

◦ Travel on all roads and streets changed by 1.6% (4.2 billion vehicle miles) for July 2013 as compared with July 2012

◦ Travel for the month is estimated to be 263.6 billion vehicle miles.

◦ Cumulative Travel for 2013 changed by 0.2% (2.7 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 68 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 July compared to July 2012. In July 2013, gasoline averaged of $3.66 per gallon according to the EIA. In 2012, prices in July averaged $3.50 per gallon.  Even with higher gasoline prices, vehicle miles were up in July.

Gasoline prices were down year-over-year in August, so I expect miles driven to be up in August too.  

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 9/23/2013 10:55:00 AM

From NY Fed President William Dudley: Reflections on the Economic Outlook and the Implications for Monetary Policy

To begin to taper, I have two tests that must be passed: (1) evidence that the labor market has shown improvement, and (2) information about the economy’s forward momentum that makes me confident that labor market improvement will continue in the future. So far, I think we have made progress with respect to these metrics, but have not yet achieved success.

With respect to the first metric, we have seen labor market improvement since the program began last September. Over this time period, the unemployment rate has declined to 7.3 percent from 8.1 percent. However, at the same time, this decline in the unemployment rate overstates the degree of improvement. Other metrics of labor market conditions, such as the hiring, job-openings, job-finding rate, quits rate and the vacancy-to-unemployment ratio, collectively indicate a much more modest improvement in labor market conditions compared to that suggested by the decline in the unemployment rate. In particular, it is still hard for those who are unemployed to find jobs. Currently, there are three unemployed workers per job opening, as opposed to an average of two during the period from 2003 to 2007.

With respect to the second metric—confidence that the economic recovery is strong enough to generate sustained labor market improvement—I don’t think we have yet passed that test. The economy has not picked up forward momentum and a 2 percent growth rate—even if sustained—might not be sufficient to generate further improvement in labor market conditions. Moreover, fiscal uncertainties loom very large right now as Congress considers the issues of funding the government and raising the debt limit ceiling. Assuming no change in my assessment of the efficacy and costs associated with the purchase program, I’d like to see economic news that makes me more confident that we will see continued improvement in the labor market. Then I would feel comfortable that the time had come to cut the pace of asset purchases.
emphasis added

On the first metric, clearly Dudley puts significant emphasis on the JOLTS report in addition to the employment report. On the second metric, Congress has to do their job (pay the bills, fund the government) before Dudley would be willing to start to taper.

by Calculated Risk on 9/23/2013 10:16:00 AM

Notes: I follow several house price indexes (Case-Shiller, CoreLogic, LPS, Zillow, FHFA, FNC and more). The timing of different house prices indexes can be a little confusing. LPS uses June closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From LPS: LPS Home Price Index Report: July Transactions, U.S. Home Prices Up 0.6 Percent for the Month; Up 8.7 Percent Year-Over-Year

Lender Processing Services ... today released its latest LPS Home Price Index (HPI) report, based on July 2013 residential real estate transactions. The LPS HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The LPS HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.

The LPS HPI is off 14.7% from the peak in June 2006. Note: The press release has data for the 20 largest states, and 40 MSAs. LPS shows prices off 46.1% from the peak in Las Vegas, off 38.8% in Orlando, and 36.7% off from the peak in Riverside-San Bernardino, CA (Inland Empire). Prices were at new peaks in Austin, Dallas, Denver, Houston and San Antonio.

Note: Case-Shiller for July will be released tomorrow.

by Calculated Risk on 9/23/2013 08:30:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Economic Growth Picked Up in August

The Chicago Fed National Activity Index (CFNAI) increased to +0.14 in August from –0.43 in July.

The index’s three-month moving average, CFNAI-MA3, increased to –0.18 in August from –0.24 in July, marking its sixth consecutive reading below zero. August’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was below the historical trend in August (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 9/22/2013 09:59:00 PM

From Jon Hilsenrath at the WSJ: Yellen Would Bring Tougher Tone to Fed

Janet Yellen, the lead candidate to succeed Federal Reserve Chairman Ben Bernanke, brings a demanding and harder-driving leadership style to the central bank, in contrast to Mr. Bernanke's low-key and often understated approach.

Ms. Yellen, the Fed vice chairwoman, is highly regarded by many central bank staff members, who call her an effective leader with a sharp mind. But she has clashed with others and left some hard feelings in the wake of those confrontations, according to interviews with more than a dozen current and former staff members and officials who worked with her directly in recent years.

Most agree that Ms. Yellen—who has climbed the ranks from Fed researcher to Fed governor and regional Fed bank president, in between stints outside the central bank—is exacting and exceptionally detail-oriented.

I believe Yellen will be an excellent Fed Chair.

Monday:
• 8:30 AM ET, the Chicago Fed National Activity Index for August. This is a composite index of other data.

• At 9:00 AM, the Markit US PMI Manufacturing Index Flash for September. The consensus is for an increase to 54.0 from 53.9 in August.

Weekend:
• Schedule for Week of September 22nd

• Preliminary annual Employment benchmark revision to be released Thursday

The Nikkei is down about 0.2%.

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

Oil prices are mostly unchanged with WTI futures at $104.59 per barrel and Brent at $109.02 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are below $3.50 per gallon again.  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 9/22/2013 02:20:00 PM

On Thursday the BLS will release the preliminary annual Benchmark Revision for the Current Employment Statistics. The final revision will be published next February when the January 2012 employment report is released. Usually the preliminary estimate is pretty close to the final benchmark estimate.

The annual revision is benchmarked to state tax records. From the BLS:

Each year, the Current Employment Statistics (CES) survey estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW) for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. On September 26, 2013 at 10:00 a.m. the Bureau of Labor Statistics (BLS) will release the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series.

With the release of the final benchmark estimate in February, total payroll employment in March 2013 will changed by the amount of the revision. The number is then "wedged back" to the previous revision (March 2012).

For details on the benchmark revision process, see from the BLS Benchmark Article.

The following table shows the benchmark revisions since 1979. The BLS employment estimate tends to miss turning points - as an example the benchmark revisions were down in 2007 through 2010, and have been up for the last two years.   We see a similar pattern for previous recessions (like in the early '80s and early '90s).    My guess is the revision will be small this year.

A few months ago Josh Lehner looked at state level data and he thinks the revision will be positive again this year. Although he thinks the revision for government employees may be larger than normal due to the sequester. According to MarketWatch, economists at BNP Paribas expect a negative revision.

Year	Percent benchmark revision	Benchmark revision (in thousands)
1979	0.5	447
1980	-0.1	-63
1981	-0.4	-349
1982	-0.1	-113
1983	*	36
1984	0.4	353
1985	*	-3
1986	-0.5	-467
1987	*	-35
1988	-0.3	-326
1989	*	47
1990	-0.2	-229
1991	-0.6	-640
1992	-0.1	-59
1993	0.2	263
1994	0.7	747
1995	0.5	542
1996	*	57
1997	0.4	431
1998	*	44
1999	0.2	258
2000	0.4	468
2001	-0.1	-123
2002	-0.2	-313
2003	-0.2	-122
2004	0.2	203
2005	-0.1	-158
2006	0.6	752
2007	-0.2	-293
2008	-0.1	-89
2009	-0.7	-902
2010	-0.3	-378
2011	0.1	162
2012	0.3	424
2013	NA	NA
* less than 0.05%