RSS Feed by Calculated Risk on 3/03/2010 07:21:00 AM
Wednesday, March 03, 2010
MBA: Mortgage Purchase Applications increase slightly
The MBA reports: Mortgage Refinance Applications Increase in Latest MBA Weekly Survey
The Market Composite Index ... increased 14.6 percent on a seasonally adjusted basis from one week earlier. ...
“Mortgage applications rebounded last week, particularly refis, as rates dropped back below 5 percent,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Purchase activity remains subdued, with application volumes remaining within the narrow range seen in the last few months.”
The Refinance Index increased 17.2 percent from the previous week and the seasonally adjusted Purchase Index increased 9.0 percent from one week earlier. ...
The refinance share of mortgage activity increased to 69.1 percent of total applications from 68.1 percent the previous week. ...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.95 percent from 5.03 percent, with points decreasing to 0.99 from 1.34 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
Click on graph for larger image in new window.This graph shows the MBA Purchase Index and four week moving average since 1990.
Even with the increase in purchase applications this week, the level is back to the levels of 1997.
Also, with mortgage rates back below 5% again, refinance activity increased last week.
Tuesday, March 02, 2010
Census 2010: Impact on Employment
by Calculated Risk on 3/02/2010 09:30:00 PM
With all the talk about the impact of the February snow storms on employment, it is worth remembering that the temporary hiring for Census 2010 will also distort the payroll employment numbers.
Luckily the Census Bureau provides a monthly report on net hiring for the decennial census: Census 2010 temporary and intermittent workers
Click on graph for larger image in new window.
This graph shows the monthly change in Federal government employment during the 2010 census (January in red) and the last two decennial census periods (1990 and 2000).
During the previous two census years, there was a sharp increase in payroll employment in March and April, and a surge in May. And then almost all of the jobs were lost in the June through September period. We should expect a similar pattern this year.
Note: there are reports that the Census Bureau will hire up to 1.4 million people, however that represents some contingency planning, and includes a number of people already hired temporarily in 2009. We can probably expect a couple hundred thousand people added between January through April, and another 500 thousand or so in May. This could push the unemployment rate down slightly, but probably in the 0.1% to 0.2% range.
The Census Bureau is gearing up: Census Takers Begin Hand Delivering 2010 Census Questionnaires to 12 Million U.S. Addresses
About 56,000 census workers today began hand delivering 2010 Census questionnaires to roughly 12 million addresses across the nation, mostly in rural areas where people do not receive mail at the same location as their residence. Most of nation’s 120 million households, about 90 percent of the U.S. population, should look for their 10-question forms to arrive by mail mid-March.A few key points:
...
In 2000, 72 percent of households that received a form mailed it back. The mail participation rate is a new measure designed to give a better picture of actual participation by factoring out census forms that the U.S. Postal Service was unable to deliver as addressed. It should be particularly useful in areas with seasonal populations or a large number of vacancies or foreclosures.
“It costs us just 42 cents in a postage paid envelope when households mail back their 2010 Census forms,” Groves said. “The Census Bureau will spend about $25 per person if we have to go out and knock on the doors of households that don’t mail them back.”
ABI: Personal Bankruptcy Filings Up 14% from February 2009
by Calculated Risk on 3/02/2010 06:10:00 PM
From the American Bankruptcy Institute: February Consumer Bankruptcy Filings up 14 Percent over Last Year
The 111,693 consumer bankruptcies filed in February represented a 14 percent increase nationwide over the 98,344 filings recorded in February 2009, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). NBKRC’s data also showed that the February 2010 consumer filings represented a 9 percent increase over the 102,254 consumer filings recorded in January 2010. ...
“While Congress and the Obama administration continue to consider measures to reduce high unemployment and mortgage burdens, families with increasing debt loads have little choice but to continue to turn to bankruptcy for financial relief,” said ABI Executive Director Samuel J. Gerdano. “Consumer filings this year will likely surpass 1.5 million filings, or the same number of annual filings averaged in the years leading up to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.”
emphasis added
Click on graph for larger image in new window.This graph shows the non-business bankruptcy filings by quarter (Q1 2010 is estimated based on January and February data).
The ABI's forecast for over 1.5 million filings is at about the same level as prior to when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect.
U.S. Light Vehicle Sales 10.4 Million SAAR in February
by Calculated Risk on 3/02/2010 03:39:00 PM
Click on graph for larger image in new window.
This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for February (red, light vehicle sales of 10.4 million SAAR from AutoData Corp).
This is a 3.5% decline from the January sales rate.
The second graph shows light vehicle sales since the BEA started keeping data in 1967.
This is the lowest level since September - when sales fell sharply after the "Cash-for-clunkers" program ended in August. The current level of sales are very low, and are still below the lowest point for the '90/'91 recession (even with a larger population).
Right now it looks like both seasonally adjusted auto sales and residential investment will be lower in Q1 than in Q4 2009.
New Credit Suisse ARM Recast Chart
by Calculated Risk on 3/02/2010 02:49:00 PM
From Zach Fox at SNL Financial: Credit Suisse: $1 trillion worth of ARMs still face resets
Most of the resets are expected to occur through 2012. Between 2010 and 2012, the chart indicates that $253.25 billion of option ARMs will adjust, while Alt-A loans totaling $163.71 billion will reset over that time. Altogether, $1.010 trillion worth of ARMs will reset or recast during the three-year period.
...
"Option ARM resets are still pending. … Nothing much has happened yet because rates were so low that resets were pushed back," Chandrajit Bhattacharya, head of non-agency RMBS and ABS strategy at Credit Suisse, told SNL.
...
[Greg McBride, senior financial analyst at Bankrate.com] was cool to the idea that option ARMs could flood the foreclosure rolls. Option ARMs are less concerning, he said, because so many have defaulted already. Indeed, the September 2009 Fitch Ratings report showed that 30-day delinquencies on option ARMs sat at 46% even though just 12% had recast. Further, option ARM foreclosure rates already match the sky-high subprime foreclosure rates.
Instead, McBride is worried about the prime ARMs posted in the Credit Suisse chart [if interest rates rise - see article for discussion].
excerpts with permission
Click on graph for larger image in new window.Source: SNL Financial.
This graph shows the amount of ARMs resetting and recasting over the next few year. Resets are not a huge worry right now - because interest rates are so low - but if interest rates rise, this could lead to more defaults in the future.
Recasts - when the loans reamortize - are a concern, although it is unclear how large the payment shock will be. For borrowers with negative equity, any payment shock might be lead to default. As I wrote last year in A comment on Option ARMs
It is a little confusing. You can't just look at a chart of coming recasts and know when borrowers will default. The real problem for Option ARMs is negative equity, and the surge in defaults is happening before the loans recast.
But the recasts will matter too, since many of these borrowers used these mortgages as "affordability products", and bought the most expensive homes they could "afford" (based on monthly payments only). When the recasts arrive, these borrowers will have few options.
Real Personal Income less Transfer Payments
by Calculated Risk on 3/02/2010 12:58:00 PM
The National Bureau of Economic Research (NBER) uses several measures to determine if the economy is in recession. From the most recent NBER memo:
Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.
The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. ...
The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. ...
General Motors: February Sales increase 12% compared to Feb 2009
by Calculated Risk on 3/02/2010 10:36:00 AM
From CNBC: GM's US Auto Sales Rise 11.5 Percent in February
General Motors says its February sales rose 11.5 percent compared with the same month last year ...This is based on a very easy comparison; in February 2009 U.S. light vehicle sales fell sharply to 9.143 million (SAAR) following the financial crisis and reports of the then impending bankruptcy of GM and Chrysler. February 2009 was the bottom for auto sales.
I'll add reports from the other major auto companies as updates to this post. Toyota will be especially interesting because of the quality issues.
FHFA Extends Refinance Program
by Calculated Risk on 3/02/2010 08:41:00 AM
Just something I forgot to mention yesterday ...
Press Release: FHFA Extends Refinance Program By One Year
Federal Housing Finance Agency Acting Director Ed DeMarco today announced the extension of the Home Affordable Refinance Program, (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, to June 30, 2011. ... The HARP program expands access to refinancing for qualified individuals and families whose homes have lost value. The program was set to expire on June 10 of this year.
Monday, March 01, 2010
Summers: Blame it on the Snow
by Calculated Risk on 3/01/2010 09:40:00 PM
Larry Summers on CNBC: "Very important to look past the next [employment] figures." (27 second long after ad)
Reports: Senate nears agreement on consumer financial protection
by Calculated Risk on 3/01/2010 07:32:00 PM
Binyamin Appelbaum, at the WaPo, reports that Senators Dodd and Corker (Tenn) are nearing a deal to give authority for financial consumer protection to the Federal Reserve.
Uh, wasn't the Fed already responsible for consumer financial protection?
Fannie, Freddie and FHA REO Inventory
by Calculated Risk on 3/01/2010 04:02:00 PM
REO: Real Estate Owned.
Click on graph for larger image in new window.
This graph (ht Tom Lawler) shows the REO inventory for Fannie, Freddie and FHA through Q4 2009.
Even with all the delays in foreclosure, the REO inventory has increased sharply over the last two quarters, from 135,868 at the end of Q2 2009, to 153,007 in Q3 2009, and 172,357 at the end of Q4 2009.
ISM and Manufacturing Employment
by Calculated Risk on 3/01/2010 01:53:00 PM
The ISM report provides some hints for the BLS report later this week, but it is important to remember that manufacturing employment is a small percentage of the overall work force.
From the ISM Manufacturing report on employment:
ISM's Employment Index registered 56.1 percent in February, which is 2.8 percentage points higher than the seasonally adjusted 53.3 percent reported in January. This is the third month of growth in manufacturing employment, and the highest reading since January 2005 (58.7 percent). An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.The following graph shows the ISM Manufacturing Employment Index vs. the BLS reported monthly change in manufacturing employment (as a percent of manufacturing employment).
The graph includes data from 1948 through 2009. The earlier period (1948 - 1988) is in red, and the last 20 years is in blue.
Construction Spending Declines in January
by Calculated Risk on 3/01/2010 10:30:00 AM
Private residential construction spending was up slightly in January, but is mostly moving sideways. I expect some growth in residential spending in 2010, but the increases will probably be sluggish until the large overhang of existing inventory is reduced.
Non-residential spending decreased in January, and is now at the lowest level since November 2006. The collapse in non-residential construction spending continues ... 
Click on graph for larger image in new window.
The first graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.
Residential construction spending increased slighltly in January, and nonresidential spending declined.
ISM Manufacturing Index Shows Expansion in February
by Calculated Risk on 3/01/2010 10:00:00 AM
PMI at 56.5% in February. Down from 58.4% in January, and up from 54.9% in December.
From the Institute for Supply Management: February 2010 Manufacturing ISM Report On Business®
Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the seventh consecutive month during February. While new orders and production were not as strong as they were in January, they still show significant month-over-month growth. Additionally, the Employment Index is very encouraging, as it is up 2.8 percentage points for the month to 56.1 percent. This is the third consecutive month of growth in the Employment Index. With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment."
January Personal Income Flat, Spending Increases
by Calculated Risk on 3/01/2010 08:30:00 AM
From the BEA: Personal Income and Outlays, January 2010
Personal income increased $11.4 billion, or 0.1 percent, and disposable personal income (DPI) decreased $47.6 billion, or 0.4 percent, in January, according to the Bureau of Economic Analysis. ... Personal consumption expenditures (PCE) increased $52.4 billion, or 0.5 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in January, compared with an increase of 0.1 percent in December.
...
Personal saving -- DPI less personal outlays -- was $367.2 billion in January, compared with $467.9 billion in December. Personal saving as a percentage of disposable personal income was 3.3 percent in January, compared with 4.2 percent in December.
Sunday, February 28, 2010
What about Financial Reform?
by Calculated Risk on 2/28/2010 11:59:00 PM
First from Paul Krugman: Financial Reform Endgame
A weak financial reform ... wouldn’t be tested until the next big crisis. All it would do is create a false sense of security and a fig leaf for politicians opposed to any serious action — then fail in the clinch.
Auto Sales: Blame it on the Snow and Toyota
by Calculated Risk on 2/28/2010 07:25:00 PM
In the Weekly Summary and a Look Ahead post, I included a consensus forecast of a decline in light vehicle sales to 10.4 million units in February, on a seasonally adjusted annual rate (SAAR) basis. That may be a little high ...
From The Detroit News: Snowstorms, Toyota problems cut into February auto sales
When results are released Tuesday, automotive research firm Edmunds.com predicts retail sales will increase 14.2 percent from a year earlier, while research firm TrueCar.com expects a nearly 9 percent bump. ... [On a SAAR basis] Edmunds predicting 10.6 million U.S. sales ... while TrueCar.com anticipates 10.04 million
Greece Bailout Plan and Further Austerity Measures moving forward
by Calculated Risk on 2/28/2010 03:29:00 PM
From Stephen Castle and Landon Thomas Jr. at the NY Times: Europe Union Moves Toward a Bailout of Greece
[T]he European Union is moving toward the first bailout in the history of its common currency, which is expected to involve loan guarantees from the German and French governments to encourage their banks to buy Greek debt.
Even as the negotiations continue, the bloc is insisting that Athens impose further, painful austerity measures ...
Weekly Summary and a Look Ahead
by Calculated Risk on 2/28/2010 11:55:00 AM
This will be a busy week for economic data, and the focus will be on the BLS February employment report to be released on Friday. The consensus is for a net loss of 50 to 80 thousand payroll jobs, and the unemployment rate to increase slightly to 9.8% (from 9.7%).
There is considerable debate on the impact of the snow storms on the employment report. The BLS will disclose and adjust for any snow related data collection issues, but some hiring might have been delayed because of the storms. However, if so, there will be a bounce back in March - however it is important to remember that the weekly unemployment claims were moving higher before the storms arrived. Also the temporary hiring for the 2010 Census will have increased slightly - I'm sure all of these issues will be widely discussed ...
On Monday, the BEA will release the Personal Income and Outlays report for January. This release is very useful for looking at both Personal Income and Personal Consumption Expenditures (PCE). Also on Monday, the ISM Manufacturing index (consensus is for expansion, but a slight decrease to 57.5% from 58.4%), and the January Construction Spending report from the Census Bureau (consensus is for a decline of 0.5%).
On Tuesday, the various manufacturers will release light vehicle sales for February. The consensus is for a decline to about 10.4 million on a Seasonally Adjusted Annual Rate (SAAR) basis from 10.8 million in January. Sales for Toyota will be closely watched. Also on Tuesday, the Personal Bankruptcy Filings estimate for February will be released.
1.2 Million to Lose Unemployment Benefits Today
by Calculated Risk on 2/28/2010 08:59:00 AM
Just a reminder ...
From John Schmid at the Journal Sentinel: Unemployment benefits for 1.2 million Americans could expire Sunday
Nearly 1.2 million unemployed Americans ... face an imminent cutoff of government unemployment checks if Congress cannot pass emergency legislation to extend federal benefits before funding expires Sunday.
