Calculated Risk

Tuesday, August 24, 2010

S&P Cuts Ireland's Rating, Outlook Negative

by Calculated Risk on 8/24/2010 05:32:00 PM

From MarketWatch: S&P downgrades Ireland on financial sector cost

The 10-year Ireland-to-German bond spread has risen to 318 bps, and is now above the peak during the European crisis in May. The peak in May was 306 bps.

The 10-year Greece-to-German bond spread is now 885 bps, just below the peak level of 963 bps in May.

CBO: Stimulus raised GDP 1.7% to 4.5% in Q2

by Calculated Risk on 8/24/2010 03:39:00 PM

From the Congressional Budget Office: Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from April 2010 Through June 2010

CBO estimates that in the second quarter of calendar year 2010, ARRA’s policies:

They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,

Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,

Increased the number of people employed by between 1.4 million and 3.3 million, and

Increased the number of full-time-equivalent jobs by 2.0 million to 4.8 million compared with what would have occurred otherwise.

The effects of ARRA on output are expected to gradually diminish during the second half of 2010 and beyond. The effects of ARRA on employment and unemployment are expected to lag slightly behind the effects on output; they are expected to wane gradually in 2011 and beyond.

Here is the CBO's estimate of the impact on GDP by quarter:

Change Attributable to ARRA, GDP change (percent)
		Low Estimate	High Estimate
2009	Q1	0.1	0.1
2009	Q2	0.8	1.3
2009	Q3	1.2	2.4
2009	Q4	1.4	3.3
2010	Q1	1.7	4.1
2010	Q2	1.7	4.5
2010	Q3	1.5	4.2
2010	Q4	1.1	3.6

Note: the impact on GDP growth (the headline number reported each quarter by the BEA), is the change in spending from one quarter to the next. The ARRA impact on GDP peaks in Q2 2010 and is lower in Q3 2010 by both estimates. This change will show up as a drag on GDP growth in Q3.

Less stimulus spending in Q3 was one of the reason I expected a slowdown in growth in the 2nd half of 2010. There are other reasons that I've listed before: the end of the inventory correction, more household saving leading to slower growth in personal consumption expenditures, another downturn in housing (lower prices, less residential investment), slowdown in China and Europe and cutbacks at the state and local level.

The existing home sales report this morning - especially the high level of inventory and downward pressure on prices - are a key part of the 2nd half story.

Richmond Fed: Manufacturing Growth Continued to Ease in August

by Calculated Risk on 8/24/2010 01:33:00 PM

Note: Usually I don't post all the regional manufacturing surveys, however with the inventory adjustment over, export growth slowing, and domestic consumer demand sluggish, these surveys provide an early look at weakness in the manufacturing sector.

From the Richmond Fed: Manufacturing Growth Continued to Ease in August; Expectations Drifted Lower

Manufacturing activity in the central Atlantic region advanced for the seventh consecutive month in August, but at a more modest pace than a month earlier, according to the Richmond Fed's latest survey. All broad indicators — shipments, new orders and employment — continued to grow but at a rate below July's pace. Other indicators were mixed, however. Capacity utilization grew nearly on par with last month, while growth in backlogs flatlined. Vendor delivery times grew at a slightly quicker rate and manufacturers reported somewhat faster growth in finished goods inventories.

Looking ahead, assessments of business prospects for the next six months were less optimistic in August. Survey contacts anticipated slower growth in shipments, new orders, capacity utilization, and capital expenditures and expected declines in backlogs and vendor lead time.

This is similar to the NY Fed and Philly Fed surveys - although the Philly Fed showed contraction in August. Growth in the manufacturing sector is clearly slowing.

Existing Home Inventory decreases 1.9% Year-over-Year

by Calculated Risk on 8/24/2010 11:30:00 AM

Earlier the NAR released the existing home sales data for July; here are a couple more graphs ...

The first graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.

Click on graph for larger image in new window.

Although inventory increased from June 2010 to July 2010, inventory decreased 1.9% YoY in July. The slight year-over-year decline is probably because some sellers put their homes on the market in the Spring hoping to take advantage of the home buyer tax credit.

Note: Usually July is the peak month for inventory.

This level of inventory is especially bad news because the reported inventory is already historically very high, and the 12.5 months of supply in July is far above normal.

The months-of-supply will probably decline in August as sales rebound slightly and some sellers take their homes off the market, but I expect double digit months-of-supply for some time - and that will be a really bad sign for house prices ...

A normal housing market usually has under 6 months of supply. The following graph shows the relationship between supply and house prices (using Case-Shiller).

This graph show months of supply (through July 2010) and the annualized change in the Case-Shiller Composite 20 house price index (through May 2010).

Below 6 months of supply (blue line) house prices are typically rising (black line).

Above 6 or 7 months of supply, house prices are usually falling. This isn't perfect - it is just a guideline. Over the last year, there have been many programs aimed at supporting house prices, and house prices increased slightly even with higher than normal supply. However those programs have mostly ended.

This is a key reason why I expect house prices to fall further later this year as measured by the Case-Shiller and CoreLogic repeat sales house price indexes, although I don't expect huge declines like in 2008. My expectation is further price declines of 5% to 10% on the repeat sales indexes.

Notes: The Case-Shiller house price index for June will be reported next week (really a 3 month average of April, May and June). We really want to see prices for July - and those will not be reported until the end of September. And once again the July numbers will be a 3 month average. So it might take until the end of October to see the price declines that are already happening in the housing market.

Existing Home Sales lowest since 1996, 12.5 months of supply

by Calculated Risk on 8/24/2010 10:00:00 AM

The NAR reports: July Existing-Home Sales Fall as Expected but Prices Rise

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.

Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995.
...
Total housing inventory at the end of July increased 2.5 percent to 3.98 million existing homes available for sale, which represents a 12.5-month supply at the current sales pace, up from an 8.9-month supply in June.

Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in July 2010 (3.83 million SAAR) were 27.2% lower than last month, and were 25.5% lower than July 2009 (5.14 million SAAR).

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 3.98 million in July from 3.89 million in June. The all time record high was 4.58 million homes for sale in July 2008.

Inventory is not seasonally adjusted and there is a clear seasonal pattern with inventory increasing in the spring and into the summer. I'll have more on inventory later ...

The last graph shows the 'months of supply' metric.

Months of supply increased to 12.5 months in July from 8.9 months in June. A normal market has under 6 months of supply, so this is extremely high and suggests prices, as measured by the repeat sales indexes like Case-Shiller and CoreLogic, will start declining.

Ignore the median price! Double digit supply and lowest sales rate since 1996 are the key stories.

I'll have more soon.

Monday, August 23, 2010

WSJ: The FOMC Debate on Monetary Policy

by Calculated Risk on 8/23/2010 08:55:00 PM

Jon Hilsenrath at the WSJ discusses the debate at the August FOMC meeting: Fed Split on Move to Bolster Sluggish Economy

A few key points:

There is a clear split on the FOMC between those who want the Fed to be more aggressive - because of the high unemployment rate and low inflation - and those that want to take no further action.

Because of low mortgage rates and more refinancing, the NY Fed projected that the balance sheet would shrink by almost $400 billion by the end of 2011 if they Fed did nothing. Earlier this year the estimate was $200 billion.

According to Hilsenrath, Bernanke "is determined to avoid mistakes of past central bankers that created devastating bouts of deflation". And that probably means QE2 - it is probably just a matter of when and how long the FOMC waits.

Note: Existing home sales will be reported tomorrow morning. Don't miss Lawler's Existing Home Sales: “Consensus” vs. Likely for a preview!

Lawler: Existing Home Sales: “Consensus” vs. Likely

by Calculated Risk on 8/23/2010 05:24:00 PM

CR Note: This is from economist Tom Lawler.

Given the various state/local MLS sales reports available for July, it seems INCREDIBLY likely that existing home sales last month were down a boatload from June’s pace. Every local realtor report I’ve seen showed a drop in sales from a year ago, with most showing YOY sales declines over 20%, and some reporting sales declines of over 40% from a year ago. (See last page for “raw” data) Yet amazingly the “consensus” forecast for existing home sales in July calls for a SAAR of 4.65-4.66 million, which would be down just 9.3-9.5% from last July’s seasonally adjusted pace. Of course, since this July had one fewer business day than last July, that would imply a larger YOY decline in unadjusted sales, but only to about 10.5-10.7%.

With so many state and/or local MLS publicly reporting YOY sales declines massively higher than that, how can the “consensus” be as high as it is?

Click on graph for larger image in new window.

Even if an economist were willing to put out a forecast for existing home sales, but were unwilling to actually “do the work” in compiling local sales data, one would think that that economist would look at the pending home sales index – which plunged by 29.9% on a seasonally adjusted basis from April to May, and then fell by another 2.6% from May to June! How would these drops be consistent with a monthly seasonally adjusted decline of just 13.2% - 13.4%? Well, er, uh … they aren’t! One forecaster (no names!), after hearing about the local sales data, suggested that the NAR “just won’t” publish a sales number that low, and will probably “smooth” the number over the next several months!!! I very much doubt that!!!

So … where does the “consensus” come from, and why does it appear to be so far off?

Well, as best as I can determine A LOT of the economists surveyed for various “consensus” forecasts often don’t really know much about many of the statistics they are asked to project, but are still quite willing to be in such surveys. In the case of home sales, very few track local sales data, but surprising quite a few also don’t look at pending sales either! And for some others that do, they are often reluctant to project “really big” changes – they don’t feel comfortable being an “outlier” – and figure that if they get the direction right, well, THAT’S pretty good!

Below is a table showing the YOY % decline reported by various realtor organization/MLS/others. Where state realtor associations and/or other organizations show a full-state total, I don’t show individual areas separately. Note that for some areas the YOY growth reflects a preliminary count for this July vs. a final count for last July, and I try to take this into account in coming up with my own forecast.

Right now all of the incoming regional data in my view appear to be consistent with the NAR reporting a seasonally adjusted annual rate for existing home sales in July of 3.95 million. I’ve been a bit uncomfortable about the forecast because it is so far below consensus; however, that’s what the incoming data suggest!

If existing home sales come in as I expect, existing home sales (unadjusted) in the first seven months of 2010 will be up about 7.6% [compared to] sales in the first seven months of 2009.

August sales will probably come in pretty weak as well, however; while my early read suggests that the NAR’s pending home sales index will show a seasonally adjusted gain from June to July of around 5%, that would still leave the index about 19% below last July’s level.

So… what did we learn from the home buyer tax credit? (1) “if you pay them, they will come”; (2) if there is a deadline, they will rush to meet the deadline; and (3) when the deadline is over, sales will fall WAY below trend!

Some folks still like the tax credit, because (a) it helped “stabilize” home prices (short term it does appear to have); (b) it would help reduce excess inventories (for new home sales it did, but existing inventories have kept increasing); and (c) it would “generate interest” in the housing sector. On the latter score, the stabilization of home prices and reports of earlier strong sales DID appear to generate interest in housing – but mainly from previously “discouraged” sellers who decided to put their homes on the market (in many cases again) – which appears to be the major reason why active listings have INCREASED despite the tax-credit “goose” to sales!

YOY % Change, Home Sales, July 2010
.Alabama	Birmingham	-30.0%	Huntsville	-32.5%
.Arizona	Phoenix	-21.9%	Tucson	-33.1%
.California	Whole State (new and resale)	-21.9%
.Colorado	Denver	-26.6%	Colorado Springs	-23.4%
.Connecticut	Hartford	-49.1%
. DC	All of DC	-18.4%
.Florida	Northeast Florida	-12.8%	Mid-Florida	-10.5%	Southeast Florida	-9.1%
	Pensacola	-29.2%	Naples	-20.9%
.Hawaii	Oahu	-3.4%
.Idaho	Ada County	-24.0%
.Illinois	Chicago Metro	-25.0%	Peoria	-36.8%
.Indiana	Whole State	-28.8%
.Iowa	Whole State	-43.8%
.Kansas	Kansas City	-36.9%	Wichita	-34.0%
.Kentucky	Louisville	-22.0%	Lexington	-32.4%
.Maryland	Whole State	-17.1%
.Massachusetts	Whole State	-31.6%
.Michigan	Detroit metro	-19.4%	Ann Arbor	-17.0%	Kalamazoo	-36.4%
.Minnesota	Whole State	-40.8%
.Nebraska	Omaha	-46.1%
.Nevada	Vegas	-18.6%	Reno	-24.8%
.New Hampshire	Whole State	-32.4%
.New Mexico	Albuquerque	-27.1%
.New York	Long Island	-31.6%	Greater Hudson Valley	-37.2%	Dutchess County	-36.8%
.North Carolina	Charlotte	-11.5%	Triangle	-31.0%	Fayetteville	-20.9%
	Asheville	-25.5%	Wilmington	-19.8%
.Ohio	Toledo	-28.1%	Akron	-26.0%
.Oklahoma	Oklahoma City	-33.3%
.Oregon	Portland	-29.0%
.Pennsylvania	Pittsburgh	-6.0%	Lehigh Valley	-41.7%
.South Carolina	Whole State	-16.1%
.Tennessee	Nashville	-23.1%	Memphis	-28.5%	Knoxville	-25.3%
.Texas	Whole State	-25.4%
.Virginia	Greater NoVa	-19.7%	Hampton Roads	-20.7%	Roanoke Valley	-36.6%
.Washington	NW Washington	-18.7%
.Wisconsin	South Central Wisconsin	-43.1%	Milwaukee metro	-48.6%

CR Note: This is from economist Tom Lawler.

Waldman on meeting of Bloggers and Treasury Officials

by Calculated Risk on 8/23/2010 01:49:00 PM

Steve Randy Waldman at Interfluidity writes about a discussion last week with several bloggers and Treasury officials: Monday at the Treasury: an overlong exegesis

A few excerpts:

Obviously the headline act was Timothy Geithner. Off the record (or “on deep background”), Geithner is entirely different from the sometimes stiff character who appears on television. He is fun to argue with, very smart, good natured, and intellectually wily. As Yves Smith quipped afterwards, Geithner “gives good meeting.”

Despite that, our seminar was an adversarial affair.

And on HAMP:

On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

If correct, HAMP was mostly a foreclosure delaying program.

There is much more in the post from Waldman.

DOT: Vehicle Miles driven increase in June

by Calculated Risk on 8/23/2010 10:47:00 AM

The Department of Transportation (DOT) reported that vehicle miles driven in June were up 1.3% compared to June 2009:

Travel on all roads and streets changed by +1.3% (3.4 billion vehicle miles) for June 2010 as compared with June 2009.
...
Cumulative Travel for 2010 changed by +0.1% (1.6 billion vehicle miles).

Click on graph for larger image in new window.

This graph shows the rolling 12 month total vehicle miles driven.

On a rolling 12 month basis, vehicle miles driven are mostly moving sideways. Miles driven are still 1.9% below the peak - and only 0.7% above the recent low.

Back in 2008, vehicle miles turned strongly negative on a "month over the same month of the prior year" basis, and that was one of the pieces of data that helped me correctly predict oil prices would decline sharply in the 2nd half of 2008. So far we haven't seen a sharp decline in vehicle miles - but we also haven't seen a strong increase.

Early next year this will be the longest period with the rolling 12-months miles driven below the previous peak since the DOT started tracking this series. The current longest slump followed the 1979 oil crisis and lasted for 40 months (starting in 1979 and lasting through the recession of the early '80s).

Chicago Fed: Economic activity rebounded in July

by Calculated Risk on 8/23/2010 08:30:00 AM

Note: This is a composite index based on a number of economic releases.

From the Chicago Fed: Index shows economic activity rebounded in July

Led by improvements in production-related indicators, the Chicago Fed National Activity Index returned to its historical average of zero in July, up from –0.70 in June. Three of the four broad categories of indicators that make up the index improved from June, but only the production and income category made a positive contribution to the index in July.

The index’s three-month moving average, CFNAI-MA3, edged lower to –0.17 in July from –0.12 in June. July’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

Click on table for larger image in new window.

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

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.

This composite index increased in July because of the boost in industrial production. That was probably mostly auto related and recent surveys (like from the Philly Fed) have indicated slowing or even contraction for production in August.

Sunday, August 22, 2010

Report: Home buyers remain optimistic about appreciation

by Calculated Risk on 8/22/2010 10:07:00 PM

Note: Here is the Weekly Summary for last week, and the Schedule for next week (will be busy!).

Amazing ... people still think house prices will go up 10% per year ... from David Streitfeld at the NY Times: Housing Fades as a Means to Build Wealth, Analysts Say

In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.

With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At the boom’s peak in 2005, they said prices would go up. When the market was sliding in 2008, they still said prices would go up.

“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.

Mansion squatters in Seattle

by Calculated Risk on 8/22/2010 05:50:00 PM

Note: Here is the Weekly Summary for last week, and the Schedule for next week (will be busy!).

A bizarre story from Danny Westneat at the Seattle Times: Mansion squatters return in a big way (ht Laura)

Mark von der Burg [is] the Eastside real-estate agent who, two months ago while prepping for an open house to sell a $3.3 million mansion in Kirkland, was stunned to find that complete strangers had moved in and were staking a tortured legal claim to the foreclosed property.
...
Von der Burg says that while the mansion-squatting story may have been entertaining — it ended when police retook control of the house for the bank that owned it — it cost his client, a bank, $35,000 in ... So count him as not amused that this week, the same team of squatters apparently attempted to stake claims to three new mansions on the Eastside ... Police say no one has as yet moved into any of the houses. But all three had letters tacked to the front doors ordering anyone claiming ownership "to surrender possession within three days." And then threatening "judicial proceedings" against anyone who doesn't comply.

These squatters sounds like upscale "bandos"¹, but it sounds like they are really just scammers - looking for something for nothing. The real estate bust has really brought out the worst in some people.

¹ "Bandos" are homeless people who live in abandoned homes.

Summary for Week ending August 21st

by Calculated Risk on 8/22/2010 12:02:00 PM

Here is the Schedule for Week of August 22nd (always in menu bar too).

Single Family Housing Starts decline in July

Total Housing Starts and Single Family Housing Starts

Click on graph for larger image in new window.

Total housing starts were at 546 thousand (SAAR) in July, up 1.7% from the revised June rate of 537 thousand (revised down from 549 thousand). Single-family starts declined 4.2% to 432 thousand in July.

The graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over a year - with a slight up and down over the last several months due to the home buyer tax credit.

NAHB Builder Confidence falls in August to lowest since March 2009

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 13 in August. This is down slightly from 14 in July and below expectations. The record low was 8 set in January 2009, and 13 is very low ...

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the August release for the HMI and the June data for starts (NAHB was released before starts).

This shows that the HMI and single family starts mostly move generally in the same direction - although there is plenty of noise month-to-month.

Press release from the NAHB: Builder Confidence Declines In August

Builder confidence in the market for newly built, single-family homes edged down for a third consecutive month in August ... The HMI declined one point to 13, its lowest level since March of 2009.

CoreLogic: House Prices flat in June

From CoreLogic (formerly First American LoanPerformance): CoreLogic® Home Price Index Increases Decelerate in June Note: CoreLogic reports the year-over-year change.

This graph shows the national LoanPerformance data since 1976. January 2000 = 100.

The index is up 1.4% over the last year, and off 28% from the peak.

CoreLogic expects prices to "moderately decline" (more negative view than last month). I expect that we will see lower prices on this index later this year and into 2011.

This data is for June and was still impacted by the tax credit. I've been expecting this index to start showing price declines in July as sales collapsed.

AIA: Architecture Billings Index shows contraction in July

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

This graph shows the Architecture Billings Index since 1996. The index has remained below 50, indicating falling demand, since January 2008.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So there will probably be further declines in CRE investment into 2011.

NY Fed: Total Household Debt down 6.4% from the peak in 2008

From the NY Fed: New York Fed Releases New Report, Web Page on Household Credit Conditions in U.S., Select States Showing Decline in Consumer Indebtedness

Here is the report: Quarterly Report on Household Debt and Credit

And some data and graphs.

Graph and text from the NY Fed. "Aggregate consumer debt continued to decline in the second quarter, continuing its trend of the previous six quarters. As of June 30, 2010, total consumer indebtedness was $11.7 trillion, a reduction of $812 billion (6.5%) from its peak level at the close of 2008Q3, and $178 billion (1.5%) below its March 31, 2010 level. ... Excluding mortgage and HELOC balances, consumer indebtedness fell 1.5% in the quarter and, after having fallen for six consecutive quarters, stands at $2.31 trillion, 8.4% below its 2008Q4 peak."

Industrial Production, Capacity Utilization increase in July

From the Fed: Industrial production and Capacity Utilization

This graph shows Capacity Utilization. This series is up 9.8% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 74.8% is still far below normal - and well below the the pre-recession levels of 81.2% in November 2007.

Note: y-axis doesn't start at zero to better show the change.

Weekly initial unemployment claims at 500,000, highest since November 2009

The DOL reports on weekly unemployment insurance claims

This graph shows the 4-week moving average of weekly claims since January 2000.

The four-week average of weekly unemployment claims increased this week by 8,000 to 482,500.

The dashed line on the graph is the current 4-week average. This is the highest level for initial claims - and also for the 4-week average - since November 2009.

Other Economic Stories ...

From the Philly Fed: Business Outlook Survey. Philly Fed Index shows contraction in August, first time since July 2009.

From the NY Fed: Empire State Manufacturing Survey. Manufacturing Conditions improve "modestly" in August.

From the Fed: July 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices. Large banks ease lending standards slightly, demand still weak.

Moody's: Commercial Real Estate Price Index declines 4% in June

MBA: Mortgage refinance activity increases sharply, Purchase activity declines

Unofficial Problem Bank List increases to 817 institutions

Best wishes to all.

Schedule for Week of August 22nd

by Calculated Risk on 8/22/2010 09:00:00 AM

Three key housing reports and the second estimate of Q2 GDP will be the highlights this week. Existing home sales will be released on Tuesday, New Home sales on Wednesday, the MBA Q2 National Delinquency Survey on Thursday, and Q2 GDP on Friday. A busy week ...

----- Monday Aug 23rd -----
8:30 AM ET: Chicago Fed National Activity Index (July). This is a composite index of other data.

10:30 AM: Q2 Quarterly Banking Profile from the FDIC.
Note: could be released on Tuesday.

----- Tuesday Aug 24th -----
8:15 AM: Chicago Fed President Charles Evans will speak to the Indianapolis Neighborhood Housing Partnership (Evans will be on the FOMC in 2011).

10:00 AM: Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for a decrease to 4.65 million (SAAR) in July from 5.37 million in June. Take the under! Housing economist Tom Lawler is projecting 3.95 million SAAR. In addition to sales, the level of inventory and months-of-supply will be very important (since months-of-supply impacts prices).

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August. The consensus is for a decrease in the index to +11 (still expanding) from 16 last month. These regional surveys are important now since it appears manufacturing is slowing (or contracting like the Philly Fed survey showed last week).

----- Wednesday Aug 25th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index declined sharply following the expiration of the tax credit, and the index has only recovered slightly over the last few weeks - suggesting reported home sales in July and August will be very weak.

8:30 AM: Durable Goods Orders for July from the Census Bureau. The consensus is for a 2.5% increase in durable good orders.

10:00 AM: New Home Sales for July from the Census Bureau. The consensus is for a slight increase in sales to 340K (SAAR) in July from 330K in June. New Home Sales already collapsed in May since sales are counted when contracts are signed - whereas existing home sales will collapse in July (counted when sales are closed).

10:00 AM: 10:00 FHFA House Price Index for June. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

----- Thursday Aug 26th -----
Note: Aug. 26-28th Kansas City Fed Economic Symposium at Jackson Hole, WY

8:30 AM: The initial weekly unemployment claims report will be released. Consensus is for a slight decrease to 495K from 500K last week. The increase in weekly claims is very concerning, and the 4-week average will probably be at the highest level since last November.

10:00 AM: MBA's Q2 2010 National Delinquency Survey (NDS). This is key report of mortgage delinquencies. I'll also report on the conference call Thursday AM.

11:00 AM: Kansas City Fed regional Manufacturing Survey for August. The index was at 14 in July.

----- Friday Aug 27th -----
8:30 AM: Q2 GDP (second release). In the advance release, the BEA reported real GDP increased at a 2.4% annualized rate in Q2. However subsequent economic releases for construction spending, inventory and trade all suggest downward revisions in the second release. The consensus is for a downward revision to 1.3% real annualized growth.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for August).

10:00 AM: Fed Chairman Ben Bernanke will speak at the Jackson Hole Economic Symposium in Wyoming. The speech is titled "The Economic Outlook and the Federal Reserve's Policy Response".

After 4:00 PM: The FDIC will probably have another busy Friday afternoon ...

Saturday, August 21, 2010

Unemployment Rate continues to Rise in Greece

by Calculated Risk on 8/21/2010 09:47:00 PM

From Nick Skrekas at the WSJ: Jobs Crisis Grows As Greece Falters

Greece's gross domestic product contracted by 3.5% in the second quarter from a year earlier ... sending unemployment rates to above 12% of the work force ...

The International Monetary Fund predicts the jobless rate will reach 14.8% by 2012. But some labor experts fear that before long, one in five Greek workers could be without jobs.

And the 10-year Greece-to-German bond spread has continued to widen, hitting 848 bps on Friday - the highest level since the 963 bps during the May crisis.

Note: The unemployment rate in Ireland is at 13.7% and rising ...

Unofficial Problem Bank List increases to 817 institutions

by Calculated Risk on 8/21/2010 06:12:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for August 20, 2010.

Changes and comments from surferdude808:

Failures and the OCC disclosure of its recent actions contributed to many changes in the Unofficial Problem Bank List this week. After 12 additions and 8 removals this week the Unofficial Problem Bank List stands at 817 institutions with aggregate assets of $415.9 billion.

The eight failures this week – ShoreBank ($2.3 billion), Los Padres Bank ($902 million Ticker: HWFG), Butte Community Bank ($523 million Ticker: CVLL), Sonoma Valley Bank ($363 million Ticker: SBNK), Pacific State Bank ($323 million Ticker: PSBC), Independent National Bank ($163 million Ticker: IBFL), Community National Bank at Bartow ($75 million), and Imperial Savings and Loan Association ($10 million) were removed.

There were 12 additions this week including Southern First Bank, National Association, Greenville, SC ($742 million Ticker: SFST); First National Bank South Dakota, Yankton, SD ($405 million Ticker: FINN); The Peoples National Bank, Easley, SC ($341 million Ticker: PBCE); and United Fidelity Bank, fsb, Evansville, IN ($214 million Ticker: FDLB).

Other changes include Prompt Corrective Action Orders issued by the Federal Reserve against First Banking Center ($869 million Ticker: FBCI) and by the OTS against Security Savings Bank, F.S.B. ($536 million).

Note: The FDIC Q2 2010 Quarterly Banking Profile will be released this coming week.

CEO: No need to invest right now

by Calculated Risk on 8/21/2010 12:49:00 PM

"I could borrow $2 billion tomorrow for 3 1/2 percent. But what am I going to do with it?"David Speer, CEO of Illinois Tool Works which has 60,000 employees worldwide in more than 800 business units and $14 billion in sales.

The above quote is from an article by Neil Irwin in the WaPo: With consumers slow to spend, businesses are slow to hire

There is no reason to invest when there is excess capacity in most industries (and excess supply in housing). This excess capacity or lack of demand - and therefore lack of new investment - is a key reason why the recovery is sluggish.

Restaurants in "survival mode"

by Calculated Risk on 8/21/2010 08:29:00 AM

From Sharon Bernstein at the LA Times: U.S. restaurants starved for business

"It's been a miserable 21/2 years," said Chuck Keagle, who has closed six of the 10 restaurants in his family's Rancho Cucamonga-based Cask 'n Cleaver steakhouse chain since the downturn began.
...
Overall, customers spent about 7% less in 2009 than the previous year, and business is still slow, said Darren Tristano, analyst with the food industry research firm Technomic Inc. The company expects consumers to spend just 0.5 percentage point more on restaurant food this year than last year.
...
"We're in survival mode — have been for a while," said [Matt DeMasi, who co-owns Zach's Cafe in Studio City] ...

"This is the weakest that the restaurant business has been," said [Bonnie Riggs, NPD Group's restaurant industry analyst]. Year over year, the number of patrons coming to restaurants has declined for each of the last seven quarters — the most prolonged drop in the 22 years that the company has been keeping track, she said.

Nationwide, the number of restaurants dropped in 2010 for the first time in more than a decade, according to NPD, falling 5,202 to 579,416.

Restaurants are a discretionary expense and are frequently first in and last out of a recession. The second half slowdown is already hitting restaurants again according to the National Restaurant Association's Restaurant Performance Index that showed contraction in June.

Friday, August 20, 2010

Bank Failures #115 to #118: California

by Calculated Risk on 8/20/2010 09:14:00 PM

From the FDIC: Rabobank, National Association, El Centro, California, Acquires All the Deposits of Two Banks in California

As of June 30, 2010, Butte Community Bank had total assets of $498.8 million and total deposits of $471.3 million; and Pacific State Bank had total assets of $312.1 million and total deposits of $278.8 million. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for Butte Community Bank will be $17.4 million; and for Pacific State Bank, $32.6 million. ... These closings bring the total for the year to 116 banks in the nation, and the seventh and eighth in California.

From the FDIC: Pacific Western Bank, San Diego, California, Assumes All of the Deposits of Los Padres Bank, Solvang, California

As of June 30, 2010, Los Padres Bank had approximately $870.4 million in total assets and $770.7 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $8.7 million. ... Los Padres Bank is the 117th FDIC-insured institution to fail in the nation this year, and the eighth in California.

From the FDIC: Westamerica Bank, San Rafael, California, Assumes All of the Deposits of Sonoma Valley Bank, Sonoma, California

As of June 30, 2010, Sonoma Valley Bank had approximately $337.1 million in total assets and $255.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $10.1 million. ... Sonoma Valley Bank is the 118th FDIC-insured institution to fail in the nation this year, and the ninth in California.

Eight down today.