by Calculated Risk on 1/22/2012 09:20:00 PM

Another update ... still a mess.

From Landon Thomas at the NY Times: Greek Talks Hit a Snag Over Rates

While considerable progress has been made, Greece’s financial backers — Germany and the International Monetary Fund — have been unyielding in their insistence that the longer-term bonds that would replace the current securities must carry yields in the low 3 percent range, officials involved in the negotiations said on Sunday.
...
Also holding up discussions was the question of what to do about the European Central Bank’s 55 billion euros in Greek bonds. ... To get around this, officials are now discussing the possibility that Europe’s rescue fund might lend money to Greece to allow it to buy the bonds back from the European Central Bank at the price the bank paid for them — thought to be about 75 cents on the euro.

Earlier:
• Summary for Week ending January 20th
• Schedule for Week of Jan 22nd
• FOMC Meeting Preview

by Calculated Risk on 1/22/2012 03:20:00 PM

There will be a two day meeting of the Federal Open Market Committee (FOMC) this coming Tuesday and Wednesday. I expect no changes to the Fed Funds rate, or to the program to "extend the average maturity of its holdings of securities" (scheduled to end in June 2012), or to the program to "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities". I don't expect further accommodation (aka "QE3") to be announced at this meeting.

On Wednesday the FOMC statement will be released around 12:30PM and Fed Chairman Ben Bernanke will hold a quarterly press briefing at 2:15 PM ET.

A few things to look for:

1) FOMC participants' projections of the appropriate target federal funds rate. This will the first quarterly release of the participants' view of the appropriate path for the Fed funds rate. On Friday the Fed released blank templates for reporting participants' views. The first chart "Appropriate Timing of Policy Firming" will show when participants judge that the first increase in the target federal funds rate from its current range will occur. The second chart will the participants' view of the "Appropriate Pace of Policy Firming".

These charts will probably show that most participants judge that the first rate increase will occur in 2014 or later, and that most participants believe the appropriate policy path through 2013 will be no change in the Fed's fund rate.

2) Fed Chairman Press Briefing. At the press briefing, Chairman Bernanke will discuss the new FOMC forecasts including the two new charts on the Fed funds rate. Growth forecasts were routinely revised down all through 2011, and it is likely that GDP growth for 2012 will be revised down slightly again this month. However the unemployment rate for 2012 might be revised down or left unchanged.

I expect Bernanke will be asked about the possibility of a large scale MBS purchase program, but it appears too early for "QE3".

Here are the updated forecasts from the November meeting. The GDP projection for 2012 will probably be revised down slightly from the 2.5% to 2.9% range.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2011	2012	2013	2014
November 2011 Projections	1.6 to 1.7	2.5 to 2.9	3.0 to 3.5	3.0 to 3.9

¹ Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate declined to 8.5% in December, and the projection for 2012 will probably be revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2011	2012	2013	2014
November 2011 Projections	9.0 to 9.1	8.5 to 8.7	7.8 to 8.2	6.8 to 7.7

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

The forecasts for overall and core inflation will probably be mostly unchanged.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2011	2012	2013	2014
November 2011 Projections	2.7 to 2.9	1.4 to 2.0	1.5 to 2.0	1.5 to 2.0

Here is core inflation:

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2011	2012	2013	2014
November 2011 Projections	1.8 to 1.9	1.5 to 2.0	1.4 to 1.9	1.5 to 2.0

If the economy under performs or even tracks the November projections, QE3 would seem likely at either of the two day meetings in April or June. Some have argued that QE3 could happen sooner, perhaps at the March meeting. If the economy performs better than expected, then the Fed will probably wait longer.

3) Possible Statement Changes. The FOMC met in December, and not much has changed - so the statement will probably be very similar to the December statement.

Investors will probably focus on any change to the sentence in the second paragraph: "Strains in global financial markets continue to pose significant downside risks to the economic outlook."

The FOMC will probably reiterate that they stand ready to take further action: "The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability."

The sentence "The Committee ... currently anticipates that economic conditions ... are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013" will be removed and replaced with the Fed funds rate projections.

I expect the focus will be on the press briefing and the FOMC forecasts.

Yesterday:
• Summary for Week ending January 20th
• Schedule for Week of Jan 22nd

by Calculated Risk on 1/22/2012 10:53:00 AM

The advance Q4 GDP report will be released on Friday. The consensus is that real GDP increased 3.0% annualized in Q4. Here are a few forecasts:

From Merrill Lynch:

We expect real GDP advanced 2.7% annualized in the fourth quarter after rising 1.8% in Q3. Nearly a full percentage of the growth last quarter stemmed from inventory accumulation, which means that domestic final sales rose just 1.7%. ... Stepping back, the broader story is that as the shocks of last summer have dissipated, the economy has picked up momentum. However, the bounce we’ve seen is fairly feeble ...

From Goldman Sachs:

We estimate that real GDP increased by 3.2% (annualized) in Q4, up from 1.8% in Q3. Despite this momentum in the recent data, we still expect growth to slow somewhat in the first half of 2012. ... we expect the Euro-area crisis to weigh somewhat more heavily on growth than it has done so far, mainly via financial channels.

And a few more forecasts from a week ago via the WSJ MarketBeat:

Macroeconomic Advisers cut their estimate of fourth-quarter GDP from 3.3% to 3% today on the trade news. ... J.P. Morgan economists also cut their fourth-quarter estimates ... to 3% from 3.5%.

Bank of America Merrill Lynch economist Neil Dutta cut his estimate ... "A wider trade gap implies weaker GDP; our Q4 tracking estimate is running 2.7% from 3.0% post retail sales. The broader story is that growth net of inventory accumulation – domestic demand – is softening as we head into 2012."

Still sluggish growth.

by Calculated Risk on 1/21/2012 08:37:00 PM

The talks are continuing, but it is unclear if a deal will be reached before the eurozone finance minister meeting on Monday.

From the Athens News: Dallara leaves Athens, talks to continue: sources

The representatives of Greece's private creditors have left Athens and debt swap talks will continue over the phone during the weekend, sources close to the negotiations said, adding that it was unlikely that a deal would be clinched before next week.
...
Athens is anxious to strike a deal before a meeting on Monday of eurozone finance ministers, just in time to set in motion the paperwork and approvals necessary to receive a new injection of aid to avoid a messy bankruptcy in March.

"The elements of an unprecedented voluntary PSI are coming into place," the Institute of International Finance said in a statement after Friday's three-hour evening negotiation session, referring to the bond swap scheme.

From the Financial Times: Bondholders face additional losses on Greek debt

The Institute of International Finance, representing holders of some €200bn of Greek debt, on Saturday denied rumours the talks had stalled, saying that experts from its steering committee “will be working with Greek government officials on many aspects of the PSI."
excerpt with permission

Earlier:
• Summary for Week ending January 20th
• Schedule for Week of Jan 22nd

by Calculated Risk on 1/21/2012 05:24:00 PM

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

Here is the unofficial problem bank list for Jan 20, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

With the FDIC back to closings and the OCC releasing its enforcement actions through mid-December 2011, the Unofficial Problem Bank List underwent several changes during the week. In all, there were seven removals and one addition, which leaves the list standing at 963 institutions with assets of $389.2 billion. A year ago, the list held 937 institutions with assets of $409.4 billion.

Five of the seven removals were rehabilitations as the OCC terminated actions against Central National Bank, Junction City, KS ($834 million); Citizens National Bank of Paintsville, Paintsville, KY ($563 million); National Bank of Commerce, Superior, WI ($534 million); The First National Bank of Wynne, Wynne, AR ($255 million); and The First National Bank of Ipswich, Ipswich, MA ($276 million), which had been under an action since 2006.

There were three failures this week, but only two were on the Unofficial Problem Bank List -- Central Florida State Bank, Belleview, FL ($79 million Ticker: CEFB); and American Eagle Savings Bank, Boothwyn, PA ($20 million). The other failure, The First State Bank, Stockbridge, GA ($537 million), was not on the list. It seems unusual for a bank to fail these days without being under a formal action. After some research, the bank in a 10-Q filing on August 13, 2010 disclosed the entering of a Consent Order with the FDIC on May 7, 2010. What is odd is this action does not seem to appear in an FDIC monthly press release or on its website (http://www.fdic.gov/bank/individual/enforcement/begsrch.html). Should anyone have luck finding this action at the FDIC let us know, otherwise it appears they were on double secret probation. First State Bank was costly as the FDIC estimates it will cost around 40 percent of the failed bank's assets.

Added this week was Naugatuck Valley Savings and Loan, Naugatuck, CT ($582 million Ticker: NVSL). Other changes include the OCC issuing Prompt Corrective Action Orders against Home Savings of America, Little Falls, MN ($440 million); and Charter National Bank and Trust, Hoffman Estates, IL ($98 million). Next week, we anticipate the FDIC to release its actions through December 2011.

Earlier:
• Summary for Week ending January 20th
• Schedule for Week of Jan 22nd

by Calculated Risk on 1/21/2012 01:15:00 PM

Earlier:
• Summary for Week Ending January 20th

The key U.S. economic report for the coming week is the Q4 advance GDP report to be released on Friday. Also New Home sales will be released on Thursday.

The Fed's FOMC holds a two day meeting on Tuesday and Wednesday, and Fed Chairman Ben Bernanke will hold a press conference following the FOMC announcement on Wednesday. The FOMC will release participants' projections of the appropriate target federal funds rate along with the usual quarterly economic projections.

On Tuesday, President Obama will present the State of the Union address. This might include mention of several housing initiatives.

----- Monday, Jan 23rd -----
No economic releases scheduled.

----- Tuesday, Jan 24th -----
10:00 AM: Richmond Fed Survey of Manufacturing Activity for January. The consensus is for an increase to 6 for this survey from 3 in December (above zero is expansion).

10:00 AM: Regional and State Employment and Unemployment (Monthly) for December 2011

9:00 PM: State of the Union Address. President Obama will probably mention some housing policy initiatives such as the new HARP program (refinance activity will increase in March), an REO to rental program for Fannie and Freddie, and possibly the long rumored mortgage settlement agreement.

----- Wednesday, Jan 25th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index was especially weak last year, although it has increased a little recently.

10:00 AM: FHFA House Price Index for November 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

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

12:30PM: FOMC Meeting Announcement. No changes are expected to interest rates. The key change will be the release of Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:15 PM: Fed Chairman Ben Bernanke holds a press briefing following the FOMC announcement.

----- Thursday, Jan 26th -----
8:30 AM: The initial weekly unemployment claims report will be released.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased last week to 379,000.

The consensus is for an increase to 370,000 from 352,000 last week.

8:30 AM: Durable Goods Orders for December from the Census Bureau. The consensus is for a 2.0% increase in durable goods orders.

8:30 AM ET: Chicago Fed National Activity Index (December). This is a composite index of other data.

10:00 AM ET: New Home Sales for December from the Census Bureau.

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

The consensus is for a slight increase in sales to 320 thousand Seasonally Adjusted Annual Rate (SAAR) in December from 315 thousand in November. The consensus might be a little low based on the homebuilder confidence survey.

10:00 AM: Conference Board Leading Indicators for December. The consensus is for a 0.7% increase in this index.

11:00 AM: Kansas City Fed regional Manufacturing Survey for January. This survey was at -4 in December (contraction).

----- Friday, Jan 27th -----
8:30 AM: Q4 GDP (advance release). This is the advance release from the BEA. The consensus is that real GDP increased 3.0% annualized in Q4.

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years.

The Red column is the forecast for Q3 GDP.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for January). The consensus is for no change from the preliminary reading of 74.0.

by Calculated Risk on 1/21/2012 08:11:00 AM

The economic data last week wasn't strong, but it was mildly encouraging. Although housing starts declined in December, the decline was due to the volatile multifamily sector - in fact single family housing starts were at the highest level of the year. This followed an increase in the homebuilder confidence index; the builders are still depressed, but not quite as pessimistic as before.

The existing home sales report showed a sharp decline in inventory - an important story for housing. Economist Tom Lawler commented:

[O]ne of the more startling trends is the sharp decline in the estimated number of existing homes for sale. ... While the argument some make that the declining inventory trend in part reflects discouraged would-be sellers from taking their home off the market until “better times” arrive has some merit, it would be inane to dismiss completely the sharp decline in inventories – just as it was inane to dismiss the explosive jump in inventories in 2006 and 2007.

One other reason for the drop in listings is the sharp decline in REO listings from the end of 2010 to the end of 2011. While the foreclosure/robo-signing mess resulted in a significant decline in bank repossessions in 2011 compared to 2010, there wasn’t any corresponding slowdown in REO sales. ... As a result, REO inventories probably fell by close to 150,000. This, of course, would only explain a modest part of the huge drop in listings last year, but it was a factor.

In addition, anecdotal evidence indicates that a decent share of investors who have purchase REO – and the investor share of purchase is significant – have purchased properties not for a “quick flip,” but as a rental investment. As a result, fewer properties purchased by investors have quickly come back on the market than was the case several years ago.

There was good news on initial weekly unemployment claims too. The DOL reported initial weekly claims declined to 352,000 - the lowest level since April 2008. And two regional manufacturing surveys showed expansion in January. Also the Architecture Billings Index was positive for the 2nd consecutive month (a leading indicator for commercial real estate). All and all, the US economic reports were mildly encouraging last week.

Here is a summary in graphs:

• Housing Starts declined in December

Click on graph for larger image.

Total housing starts were at 657 thousand (SAAR) in December, down 4.1% from the November rate of 685 thousand (SAAR). Most of the increase this year has been for multi-family starts, but single family starts have been increasing recently too.

Single-family starts increased 4.4% to 470 thousand in December - the highest level in 2011, and the highest since the expiration of the tax credit.

This was below expectations of 680 thousand starts in December, although the decline in December was related to the volatile multifamily sector.
All Housing Graphs
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply

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

Sales in December 2011 (4.61 million SAAR) were 5.0% higher than last month, and were 3.6% above the December 2010 rate.

According to the NAR, inventory decreased to 2.38 million in December from 2.62 million in November. This is the lowest level of inventory since March 2005.

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

Inventory decreased 21.2% year-over-year in December from December 2010. This is the tenth consecutive month with a YoY decrease in inventory.

Months of supply decreased to 6.2 months in December, down from 7.2 months in November. This is still a little higher than normal.
All current Existing Home Sales graphs
• Industrial Production increased 0.4% in December, Capacity Utilization increased

From the Fed: Industrial production and Capacity Utilization

This graph shows Capacity Utilization. This series is up 10.8 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.1% is still 2.3 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

This graph shows industrial production since 1967.

Industrial production increased in December to 95.3, and previous months were revised up slightly.

The consensus was for a 0.5% increase in Industrial Production in December, and for an increase to 78.1% for Capacity Utilization. This was close to consensus.
All current manufacturing graphs
• AIA: Architecture Billings Index indicated expansion in December

From AIA: Architecture Billings Index Positive for Second Straight Month

This graph shows the Architecture Billings Index since 1996. The index was unchanged at 52.0 in December. Anything above 50 indicates expansion in demand for architects' services.

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 this suggests further declines in CRE investment in early 2012, but perhaps stabilizing later in 2012.
All current Commercial Real Estate graphs
• NAHB Builder Confidence index increased in January

From the NAHB: Builder Confidence Rises Fourth Consecutive Time in January

The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased in January to 25 from 21 in December. 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 January release for the HMI and the November data for starts.

Both confidence and housing starts had been moving sideways at a very depressed level for several years - but confidence has been moving up. This is still very low, but this is the highest level since June 2007.
All Housing Graphs
• Weekly Initial Unemployment Claims declined to 352,000

This graph shows the 4-week moving average of weekly claims since January 2000.The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 379,000.

The 4-week moving average is well below 400,000.

This is the lowest level for weekly claims since April 2008.
All current Employment Graphs

• Regional Fed Surveys show expansion in January

From the Philly Fed: January 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged up slightly from a revised reading of 6.8 in December to 7.3 in January.

From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that manufacturing activity expanded in New York State in January. The general business conditions index climbed five points to 13.5.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through January. The ISM and total Fed surveys are through December.

The average of the Empire State and Philly Fed surveys increased again in January, and is at the highest level since early 2011.
All current manufacturing graphs
• Key Measures of Inflation moderated in December

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.5%, and core CPI rose 2.2%. Core PCE is for November and increased 1.7% year-over-year.

On a monthly basis, the median Consumer Price Index increased 2.9% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 1.5% annualized, and core CPI increased 1.8% annualized.

These measures show inflation has moderated.

• Other Economic Stories ...
• Housing: Record Low Total Completions in 2011
• Lawler: Housing Forecast for 2012
• LA area Port Traffic increases slightly year-over-year in December
• Residential Remodeling Index declines seasonally in November

by Calculated Risk on 1/20/2012 08:05:00 PM

From the Federal Reserve: Federal Reserve releases templates for reporting FOMC participants' projections of the appropriate target federal funds rate

The Federal Reserve on Friday released blank templates showing the format of the two charts it will use on January 25 to report Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate. It also released a draft of an explanatory note that will accompany the projections.

The first chart, which will have shaded bars when released on January 25, will show FOMC participants’ projections for the timing of the initial increase in the target federal funds rate. The second chart, which will have dots representing policymakers’ individual projections when released on January 25, will show participants’ views of the appropriate path of the federal funds rate over the next several years and in the longer run.

From Luca Di Leo and Jon Hilsenrath at the WSJ: Fed Details How It Will Release Rate Forecasts

One of the new charts is a bar chart showing in which year officials expect to see the first short-term interest rate increase, with options ranging from 2012 all the way out to 2016. ... It was striking that the Fed charts go all the way out to 2016 — suggesting that some officials don’t see rate hikes for many more years.

These projections will be released next Wednesday as part of the usually quarterly economic projections.

Earlier:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 1/20/2012 06:11:00 PM

What's that crashing sound?
Houston, we have a problem.
Eagle has landed
by Soylent Green is People
From the FDIC: Capital Bank, National Association, Rockville, Maryland, Assumes All of the Deposits of American Eagle Savings Bank, Boothwyn, Pennsylvania

As of September 30, 2011, American Eagle Savings Bank had approximately $19.6 million in total assets and $17.7 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3.2 million. ... American Eagle Savings Bank is the third FDIC-insured institution to fail in the nation this year, and the first in Pennsylvania.

That makes 3 today so far. The FDIC is back to work.

by Calculated Risk on 1/20/2012 05:08:00 PM

New year, same pattern.
Florida, Georgian failures
Wash, then rinse, repeat
by Soylent Green is People
From the FDIC: CenterState Bank of Florida, National Association, Winter Haven, Florida, Assumes All of the Deposits of Central Florida State Bank, Belleview, Florida

As of September 30, 2011, Central Florida State Bank had approximately $79.1 million in total assets and $77.7 million in total deposits ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $24.4 million. ... Central Florida State Bank is the first FDIC-insured institution to fail in the nation this year, and the first in Florida.

From the FDIC: Hamilton State Bank, Hoschton, Georgia, Assumes All of the Deposits of the First State Bank, Stockbridge, Georgia

As of September 30, 2011, The First State Bank had approximately $536.9 million in total assets and $527.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $216.2 million. ... The First State Bank is the second FDIC-insured institution to fail in the nation this year, and the first in Georgia.

And so it begins in 2012.

by Calculated Risk on 1/20/2012 03:35:00 PM

From HotelNewsNow.com: STR: US results for week ending 14 January

The U.S. hotel industry experienced increases in all three key performance metrics during the week of 8-14 January 2012, according to data from STR.

In year-over-year comparisons for the week, occupancy was up 4.9 percent to 52.1 percent, average daily rate increased 5.6 percent to US$102.99 and revenue per available room was up 10.8 percent to US$53.65.

This is the weak season for hotel occupancy, but this is a fairly strong improvement over the same period last year. Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average.

Click on graph for larger image.

The red line is for 2012, yellow is for 2011, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels).

Hotels have seen a solid start to 2012. The 4-week average of the occupancy rate is back to normal.

Looking forward, February and March are the next key period - that is when business travel usually picks up.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

Earlier:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 1/20/2012 12:35:00 PM

The NAR reported inventory fell to 2.38 million in December. This is down 21.2% from December 2010, and this is about 16% below the inventory level in December 2005 (2005 was when inventory started increasing sharply). Inventory is about 7% above the level in December 2004. This decline in inventory was a significant story in 2011.

The following graph shows inventory by month since 2004. In 2004 (black line), inventory was fairly flat and declined at the end of the year. In 2005 (dark blue line), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red) inventory is at the lowest level since 2004. Inventory is still elevated - especially with the much lower sales rate - but lower inventory levels put less downward pressure on house prices (of course the level of distressed properties is still very high, and there is a significant shadow inventory).

Note that inventory usually starts increasing in February and March, and peaks in July and August. The seasonal increase in inventory will be something to watch this spring and summer.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2011.

Sales NSA are slightly above December 2009 and December 2010, but sales are far below the bubble years of 2005 and 2006.

The level of sales is still elevated due to investor buying. The NAR noted:

All-cash sales accounted for 31 percent of purchases in December, up from 28 percent in November and 29 percent in December 2010. Investors account for the bulk of cash transactions.

Investors purchased 21 percent of homes in December, up from 19 percent in November and 20 percent in December 2010.

Earlier:
• Existing Home Sales in December: 4.61 million SAAR, 6.2 months of supply
• Existing Home Sales graphs

by Calculated Risk on 1/20/2012 10:00:00 AM

The NAR reports: December Existing-Home Sales Show Uptrend

The latest monthly data shows total existing-home sales rose 5.0 percent to a seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November, and are 3.6 percent higher than the 4.45 million-unit level in December 2010.
...
Total housing inventory at the end of December dropped 9.2 percent to 2.38 million existing homes available for sale, which represents a 6.2-month supply at the current sales pace, down from a 7.2-month supply in November.

Click on graph for larger image.

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

Sales in December 2011 (4.61 million SAAR) were 5.0% higher than last month, and were 3.6% above the December 2010 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 2.38 million in December from 2.62 million in November. This is the lowest level of inventory since March 2005.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 21.2% year-over-year in December from December 2010. This is the tenth consecutive month with a YoY decrease in inventory.

Months of supply decreased to 6.2 months in December, down from 7.2 months in November. This is still a little higher than normal.

These sales numbers were right at the Tom Lawler's estimate of 4.64 million.

All current Existing Home Sales graphs

by Calculated Risk on 1/20/2012 09:01:00 AM

Landon Thomas at the NY Times DealBook has some details: Greece Inches Toward a Deal With Its Bondholders

[A] compromise seems to be at hand, with the Greeks close to locking in an interest rate just below 4 percent on the new bonds, according to officials involved in the negotiations. ... In a concession to creditors, the coupon is expected to escalate beyond 4 percent over time, linked to the growth of the Greek economy.

Assuming all goes according to plan, investors would be offered the opportunity to exchange their old bonds for new ones carrying the agreed-upon terms in early to mid-February.

Bankers say that the creditors believe 50 to 60 percent of private sector bond holders might accept the proposal ... The challenge for Greece and the creditor group is to persuade investors on the fence to join in the deal in order to reach a figure of about 75 percent.

With a 75 percent participation rate, Greece could well be in a position to take advantage of the collective-action clauses that are set to be attached to the Greek law bonds, forcing the terms of the agreement on all bondholders.

And from the AthensNews: Debt swap talks to continue in the evening

The government will continue debt swap negotiations with private sector bondholders at around 7.30pm, Finance Minister Evangelos Venizelos said after concluding a first round of talks with Institute of International Finance (IIF) chief Charles Dallara.
...
Investors have also bridled at the government’s threat to enforce losses if not enough bondholders sign up to the deal.

by Calculated Risk on 1/19/2012 10:35:00 PM

It sounds like they need a deal in the next few days.

From Reuters: Greece, Creditors Move Closer to Deal in Race Against Time

Greece and its private bondholders resume debt swap talks on Friday amid signs they are inching closer to a long-awaited deal ... A large chunk of the bond swap must be agreed by noon on Friday and formalized before Monday's meeting of euro zone finance ministers, [Finance Minister Evangelos Venizelos] has said.

Adding to the pressure, officials from the "troika" of foreign lenders are due to begin meetings with the Greek government on Friday to discuss reforms and plans to finalize that bailout package.

"Now is the crucial moment in the final battle for the debt swap and the crucial moment in the final and definitive battle for the new bailout," Venizelos told parliament. "Now, now! Now is the time to negotiate for the sake of the country."

Earlier:
• Housing Starts declined in December
• Housing: Record Low Total Completions in 2011
• Weekly Initial Unemployment Claims decline to 352,000
• Key Measures of Inflation moderate in December
• Philly Fed: "Regional manufacturing activity continued to expand at a moderate pace in January"

by Calculated Risk on 1/19/2012 05:26:00 PM

From economist Tom Lawler:

At the beginning of 2011, the “consensus” forecast for total housing starts was in the 690,000 to 700,000 range, with most analysts looking for an increase in both Single Family (SF) and Multifamily (MF) starts. Early last year one well-respected analysts who regularly surveys SF builders said that on average builders planned to increase SF starts by 15-20% in 2011. As I noted at the time, however, such an increase seemed highly unlikely given new and existing inventories, distressed sales, and pricing relative to where builders were willing to sell homes. It turned out, of course, that new home sales in the early months of last year were “quite disappointing” in aggregate, and builders in aggregate quickly changed their “plans.”

MF starts, in contrast, exceeded “consensus” forecasts, as the combination of very low completion rates (completions lag starts considerably), a moderate rebound in household growth, and a shift toward more renters than buyers (both voluntary and involuntary) resulted in a sharp reduction in apartment rental vacancy rates, as well as rising rents.

While the labor market has shown some signs of improving, household growth is highly likely to be faster in 2012 than 2011, active government intervention has pushed mortgage rates to yet new lows (AND with a record low “handle”), new and existing home inventories are down significantly from a year ago, last year’s subdued housing production helped further reduce the “excess” supply of housing, and last year’s SF activity was still depressed by the earlier and ill-conceived home buyer tax credits, this year’s “consensus” forecast for housing starts in 2012 appears to be lower than last year’s forecast for 2011 – especially on the SF side!

Quite frankly, that doesn’t seem to make a lot of sense to me.

So ... just like a year ago I thought the consensus forecast for housing starts was too high, this year I believe it is too low.

Right now, my “best guess” for housing starts, new SF home sales, existing home sales, and housing completions, would be as follows.

Housing Starts and Home Sales (000s)
	Housing Starts		Single Family		Multifamily (2+)
	Total	Built for Sale	SF	Built for Sale	MF	Built for Sale	New SF Home Sales	Existing Home Sales
2010	587	321	471	306	116	15	323	4,182
2011	607	315	429	295	178	20	305	4,272
2012(F)	740	385	515	360	225	25	365	4,550

Note: My 2010 existing home sales numbers is the sum of the NAR’s NOT SEASONALLY ADJUSTED sales figures from its re-benchmarking release. In the past the NAR’s annual number always “footed” to the sum of the NSA numbers, but that was not the case when it released its benchmark revisions.

And for completions in 2012:

Housing Completions (000s)
	Housing Completions		Single Family		Multifamily (2+)
	Total	Built for Sale	SF	Built for Sale	MF	Built for Sale	Mfg. Housing Placements	Total
2010	652	362	496	331	155	31	50	702
2011	584	309	445	294	139	15	46	630
2012(F)	635	359	470	340	165	19	60	695

CR Note: The following table shows several forecasts for 2012:

Some Housing Forecasts for 2012 (000s)
	New Home Sales	Single Family Starts	Total Starts
Merrill Lynch	330		713
Fannie Mae	336	473	704
Wells Fargo	350	457	690
John Burns	359		717
NAHB	360	501	709
Tom Lawler	365	515	740
Moody's	530	687
2011 Actual	302	431	609

CR Note: table updated on Feb 16, 2012 (Merrill's actual forecast added)

by Calculated Risk on 1/19/2012 03:08:00 PM

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in December on a seasonally adjusted basis ... The index for all items less food and energy increased 0.1 percent in December after rising 0.2 percent in November.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.9% annualized rate) in December. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.5% annualized rate) during the month.
...
The CPI less food and energy increased 0.1% (1.8% annualized rate) on a seasonally adjusted basis.

Over the last 12 months, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.5%, the CPI rose 3.0%, and the CPI less food and energy rose 2.2%.

Note: The Cleveland Fed has the median CPI details for December here.

On a monthly basis, the rate of increase is mostly below the Fed's target (Median is above, trimmed-mean and core are below).

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.5%, and core CPI rose 2.2%. Core PCE is for November and increased 1.7% year-over-year. On a monthly basis, the median Consumer Price Index increased 2.9% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 1.5% annualized, and core CPI increased 1.8% annualized.

These measures show inflation has moderated.

by Calculated Risk on 1/19/2012 12:22:00 PM

A few key points for 2011:
• There were a record low number of total completions.
• There were a record low number of single family completions.
• There were a record low number of housing units added to the housing stock, and this suggests the excess vacant inventory declined significantly.
• Multifamily starts were up 60%. This will probably increase further in 2012.
• Single family starts were down 9% to a new record low. This looks to rebound in 2012.

Multifamily starts were up 60% in 2011 over 2010 - from 104,300 in 2010 to 167,400 in 2011. This will probably increase further in 2012 since 167 thousand is still a fairly low level of starts. Single family starts were down 9% in 2011 to 428,600. This is the lowest level of single family starts since the Census Bureau started tracking starts in 1959!

Since it typically takes over a year to complete a multifamily building, and since multifamily starts were are record lows in 2009 (and close in 2010), there were a near record low number of multifamily completions in 2011.

The following graph shows the lag between multi-family starts and completions using a 12 month rolling total. The blue line is for multifamily starts and the red line is for multifamily completions.

Click on graph for larger image.

The rolling 12 month total for starts (blue line) increased all year. Multifamily starts were at 167.4 thousand units in 2011.

Completions (red line) appear to have bottomed. This is probably because builders rushed some projects to completion because of the strong demand for rental units. Multifamily completions were at 130.5 thousand in 2011, just above the record low of 127.1 thousand in 1993.

Total completions were at a record low in 2011 (as were single family completions), and the U.S. added the fewest net housing units to the housing stock since the Census Bureau started tracking completions in the '60s.

Below is a table of net housing units added to the housing stock since 1990. Note: Demolitions / scrappage estimated.

This means that the overhang of excess inventory probably declined significantly in 2011.

Housing Units added to Stock (000s)
	1 to 4 Units	5+ Units	Manufactured Homes	Sub-Total	Demolitions / Scrappage	Total added to Stock
1990	1010.8	297.3	188.3	1496.4	200	1296.4
1991	874.4	216.6	170.9	1261.9	200	1061.9
1992	999.7	158	210.5	1368.2	200	1168.2
1993	1065.7	127.1	254.3	1447.1	200	1247.1
1994	1192.1	154.9	303.9	1650.9	200	1450.9
1995	1100.2	212.4	339.9	1652.5	200	1452.5
1996	1161.6	251.3	363.3	1776.2	200	1576.2
1997	1153.4	247.1	353.7	1754.2	200	1554.2
1998	1200.3	273.9	373.1	1847.3	200	1647.3
1999	1305.6	299.3	348.1	1953	200	1753
2000	1269.1	304.7	250.4	1824.2	200	1624.2
2001	1289.8	281	193.1	1763.9	200	1563.9
2002	1360.1	288.2	168.5	1816.8	200	1616.8
2003	1417.8	260.8	130.8	1809.4	200	1609.4
2004	1555	286.9	130.7	1972.6	200	1772.6
2005	1673.4	258	146.8	2078.2	200	1878.2
2006	1695.3	284.2	117.3	2096.8	200	1896.8
2007	1249.8	253	95.7	1598.5	200	1398.5
2008	842.5	277.2	81.9	1201.6	200	1001.6
2009	534.6	259.8	49.8	844.2	150	694.2
2010	505.2	146.5	50	701.7	150	551.7
2011	453.5	130.5	46	630	150	480

by Calculated Risk on 1/19/2012 10:10:00 AM

From the Philly Fed: January 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged up slightly from a revised reading of 6.8 in December to 7.3 in January. ... The new orders index remained positive for the fourth consecutive month but declined from a revised reading of 10.7 in December to 6.9 this month.
...
The current employment index has now been positive for five consecutive months
but was virtually unchanged from last month’s reading. The percentage of firms
reporting an increase in employment (21 percent) was higher than the percentage
reporting a decline (10 percent). Firms reporting a longer workweek (23 percent) only narrowly outnumbered those reporting a shorter one (18 percent).
...
The future general activity index increased from a revised reading of 40 in December to 49 this month. The index has increased for five consecutive months and is now at its highest reading in 10 months.

This indicates expansion in January, at a slower pace than in December, but below the consensus forecast of +11.0.

The six month outlook improved again, and employment increased (number of employees was at 11.6, up slightly from 11.5 last month, and the average workweek was at 5.0, up from 2.8).

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through January. The ISM and total Fed surveys are through December.

The average of the Empire State and Philly Fed surveys increased again in January, and is at the highest level since early 2011.

All current manufacturing graphs

Earlier:
• Weekly Initial Unemployment Claims decline to 352,000
• Housing Starts decline in December

by Calculated Risk on 1/19/2012 08:55:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 657,000. This is 4.1 percent below the revised November estimate of 685,000, but is 24.9 percent (±18.3%) above the December 2010 rate of 526,000.

Single-family housing starts in December were at a rate of 470,000; this is 4.4 percent above the revised November figure of 450,000. The December rate for units in buildings with five units or more was 164,000.

An estimated 606,900 housing units were started in 2011. This is 3.4 percent above the 2010 figure of 586,900.

Building Permits:
Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 679,000. This is 0.1 percent below the revised November rate of 680,000, but is 7.8 percent above the December 2010 estimate of 630,000.

Single-family authorizations in December were at a rate of 444,000; this is 1.8 percent above the revised November figure of 436,000. Authorizations of units in buildings with five units or more were at a rate of 209,000 in December.

Click on graph for larger image.

Total housing starts were at 657 thousand (SAAR) in December, down 4.1% from the November rate of 685 thousand (SAAR). The decline in December was related to the volatile multifamily sector. Most of the increase this year has been for multi-family starts, but single family starts have been increasing recently too.

Single-family starts increased 4.4% to 470 thousand in December - the highest level in 2011, and the highest since the expiration of the tax credit.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that total housing starts have been increasing a little lately, but have mostly moved sideways for about two years and a half years..

Multi-family starts increased in 2011 - although from a very low level. Single family starts appear to be increasing lately, but are still mostly "moving sideways".

This was below expectations of 680 thousand starts in December. I'll have more on housing starts and completions later.

All Housing Investment and Construction Graphs