RSS Feed by Calculated Risk on 1/26/2013 07:18:00 PM
Saturday, January 26, 2013
Unofficial Problem Bank list declines to 825 Institutions
Here is the unofficial problem bank list for Jan 25, 2012.
Changes and comments from surferdude808:
As anticipated, the FDIC released its enforcement actions through December 2012, which led to several changes to the Unofficial Problem Bank List. For the week, there were six removals and five additions leaving the list at 825 institutions with assets of $308.9 billion. A year ago, the list held 958 institutions with assets of $389.0 billion. For the month, the list was down by 13 and $4.1 billion in assets after two failures, four unassisted mergers, 15 action terminations, one voluntary liquidation, and nine additions.Earlier:
First National Bank, Hays, KS ($79 million) found a merger partner to get off the list. The FDIC terminated actions against Farmers & Merchants Bank, Lakeland, GA ($597 million); Border State Bank, Greenbush, MN ($338 million); Stoneham Savings Bank, Stoneham, MA ($326 million); Paragon Bank, Wells, MN ($30 million); and Peoples State Bank of Madison Lake, Madison Lake, MN ($24 million).
The FDIC issued actions against Bank of Washington, Washington, MO ($853 million); Community First Bank, Inc., Walhalla, SC ($463 million Ticker: CFOK); Central Bank, Savannah, TN ($160 million); Mountain Valley Bank, Dunlap, TN ($99 million); and US Metro Bank, Garden Grove, CA ($88 million Ticker: USMT). Also, the FDIC issued a Prompt Corrective Action order against First South Bank, Spartanburg, SC ($336 million Ticker: FSBS).
Next week should be a quiet one for the changes to the list.
• Summary for Week Ending Jan 25th
• Schedule for Week of Jan 27th
Schedule for Week of Jan 27th
by Calculated Risk on 1/26/2013 01:48:00 PM
Earlier:
• Summary for Week Ending Jan 25th
This will be a very busy week for economic data. The key reports are the Q4 advance GDP report to be released on Wednesday, and the January employment report on Friday.
Other key reports include Case-Shiller house prices for November on Tuesday, the ISM manufacturing index on Friday, and auto sales on Friday.
There is an FOMC meeting on Tuesday and Wednesday, with an announcement scheduled for Wednesday at 2:15 PM ET. No significant changes are expected.
8:30 AM: Durable Goods Orders for December from the Census Bureau. The consensus is for a 1.6% increase in durable goods orders.
10:00 AM ET: Pending Home Sales Index for December. The consensus is for a 0.3% decrease in the index.
10:30 AM: Dallas Fed Manufacturing Survey for January. This is the last of the regional surveys for January. The consensus is a decrease to 4.0 from 6.8 in December (above zero is expansion).
9:00 AM: S&P/Case-Shiller House Price Index for November. Although this is the November report, it is really a 3 month average of September, October and November. This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through October 2012 (the Composite 20 was started in January 2000).
The consensus is for a 5.8% year-over-year increase in the Composite 20 index (NSA) for November. The Zillow forecast is for the Composite 20 to increase 5.3% year-over-year, and for prices to increase 0.4% month-to-month seasonally adjusted.
10:00 AM: Conference Board's consumer confidence index for January. The consensus is for the index to be unchanged at 65.1.
10:00 AM: Q4 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to report on the homeownership rate, and the homeowner and rental vacancy rates. However, this report doesn't track other measures (like the decennial Census and the ACS) and this survey probably shouldn't be used to estimate the excess vacant housing supply.
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 172,000 payroll jobs added in January. Even with the new methodology, the report still isn't that useful in predicting the BLS report.
8:30 AM: Q4 GDP (advance release). This is the advance release from the BEA. The consensus is that real GDP increased 1.0% annualized in Q4.This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years.
The Red column (and dashed line) is the consensus forecast for Q4 GDP.
2:15 PM: FOMC Meeting Announcement. No significant announcement is expected.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 350 thousand from 330 thousand last week.
8:30 AM ET: Personal Income and Outlays for December. The consensus is for a 0.7% increase in personal income in December, and for 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.
9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a decrease to 50.5, down from 51.6 in December.
8:30 AM: Employment Report for January. The consensus is for an increase of 155,000 non-farm payroll jobs in January; there were also 155,000 jobs added in December. The consensus is for the unemployment rate to decrease to 7.7% in January.
Note: As usual, the January report will include revisions. From the BLS: "the Current Employment Statistics (CES) survey will introduce revisions to nonfarm payroll employment, hours, and earnings data to reflect the annual benchmark adjustment for March 2012 and updated seasonal adjustment factors. Not seasonally adjusted data beginning with April 2011 and seasonally adjusted data beginning with January 2008 are subject to revision."
For the Household survey, from the BLS: "Effective with the release of The Employment Situation for January 2013, scheduled for February 1, 2013, new population controls will be used in the monthly household survey estimation process."
The second employment graph shows the percentage of payroll jobs lost during post WWII recessions through December.The economy has added 5.8 million private sector jobs since employment bottomed in February 2010 including preliminary benchmark revision (5.2 million total jobs added including all the public sector layoffs).
There are still 3.1 million fewer private sector jobs now than when the recession started in 2007 (including benchmark revision).
9:00 AM: The Markit US PMI Manufacturing Index. The consensus is for an increase to 55.5, up from 54.0.
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for January). The consensus is for a reading of 71.5, up from 71.3.
10:00 AM ET: ISM Manufacturing Index for January. Here is a long term graph of the ISM manufacturing index. The ISM manufacturing index indicated expansion in December at 50.7% (dashed line). The employment index was at 48.4% in December, and the new orders index was at 50.3%. The consensus is for PMI to be unchanged at 50.7%. (above 50 is expansion).
10:00 AM: Construction Spending for December. The consensus is for a 0.8% increase in construction spending.
All day: Light vehicle sales for January. The consensus is for light vehicle sales to be at 15.3 million SAAR in January (Seasonally Adjusted Annual Rate) unchanged from the December rate.
This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate. Edmunds.com is forecasting:
Edmunds.com ... forecasts that 1,045,587 new cars and trucks will be sold in the U.S. in January for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.3 million light vehicles. The projected sales will be ... a 14.5 percent increase from January 2012.
Summary for Week ending January 25th
by Calculated Risk on 1/26/2013 09:30:00 AM
This was a light week for economic data.
The housing data - new and existing home sales - appeared a little weak in December, but the underlying details were solid. For some some commentary on the reports see: Existing Home Sales: Another Solid Report and New Home Sales and Distressing Gap. The housing recovery is ongoing.
Other positive data included a sharp drop in the 4-week average of initial weekly unemployment claims, further expansion in the Architecture Billings Index, and an increase in the ATA trucking index.
On the negative side, both the Richomd and Kansas City Fed manufacturing indexes indicated contraction in January. However, the Markit Flash PMI (for manufacturing was fairly strong).
The NMHC quarterly apartment survey indicated some loosening in the apartment market suggesting the decline in the vacancy rate might slow or even stop (just one quarter of survey results though). This will be something to watch carefully (last graph below).
Next week will be very busy!
And here is a summary of last week in graphs:
• New Home Sales at 369,000 SAAR in December
Click on graph for larger image in graph gallery.
The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 369 thousand. This was down from a revised 398 thousand SAAR in November (revised up from 377 thousand). Sales for September and October were revised up too.
The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.
Annual 2012 sales were up almost 20% compared to 2011:
"An estimated 367,000 new homes were sold in 2012. This is 19.9 percent above the 2011 figure of 306,000."
The second graph shows New Home Months of Supply.The months of supply increased in December to 4.9 months from 4.5 months in November.
The all time record was 12.1 months of supply in January 2009.
This is now in the normal range (less than 6 months supply is normal).
"The seasonally adjusted estimate of new houses for sale at the end of December was 151,000. This represents a supply of 4.9 months at the current sales rate."
On inventory, according to the Census Bureau: "A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.
This graph shows the three categories of inventory starting in 1973.
The inventory of completed homes for sale was just above the record low in December. The combined total of completed and under construction is also just above the record low since "under construction" is starting to increase.
This was below expectations of 388,000 sales in December, but with the strong upward revision to November sales (and smaller upward revisions to September and October) this was another solid report.
• Existing Home Sales in December: 4.94 million SAAR, 4.4 months of supply
Click on graph for larger image.The NAR reports: Existing-Home Sales Slip in December, Prices Continue to Rise; 2012 Totals Up
This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in December 2012 (4.94 million SAAR) were 1.0% lower than last month, and were 12.8% above the December 2011 rate.
The next graph shows nationwide inventory for existing homes.
According to the NAR, inventory declined to 1.82 million in December down from 1.99 million in November. This is the lowest level of inventory since January 2001. Inventory is not seasonally adjusted, and usually inventory decreases from the seasonal high in mid-summer to the seasonal lows in December and January.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. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.
Inventory decreased 21.6% year-over-year in December from December 2011. This is the 22nd consecutive month with a YoY decrease in inventory.Months of supply declined to 4.4 months in December, the lowest level since May 2005.
This was below expectations of sales of 5.10 million, but right at Tom Lawler's forecast. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing.
• AIA: "Fifth Consecutive Month of Gains in Architecture Billings Index"
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From AIA: Fifth Consecutive Month of Gains in Architecture Billings Index
This graph shows the Architecture Billings Index since 1996. The index was at 52.0 in December, down from 53.2 in November. 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. This suggests some increase in CRE investment in 2013.
• Weekly Initial Unemployment Claims decline to 330,000
The DOL reports:In the week ending January 19, the advance figure for seasonally adjusted initial claims was 330,000, a decrease of 5,000 from the previous week's unrevised figure of 335,000. The 4-week moving average was 351,750, a decrease of 8,250 from the previous week's revised average of 360,000.The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 351,750.
This is the lowest level for the 4-week average since early 2008. Note: Data for January has large seasonal adjustments - and can be very volatile, but this is still good news.
Weekly claims were below the 360,000 consensus forecast.
• NMHC Apartment Survey: Market Conditions Loosen Slightly
From the National Multi Housing Council (NMHC): Expansion Moderates for Apartment Markets in January
This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tightening from the previous quarter. This quarterly decline followed eleven consecutive quarters with tighter market conditions.
The recent Reis data showed apartment vacancy rates fell in Q4 2012 to 4.5%, down from 4.7% in Q3 2012. As Obrinsky noted, markets are still tight, but this might suggest the vacancy rate will stop declining (caveat: this is just one quarter of survey data and the index might bounce back).
On supply: Even though multifamily starts have been increasing, completions lag starts by about a year - so the builders are still trying to catch up. There will be many more completions in 2013 than in 2012, increasing the supply.
As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010. This survey now suggests vacancy rates might stop falling - a possible significant market change - although apartment markets are still tight, so rents will probably continue to increase.
Friday, January 25, 2013
Zillow forecasts Case-Shiller House Price index to increase 5.3% Year-over-year for November
by Calculated Risk on 1/25/2013 09:20:00 PM
Zillow Forecast: November Case-Shiller Composite-20 Expected to Show 5.3% Increase from One Year Ago
On [Tuesday] January 29th, the Case-Shiller Composite Home Price Indices for November will be released. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will be up by 5.3 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will be up 4.5 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from October to November will be 0.3 percent for both the 20-City Composite and the 10-City Composite Home Price Index (SA).Zillow's forecasts for Case-Shiller have been pretty close. Right now it looks like Case-Shiller will be over 6% in 2012 (through the December / Q4 reports to be released in February).
To forecast the Case-Shiller indices we use past data from Case-Shiller, as well as the Zillow Home Value Index (ZHVI), which is available a month in advance of Case-Shiller numbers, paired with foreclosure re-sale numbers, which we also have available a month prior to Case-Shiller numbers. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices. The ZHVI does not include foreclosure re-sales and closed 2012 (December) with home values up 5.9% from year-ago levels. We expect home value appreciation to moderate in 2013, rising only 3.3 percent from December 2012 to December 2013. Further details on our forecast can be found here.
Zillow’s December 2012 data can be found here.
| Case Shiller Composite 10 | Case Shiller Composite 20 | ||||
|---|---|---|---|---|---|
| NSA | SA | NSA | SA | ||
| Case Shiller (year ago) | Nov 2011 | 151.41 | 150.49 | 138.19 | 137.37 |
| Case-Shiller (last month) | Oct 2012 | 158.77 | 156.61 | 146.08 | 144.12 |
| Zillow Nov Forecast | YoY | 4.5% | 4.5% | 5.3% | 5.3% |
| MoM | -0.3% | 0.3% | -0.4% | 0.4% | |
| Zillow Forecasts1 | 158.3 | 157.2 | 145.5 | 144.7 | |
| Current Post Bubble Low | 146.46 | 149.40 | 134.07 | 136.70 | |
| Date of Post Bubble Low | Mar-12 | Jan-12 | Mar-12 | Jan-12 | |
| Above Post Bubble Low | 8.1% | 5.2% | 8.5% | 5.8% | |
| 1Estimate based on Year-over-year and Month-over-month Zillow forecasts | |||||
WSJ: "Six Housing Forecasters Who Got Things Right in 2012"
by Calculated Risk on 1/25/2013 05:46:00 PM
From Nick Timiraos at the WSJ: Six Housing Forecasters Who Got Things Right in 2012
A few analysts, of course, did offer housing forecasts at the beginning of the past year that turned out to be largely correct. What’s more: some of these analysts had also accurately forecast the housing sector’s slowdown as the market neared its peak in 2005 and 2006.Here are the six forecasters.
On Tom Lawler:
Last year, he began writing about how Phoenix had hit a “bottom” in real estate, a prediction that became the genesis of this Page One story in the Journal last year. Nationally, Mr. Lawler called for gains of nearly 20% in new home sales to an annual rate of 365,000 [the Census Bureau reported 367,000 this morning] and gains of around 24% in total housing starts (preliminary estimates show they were up around 28%).Thanks to Nick - I appreciate the mention! (others mentioned include Ivy Zelman, Glenn Kelman, Joseph LaVorgna and John R. Talbott).
Hotels: RevPAR increases 12% compared to same week in 2012
by Calculated Risk on 1/25/2013 03:43:00 PM
From HotelNewsNow.com: STR: US results for week ending 19 January
In year-over-year comparisons, occupancy was up 6.1 percent to 54.5 percent, average daily rate rose 5.6 percent to US$105.73 and revenue per available room increased 12.1 percent to US$57.57.The 4-week average of the occupancy rate is back to normal levels.
Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.
Click on graph for larger image.The red line is for 2013, yellow is for 2012, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels.
The occupancy rate will continue to increase over the next few months as business travel picks up in the Spring. This is a key period for the hotel industry and the occupancy rate was still weak early in 2012 (the Summer and Fall occupancy rate was close to normal in 2012).
Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com
New Home Sales and Distressing Gap
by Calculated Risk on 1/25/2013 11:58:00 AM
The Census Bureau reported a month-to-month decline in new home sales in December, but sales for the three previous months were revised up - so 2012 annual sales were at the expected level of 367 thousand (before further revisions). This was an increase of 19.9% from 2011.
Note: I also expect sales for December will be revised up (almost all the recent revisions have been up).
This table shows the annual sales rate for the last eight years.
| Annual New Home Sales | ||
|---|---|---|
| Year | Sales (000s) | Change in Sales |
| 2005 | 1,283 | 6.7% |
| 2006 | 1,051 | -18.1% |
| 2007 | 776 | -26.2% |
| 2008 | 485 | -37.5% |
| 2009 | 375 | -22.7% |
| 2010 | 323 | -13.9% |
| 2011 | 306 | -5.3% |
| 2012 | 367 | 19.9% |
Even with the sharp increase in sales, 2012 was the third lowest year for new home sales since the Census Bureau started tracking sales in 1963. The two lowest years were 2010 and 2011.
Note: For 2013, estimates are sales will increase to around 450 to 460 thousand, or another 22% to 25% on an annual basis.
My guess is sales will rise to around 800 thousand per year in a few years, but others think the next peak may be lower, perhaps closer to 700 thousand. I think the demographics support close to 800 thousand per year, but even if sales only rise to the average of 664 thousand for the '80s and '90s, sales would still increase over 80% from the 2012 level.
And here is another update to the "distressing gap" graph that I first started posting over four years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to start to close over the next few years.
The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through December. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.
Click on graph for larger image.Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales kept existing home sales elevated, and depressed new home sales since builders weren't able to compete with the low prices of all the foreclosed properties.
I don't expect much of an increase in existing home sales (distressed sales will slowly decline and be offset by more conventional sales). But I do expect this gap to close - mostly from an increase in new home sales.
Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.
Earlier:
• New Home Sales at 369,000 SAAR in December
• New Home Sales graphs
New Home Sales at 369,000 SAAR in December
by Calculated Risk on 1/25/2013 10:00:00 AM
The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 369 thousand. This was down from a revised 398 thousand SAAR in November (revised up from 377 thousand). Sales for September and October were revised up too.
The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.
"Sales of new single-family houses in December 2012 were at a seasonally adjusted annual rate of 369,000 ... This is 7.3 percent below the revised November rate of 398,000, but is 8.8 percent above the December 2011 estimate of 339,000."
Click on graph for larger image in graph gallery.Annual 2012 sales were up almost 20% compared to 2011:
"An estimated 367,000 new homes were sold in 2012. This is 19.9 percent above the 2011 figure of 306,000."The second graph shows New Home Months of Supply.
The months of supply increased in December to 4.9 months from 4.5 months in November.
The all time record was 12.1 months of supply in January 2009.
This is now in the normal range (less than 6 months supply is normal)."The seasonally adjusted estimate of new houses for sale at the end of December was 151,000. This represents a supply of 4.9 months at the current sales rate."On inventory, according to the Census Bureau:
"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.
This graph shows the three categories of inventory starting in 1973.The inventory of completed homes for sale was just above the record low in December. The combined total of completed and under construction is also just above the record low since "under construction" is starting to increase.
The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).
In December 2012 (red column), 26 thousand new homes were sold (NSA). Last year only 24 thousand homes were sold in December. This was the sixth weakest December since this data has been tracked. The high for December was 87 thousand in 2005.
New home sales were at 367 thousand in 2012, up almost 20% from 307 thousand in 2011. Also sales are finally near the lows for previous recessions too.This was below expectations of 388,000 sales in December, but with the strong upward revision to November sales (and smaller upward revisions to September and October) this was another solid report. I'll have more soon ...
U.K. Economy Shrinks Again
by Calculated Risk on 1/25/2013 08:57:00 AM
From the WSJ: U.K. Economy Shrinks
The U.K. economy shrank in the final quarter of 2012, leaving Britain at risk of entering its third recession since 2008.A triple dip?
In its preliminary estimate, the Office for National Statistics said gross domestic product contracted 0.3% between October and December compared with the third quarter. On an annual basis economic output was flat.
"At the moment it remains too early to tell if the economy will triple-dip, but today's numbers have greatly increased the risk of a new recession and a downgrading of the U.K.'s triple-A credit rating," said Chris Williamson, chief economist at data providers Markit.
However it appears employment is doing better than GDP in the U.K., from Izabella Kaminska at FT Alphaville: Mismeasuring UK GDP
Thursday, January 24, 2013
Friday: New Home Sales
by Calculated Risk on 1/24/2013 08:47:00 PM
First, from Michelle Meyer at Merrill Lynch: Tale of the missing homes
One of the key developments for the housing market in 2012 was a significant decline in inventory. The number of existing homes on the market for sale plunged 22% from the end of 2011, reaching the lowest level since January 2001. At the current sales pace, it now only takes 4.4 months to clear the stock of homes for sale. This is the slowest pace since the heart of the housing bubble in mid-2005. The reduction in supply has underpinned home prices and created a need for construction yet again.CR note: Watching inventory - while not much more exciting than watching grass grow - will be key this year. My guess is inventory has bottomed, but even if there are further declines, the year-over-year declines will be much less in 2013 than in 2012.
The decline in supply can be explained by a few factors. Most significantly, the sharp decline in homebuilding translated to minimal growth in the housing stock. From 2009 to 2011, housing starts only slightly exceeded the pace of demolitions. The sluggish pace of new construction, of course, has a more direct impact on new inventory than it does on existing supply. Nonetheless, over time, it means fewer homes available for sale and hence slower turnover.
The latter – the decline in turnover – is the main reason for lean inventory of existing properties. This is a function of 1) falling home prices, which discouraged sellers; 2) tight credit, which reduced the number of move-up buyers; 3) negative equity that led to lock-in. As home prices increase and credit standards ease, some of this "pent-up" inventory will be unleashed. That said, if it is truly turnover – which means selling a property to buy a different one – it will also result in a gain in home sales. Months supply can therefore remain low.
Another source of inventory is from distressed properties – both current and previous. There is still a large pipeline of mortgages in foreclosure or seriously delinquent that needs to be processed. We think this will be gradual given the delays from states with a judicial foreclosure process. We can also see inventory from previously delinquent mortgages that had been purchased by investors. Many institutional investors bought distressed properties in bulk with the intention of renting them for a few years until prices appreciated. As prices rise, investors will look to take capital gains.
We advise some caution when interpreting the inventory data as there are big seasonal swings. Inventory typically falls at the end of the year and picks up again in Q1 in anticipation of the spring selling season. Extracting the seasonal factors from inventory shows that the biggest adjustments occur in December, when inventory is low, and August when inventory is high. We therefore expect a gain in inventory over Q1. This may very well be matched with a modest gain in sales in the spring, therefore making it a temporary rise in inventory.
Friday economic releases:
• At 10:00 AM ET, New Home Sales for December from the Census Bureau. The consensus is for an increase in sales to 388 thousand Seasonally Adjusted Annual Rate (SAAR) in December. This will put annual sales at around 367,000, an increase of around 20% from 2011.
DOT: Vehicle Miles Driven increased 0.8% in November
by Calculated Risk on 1/24/2013 04:11:00 PM
The Department of Transportation (DOT) reported:
Travel on all roads and streets changed by +0.8% (1.9 billion vehicle miles) for November 2012 as compared with November 2011. Travel for the month is estimated to be 238.8 billion vehicle miles.The following graph shows the rolling 12 month total vehicle miles driven.
Cumulative Travel for 2012 changed by +0.6% (16.7 billion vehicle miles). The Cumulative estimate for the year is 2,702.9 billion vehicle miles of travel.
Traffic in the Northeast was down 0.9%, but there were gains in every other region. The rolling 12 month total is still moving sideways.
Click on graph for larger image.In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.
Currently miles driven has been below the previous peak for 60 months - 5 years - and still counting.
The second graph shows the year-over-year change from the same month in the previous year.
Gasoline prices were up in November compared to November 2011. In November 2012, gasoline averaged of $3.52 per gallon according to the EIA. Last year, prices in November averaged $3.44 per gallon. However, as I've mentioned before, gasoline prices are just part of the story. The lack of growth in miles driven over the last 5 years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.
With all these factors, it might take several more years before we see a new peak in miles driven.
Forecast: Solid Auto Sales in January
by Calculated Risk on 1/24/2013 02:32:00 PM
From Edmunds.com: January Auto Sales Suggest the Good Times Will Keep Rolling in 2013, says Edmunds.com
Edmunds.com ... forecasts that 1,045,587 new cars and trucks will be sold in the U.S. in January for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.3 million light vehicles. The projected sales will be ... a 14.5 percent increase from January 2012.It looks like auto sales are starting 2013 fairly strong.
“January’s numbers show that vehicle sales stayed strong, even after the holiday ads faded away and the replacement sales following Hurricane Sandy started to dry up,” says Edmunds.com Senior Analyst Jessica Caldwell. “These results certainly reinforce the exuberance and optimism that filled the air last week at the North American International Auto Show in Detroit.”
The following table shows annual light vehicle sales, and the change from the previous year. Light vehicle sales have seen double digit growth for three consecutive years, but the growth rate will probably slow in 2013.
| Light Vehicle Sales | ||
|---|---|---|
| Sales (millions) | Annual Change | |
| 2005 | 16.9 | 0.5% |
| 2006 | 16.5 | -2.6% |
| 2007 | 16.1 | -2.5% |
| 2008 | 13.2 | -18.0% |
| 2009 | 10.4 | -21.2% |
| 2010 | 11.6 | 11.1% |
| 2011 | 12.7 | 10.2% |
| 2012 | 14.4 | 13.4% |
Kansas City Fed: Regional Manufacturing Contracted Modestly in January
by Calculated Risk on 1/24/2013 11:00:00 AM
From the Kansas City Fed: Tenth District Manufacturing Survey Contracted Modestly
The Federal Reserve Bank of Kansas City released the January Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity contracted modestly again in January, but factories’ production expectations remained relatively optimistic for the months ahead.This follows contraction in the Richmond Fed survey earlier this week:
“Regional factory activity has now edged down for four straight months, as fiscal policy uncertainty continues to weigh on firms’ plans, said Wilkerson. On the positive side, expectations for new orders rose quite a bit in January, but hiring and capital spending plans were only modestly positive.”
The month-over-month composite index was -2 in January, largely unchanged from readings of -1 in December and -3 in November. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing activity declined at most durable goods-producing plants, while nondurable producers noted a slight increase overall. Most other month-over-month indexes were below zero but higher than in December. The production index inched higher from -5 to -3, and the shipments, new orders, and order backlog indexes also rose somewhat but stayed in negative territory. In contrast, the employment index fell from -1 to -8, its lowest level since mid-2009, and the new orders for exports index also declined.
emphasis added
In January, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — lost seventeen points to settle at −12 from December's reading of 5. Among the index's components, shipments fell seventeen points to −11, the gauge for new orders moved down twenty-seven points to end at −17, and the jobs index slipped two points to −5.The NY Fed (Empire state) and Philly Fed surveys showed contraction last week.
However, the Markit Flash PMI was positive for January: Strongest manufacturing expansion since March 2011
The expansion of the U.S. manufacturing sector gained further momentum at the start of 2013, with the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) rising to 56.1 in January. Up from 54.0 in December, the ‘flash’ PMI reading, which is based on around 85% of usual monthly replies, signalled.The Markit Flash PMI is the opposite of the regional surveys. Go figure.
Manufacturing employment also rose strongly during January, with new jobs being created at the fastest rate for nine months. Firms generally linked job creation to fuller order books.
Weekly Initial Unemployment Claims decline to 330,000
by Calculated Risk on 1/24/2013 08:40:00 AM
The DOL reports:
In the week ending January 19, the advance figure for seasonally adjusted initial claims was 330,000, a decrease of 5,000 from the previous week's unrevised figure of 335,000. The 4-week moving average was 351,750, a decrease of 8,250 from the previous week's revised average of 360,000.The previous week was unrevised.
The following graph shows the 4-week moving average of weekly claims since January 2000.
Click on graph for larger image.
The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 351,750.
This is the lowest level for the 4-week average since early 2008. Note: Data for January has large seasonal adjustments - and can be very volatile, but this is still good news.
Weekly claims were below the 360,000 consensus forecast.
Wednesday, January 23, 2013
Thursday: Unemployment Claims
by Calculated Risk on 1/23/2013 08:00:00 PM
From Alejandro Lazo and Andrew Khouri at the LA Times: Number of homes entering foreclosure drops 22.1% to six-year low
California's foreclosure crisis eased considerably during the final quarter of last year, with the number of homes entering foreclosure dropping to a six-year low.Here is the DataQuick release: California: Foreclosure Starts Lowest Since 2006
The real estate research firm DataQuick reported a 22.1% decline in default notices during the final three months of 2012 compared with the previous quarter — and a 37.9% drop from a year earlier. A total of 38,212 default notices were logged on California houses and condominiums last quarter, the lowest number since the final quarter of 2006. A default notice is the first formal step in the state's foreclosure process.
Note: California is a non-judicial foreclosure state, and the non-judicial states are recovering quicker than many judicial states (the courts take time).
Thursday economic releases:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 360 thousand from 335 thousand last week.
• At 9:00 AM, The Markit US PMI Manufacturing Index Flash. This release might provide hints about the ISM PMI for January. This consensus is for a decrease to 54.0 from 54.2 in December. All of the regional surveys have been week so far, so this may decline more than the consensus.
• At 10:00 AM, the Conference Board Leading Indicators for December. The consensus is for a 0.4% increase in this index.
• At 11:00 AM, the Kansas City Fed regional Manufacturing Survey for January will be released. The consensus is for a reading of 2, up from -2 in December (below zero is contraction).
Lawler: Table of Short Sales and Foreclosures for Selected Cities in December
by Calculated Risk on 1/23/2013 03:52:00 PM
Economist Tom Lawler sent me the table below of short sales and foreclosures for several selected cities in December. This shows distressed sales are down just about everywhere, and there are more short sales than foreclosures in most areas (Minneapolis and Colorado are exceptions.
Look at the right two columns in the table below (Total "Distressed" Share for Dec 2012 compared to Dec 2011). In every area that reports distressed sales, the share of distressed sales is down year-over-year - and down significantly in most areas.
Also there has been a decline in foreclosure sales just about everywhere. Look at the middle two columns comparing foreclosure sales for Dec 2012 to Dec 2011. Foreclosure sales have declined in all these areas, and some of the declines have been stunning (the Nevada sales were impacted by a new foreclosure law). There will probably be an increase in foreclosure sales in some judicial states in 2013, but overall foreclosures will probably be down this year.
Also there has been a shift from foreclosures to short sales. In most areas, short sales now far out number foreclosures.
As a follow-up to the previous post, imagine that the number of total existing home sales doesn't change over the next year - some people would argue that is "bad" news and the housing market isn't recovering. But also imagine that the share of distressed sales declines 20%, and conventional sales increase to make up the difference. That would be a positive sign - and that is what appears to be happening.
Comments from Tom Lawler: Below is an updated “distressed sales” share report for
December (or, for
| Short Sales Share | Foreclosure Sales Share | Total "Distressed" Share | ||||
|---|---|---|---|---|---|---|
| 12-Dec | 11-Dec | 12-Dec | 11-Dec | 12-Dec | 11-Dec | |
| Las Vegas | 45.8% | 26.6% | 9.5% | 46.0% | 55.3% | 72.6% |
| Reno | 47.0% | 35.0% | 10.0% | 24.0% | 57.0% | 59.0% |
| Phoenix | 27.2% | 32.2% | 12.2% | 27.6% | 39.4% | 59.8% |
| Sacramento | 40.0% | 30.2% | 11.5% | 33.9% | 51.5% | 64.1% |
| Minneapolis | 12.3% | 14.6% | 26.6% | 35.8% | 38.9% | 50.4% |
| Mid-Atlantic (MRIS) | 13.0% | 14.3% | 9.7% | 15.4% | 22.7% | 29.7% |
| Orlando | 30.2% | 36.6% | 20.4% | 22.2% | 50.6% | 58.8% |
| California (DQ)* | 25.3% | 25.5% | 15.5% | 33.9% | 40.8% | 59.4% |
| So. California (DQ)* | 25.6% | 26.0% | 14.8% | 32.4% | 40.4% | 58.4% |
| Lee County, FL*** | 18.9% | 20.4% | 17.2% | 24.1% | 36.1% | 44.5% |
| Florida SF | 21.6% | 25.1% | 16.9% | 20.1% | 38.6% | 45.2% |
| Florida C/TH | 16.6% | 23.4% | 14.7% | 18.7% | 31.3% | 42.1% |
| Northeast Florida | 43.0% | 49.8% | ||||
| Chicago | 44.3% | 45.8% | ||||
| Charlotte | 15.6% | 17.7% | ||||
| Colorado** | 7.3% | 7.6% | 12.5% | 20.6% | 19.8% | 28.2% |
| Columbus OH** | 27.8% | 38.7% | ||||
| Atlanta | 26.0% | 47.0% | ||||
| Houston | 14.2% | 20.5% | ||||
| Memphis* | 26.9% | 30.2% | ||||
| Birmingham AL | 27.8% | 34.0% | ||||
| *share of existing home sales, based on property records | ||||||
| **Third Quarter | ||||||
| *** SF only | ||||||
Understanding the Existing Home Sales Report
by Calculated Risk on 1/23/2013 02:01:00 PM
The reporting on the Existing Home sales report was pretty negative yesterday even though I thought it was a solid report. And some of the positive reports were about prices - the NAR reported "The national median existing-home price for all housing types was $180,800 in December, which is 11.5 percent above December 2011" - and I completely ignore the median price. What gives?
First, on prices, the median is impacted by the mix, and the mix changed in 2012 with fewer low end foreclosures. I think the median price should be ignored during periods when the mix is changing (with all the repeat sales indexes available, I mostly ignore median prices all the time).
And on sales, the lead for many articles was that seasonally adjusted sales declined in December compared to November, and that sales were below the consensus forecast. There were some suggestions that this called into question the "housing recovery". Nonsense.
What is a "housing recovery"? There are really two recoveries: House prices and residential investment. Most people - homeowners and potential buyers - focus on prices, and for prices we should use the repeat sales indexes, and not the NAR median price (repeat sales indexes include Case-Shiller, CoreLogic, etc). What matters in the NAR report for prices is inventory and months-of-supply. And inventory is at the lowest level since January 2001, and months-of-supply fell to 4.4 months - the lowest since May 2005.
But for GDP and jobs, the key is what the Bureau of Economic Analysis (BEA) calls "residential investment" (RI) . For existing homes, only the broker's commission is part of GDP, but for new homes the entire sales price is part of GDP. There are some spillover effects from home sales (furniture, landscapting, etc), but those aren't included in RI.
Click on graph for larger image.
This graph shows the components for RI as a percent of GDP. According to the BEA, RI includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).
Usually the most important components are investment in single family structures followed by home improvement.
Right now home improvement is the largest category, but new single family structures will be the largest component soon. Broker's commissions is usually the third largest category and is relatively small compared to single family investment and home improvement.
So if existing home sales decline there is a minor impact on RI and GDP. When we talk about the "housing recovery" for jobs and GDP, existing home sales are mostly irrelevant - the focus should be on new home sales, housing starts and home improvement.
On home improvement, from the NAHB: Remodeling Market Remains Strong in the Fourth Quarter
The Remodeling Market Index (RMI) reached 55 in the fourth quarter of 2012, increasing five points from the previous quarter, according to the National Association of Home Builders (NAHB). This is the highest reading since the first quarter 2004.Finally, as I mentioned yesterday, as the number of distressed sales decline, the number of total sales might decline too - but we need to look at the number of conventional sales - and conventional sales have been increasing. That is probably a sign of a healing market.
An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.
“Remodelers are optimistic about the outlook for slow and steady market growth in the new year,” said 2013 NAHB Remodelers Chairman Bill Shaw, GMR, GMB, CGP, a remodeler from Houston. “Professional remodelers reported more work from large and small projects as well as overall home repair.”
I don't expect much of an increase in existing home sales in 2013, and I wouldn't be surprised by a decline depending on the number of foreclosures this year. But I think the housing recovery will remain fairly strong with new home sales and housing starts up sharply again this year.
AIA: "Fifth Consecutive Month of Gains in Architecture Billings Index"
by Calculated Risk on 1/23/2013 10:55:00 AM
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From AIA: Fifth Consecutive Month of Gains in Architecture Billings Index
Business conditions at architecture firms continue to improve. As a leading economic indicator of construction activity, the Architecture Billings Index (ABI) reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the December ABI score was 52.0, down from the mark of 53.2 in November. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.4, down slightly from the 59.6 mark of the previous month.
“While it’s not an across the board recovery, we are hearing a much more positive outlook in terms of demand for design services,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Moving into 2013 we are expecting this trend to continue and conditions improve at a slow and steady rate. That said, we remain concerned that continued uncertainty over the outcomes of budget sequestration and the debt ceiling could impact further economic growth.”
• Regional averages: Midwest (55.7), Northeast (53.1), South (51.2), West (49.6)
• Sector index breakdown: commercial / industrial (53.4), mixed practice (53.0), institutional (50.9), multi-family residential (50.5)
emphasis added
Click on graph for larger image.This graph shows the Architecture Billings Index since 1996. The index was at 52.0 in December, down from 53.2 in November. Anything above 50 indicates expansion in demand for architects' services.
Every building sector is now expanding and new project inquiries are strongly positive. Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, 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. This suggests some increase in CRE investment in 2013.
FHFA: House Prices increase 0.6% in November, Up 5.6% Year-over-year
by Calculated Risk on 1/23/2013 10:09:00 AM
From the Federal Housing Finance Agency (FHFA): FHFA House Price Index Up 0.6 Percent in November
U.S. house prices rose 0.6 percent on a seasonally adjusted basis from October to November, according to the Federal Housing Finance Agency’s monthly House Price Index (HPI). The previously reported 0.5 percent increase in October was revised upward to a 0.6 percent increase. For the 12 months ending in November, U.S. prices rose 5.6 percent.This monthly index is for loans owned or guaranteed by Fannie or Freddie.
It appears price were up around 6% in 2012 on the repeat sales indexes (Case-Shiller, Corelogic, etc). The Case-Shiller index for November will be released next Tuesday, January 29th.
LPS: Mortgage delinquencies increased slightly in December, "In Foreclosure" Declines
by Calculated Risk on 1/23/2013 08:58:00 AM
LPS released their First Look report for December today. LPS reported that the percent of loans delinquent increased in December compared to November, and declined about 9% year-over-year. Also the percent of loans in the foreclosure process declined further in December and were down significantly in 2012.
LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) increased to 7.17% from 7.12% in November. Note: the normal rate for delinquencies is around 4.5% to 5%.
The percent of loans in the foreclosure process declined to 3.44% in December from 3.51% in November.
The number of delinquent properties, but not in foreclosure, is down about 11% year-over-year (465,000 fewer properties delinquent), and the number of properties in the foreclosure process is down 20% or 434,000 properties year-over-year.
The percent (and number) of loans 90+ days delinquent and in the foreclosure process is still very high, but the number of loans in the foreclosure process is now declining.
LPS will release the complete mortgage monitor for December in early February.
| LPS: Percent Loans Delinquent and in Foreclosure Process | |||
|---|---|---|---|
| Dec 2012 | Nov 2012 | Dec 2011 | |
| Delinquent | 7.17% | 7.12% | 7.89% |
| In Foreclosure | 3.44% | 3.51% | 4.20% |
| Number of properties: | |||
| Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure: | 2,031,000 | 1,999,000 | 2,250,000 |
| Number of properties that are 90 or more days delinquent, but not in foreclosure: | 1,545,000 | 1,584,000 | 1,791,000 |
| Number of properties in foreclosure pre-sale inventory: | 1,716,000 | 1,767,000 | 2,150,000 |
| Total Properties | 5,292,000 | 5,350,000 | 6,192,000 |
