by Calculated Risk on 2/08/2013 12:58:00 PM

Just an update ... during the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.

Since then Las Vegas visitor traffic has recovered to a new record high in 2012.

However convention attendance was only up 1.6% from 2011 and is about 21% below the peak level in 2006.  Here is the data from the Las Vegas Convention and Visitors Authority.  

Click on graph for larger image.

The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale). 

There were 39,727,022 visitors to Las Vegas in 2012, just above the previous record of 39,196,761 in 2007.

Convention attendance was at 4,944,014 in 2012, still well below the record of 6,307,961 in 2006.

So it looks like the gamblers are back ...

by Calculated Risk on 2/08/2013 10:31:00 AM

Last week I posted an article from Trulia chief economist Jed Kolko: Here are the “Missing” Construction Jobs.  Here is another projection from Merrill Lynch economist Michelle Meyer: Construction Coming Back

One of the puzzles last year was the lack of hiring in the construction sector. Despite a 25% gain in housing starts, only a net 18,000 construction jobs were added for the year. This seemed too low, and we learned that evidently it was. The revisions yielded another 73,000 construction jobs in 2012 and 75,000 in 2011, bringing the total to 91,000 and 144,000, respectively.

We think construction hiring will ramp up this year. The best way to forecast construction jobs is to look at the lagged impact of housing starts or residential investment. This comparison is easiest if we adjust construction employment for the size of the labor force. We find that the correlation between construction jobs and housing starts is the highest at 72% when housing starts are lagged by five quarters (Chart 2). Since housing starts reached a trough in 1Q11, construction jobs should have turned higher last spring. We saw some gains, but only very modest ones (which we learned after last month’s revision). The gain in housing starts accelerated in 2012, suggesting a faster pickup in construction jobs this year.

Click on graph for larger image.

Timing the turn is much easier than estimating the magnitude, however. The historical comparison is imperfect because we are not controlling for variablessuch as the change in the average size of homes, types of properties (apartment vs. single family) and labor productivity. From the mid-1990s through the bubble, there was a shift toward greater single family homes, which tend to be more labor-intensive than apartments. During the last few years of the bubble, there was an increase in the share of “McMansions” that also required greater labor. As such, the gain in construction jobs outpaced housing starts during this period. We would argue the reverse is true today as households are looking to downsize, either into apartments or smaller single-family properties. The gain in construction jobs may therefore be slower than implied by the historical comparison.

Plugging in our forecast for housing starts through 2014 and lagging five quarters, we think it is reasonable to expect gains of about 225,000 to 250,000 construction jobs this year, which implies nearly 20,000 a month on average (again see Chart 2). We judge this to be a conservative estimate and see upside risk given improvement in renovation spending.

by Calculated Risk on 2/08/2013 08:26:00 AM

The Department of Commerce reported:

[T]otal December exports of $186.4 billion and imports of $224.9 billion resulted in a goods and services deficit of $38.5 billion, down from $48.6 billion in November, revised. December exports were $3.9 billion more than November exports of $182.5 billion. December imports were $6.2 billion less than November imports of $231.1 billion.

The trade deficit was much smaller than the consensus forecast of $46.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through December 2012.

Click on graph for larger image.

Exports increased in December, and imports decreased.

Exports are 10% above the pre-recession peak and up 4.8% compared to December 2011; imports are near the pre-recession peak, and down 2% compared to December 2011.

The second graph shows the U.S. trade deficit, with and without petroleum, through November.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The decrease in the trade deficit in December was due to both a decline in petroleum and non-petroleum products.

Oil averaged $95.16 in December, down from $97.45 per barrel in November. But most of the decline in the value of petroleum imports was due to a sharp decline in the volume of imports.

The trade deficit with China increased to $24.5 billion in December, up from $23.1 billion in December 2011. Most of the trade deficit is still due to oil and China.

The trade deficit with the euro area was $7.5 billion in December, down from $8.6 billion in December 2011.

Notes: The trade deficit might have been skewed by the LA port strike that started in late November and ended in early December. This does suggest an upward revision to Q4 GDP.

by Calculated Risk on 2/07/2013 09:00:00 PM

As expected, the payroll tax increase is impacting consumers, from the WSJ: Tax Holiday Ends, Consumers Scrimp

Some early signs suggest [consumers] are tapping the brakes. Surveys show the majority of Americans who are aware of the tax increase say they plan to cut spending, and consumer confidence has wavered. Companies like Target Corp. and women's clothier Cato Corp. say the tax increase has crimped sales.

And from Mark Thoma at EconomistsView: Fed Worried about Bubbles, Not Inflation

With fiscal policy moving in the wrong direction -- deficit reduction rather than employment enhancing stimulus, e.g. infrastructure -- if monetary policymakers begin getting skittish, then the unemployed will lose the one institution that seemed to actually care about their struggles. Not good.

A little less fiscal austerity now - or even some more fiscal stimulus - would take some pressure off of monetary policy.  But that doesn't seem likely.

Friday economic releases:
• At 8:30 AM ET, The Trade Balance report for December will be released. The consensus is for the U.S. trade deficit to decrease to $46.0 billion in December from $48.7 billion in November.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for December. The consensus is for a 0.3% increase in inventories.

by Calculated Risk on 2/07/2013 05:43:00 PM

From economist Tom Lawler:

DataQuick reported yesterday that both the number and the share of California home sales purchased with cash (meaning no mortgage was recorded at the time of sale) hit record levels in 2012. According to DataQuick, 145,797 California condos and homes were bought without mortgage financing last year, representing a record high 32.4% of all home sales, up from 30.4% in 2011 and more than double the average “all-cash” share since 1991. Based on mailing addresses vs. property addresses, DataQuick said that “investors and vacation-home buyers” represented “roughly” 55% of all California homes purchased with cash last year. Dataquick also reported that in 2012 there were “more than” 11,700 buyers who bought more than one home for cash, and that these “multi-home, all-cash” buyers combined purchased “about” 41,450 homes, representing “about” 9.3% of total sales.

Various MLS data on sales by financing indicate that the “all-cash” share of home purchases increased significantly in a wide range of markets starting in the latter part of decade, and remained high last year. Here are a few areas where either (1) local MLS produce annual stats which include data on financing type; or (2) where I went back to monthly reports.

All-Cash Share of MLS Home Purchases (Yearly Totals)
	Phoenix	Orlando	Tucson	Miami MSA: SF	Miami MSA: C/TH	Sacramento	Des Moines	Omaha
2002	14.1%	10.0%
2003	10.8%	9.4%	13.5%
2004	13.5%	10.5%	14.9%
2005	12.1%	9.3%	14.8%
2006	9.2%	6.6%	12.8%
2007	11.6%	9.0%	12.6%			4.4%
2008	12.6%	20.3%	18.8%			15.4%		12.1%
2009	37.2%	41.4%	23.9%			25.1%		11.8%
2010	41.8%	51.5%	28.3%			26.7%	20.1%	16.7%
2011	46.9%	52.9%	34.6%	43.8%	80.8%	30.1%	21.9%	20.2%
2012	46.0%	53.1%	34.4%	45.0%	79.8%	34.0%	21.5%	17.6%

All-Cash Share of MLS Home Purchases
	Dec-12	Dec-11	Dec-07
DC Metro	19.9%	20.3%	6.2%
Baltimore Metro	23.4%	22.5%	9.0%
Florida SF	47.2%
Florida C/TH	73.5%
Toledo	44.4%	45.3%
Akron	33.0%	39.4%	28.1%
Peoria	20.7%	19.9%	8.6%
Las Vegas	55.2%	50.8%
Memphis	39.8%	30.8%	22.6%

The surge in the all-cash share of home purchases in many areas reflects an increase in the investor share of total purchases, though there also appears to have been an increase in the all-cash share of owner-occupied purchases.

In the early-to-mid part of last decade the investor share of home purchases increased significantly in several areas, especially areas that experienced a sharp increase in home prices. However, back then, the bulk of investors buying homes used mortgage financing, often with as much leverage as allowable and often with loan features that many today would view as “risky.” In the early/mid part of last decade few investors bought homes because rental yields looked attractive, but instead the purchases were driven by expectations of price appreciation. When prices started to soften investor buying eased, many investors listed homes for sale at price levels above the new, lower “market-clearing” levels, home listings soared, mortgage defaults surged, and, well, ...

CR Note: This was from Tom Lawler.

by Calculated Risk on 2/07/2013 03:08:00 PM

I rarely mention consumer credit, but the amount of credit outstanding has been steadily increasing as is normal in a recovery. This is OK if the borrowers can repay the debt, unfortunately much of the recent increase has been related to student loans - and student loan defaults are increasing.

From the Fed:

Consumer credit increased at a seasonally adjusted annual rate of 6-1/2 percent during the fourth quarter. Revolving credit was little changed, while nonrevolving credit increased at an annual rate of 9-1/2 percent. In December, consumer credit increased at an annual rate of 6-1/4 percent.

Consumer credit increased $14.6 billion in December, with nonrevolving credit increasing $18.2 billion (this includes auto, student and other loans).

Also, talking about credit, from Fed Governor Jeremy Stein: Overheating in Credit Markets: Origins, Measurement, and Policy Responses

The question I'd like to address today is this: What factors lead to overheating episodes in credit markets? In other words, why do we periodically observe credit booms, times during which lending standards appear to become lax and which tend to be followed by low returns on credit instruments relative to other asset classes? We have seen how such episodes can sometimes have adverse effects on the financial system and the broader economy, and the hope would be that a better understanding of the causes can be helpful both in identifying emerging problems on a timely basis and in thinking about appropriate policy responses.

This is an important topic.

by Calculated Risk on 2/07/2013 10:39:00 AM

This is a quarterly index from the the National Association of Home Builders (NAHB) and is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008, so all readings are very low.

From the NAHB: Builder Confidence in the 55+ Housing Market Ends Year on a Positive Note

Builder confidence in the 55+ housing market for single-family homes showed continued improvement in the fourth quarter of 2012 compared to the same period a year ago, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. The index increased 10 points to a level of 28, the fifth consecutive quarter of year over year improvements.
...
Although all components of the 55+ single-family HMI remain below 50, they have improved significantly from a year ago: present sales climbed 10 points to 27, expected sales for the next six months increased 12 points to 38 and traffic of prospective buyers rose nine points to 24.
...
“Like the overall housing market, the 55+ segment of the market is undergoing a slow but steady recovery,” said NAHB Chief Economist David Crowe. “That said, there are serious obstacles to a continued and stronger recovery. While problems with tight credit conditions for buyers and obtaining accurate appraisals are still lingering, new problems like spot shortages and rising costs for labor, materials and lots are beginning to emerge.”

Click on graph for larger image.

This graph shows the NAHB 55+ HMI through Q4 2012. All of the readings are very low for this index, and the index dipped in Q4 - but the general trend is up. Still, any reading below 50 "indicates that more builders view conditions as poor than good."

This is going to be a key demographic for household formation over the next couple of decades, but only if the baby boomers can sell their current homes!

There are two key drivers: 1) there is a large cohort moving into the 55+ group, and 2) the homeownership rate typically increases for people in the 55 to 70 year old age group.

The second graph shows the homeownership rate by age for 1990, 2000, and 2010. This shows that the homeownership rate usually increases until 70 years old or so.

So demographics should be favorable for the 55+ market.

by Calculated Risk on 2/07/2013 08:38:00 AM

The DOL reports:

In the week ending February 2, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 5,000 from the previous week's revised figure of 371,000. The 4-week moving average was 350,500, a decrease of 2,250 from the previous week's revised average of 352,750.

The previous week was revised up from 368,000.

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 350,500.

Weekly claims were above the 360,000 consensus forecast, however the 4-week average is at the lowest level since early 2008.

by Calculated Risk on 2/06/2013 07:45:00 PM

The light week for economic data continues ...

I guess we have to start paying attention to the "sequester" negotiations. From the WSJ: Sequester Triggers Delay in Deployment

The Pentagon’s decision to delay the deployment of a carrier to the Middle East could give opponents of the sequester some added ammunition in their battle to undo the across-the-board Pentagon spending cuts.

Sen. Kelly Ayotte (R., N.H.), a member of the Armed Services Committee, called the decision to delay the carrier deployment “deeply disturbing.”

“I hope what has happened here with these very stark examples of how [the sequester] is going to undermine our national security will move people to resolve this,” Ms. Ayotte said. “There are ways forward.”
...
Cuts totaling $85 billion are scheduled to start March 1 and run through Sept. 30; after that, about $110 billion in annual spending cuts would kick in.

My prediction at the beginning of the year was:

Although the negotiations on the "sequester" will be tough, I suspect something will be worked out (remember the goal is to limit the amount of austerity in 2013).

The only thing that seems certain is that negotiations will go down to the wire. The sequester cuts would be an additional drag on the economy on top of the "fiscal cliff" agreement.

Thursday economic releases:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 360 thousand from 368 thousand last week. The 4-week average could fall to the lowest level since early 2008.

• At 3:00 PM, Consumer Credit for December from the Federal Reserve. The consensus is for credit to increase $14.5 billion in December.

by Calculated Risk on 2/06/2013 03:52:00 PM

From DataQuick: Record Number of California Homes Bought with Cash

The number of California homes purchased with cash reached an all-time high last year ... A total of 145,797 condos and houses were bought without mortgage financing in 2012, a record. That was up from 125,812 in 2011, the previous high. In 2007, as the housing market deflated, cash sales totaled 39,731, according to San Diego-based DataQuick.

"It's clear that a lot of today's housing market recovery is being fueled by people putting their own money into homes. Some cash buying is part of a normal housing market, but we're at twice that normal rate. There are always some rich people, also buyers from abroad, but in a normal market the biggest single category would be retirees and empty-nesters who are down-sizing. Today, a lot of buyers are chasing what they view as the deal of a lifetime," said John Walsh, DataQuick president.

Cash purchases accounted for a record 32.4 percent of California's overall home sales last year, up from 30.4 percent in 2011 and more than double the annual average of 15.6 percent since 1991, when DataQuick's cash statistics begin.
...
Last year more all-cash deals occurred above the $500,000 threshold, and fewer below $100,000. Cash-only purchases of $500,000 or more rose 35.0 percent compared with 2011. That compares with an 11.2 percent decline in the number of homes cash buyers purchased below $100,000.

Investors and vacation-home buyers bought roughly 55 percent of all homes purchased with cash last year. Multi-home buyers, meaning those purchasing two or more properties, accounted for about 28 percent of last year's cash sales, up from around 24 percent in 2011, according to an analysis of buyer names in the public record.

Last year more than 11,700 cash-paying, multi-home buyers collectively purchased about 41,450 homes.
emphasis added

Cash buying at the low end is mostly investors, but there are a large number of cash buyers for higher priced homes.

DataQuick reports that a total of "447,573 homes were sold in California to all buyers".  If we assume that last sentence is institutional investors - then institutional investors are buying close to 10% of all homes in California.

by Calculated Risk on 2/06/2013 12:38:00 PM

This fits with the MBA purchase index released this morning ...

From Redfin: Homebuyer Demand Takes Off in January with Home Offers up 70%, Tours up 58%

• Customers signing offers increased 70.4 percent in January, compared with an increase of 58.5 percent a year earlier.

• Customers requesting home tours were up 57.9 percent in January, compared with an increase of 52.0 percent in 2012.

The increase in homebuyer demand seen in January paired with a nation-wide inventory shortage has created an extreme seller’s market as we head into the spring home-buying and selling season. Particularly in Redfin’s Southern California markets, bidding wars involving thirty or more offers have become increasingly common. With no signs that homebuyer demand will let up any time soon, all eyes are on the nation's homeowners, builders and banks to list their homes for sale, providing some relief from this chaotic market.

Note that demand always picks up in January and Redfin provides a comparison to the increase last year in their markets.

I expect more inventory to come on the market over the next few months (Several potential sellers have told me they plan to list their homes soon since the market has "improved").

by Calculated Risk on 2/06/2013 08:43:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 2 percent from one week earlier was at its highest level since the week ending May 7, 2010. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.73 percent from 3.67 percent, with points increasing to 0.43 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The contract interest rate for 30-year fixed mortgages has increased for seven of the last eight weeks.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

The purchase index has increased in all but one week this year, and is now at the highest level since May 7, 2010 - and that was a spike related to the housing tax credit. The 4-week average of the purchase index is also at the highest level since May 2010.

by Calculated Risk on 2/05/2013 08:23:00 PM

There is a clear seasonal pattern for house prices. Even in normal times house prices tend to be stronger in the spring and early summer, than in the fall and winter. Recently there has been a stronger than normal seasonal pattern because conventional sales are following the normal pattern (more sales in the spring and summer), but distressed sales (foreclosures and short sales) happen all year. So distressed sales have had a larger negative impact on prices in the fall and winter.

However, house prices - not seasonally adjusted (NSA) - have been pretty strong over the last few months - at the start of the normally weak months.

Click on graph for larger image.

This graph shows the month-to-month change in the CoreLogic and NSA Case-Shiller Composite 20 index over the last several years (Case-Shiller through November, CoreLogic through December).

The CoreLogic index has been positive in both the November and December reports (CoreLogic is a 3 month weighted average, with the most recent month weighted the most).

Case-Shiller NSA turned negative month-to-month in the October report (also a three month average, but not weighted), but was only slightly negative in November.   I expect more inventory to come on the market over the next few months than during the spring of 2011 and 2012, and that might slow the price increases - but it looks like the "off-season" for prices will be pretty strong.

by Calculated Risk on 2/05/2013 03:36:00 PM

The Congressional Budget Office (CBO) released their new The Budget and Economic Outlook: Fiscal Years 2013 to 2023.

From the WSJ: CBO Sees Rising U.S. Debt, Economic Rebound in 2014

Economic growth and recent legislation have cut the federal budget deficit in half in the past four years ... the Congressional Budget Office said Tuesday in the annual update of its budget and economic forecast.

The CBO said it expected economic growth to be sluggish in 2013, in part because of a sharp drop in government spending, but it sees a better economy in 2014 as the recovery takes hold.

The federal deficit for the fiscal year ending Sept. 30, 2013, is projected to fall to $845 billion, or 5.3% of gross domestic product, said the CBO, which produces nonpartisan reports on the budget and economy for Congress. That is down sharply from the past four years, which each had deficits exceeding $1 trillion. The 2012 deficit amounted to 7% of GDP.

The CBO projects the deficit will decline to 3.7% of GDP in fiscal 2014, and 2.4% of GDP in fiscal 2015.

Click on graph for larger image.

This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO.

The CBO deficit estimates are even lower than my projections.

After 2015, the deficit will start to increase again according to the CBO, but as I've noted before, we really don't want to reduce the deficit much faster than this path over the next few years, because that will be too much of a drag on the economy.

by Calculated Risk on 2/05/2013 11:55:00 AM

Press Release: Asking Prices Up 5.9 Percent Nationally Year-Over-Year, Rents Rose 4.1 Percent

Indicating the strength of the home price recovery, asking prices rose 0.3 percent quarter-over-quarter (Q-o-Q) in January without seasonal adjustment—despite the fact that prices typically fall during the wintertime. Seasonally adjusted, prices rose 2.2 percent Q-o-Q. Moreover, prices rose 0.9 percent month-over-month (M-o-M), the highest monthly gain since the price recovery began. Year-over-year (Y-o-Y), prices rose 5.9 percent; excluding foreclosures, prices rose 6.5 percent.

With more newly-constructed multi-unit buildings coming to completion, rent gains fell behind asking price increases at the national level for the first time since the price recovery began last spring. In January, rents rose 4.1 percent Y-o-Y nationally, slowing down from 4.7 percent in July 2012. Regionally, rent gains cooled the most in San Francisco, where rents rose 2.4 percent versus 11.5 percent in July 2012.

“Rent gains are slowing down because of more supply, not less demand,” explains Jed Kolko, Trulia’s Chief Economist. “Many of the multi-unit buildings that have been under construction over the past two years are now coming onto the market. Renters in San Francisco, Seattle, and Denver are starting to get a touch of relief, even though rising prices might put homeownership out of their reach.”

More from Jed Kolko, Trulia Chief Economist: Asking Home Prices Set New Records While Rents Ease as Supply Expands

These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a seasonally adjusted basis.

by Calculated Risk on 2/05/2013 10:00:00 AM

The January ISM Non-manufacturing index was at 55.2%, down from 55.7% in December. The employment index increased in January to 57.5%, up from 55.3% in December. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: January 2013 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in January for the 37th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI™ registered 55.2 percent in January, 0.5 percentage point lower than the seasonally adjusted 55.7 percent registered in December. This indicates continued growth at a slightly slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 56.4 percent, which is 4.4 percentage points lower than the seasonally adjusted 60.8 percent reported in December, reflecting growth for the 42nd consecutive month. The New Orders Index decreased by 3.9 percentage points to 54.4 percent, and the Employment Index increased 2.2 percentage points to 57.5 percent, indicating growth in employment for the sixth consecutive month. The Prices Index increased 1.9 percentage points to 58 percent, indicating prices increased at a faster rate in January when compared to December. According to the NMI™, eight non-manufacturing industries reported growth in January. Respondents' comments are mixed about the economy and business conditions; however, the majority of respondents are optimistic about the overall direction."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was slightly above the consensus forecast of 55.0% and indicates slightly slower expansion in January than in December. 

by Calculated Risk on 2/05/2013 08:59:00 AM

Notes: This CoreLogic House Price Index report is for December. The recent Case-Shiller index release was for November. Case-Shiller is currently the most followed house price index, however CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Home Price Index Rises for the 10th Consecutive Month in December; Biggest Year-Over-Year Increase Since May 2006

Home prices nationwide, including distressed sales, increased on a year-over-year basis by 8.3 percent in December 2012 compared to December 2011. This change represents the biggest increase since May 2006 and the 10th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 0.4 percent in December 2012 compared to November 2012. The HPI analysis shows that all but four states are experiencing year-over-year price gains.

Excluding distressed sales, home prices increased on a year-over-year basis by 7.5 percent in December 2012 compared to December 2011. On a month-over-month basis, excluding distressed sales, home prices increased 0.9 percent in December 2012 compared to November 2012. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that January 2013 home prices, including distressed sales, are expected to rise by 7.9 percent on a year-over-year basis from January 2012 and fall by 1 percent on a month-over-month basis from December 2012, reflecting a seasonal winter slowdown.
...
“December marked 10 consecutive months of year-over-year home price improvements, and the strongest growth since the height of the last housing boom more than six years ago,” said Mark Fleming, chief economist for CoreLogic. “We expect price growth to continue in January as our Pending HPI shows strong year-over-year appreciation.”

Click on graph for larger image.

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

The index was up 0.4% in December, and is up 8.3% over the last year.

The index is off 26.9% from the peak - and is up 9.4% from the post-bubble low set in February 2012 (the index is NSA, so some of the increase is seasonal).

The second graph is from CoreLogic. The year-over-year comparison has been positive for ten consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

This is the largest year-over-year increase since 2006.

Since this index is not seasonally adjusted, it was expected to decline on a month-to-month basis in December - instead the index increased, and, considering seasonal factors, this month-to-month increase was very strong.

by Calculated Risk on 2/04/2013 08:20:00 PM

A different view from Stephen Foley at the Financial Times: House price rebound cruising for a fall

The new flippers of US housing are not the individual speculators of the boom years ... These investors, who have poured into the US housing market since its nadir, are hedge funds and private equity vehicles, and recently (belatedly) individual entrepreneurs. They may be planning to hold the property for a while and harvest rental income in the interim, but decent returns are predicated on a sale, and usually a quick one.

That makes them flippers – and it means that the recent run of strong housing market data may be more chimeric than real.
excerpt with permission

Maybe. But these investors initially bought for the cash-flow, and they would only sell now if they could make a solid profit - and that means a higher price. This isn't logic for a "fall" in house prices, rather this is an argument for less future appreciation.

Also - the author argues "individual entrepreneurs" were late to the party and that is incorrect. Many individuals and small groups were ahead of the hedge funds and private equity groups. I've noted my discussions with some of these groups over the last few years, and they are very happy with their properties (I called one group after reading this article, and I was told they have no intention of selling any properties).

Tuesday economic releases:
• At 10:00 AM ET, the ISM non-Manufacturing Index for January. The consensus is for a decrease to 55.0 from 55.7 in December. Note: Above 50 indicates expansion, below 50 contraction.

• Also at 10:00 AM, the Trulia Price Rent Monitors for January will be released. This is the index from Trulia that uses asking prices adjusted both for the mix of homes listed for sale and for seasonal factors.

by Calculated Risk on 2/04/2013 02:00:00 PM

From the Federal Reserve: The January 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices

In the January survey, generally modest fractions of domestic banks reported having eased their standards across major loan categories over the past three months on net. Domestic respondents indicated that demand for business loans, prime residential mortgages, and auto loans had strengthened, on balance, while demand for other types of loans was about unchanged. U.S. branches and agencies of foreign banks, which mainly lend to businesses, reported little change in their lending standards, while demand for their loans was reportedly stronger on net.
...
Within consumer lending, a moderate fraction of domestic banks reported an easing of standards on auto loans, on net, while standards on other types of consumer loans were about unchanged. On balance, banks indicated having eased selected terms on consumer loans over the survey period. A moderate fraction of respondents continued to experience stronger demand for auto loans, on net, while demand for credit card loans was reportedly unchanged.
...
The January survey also included three sets of special questions: The first set asked banks about lending to and competition from banks headquartered in Europe; the second set asked banks about changes in their lending policies on CRE loans over the past year; and the third set asked banks about their outlook for asset quality in major loan categories during 2013. In response to the first set, only a small fraction of domestic banks indicated that lending standards to European banks and their affiliates had been tightened, on net, while foreign respondents' standards were reportedly little changed for such institutions. In response to the second set, respondents indicated that they had eased selected CRE loan terms over the past 12 months on net, with the rest of the surveyed terms having been about unchanged. Finally, respondents' answers for the outlook for asset quality revealed that moderate to large fractions of banks expect improvements in credit quality in most major loan categories on balance.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

These two graphs shows the change in lending standards and demand for CRE (commercial real estate) loans.

Increasing demand and some easing in standards suggests some increase in CRE activity going forward.

In general this survey indicates lending standards are still tight, but some banks are loosening a little - and there is also increasing demand for certain loans.

by Calculated Risk on 2/04/2013 12:39:00 PM

Inventory declines every year in December and January as potential sellers take their homes off the market for the holidays - and then starts increasing again in February. That is why it helps to look at the year-over-year change in inventory.

According to the deptofnumbers.com for (54 metro areas), overall inventory is down 22.2% year-over-year in early February and up slightly from January (on a monthly basis).

This graph shows the NAR estimate of existing home inventory through December (left axis) and the HousingTracker data for the 54 metro areas through early February.


Click on graph for larger image.

Since the NAR released their revisions for sales and inventory in 2011, the NAR and HousingTracker inventory numbers have tracked pretty well.

On a seasonal basis, housing inventory usually bottoms during the holidays and then starts increasing in February - and peaks in mid-summer.  So inventory will probably increase for the next 6+ months.

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the early February listings, for the 54 metro areas, declined 22.2% from the same period last year.

The year-over-year declines will probably start to get smaller since inventory is already very low.

One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'm also tracking inventory weekly this year.

If inventory does bottom, we probably will not know for sure until late in the year.  Ben at Housing Tracker (Department of Numbers) has provided me weekly inventory data for the last several years and this is displayed on the graph below as a percentage change from the first week of the year.

In 2010 (blue), inventory followed the normal seasonal pattern, however in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

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

The key will be to see how much inventory increases over the next few months. In 2010, inventory was up 8% by early March, and up 15% by the end of March.

For 2011 and 2012, inventory only increased about 5% at the peak.

So far in 2013, even with the slight decline last week (probably noise), inventory is already up 3.0%.  The next few months will be very interesting for inventory!