by Calculated Risk on 5/09/2013 10:02:00 AM

From Fannie Mae: Fannie Mae Reports Pre-Tax Income of $8.1 Billion for First Quarter 2013

Fannie Mae reported pre-tax income of $8.1 billion for the first quarter of 2013, compared with pre-tax income of $2.7 billion in the first quarter of 2012 and pre-tax income of $7.6 billion in the fourth quarter of 2012. Fannie Mae’s pre-tax income for the first quarter of 2013 was the largest quarterly pre-tax income in the company’s history. The improvement in the company’s results in the first quarter of 2013 compared with the first quarter of 2012 was due primarily to strong credit results driven by an increase in home prices, including higher average sales prices on Fannie Mae-owned properties, a decline in the number of delinquent loans, and the company’s resolution agreement with Bank of America. Including Fannie Mae’s release of the valuation allowance on its deferred tax assets, the company reported quarterly net income of $58.7 billion for the first quarter of 2013. Fannie Mae reported comprehensive income of $59.3 billion in the first quarter of 2013, compared with comprehensive income of $3.1 billion for the first quarter of 2012.

From Nick Timiraos at the WSJ: Fannie Mae to Send $59.4 Billion to U.S. Treasury

Fannie recognized $50.6 billion in tax benefits during the first quarter, in addition to pre-tax income of $8.1 billion during the period. ... The tax boost stemmed from reversing write-downs of its deferred-tax assets, which are unused tax credits and deductions that can offset future tax bills but which are worthless if a company isn't expected to turn a profit and have taxable income.

The mortgage-finance company began writing down the tax benefits in 2008 as rising mortgage defaults threatened to wipe out thin capital reserves. ... Fannie reclaimed the deferred-tax assets during the first quarter because the company concluded it is likely to be profitable for the foreseeable future.

Fannie's expected payment of $59.4 billion to the U.S. Treasury will bring to $95 billion the amount of dividends it has paid to the Treasury. It has received $116.1 billion in aid, leaving the net cost of its bailout at around $21.1 billion.

This bailout will probably be positive soon - and the U.S. still owns all the preferred shares!

On REO (Real Estate Owned), Fannie Mae reported that REO declined to 101,449 houses, down from 105,666 at the end of Q4 2012. This is the lowest level of REO since 2009.

From Fannie's SEC filing:

We recognized a benefit for credit losses of $957 million in the first quarter of 2013 compared with a provision for credit losses of $2.0 billion in the first quarter of 2012. This result was driven by an increase in home prices, including the sales prices of our REO properties in the first quarter of 2013, and lower single-family delinquency rates. Home prices increased in the first quarter of 2013, which decreases the likelihood that loans will default and reduces the amount of credit losses on loans that default. Sales prices on dispositions of our REO properties improved in the first quarter of 2013 as a result of strong demand compared with the prior year. We received net proceeds from our REO sales equal to 65% of the loans’ unpaid principal balance in the first quarter of 2013, compared with 56% in the first quarter of 2012. ...

The number of seriously delinquent loans declined 19% to approximately 528,000 as of March 31, 2013 from approximately 651,000 as of March 31, 2012 and the number of early stage delinquent loans declined 7% to approximately 392,000 as of March 31, 2013 from approximately 419,000 as of March 31, 2012. The reduction in the number of delinquent loans is due, in part, to our efforts since 2009 to improve our underwriting standards and the credit quality of our single-family guaranty book of business, which has resulted in a decrease in the number of loans becoming delinquent. A decline in the number of loans becoming delinquent or seriously delinquent reduces our total loss reserves and provision for credit losses.

So Fannie is taking smaller losses on foreclosed houses (65% of UPB because of rising prices), there are fewer seriously delinquent loans, and there are fewer early stage delinquencies.

by Calculated Risk on 5/09/2013 08:35:00 AM

The DOL reports:

In the week ending May 4, the advance figure for seasonally adjusted initial claims was 323,000, a decrease of 4,000 from the previous week's revised figure of 327,000. The 4-week moving average was 336,750, a decrease of 6,250 from the previous week's revised average of 343,000.

The previous week was revised up from 324,000.

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 336,750.

The 4-week average is at the lowest level since the recession started in December 2007. Claims were below the 335,000 consensus forecast.

by Calculated Risk on 5/08/2013 09:15:00 PM

Earlier I mentioned the improvement in the California budget (a sign that the drag from state and local governments is ending). Of course the Federal budget deficit is falling quickly. Here is the CBO's monthly budget review:

The federal government ran a budget deficit of $489 billion in the first seven months of fiscal year 2013 (that is, from October 2012 through April 2013), according to CBO’s estimates. That amount is $231 billion less than the shortfall recorded during the same period last year, primarily because revenue collections have been much greater than they were at this point in 2012. In contrast, federal spending so far this year has been slightly lower than what it was last year at this time.

I'd argue we should have - and still could spend more to address unemployment.

My view is the deficit is currently falling too quickly and slowing the economy, but that view doesn't seem to be getting any traction among policymakers. At the least there is no reason for further fiscal tightening over the next couple of years - the deficit is already falling fast (there are still longer term issues).

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 335 thousand from 324 thousand last week.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for March. The consensus is for a 0.4% increase in inventories.

by Calculated Risk on 5/08/2013 06:29:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Local home prices rise again, according to GLVAR report

GLVAR said the total number of existing local homes, condominiums and townhomes sold in April was 3,789. That’s up from 3,642 in March, but down from 3,924 total sales in April 2012. ...
...
Another trend is the decline in foreclosures and short sales – which occur when a lender agrees to sell a home for less than what the borrower owes on the mortgage. In April, 32.5 percent of all existing local home sales were short sales, down from 33.3 percent in March. Another 10.0 percent of all sales were bank-owned properties, down from 11.2 percent of all sales in March. The remaining 57.5 percent of all sales were the traditional type, which was up from 55.5 percent in March.
...
The total number of properties listed for sale on GLVAR’s Multiple Listing Service increased in April, with 13,881 single-family homes listed for sale at the end of the month. That’s up 1.4 percent from 13,693 single-family homes listed for sale at the end of March, but down 22.4 percent from one year ago.

As for available homes listed for sale without any sort of pending or contingent offer by the end of April, GLVAR reported 3,161 single-family homes listed without any sort of offer. That’s up 11.3 percent from 2,839 such homes listed in March, but still down 24.1 percent from one year ago.
...
In April, GLVAR reported that 59.3 percent of all existing local homes sold were purchased with cash. That’s up from 57.5 percent in March and approaching the peak of 59.5 percent in February.
emphasis added

There are several key trends that we've been following:

1) Overall sales are down a little year-over-year, but ...

2) Conventional sales are up sharply.  In April 2012, only 33.2% of all sales were conventional.  This year, in April 2013, 57.5% were conventional.  That is an increase in conventional sales of about 67% (of course this is heavily investor buying, but that is still quite an increase in non-distressed sales).

3) There is a shift from foreclosures to short sales.

4) and probably most interesting right now is that the decline in non-contingent inventory (year-over-year) has slowed sharply.  This suggests inventory is near a bottom.

by Calculated Risk on 5/08/2013 03:21:00 PM

From California State Controller: Controller Releases April Cash Update

Through the first 10 months of the fiscal year, total revenues exceeded the Governor's January projections by $4.6 billion (+6.1 percent). ...

"We've reached an important milestone in California's economic recovery. For the first time in nearly six years, we closed out a month without borrowing from internal state funds to pay our bills," said Chiang. "But, there remains significant debt that must be shed before we can claim victory and these unanticipated revenues provide us with an important opportunity to take further steps toward long-term fiscal stability."
...
The State ended the last fiscal year with a cash deficit of $9.6 billion, and by April 30, 2013, that cash deficit narrowed to $5.8 billion. That deficit is being covered by $10 billion in external borrowing, which the State will begin repaying later this month.

This is just one state, but the drag from the cutbacks at the state and local governments levels are mostly over.  Over the last four years, state and local governments have reduced budgets and employment substantially.  Here are two graphs I've posted recently:

Click on graph for larger image.

This graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In April 2013, state and local governments lost 3,000 jobs, however state and local employment is unchanged so far in 2013.

The second graph shows the contribution to percent change in GDP for residential investment and state and local governments since 2005.

The blue bars are for residential investment (RI), and RI was a significant drag on GDP for several years. Now RI has added to GDP growth for the last 8 quarters (through Q1 2013).

However the drag from state and local governments has continued.   I was expecting the drag from state and local governments to end last year, but this unprecedented and relentless decline in state and local government spending has still been a drag on the economy in early 2013.

The good news is the drag has to end soon - in real terms, state and local government spending is back to early 2001 levels.  And just ending the drag from state and local governments will be a positive for the economy.

by Calculated Risk on 5/08/2013 11:28:00 AM

From Freddie Mac: Freddie Mac Reports Net Income of $4.6 BILLION;

Freddie Mac today reported net income of $4.6 billion for the first quarter of 2013, compared to net income of $4.5 billion for the fourth quarter of 2012. ...
...
On a quarterly basis, the company determines whether a valuation allowance is necessary on its net deferred tax assets. After evaluating all available evidence, Freddie Mac continued to record a valuation allowance on a portion of its net deferred tax assets as of March 31, 2013. The valuation allowance as of March 31, 2013, was $30.1 billion. To the extent Freddie Mac releases the valuation allowance on its deferred tax assets in a future period, the amount released would be included as income in that period and would result in a corresponding increase in the company’s net worth as of the end of that period.
...
(Provision) benefit for credit losses was a benefit of $503 million for the first quarter of 2013, compared to a benefit of $700 million for the fourth quarter of 2012. The benefit for credit losses for the first quarter of 2013 was driven by continued improvement in national home prices combined with a further decrease in the volume of newly delinquent single-family loans.

Click on graph for larger image.

On Real Estate Owned (REO), Freddie acquired 17,882 properties in Q1 2013, and disposed of 18,895 and the total REO fell to 47,974 at the end of Q1.  This graph shows REO inventory for Freddie.

From Freddie:

In 1Q13, REO dispositions continued to exceed the volume of REO acquisitions. The volume of our single-family REO acquisitions in recent periods has been significantly affected by the length of the foreclosure process and a high volume of foreclosure alternatives, which result in fewer loans proceeding to foreclosure, and thus fewer properties transitioning to REO.

The North Central region comprised 42 percent of our REO property inventory at March 31, 2013. This region generally has experienced more challenging economic conditions, and includes a number of states with longer foreclosure timelines due to the local laws and foreclosure process in the region.

by Calculated Risk on 5/08/2013 08:31:00 AM

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

The Refinance Index increased 8 percent from the previous week to the highest level since December 2012. The gain in the Refinance Index was due to increases in both the conventional and government refinance indices of 8.8 percent and 5.7 percent respectively. The seasonally adjusted Purchase Index increased 2 percent from one week earlier to the highest level since May 2010.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.59 percent, the lowest rate since December 2012, from 3.60 percent, with points increasing to 0.33 from 0.30 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the refinance index.

There has been a sustained refinance boom for over a year.

This was the highest level for the refinance index since last December.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up over the last year, and the purchase index - and the 4-week average of the purchase index - are at the highest level since May 2010.

by Calculated Risk on 5/07/2013 06:07:00 PM

Back in 2010, some analysts took the surge in temporary help services as a leading indicator for a pickup in employment. I was skeptical back then, first because of the distortion caused by temporary Census workers, second because housing was still weak, and third because it appeared there had been a change in hiring practices.

Once again there has been a pickup in temporary help services. From the BLS report:

In April, employment rose in temporary help services (+31,000) ...

Temporary help services has added an average of 28,000 jobs per month over the last three months.

The following graph was a favorite of those expecting a huge rebound in employment in 2010 (see the red spike in 2010). The graph is a little complicated - the red line is the three month average change in temporary help services (left axis). This is shifted four months into the future.

The blue line (right axis) is the three month average change in total employment (excluding temporary help services and Census hiring).

Click on graph for larger image.

Unfortunately the data on temporary help services only goes back to 1990, but it does appear that temporary help leads employment by about four months (although noisy).

The thinking is that before companies hire permanent employees following a recession, employers will hire temporary employees. But there is also evidence of a recent shift by employers to more temporary workers.

This graph does suggest temporary help services does lead general employment, but the magnitude of the swings is less useful - and I don't think this suggests an imminent pickup in overall hiring.

by Calculated Risk on 5/07/2013 01:16:00 PM

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

In normal times, there is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for March).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory mostly 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.

Click on graph for larger image.

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

In 2010, inventory was up 15% by the end of March, and close to 20% by the end of April.

For 2011 and 2012, inventory only increased about 5% at the peak and then declined for the remainder of the year.

So far in 2013, inventory is up 12.2%. This is well above the peak percentage increases for 2011 and 2012 and suggests to me that inventory is near the bottom. It is possible that inventory could bottom this year - especially if inventory is up 15% to 18% from the seasonal lows by mid-to-late summer.

It will probably be close.  Inventory might have already bottomed in early 2013, or might bottom in early 2014.   This will be important for price increases ... once inventory starts to increase (more than seasonal), buyer urgency will wane, and I expect price increases will slow.

by Calculated Risk on 5/07/2013 11:46:00 AM

Press Release: Asking Home Prices Soared 8.3 Percent Year-Over-Year Nationwide, While Rents Rose Only 2.4 Percent

With the Spring house hunting season well underway, asking home prices rose 8.3 percent nationally year-over-year (Y-o-Y) in April. This time last year, asking prices fell 1.6 percent Y-o-Y. Seasonally adjusted, asking prices rose 1.3 percent month-over-month and 4.3 percent quarter-over-quarter. Regionally, asking prices were higher than one year ago in 95 of the 100 largest metros.

Strong job growth and the housing recovery go hand-in-hand. Nationally, job growth increased 1.5 percent Y-o-Y in March. In San Jose, Orange County, San Francisco, and Phoenix – where asking prices rose more than 18 percent Y-o-Y – job growth was well above the national average. In fact, only the Detroit suburb of Warren-Troy-Farmington Hills, MI was among the list of top 10 markets with the highest price gains without above average job growth.

Rents rose 2.4 percent Y-o-Y nationally, but rent growth has slowed. In 19 of the 25 largest rental markets, rent gains Y-o-Y was slower in April than in January. In some markets, rents and prices are moving in the opposite direction, or nearly so: the four metros with the slowest rent growth or even declines – San Francisco, Las Vegas, Sacramento, and Seattle – all had price gains of more than 15 percent Y-o-Y.

“Although some of the home-price growth is a bounce back from the housing bust, job growth is boosting housing demand and lifting home prices,” said Jed Kolko, Trulia’s Chief Economist. “Investors don’t deserve all the thanks – or blame – for rising prices. Households are doing their part, too, as the economy recovers and more people go back to work and get on more solid financial footing. Local markets with strong job growth will see home prices continue to recover even after investors decide to cash out their gains and exit the market.”

On rents, this is similar to the quarterly Reis report on apartments. It appears that rent increases are slowing.

More from Jed Kolko: Not Just Investors: Local Job Growth Also Supporting Home Price Gains

Note: 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 5/07/2013 10:11:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 3.8 million job openings on the last business day of March, little changed from 3.9 million in February, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.2 percent) and separations rate (3.1 percent) were little changed in March....
...
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... The number of quits (not seasonally adjusted) was little changed over the 12 months ending in March for total nonfarm, total private, and government.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for March, the most recent employment report was for April.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings decreased in March to 3.844 million, down from 3.899 million in February. The number of job openings (yellow) has generally been trending up, but openings are unchanged year-over-year compared to March 2012. 

Quits were down in March, and quits are mostly unchanged year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Not much changes month-to-month in this report - and the data is noisy month-to-month, but the general trend suggests a gradually improving labor market.

by Calculated Risk on 5/07/2013 09:01:00 AM

Notes: This CoreLogic House Price Index report is for March. The recent Case-Shiller index release was for February. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Home Price Index Rises by 10.5 Percent Year Over Year in March

Home prices nationwide, including distressed sales, increased 10.5 percent on a year-over-year basis in March 2013 compared to March 2012. This change represents the biggest year-over-year increase since March 2006 and the 13th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 1.9 percent in March 2013 compared to February 2013.

Excluding distressed sales, home prices increased on a year-over-year basis by 10.7 percent in March 2013 compared to March 2012. On a month-over-month basis, excluding distressed sales, home prices increased 2.4 percent in March 2013 compared to February 2013. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that April 2013 home prices, including distressed sales, are expected to rise by 9.6 percent on a year-over-year basis from April 2012 and rise by 1.3 percent on a month-over-month basis from March 2013. Excluding distressed sales, April 2013 home prices are poised to rise 12 percent year over year from April 2012 and by 2.7 percent month over month from March 2013.
...
“For the first time since March 2006, both the overall index and the index that excludes distressed sales are above 10 percent year over year,” said Dr. Mark Fleming, chief economist for CoreLogic. “The pace of appreciation has been accelerating throughout 2012 and so far in 2013 leading into the home buying season.”

Click on graph for larger image.

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

The index was up 1.9% in March, and is up 10.5% over the last year.

The index is off 25.1% from the peak - and is up 11.9% from the post-bubble low set in February 2012.

The second graph is from CoreLogic. The year-over-year comparison has been positive for thirteen 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.

This was another very strong month-to-month increase.  I expect more inventory to come on the market and slow the price increases.

by Calculated Risk on 5/06/2013 09:47:00 PM

The recent controversy surrounding historian Niall Ferguson reminds me of this post some time ago by Invictus: Open Mouth, Insert Foot: Going Viral?

This post [is] about [Ferguson's] recent Bloomberg TV interview with Erik Schatzker and Sara Eisen. And, in particular, one very specific part of that interview where Ferguson makes what is well beyond what I could even charitably refer to as a rookie mistake.
...
At 3:55 into the clip, Sara asks Ferguson about the private sector job gains versus the massive public sector job losses we’ve seen under Obama. ...

Here’s what, by my transcription, Ferguson had to say (emphasis mine):

Well, that’s not really a part of the argument I made in the piece. The point I made in the piece was that the stimulus had a very short-term effect, which is very clear if you look , for example, at the Federal employment numbers there’s a huge spike in early 2010 and then it falls back down.

Niall, babe, I got one word for you: Census (pdf).

So basically Ferguson thought incorrectly the short term hiring for Census 2010 was related to the stimulus (back then I was reporting the jobs report using both the headline number and the ex-Census number). Very amusing ...

Tuesday economic releases:
• At 10:00 AM ET, the BLS will release the Job Openings and Labor Turnover Survey for March. The number of job openings has generally been trending up, and openings were up 11% year-over-year in February.  That was most job openings since May 2008. 

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

• At 3:00 PM, the Fed will release Consumer Credit for March. The consensus is for credit to increase $15.0 billion in March.

by Calculated Risk on 5/06/2013 02:50:00 PM

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

The April 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. This summary is based on responses from 68 domestic banks and 21 U.S. branches and agencies of foreign banks. In the April survey, domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in several loan categories over the past three months.

The survey results generally indicated that banks’ policies regarding lending to businesses eased over the past three months and demand increased, on balance. In particular, a relatively large fraction of domestic respondents reported having eased standards on C&I loans, and moderate to large net fractions of such respondents reportedly eased many terms on C&I loans to firms of all sizes. ...

On the household side, the survey results were more mixed. On balance, a few domestic banks reported having eased standards on prime residential mortgages over the past three months. For the fifth consecutive survey, respondents reported that demand for prime residential mortgage loans had strengthened on net. A small net fraction of respondents reported that they had eased standards on credit card and auto loans over the past three months, while standards on other consumer loans had remained about unchanged. On balance, banks reported having eased selected terms on auto loans, but terms on credit card and other consumer loans were reportedly little changed. emphasis added

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. Here are some graphs from the Fed of lending standards and loan demand over time for various categories.

by Calculated Risk on 5/06/2013 12:07:00 PM

By request, here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

These graphs show that some major indicators are still below the pre-recession peaks.

Click on graph for larger image.

This graph is for real GDP through Q1 2013.

Real GDP returned to the pre-recession peak in Q4 2011, and has hit new post-recession highs for six consecutive quarters.

At the worst point - in Q2 2009 - real GDP was off 4.7% from the 2007 peak.

This graph shows real personal income less transfer payments as a percent of the previous peak through the March report.

This measure was off 11.2% at the trough in October 2009.

Real personal income less transfer payments returned to the pre-recession peak in December, but that was due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013.   Real personal income less transfer payments declined sharply in January, and were 3.3% below the previous peak in March.

Real personal income less transfer payments might be the last major indicator to return to pre-recession levels (excluding the spike last December).

The third graph is for industrial production through March 2013.

Industrial production was off over 17% at the trough in June 2009, and has been one of the stronger performing sectors during the recovery.

However industrial production is still 1.3% below the pre-recession peak.  This indicator will probably return to the pre-recession peak in 2013.

The final graph is for employment and is through April 2013.  This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

Payroll employment is still 1.9% below the pre-recession peak and will probably be back to pre-recession levels in 2014.

All of these indicators collapsed in 2008 and early 2009, and only real GDP is back to the pre-recession peak (personal income returned to the previous peak in December due to a one time increase in income). 

by Calculated Risk on 5/06/2013 08:38:00 AM

LPS released their Mortgage Monitor report for March today. According to LPS, 6.59% of mortgages were delinquent in March, down from 6.80% in February.

LPS reports that 3.37% of mortgages were in the foreclosure process, down from 4.19% in March 2012.

This gives a total of 9.96% delinquent or in foreclosure. It breaks down as:

• 1,842,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,466,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,689,000 loans in foreclosure process.

For a total of ​​4,997,000 loans delinquent or in foreclosure in March. This is down from 5,589,000 in March 2012.

Click on graph for larger image.

The first graph from LPS shows the number of non-current loans by delinquency bucket (30-60 days, 60-90 days, 90+ days, and in-foreclosure). The number of problem loans fell below 5 million for the first time since 2008.

Also note that short term delinquencies are close to normal - and LPS reports new problem loans are at the lowest level in 6 years - but there still 3 million loans that are 90+ days delinquent or in-foreclosure. This is still very high.

From LPS:

The March Mortgage Monitor report released by Lender Processing Services found that new problem loan rates (seriously delinquent mortgages that were current six months ago) have fallen below 1 percent for the first time since 2007. At 0.84 percent, the March new problem loan rate is approaching pre-crisis levels, and nearing the conditions of 2000-2004 when the rate averaged 0.55 percent. However, as LPS Applied Analytics Senior Vice President Herb Blecher explained, a borrower’s equity position is still a key indicator of his or her propensity to default.

“There has always been a clear correlation between higher levels of negative equity and new problem loan rates,” Blecher said. “Looking at the March data, we see that borrowers with equity are actually outperforming the national average -- at 0.6 percent, this group is quite close to pre-crisis norms. The further underwater a borrower gets, the higher those problem rates rise. Borrowers with loan-to-value (LTV) ratios of just 100-110 percent are actually defaulting at more than twice the national average. For those 50 percent or more underwater, we see new problem rates of 4 percent.

“Still, the overall equity trend has been a very positive one,” Blecher continued. “LPS’ latest data shows that the share of loans with LTVs greater than 100 percent has fallen 41 percent from a year ago. In total, there were approximately 9 million such loans, or about 18 percent of active mortgages. Some states, including the so-called ‘sand states’ (Arizona, Florida, Nevada and California), are still well above the national level, at an average 28 percent, but they, too, have seen improvement over the last year, with negative equity dropping over 40 percent across those four states since January 2012.”

There is much more in the mortgage monitor.

by Calculated Risk on 5/05/2013 09:35:00 PM

Monday economic releases:
• Early, the LPS March Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

• 2:00 PM ET, the April 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve. This might show some slight loosening in lending standards.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P and Dow futures are mostly flat (fair value).

Oil prices were up over the last week with WTI futures at $96.91 per barrel and Brent at $105.33 per barrel.

According to Gasbuddy.com (see graph at bottom), gasoline prices are down to a national average of $3.51 per gallon. Using the calculator from Professor Hamilton, and the current price of Brent crude oil, the national average should be around $3.47 per gallon. That is just below the current level according to Gasbuddy.com. A year ago gasoline was at $3.85 per gallon.

Note: If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 5/05/2013 03:57:00 PM

From Bloomberg: France Declares Austerity Over as Germany Offers Wiggle Room

“We’re witnessing the end of the dogma of austerity” as the only tool to fight the euro debt crisis, [French Finance Minister Pierre] Moscovici said today on Europe 1 radio. “We’ve been pleading for a growth policy for a year. Austerity on its own impedes growth.” ...

With German Chancellor Angela Merkel campaigning for a third term in a Sept. 22 vote, policy making among Europe’s elected leaders has ground to a crawl ...

There probably will not be any major changes in Europe until after Merkel's reelection.

More from Reuters: French finance minister says Europe's deficit move marks end of "austerity dogma"

The European Commission on Friday gave France two more years to meet its budget deficit target because of the country's poor economic outlook within the recession-hit euro zone.

"This is decisive, it's a turn in the history of the European project since the start of the euro," Moscovici told French radio Europe 1 in an interview. "We have witnessed the ending of a certain form of financial austerity and the end of the austerity dogma."

I doubt that the era of austerity is over - some policymakers in Europe and the US have invested their entire reputations on austerity - but maybe Europe will slow down the adjustment period.

by Calculated Risk on 5/05/2013 09:55:00 AM

From housing economist Tom Lawler:

Dataquick released its March home sales report for the Las Vegas Region based on property records, and the data highlighted that despite a plunge in REO sales, the all-cash and absentee buyer share of home sales increased from a year ago. Here are some stats on shares from the report.

Selected Share of New And Resale Home Sales, Las Vegas
	Mar-12	Mar-13
Absentee Buyer Share of Total Sales	51.2%	53.2%
All-Cash Share of Total Sales	54.4%	54.5%
Foreclosure Share of Resales	47.0%	13.5%
Estimated Short-Sales Share of Resales	28.2%	33.1%

According to the report, six buyers purchased 10 or more homes last month (excluding foreclosed homes sold at auction, and these six buyers combined purchased 255 homes – nearly 40% of total “multi-home” buyer purchases.

Based on these sales and share of sales stats, here are some different ways to look at home sales in Vegas for March of the last three years (note: Dataquick revised its methodology for estimating short sales, and has not released revised estimates for 2011).

March Home Sales, Las Vegas Region				YOY % Chg
	Mar-11	Mar-12	Mar-13	Mar-12	Mar-12
Total	4,953	5,021	4,485	1.4%	-10.7%
New	446	582	684	30.5%	17.5%
Resale	4,507	4,439	3,801	-1.5%	-14.4%
Absentee Buyer	2,472	2,571	2,386	4.0%	-7.2%
Primary Residence	2,481	2,450	2,099	-1.2%	-14.3%
All-Cash	2,675	2,731	2,444	2.1%	-10.5%
Mortgage Financed	2,278	2,290	2,041	0.5%	-10.9%
Foreclosure Resale	2,583	2,086	513	-19.2%	-75.4%
Non-Foreclosure Resale	1,924	2,353	3,288	22.3%	39.7%
Non-Foreclosure Total	2,370	2,935	3,972	23.8%	35.3%
Short Sale Resale	NA	1,252	1,258	NA	0.5%
Non-Distressed Resale	NA	1,101	2,030	NA	84.4%
Non-Distressed Total	NA	1,683	2,714	NA	61.3%
Multi-Home Buyers	N/A	539	647	N/A	20.0%

The number of homes purchased by households for their primary residence this March was down 14.3% from last March, suggesting that “owner demand” was soft in March. New home sales, however, were up 17.5% YOY (though from a low base), suggesting a decent pickup from a year ago. And mortgage-financed sales were down 10.9% from a year ago, suggesting that low mortgage rates weren’t fueling much home demand.

If one’s preferred metric is either non-foreclosure or “non-distressed” sales, however, then the Vegas market looked “sizzling,” as non-foreclosure sales this March showed a YOY increase of 39.7%, and non-distressed (sales ex foreclosures and short sales) a YOY jump of 61.3%. The reason, of course, is that while foreclosure sales plunged and short sales were little changed, absentee buyers dramatically increased their purchases of non-foreclosure (and to a lesser extent non-distressed) properties.

by Calculated Risk on 5/04/2013 05:27:00 PM

By request, here is an update to a graph that I've been posting for several years.  This shows single family housing starts (through March 2013) and the unemployment rate (inverted) through April. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts (blue) increased a little in 2009 with the homebuyer tax credit - and then declined again - but mostly starts moved sideways for two and a half years and only started increasing steadily near the end of 2011. This was one of the reasons the unemployment rate remained elevated.

Click on graph for larger image.

Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also additional household formation - and that leads to even more demand for housing units - and more jobs, and more households - a virtuous cycle that usually helps the economy recover.  However this time, with the huge overhang of existing housing units, this key sector didn't participate for an extended period. 

The good news is single family starts have been increasing steadily for the last 18 months or so, and I expect starts to continue to increase over the next few years. That should mean more construction employment this year, and that the unemployment rate should continue to decline.