by Calculated Risk on 10/13/2014 05:01:00 PM

I posted this cartoon 5 years ago ... it seems like yesterday.

From Larry Gonick's The Cartoon History of the Modern World, Part 2, on page 248 ... (ht TDM)

Posted with permission from Larry Gonick. Thanks!

For more on Tanta, see the menu bar above ...

by Calculated Risk on 10/13/2014 02:15:00 PM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 33.5% from the peak, and may be flattening out (still down 1.5% year-over-year). The number of salesperson's licenses has fallen to March 2004 levels.

Brokers' licenses are only off 9.9% from the peak and have only fallen to mid-2006 levels, but are still slowly declining (down 1.7% year-over-year).

Click on graph for larger image.

So far there is no sign of a pickup in real estate agents!

by Calculated Risk on 10/13/2014 11:24:00 AM

From Evan Soltas: Disinflation, Here We Come

Spot prices for oil have dropped 20 percent in the last three months, from $110 to $90 a barrel. If they remain at these levels, inflation in the United States will slow quite a bit, and quickly at that. My estimate is that headline PCE inflation will fall to just under 1 percent within the next three months of data.
...
Recall that PCE inflation is 1.5 percent year-over-year. So, one surprise from energy markets, and we could be below one percent. At a time when we are supposed to be a couple months away from a rate hike, this could complicate the exit plan.

This is why it is important to look at core measures of inflation (core CPI and PCE that remove energy), and other measures of underlying inflation such as the Cleveland Fed's median CPI and trimmed-mean CPI.

And from Tim Duy: The Methodical Fed

Just a few months ago the specter of inflation dominated Wall Street. Now the tables have turned and low inflation is again the worry du jour as a deflationary wave propagates from the rest of the world - think Europe, China, oil prices. How quickly sentiment changes.

And given how quickly sentiment changes, I am loath to make any predictions on the implications for Fed policy. ...

Bottom Line: Fed policy might sound dovish this week, but take note the the underlying tone has been methodically hawkish for a long, long time. And markets have responded accordingly, including anticipating a return to the zero bound when the next recession hits. Nor should this be unexpected. Monetary policymakers have yet to set clear objectives that includes a high probability that the zero bound is left behind for good.

One thing is clear, Fed Chair Janet was correct in June when she said

"I think recent readings on CPI index have been a bit on the high side but I think the data we're seeing is noisy. Broadly speaking inflation is evolving in line with the committee's expectations."

by Calculated Risk on 10/13/2014 08:46:00 AM

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

Here is the unofficial problem bank list for Oct 10, 2014.

Changes and comments from surferdude808:

Minimal changes to the Unofficial Problem Bank List with only one removal. After the deduction, the list count moves down to 429 institutions with assets of $136 billion.

A year ago, the list held 683 institutions with assets of $238.3 billion. The Bank of Palatine, Palatine, IL ($49 million) found a merger partner to depart the list. The other change this week was the Federal Reserve issuing a Prompt Corrective Action order against Fayette County Bank, St. Elmo, IL ($53 million), which just recently joined the list last month. Next week we expect the OCC will provide on update on its enforcement action activity.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 429.

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

When the list was increasing, the official and "unofficial" counts were about the same. Now with the number of problem banks declining, the unofficial list is lagging the official list. This probably means regulators are changing the CAMELS rating on some banks before terminating the formal enforcement actions.

by Calculated Risk on 10/12/2014 07:36:00 PM

Note: Monday is a federal/bank holiday. The Bond market will be closed in observance of the Columbus Day holiday. The stock market will be open for trading.

From Professor Hamilton: Lower oil prices

For the last 3 years, European Brent has mostly traded in a range of $100-$120 with West Texas intermediate selling at a $5 to $20 discount. But in September Brent started moving below $100 and now stands at $90 a barrel, and the spread over U.S. domestic crude has narrowed. Here I take a look at some of the factors behind these developments.
...[see Hamilton's post]

As I’ve noted before there’s a basic limit on how much U.S. production is capable of lowering the world price. The methods that are responsible for the U.S. production boom are quite expensive. Just how low the price can go before some of the frackers start to drop out is subject to some debate.

More production in Libya and in the U.S., combined with a weak global economy and the stronger dollar ... and the price of oil has declined significantly.

Weekend:
• Schedule for Week of October 12th

From CNBC: Pre-Market Data and Bloomberg futures: currently the S&P futures are down 17 and DOW futures are down over 100 (fair value).

Oil prices were down over the last week with WTI futures at $84.33 per barrel and Brent at $88.60 per barrel.  A year ago, WTI was at $102, and Brent was at $111 - so prices are down close to 20%  year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.22 per gallon (down about 10 cents from a year ago).  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 10/12/2014 11:32:00 AM

A couple of months ago I wrote: Flashback to August 2011 and 2013 (And a hint for 2015). I discussed the policy insanity in 2011 and 2013, and worried about 2015 (this happens in odd years because politicians hope voters will forget).

From Goldman Sachs economist Alec Phillips:

In many policy areas, a shift in Senate control would simply result in a new flavor of the gridlock that has prevailed since the 2010 election. The split between Congress and the White House would still exist and, while Republicans would set the agenda in both chambers if they held a majority, a degree of bipartisan support would still be necessary in the Senate light of the 60-vote threshold necessary to pass most legislation.

The exception would be the annual budget resolution and legislation related to it. The budget resolution sets out annual targets for federal spending, revenue, and debt. More importantly, it can be used to clear a procedural path for legislation that includes policies to reconcile the level of spending, revenue, or debt under current law with the levels in the budget resolution. Such “reconciliation” legislation is not subject to filibuster and can therefore pass both chambers with only a simple majority (i.e., 51 votes in the Senate).

Issues like the debt limit could be handled in one of two ways. In theory, reconciliation would allow Republicans to couple a debt limit hike with other measures and send it to the President with only Republican votes. However, in practice this would be difficult: with a narrow majority and differences between centrists and conservatives in the party, Republican leaders could struggle to get 51 votes for a debt limit hike.

The alternative would be for Republican Senate leaders to try to attract Democratic support to pass a debt limit hike with 60 votes. However, if Republicans win the Senate majority, we would expect them to push for greater concessions from the White House around this sort of fiscal deadline than they have managed to get recently.

The result is likely to be less predictability regarding the process surrounding major fiscal deadlines. Since the confrontation between House Republicans and the White House over the debt limit in 2011, markets have gradually become inured to fiscal brinksmanship, as these debates have started to follow a predictable pattern. If Republicans win majorities in both chambers as polls currently suggest they might, that pattern seems likely to change, which could lead to renewed uncertainty ahead of future fiscal deadlines.
emphasis added

Here was go again in 2015.

by Calculated Risk on 10/11/2014 06:09:00 PM

For your Saturday reading pleasure, from Fed Vice Chairman Stanley Fischer: The Federal Reserve and the Global Economy. Here is the conclusion:

To summarize and conclude, the Fed's statutory objectives are defined by its dual mandate to pursue maximum sustainable employment and price stability in the U.S. economy. But the U.S. economy and the economies of the rest of the world have important feedback effects on each other. To make coherent policy choices, we have to take these feedback effects into account. The most important contribution that U.S. policymakers can make to the health of the world economy is to keep our own house in order--and the same goes for all countries. Because the dollar is the primary international currency, we have, in the past, had to take action--particularly in times of global economic crisis--to maintain order in international capital markets, such as the central bank liquidity swap lines extended during the global financial crisis. In that case, we were acting in accordance with our dual mandate, in the interest of the U.S. economy, by taking actions that also benefit the world economy. Going forward, we will continue to be guided by those same principles.

by Calculated Risk on 10/11/2014 08:15:00 AM

The key economic reports this week are September retail sales on Wednesday, and September housing starts on Friday.

For manufacturing, the September Industrial Production and Capacity Utilization report, and the October NY Fed (Empire State) and Philly Fed manufacturing surveys, will be released this week.

For prices, PPI will be released on Wednesday.

----- Monday, October 13th -----
The is a federal/bank holiday. The Bond market will be closed in observance of the Columbus Day holiday. The stock market will be open for trading.

----- Tuesday, October 14th -----
7:30 AM ET: NFIB Small Business Optimism Index for September.

----- Wednesday, October 15th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM ET: Retail sales for September will be released.

This graph shows retail sales since 1992 through August 2014. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).On a monthly basis, retail sales increased 0.6% from July to August (seasonally adjusted), and sales were up 5.0% from August 2013.

The consensus is for retail sales to decrease 0.1% in September, and to increase 0.3% ex-autos.

8:30 AM: The Producer Price Index for September from the BLS. The consensus is for a 0.1% increase in prices, and a 0.1% increase in core PPI.

8:30 AM: NY Fed Empire Manufacturing Survey for October. The consensus is for a reading of 20.0, down from 27.5 in September (above zero is expansion).

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for August.  The consensus is for a 0.4% increase in inventories.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, October 16th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 290 thousand from 287 thousand.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for September.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 79.0%.

10:00 AM: the Philly Fed manufacturing survey for October. The consensus is for a reading of 20.0, down from 22.5 last month (above zero indicates expansion).

10:00 AM: The October NAHB homebuilder survey. The consensus is for a reading of 59, unchanged from 59 in September.  Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Friday, October 17th -----
8:30 AM: Housing Starts for September.

Total housing starts were at 956 thousand (SAAR) in August. Single family starts were at 643 thousand SAAR in August.

The consensus is for total housing starts to increase to 1.010 million (SAAR) in September.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for October). The consensus is for a reading of 84.2, down from 84.6 in September.

by Calculated Risk on 10/10/2014 04:02:00 PM

Economist Tom Lawler sent me the table below of short sales, foreclosures and cash buyers for a few selected cities in September.

Lawler also noted: "While I do not yet have enough local realtor/MLS reports to produce a reliable estimate for national existing home sales last month, my very early read is that NAR-based existing home sales ran at a seasonally adjusted annual rate of about 5.14 million in September, up 1.8% from August."

On distressed: Total "distressed" share is down in these markets due to a decline in short sales.

Short sales are down significantly in these areas.

Foreclosures are up slightly in several of these areas.

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Sep-14	Sep-13	Sep-14	Sep-13	Sep-14	Sep-13	Sep-14	Sep-13
Las Vegas	10.4%	23.0%	8.8%	7.0%	19.2%	30.0%	34.3%	47.2%
Reno**	7.0%	20.0%	7.0%	5.0%	14.0%	25.0%
Phoenix							25.7%	33.4%
Sacramento	5.3%	12.1%	6.5%	3.9%	11.8%	16.0%	19.4%	23.6%
Mid-Atlantic	5.5%	7.7%	9.7%	8.2%	15.2%	15.9%	19.1%	18.4%
Tucson							26.7%	29.8%
Toledo							31.4%	38.1%
Des Moines							16.8%	19.2%
Georgia***							27.4%	N/A
Omaha							19.9%	19.1%
Memphis*			11.7%	16.5%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 10/10/2014 02:47:00 PM

My view is that there is still significant slack in the labor market. Evidence of slack includes the elevated unemployment rate at 5.9%, the elevated level of U-6 at 11.8% (an alternative measure of labor underutilization), the large number of people working part time for economic reasons (included in U-6), and the low level of wage growth.

Some new research from Moody's Mark Zandi suggests wage growth might be picking up: Have We Underestimated U.S. Wage Growth?  A few excerpts:

[W]hat if wage growth is accelerating already, and the BLS wage measures have yet to pick this up? This is the message in new data from ADP, based on payroll processing records for more than 24 million employees, or about one-fifth of all U.S. workers.

Moody’s Analytics helped ADP separate the changes in hourly wages paid to those staying in their jobs, labeled job holders, from wages paid to those who change jobs, new entrants to the workforce, and those leaving it. The data track changes quarterly from the second quarter of 2011 to the third quarter of 2014, long enough allow for seasonal adjustments. The data can also be broken down by industry, region, company size, worker age and gender, tenure on the job, pay scale, and part- vs. full-time.

The hourly wage rate for job holders is the most telling. It is up 4.5% from a year ago in the third quarter, a strong and steady acceleration from its low two years ago. The acceleration in hourly wage growth occurs across the board, although it is up most for younger workers, those with one to five years on the job and at lower pay levels, and those who work at small companies. Wage gains have also picked up most in financial services and construction in the West and South.

Baby boomers who work at big companies in healthcare and in leisure and hospitality in the Northeast and Midwest have experienced the slowest acceleration in wages.

The ADP-based hourly wage data likely overstate the acceleration in wage growth in the broader labor market for several reasons. First, ADP’s client companies tend to perform better than average, particularly among smaller companies. A small firm will not use a payroll processing service unless its prospects are good.

How much this inflates the ADP data has not been estimated, but judging from the impact on employment, which we have quantified in our work estimating payroll employment (the ADP National Employment Report), it is meaningful. This may suggest that the ADP data foreshadow broader trends if conditions continue to improve.

Second, the ADP hourly wage for job holders more accurately measures workers’ base pay. This is unlike other BLS wage measures, which include other forms of compensation. The BLS average hourly earnings gauge includes pay for overtime hours and incentive pay (though not irregular bonuses). In 2011 and early 2012, overtime hours were increasing as was incentive pay. This supported growth in the BLS average hourly earnings metric, but not in the ADP measure. Indeed, ADP hourly wage growth lagged BLS hourly earnings growth during this period.

During the past two years, overtime hours and incentive pay have leveled off, weighing on the BLS hourly earnings growth gauge, but not on ADP’s base hourly wages measure. This effect should wear off soon, however, and stronger growth in base pay, which is evident in the ADP data, should appear as well in the BLS data.

The increase in personal income tax rates at the start of 2013 also affected the timing of some workers’ income. Businesses moved income into 2012 to benefit from the lower tax rate, reducing income afterward. This likely had a bigger impact on the BLS measures of labor compensation than on ADP’s base wage rates for job holders. Yet this impact too should also fade quickly.

Third, the significant increase in the number of job leavers and new entrants since early 2013 may also be weighing more heavily on BLS wage measures. In the third quarter of this year, there were approximately 400,000 more job leavers and 500,000 more new entrants than in the first quarter of 2013. Since new entrants are paid less than those at the ends of their careers (a large share of the leavers), measured wage growth has been depressed. While this also affects growth in ADP’s hourly wages for job holders, it does so later than it affects the BLS wage measure.

Implications

If the acceleration in ADP hourly wages presages an imminent acceleration in broader measures of labor compensation, the implications are substantial. Most encouragingly, it signals that workers will finally participate more equitably in the benefits of the economic recovery.

by Calculated Risk on 10/10/2014 12:00:00 PM

About 5 years ago I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales).  For a few years, not much changed. But over the last 2+ years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market and other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In September 2014, 11.1% of all resales were distressed sales. This was down from 11.7% last month, and down from 16.0% in September 2013. This is the post-bubble low.

The percentage of REOs was at 6.0%, and the percentage of short sales was 5.1%.

Here are the statistics for September.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Look at all that BLUE!

Active Listing Inventory for single family homes increased 50.9% year-over-year (YoY) in September.  Although this was a large YoY increase, the YoY increases have been trending down after peaking close to 100%. 

Cash buyers accounted for 19.4% of all sales, down from 23.6% in September 2013, and down from 20.2% last month (frequently investors).  This has been trending down, and it appears investors are becoming much less of a factor in Sacramento.

Total sales were down 0.6% from September 2013, and conventional equity sales were up 5.2% compared to the same month last year.

Summary: Distressed sales down sharply (at post bubble low), cash buyers down significantly, and inventory up significantly (but increases slowing).   This is what we'd expect to see in a healing market.  As I've noted before, we are seeing a similar pattern in other distressed areas.

by Calculated Risk on 10/10/2014 10:09:00 AM

In addition to Case-Shiller, and CoreLogic, I'm also watching the FNC, Zillow and several other house price indexes.

FNC released their August index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.8% from July to August (Composite 100 index, not seasonally adjusted). The other RPIs (10-MSA, 20-MSA, 30-MSA) increased between 0.9% and 1.1% in August. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.

The year-over-year (YoY) change was the same in August as in July, with the 100-MSA composite up 7.5% compared to August 2013.   In general, for FNC, the YoY increase has been slowing since peaking in February at 9.4%.

The index is still down 18.8% from the peak in 2006.

Click on graph for larger image.

This graph shows the year-over-year change based on the FNC index (four composites) through August 2014. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

All of the price indexes had been showing a slowdown in price increases - although the indexes increased the same or slightly more year-over-year in August compared to July.

The August Case-Shiller index will be released on Tuesday, October 28th, and I expect Case-Shiller to show a further slowdown in YoY price increases.

by Calculated Risk on 10/09/2014 07:10:00 PM

A couple of notes today from housing economist Tom Lawler:

NAR on Pending Home Sales Index in the West --- We Know Already

In one of last week’s reports I highlighted how the National Association of Realtors’ Pending Home Sales Index for the West region (not seasonally adjusted) was inconsistent both with the pattern of closed sales in the West and with local realtor/MLS reports from that region.

 It turns out that the NAR is “aware of the fact that (their) pending data in the West does not look correct,” and they are going through their records to see if they can figure out why. The NAR argues, however, that the YOY trend changes look fine, and “line up” better with other reported data.

 From my perspective, if the underlying, unadjusted data are wrong, I’d be leery of the YOY trends as well. As such, analysts are cautioned not to place much weight in the PHSI until the NAR fixes the underlying data.

HMDA Data on Mortgage Originations Suggest All-Cash Share Peaked in 2011

HMDA data show that the number of purchase mortgage originations by HMDA reporters in 2013 was up 13.6% from 2012. HMDA purchase mortgage originations in 2012 were up 13.1% from 2011. In both years the percentage increase in the number of purchase mortgage originations modestly exceeded the percentage increase in estimated total home sales. That was in stark contrast to the previous six years, when the number of purchase mortgage originations fell relative to the estimated number of home sales - with especially steep relative declines from 2008 to 2011. These data suggest that the “all-cash” share of home sales hit an annual high in 2011, but still remained unusually high last year.

by Calculated Risk on 10/09/2014 03:10:00 PM

From HotelNewsNow.com: STR: US results for week ending 4 October

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 28 September through 4 October 2014, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy rose 2.8 percent to 66.5 percent. Average daily rate increased 3.7 percent to finish the week at US$115.93. Revenue per available room for the week was up 6.6 percent to finish at US$77.04.
emphasis added

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.

There is always a dip in occupancy after the summer (less leisure travel), and then more business travel in the Fall.

Click on graph for larger image.

The red line is for 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and is at about the level as for the same week in 2000 (the previous high). 

Right now it looks like 2014 will be the best year since 2000 for hotels.   Since it takes some time to plan and build hotels, I expect 2015 will be a record year for hotel occupancy.

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

by Calculated Risk on 10/09/2014 01:02:00 PM

Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And at the beginning of this year I argued house price increases would slow in 2014 because of the increase in inventory.

I don't have a crystal ball, but watching inventory helps understand the housing market.   If inventory kept increasing rapidly in certain markets, then we would eventually see price declines.  However it now appears the inventory build is slowing in some former distressed markets.  

The table below shows the year-over-year change for non-contingent inventory in Las Vegas, Phoenix and Sacramento (September not available yet).  Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It now appears the inventory build is slowing in these markets.

This makes sense.  Prices increased rapidly in these markets in 2012 and 2013 (bouncing off the bottom with low inventory).  Higher prices attracted more people to list their homes.  But now that prices have flattened out - and there is plenty of inventory - potential sellers aren't as motivated to list their homes.  Unlike following the housing bubble, most of these potential sellers probably don't need to sell, so listings will not grow to the moon!

I still expect overall inventory to continue to increase, but this is something to watch.

Year-over-year Change in Active Inventory
Month	Las Vegas	Phoenix	Sacramento
Jan-13	-58.3%	-11.7%	-61.1%
Feb-13	-53.4%	-8.5%	-51.1%
Mar-13	-42.1%	-5.2%	-37.8%
Apr-13	-24.1%	-4.9%	-10.3%
May-13	-13.2%	-2.1%	5.3%
Jun-13	3.7%	-1.6%	18.3%
Jul-13	9.0%	-1.6%	54.3%
Aug-13	41.1%	2.4%	46.8%
Sep-13	60.5%	7.8%	77.3%
Oct-13	73.4%	15.7%	93.2%
Nov-13	77.4%	15.2%	56.8%
Dec-13	78.6%	20.9%	44.2%
Jan-14	96.2%	29.6%	96.3%
Feb-14	107.3%	37.7%	87.8%
Mar-14	127.9%	45.5%	71.2%
Apr-14	103.1%	48.8%	46.3%
May-14	100.6%	47.4%	83.7%
Jun-14	86.2%	43.1%	91.0%
Jul-14	55.2%	35.1%	68.0%
Aug-14	38.8%	21.9%	60.6%
Sep-14	29.5%	13.2%	NA

by Calculated Risk on 10/09/2014 10:45:00 AM

From Trulia chief economist Jed Kolko: Condo Prices and Apartment Rents Outpacing Single-Family Home Costs

Nationally, the month-over-month increase in asking home prices rose to 0.8% in September. Year-over-year, asking prices rose 6.4%, down from the 10.4% year-over-year increase in September 2013. Asking prices rose year-over-year in 92 of the 100 largest U.S. metros.
...
Nationally, rents rose 6.5% year-over-year in September. Apartment rents were up 6.9%, while single-family home rents gained 5.2%. Like the for-sale market, the rental market is tighter for multi-unit buildings than for single family homes.
emphasis added

Note: These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and although year-over-year price increases have slowed, the month-to-month increase suggests further house price increases over the next few months on a seasonally adjusted basis.

by Calculated Risk on 10/09/2014 08:30:00 AM

The DOL reports:

In the week ending October 4, the advance figure for seasonally adjusted initial claims was 287,000, a decrease of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 287,000 to 288,000. The 4-week moving average was 287,750, a decrease of 7,250 from the previous week's revised average. This is the lowest level for this average since February 4, 2006 when it was 286,500. The previous week's average was revised up by 250 from 294,750 to 295,000.

There were no special factors impacting this week's initial claims.

The previous week was revised up to 288,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

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 287,750.

Note: The low for the 4-week average in 2006 was 286,500 - so just a little lower and this will be the lowest since early 2000.

This was below the consensus forecast of 293,000 and in the normal range for an expansion.

by Calculated Risk on 10/08/2014 07:54:00 PM

From Binyamin Appelbaum at the NY Times: Fed Officials Reinforce Rate Outlook, but Seek Flexibility

The minutes showed that the central bank was continuing to play for time as it sought greater clarity about the health of the economy. Job growth has been relatively strong this year, and the unemployment rate is fast falling toward what the Fed regards as a normal level. But inflation has been relatively weak, a problem in its own right, and there is strong evidence the labor market may be weaker than it seems.

Economic data since the meeting has accentuated both trends. The economy added 248,000 jobs in September, while inflation was again weaker than expected. The growth of other large economies is also lagging behind the United States, and some of those countries are pushing to devalue their currencies.

Fed officials at the meeting expressed concerns that these trends could weaken domestic growth and further suppress inflation. The Fed’s staff reported that it did not expect inflation to reach the Fed’s preferred 2 percent annual pace over the next several years.

Thursday:
• Early: Trulia Price Rent Monitors for September. 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 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 293 thousand from 287 thousand.

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

by Calculated Risk on 10/08/2014 04:04:00 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 GLVAR reports local home prices inching up as fewer homes are selling

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in September was 2,982, down from 3,120 in August and down from 3,259 one year ago. [GLVAR President Heidi] Kasama said local home sales so far in 2014 are running about 12 percent behind last year’s pace. At the current pace, she said Southern Nevada has less than a four-month supply of available properties.
...
GLVAR said 34.3 percent of all local properties sold in September were purchased with cash. That’s up from 32.1 percent in August, but still near a five-year low and well short of the February 2013 peak of 59.5 percent, suggesting that fewer investors have been buying homes in Southern Nevada.
...
For nearly two years, GLVAR has reported fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. That trend continued in September, when GLVAR reported 10.4 of all sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 11.5 percent in August. Another 8.8 percent of all September sales were bank-owned properties, down from 8.9 percent in August.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in September was 13,857, up 0.8 percent from 13,752 in August, but down 5.5 percent from one year ago. ...

By the end of September, GLVAR reported 8,196 single-family homes listed without any sort of offer. That’s up 5.2 percent from 7,788 such homes listed in August, and a 29.5 percent jump from one year ago.
emphasis added

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

1) Overall sales were down about 8.5% year-over-year.

2) Conventional (equity, not distressed) sales were up 6% year-over-year.  In September 2013, only 69.6% of all sales were conventional equity.  This year, in September 2014, 80.8% were equity sales. 

3) The percent of cash sales has declined year-over-year from 47.2% in September 2013 to 34.3% in September 2014. (investor buying appears to be declining).

4) Non-contingent inventory is up 29.5% year-over-year. The table below shows the year-over-year change for non-contingent inventory in Las Vegas. Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It appears the inventory build is slowing (an important change).

Las Vegas: Year-over-year Change in Non-contingent Inventory
Month	YoY
Jan-13	-58.3%
Feb-13	-53.4%
Mar-13	-42.1%
Apr-13	-24.1%
May-13	-13.2%
Jun-13	3.7%
Jul-13	9.0%
Aug-13	41.1%
Sep-13	60.5%
Oct-13	73.4%
Nov-13	77.4%
Dec-13	78.6%
Jan-14	96.2%
Feb-14	107.3%
Mar-14	127.9%
Apr-14	103.1%
May-14	100.6%
Jun-14	86.2%
Jul-14	55.2%
Aug-14	38.8%
Sep-14	29.5%

by Calculated Risk on 10/08/2014 02:00:00 PM

Note: Not every member of the FOMC agrees, but I think this is the key sentence: "the costs of downside shocks to the economy would be larger than those of upside shocks because, in current circumstances, it would be less problematic to remove accommodation quickly, if doing so becomes necessary, than to add accommodation".

There was also some discussion about the impact of a strong dollar (weaker exports, lower inflation).

From the Fed: Minutes of the Federal Open Market Committee, September 16-17, 2014. Excerpts:

Inflation had been running below the Committee's longer-run objective, and the readings on consumer prices over the intermeeting period were somewhat softer than during the preceding four months, in part because of declining energy prices. Most participants anticipated that inflation would move gradually back toward its objective over the medium term. However, participants differed somewhat in their assessments of how quickly inflation would move up. Some cited the stability of longer-run inflation expectations at a level consistent with the Committee's objective as an important factor in their forecasts that inflation would reach 2 percent in coming years. Participants' views on the responsiveness of inflation to the level and change in resource utilization varied, with a few seeing labor markets as sufficiently tight that wages and prices would soon begin to move up noticeably but with some others indicating that inflation was unlikely to approach 2 percent until the unemployment rate falls below its longer-run normal level. While most viewed the risk that inflation would run persistently below 2 percent as having diminished somewhat since earlier in the year, a couple noted the possibility that longer-term inflation expectations might be slightly lower than the Committee's 2 percent objective or that domestic inflation might be held down by persistent disinflation among U.S. trading partners and further appreciation of the dollar.

In their discussion of the appropriate path for monetary policy over the medium term, meeting participants agreed that the timing of the first increase in the federal funds rate and the appropriate path of the policy rate thereafter would depend on incoming economic data and their implications for the outlook. That said, several participants thought that the current forward guidance regarding the federal funds rate suggested a longer period before liftoff, and perhaps also a more gradual increase in the federal funds rate thereafter, than they believed was likely to be appropriate given economic and financial conditions. In addition, the concern was raised that the reference to "considerable time" in the current forward guidance could be misunderstood as a commitment rather than as data dependent. However, it was noted that the current formulation of the Committee's forward guidance clearly indicated that the Committee's policy decisions were conditional on its ongoing assessment of realized and expected progress toward its objectives of maximum employment and 2 percent inflation, and that its assessment reflected its review of a broad array of economic indicators. It was emphasized that the current forward guidance for the federal funds rate was data dependent and did not indicate that the first increase in the target range for the federal funds rate would occur mechanically after some fixed calendar interval following the completion of the current asset purchase program. If employment and inflation converged more rapidly toward the Committee's goals than currently expected, the date of liftoff could be earlier, and subsequent increases in the federal funds rate target more rapid, than participants currently anticipated. Conversely, if employment and inflation returned toward the Committee's objectives more slowly than currently anticipated, the date of liftoff for the federal funds rate could be later, and future federal funds rate target increases could be more gradual. In addition, some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the Committee's goals. In their view, the costs of downside shocks to the economy would be larger than those of upside shocks because, in current circumstances, it would be less problematic to remove accommodation quickly, if doing so becomes necessary, than to add accommodation. A number of participants also noted that changes to the forward guidance might be misinterpreted as a signal of a fundamental shift in the stance of policy that could result in an unintended tightening of financial conditions.

Participants also discussed how the forward-guidance language might evolve once the Committee decides that the current formulation no longer appropriately conveys its intentions about the future stance of policy. Most participants indicated a preference for clarifying the dependence of the current forward guidance on economic data and the Committee's assessment of progress toward its objectives of maximum employment and 2 percent inflation. A clarification along these lines was seen as likely to improve the public's understanding of the Committee's reaction function while allowing the Committee to retain flexibility to respond appropriately to changes in the economic outlook. One participant favored using a numerical threshold based on the inflation outlook as a form of forward guidance. A few participants, however, noted the difficulties associated with expressing forward guidance in terms of numerical thresholds for some set of economic variables. Another participant indicated a preference for reducing reliance on explicit forward guidance in the statement and conveying instead guidance regarding the future stance of monetary policy through other mechanisms, including the SEP. It was noted that providing explicit forward guidance regarding the future path of the federal funds rate might become less important once a highly accommodative stance of policy is no longer appropriate and the process of policy normalization is well under way.

It was generally agreed that when changes to the forward guidance become appropriate, they will likely present communication challenges, and that caution will be needed to avoid sending unintended signals about the Committee's policy outlook.
emphasis added