by Calculated Risk on 9/20/2005 02:19:00 AM

Here are some excellent sites:
National Hurricane Center
U.S. Navy Storm Site
Weather Underground Note: See Jeff Master's blog.


Click on photo for larger image.

Rita nears the Keys. From the NHC Satellite Floater one.

Key West Radar and Miami Radar.

The Oil Drum: They are discussing the possible impact on oil and gas production.

I'm sure there are many more excellent sites. For most hurricanes the fear is greater than the actual damage. Hopefully that will be true with Rita. Unfortunately Katrina lived up to the hype.

From an economic perspective, Rita is a huge concern since so much oil and gas production is already shut-in. Another serious disruption of the GOM facilities could cause a significant price spike for oil, natural gas, gasoline and heating oil this winter.

For tomorrow, the concern is about the Florida Keys.

by Calculated Risk on 9/19/2005 04:05:00 PM

The National Association of Homebuilders reports: Home Builder Optimism Edges Down Further In September

Home builder optimism in the market for new single-family homes remains in a positive zone this month, albeit with some further erosion from the cyclical high in June, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

"Many builders appear to be taking on a more cautious attitude because of uncertainties in the economy and this post-Katrina environment, particularly with regard to sales expectations in the near term," observed Dave Wilson, NAHB president and a custom home builder from Ketchum, Idaho.

The overall HMI declined two points in September to a score of 65, which is the lowest it has been since July of 2003 when it also hit 65. This was the third consecutive month of declines since June’s 72 reading.

"As expected, the housing market is beginning to show signs of cooling and builders are reacting to that," agreed NAHB Chief Economist David Seiders. "While the HMI survey was taken immediately following Hurricane Katrina in early September, a combination of factors are likely in play, and Katrina impacts are only one part of the equation. In fact, the current HMI does not include responses from Katrina-hit areas, which typically account for about 2 percent of survey responses."

Weird. NAHB President Wilson blames it on Katrina and then NAHB economist Seiders admits Katrina is not a factor - yet.

Here are the components. UPDATE: Note that "Traffic of Prospective Buyers" has gone negative.

by Calculated Risk on 9/19/2005 03:13:00 AM

There have been some interesting housing articles over the last few days. This one I liked the title: Hurricane Watch for Real Estate

"The next hurricane bearing down on the United States isn't headed for one of our coasts — it's aimed for a direct hit on our economy.

Coming after Ophelia in the alphabet, its name begins with an R, as in "real estate bubble." And it's going to leave a path of destruction, starting with plummeting real estate values and hemorrhaging bank balance sheets. Banks have been stuffing those balance sheets with mortgage assets: in 1980, mortgage-related assets were 20 percent of total bank credits; now, in 2005, they are 61 percent of that total."

And there have been several articles discussing the surge in inventories, like this one: Inventory surge signals housing cool-down. The Housing Bubble has recently reviewed several of these articles.

And this article was interesting: Report: Mortgage brokers, appraisers fueling foreclosure increases. Blaming the mortgage brokers seems incorrect. Using the drug analogy (thanks to Tanta) if there were no junkies, there would be no crack dealers. But what might be most interesting is this is happening in a non-bubble state - wait until the bubble states slow - all the poor quality loans will be exposed:

"Aggressive mortgage brokers and appraisers are contributing to the rising foreclosure rate in Ohio, where mortgages fail more than any other state,"

And on a similar theme, this was an excellent article in the LA Times: Cheap Loans Are Under Fire. And then there is James Cramer complaining that housing is slowing (after touting the sector recently): Hope the Fed Sees Housing's Cooled

Stuff's not moving. Especially second-home stuff. It's like the spigot just shut off. And prices are now coming down, maybe dramatically.

There, that's my take on what's happening right now in the housing market, a market that has suddenly gone from great to just plain awful, particularly on the high end.

But take it from someone who has money on the line: The great home bubble ain't a bubble, it's a market, and the market's soft. And in all markets where there's softness, there is excess inventory, which means, alas, lower prices.

And finally, arguing for no housing bubble (via Dr. Thoma): Housing Bubble Trouble? Not if There’s No Bubble

"For the past several years, Chicken Littles have squawked that the sky -- or the ceiling -- is about to fall on the housing market... Yet basic economic logic suggests that this apparent ... bubble is anything but. Even in the highest-price cities, housing is, at most, slightly more expensive than average."

Like Professor Thoma, I'd like to read the actual paper, but in the mean time please call me Chicken Little!

by Calculated Risk on 9/19/2005 12:49:00 AM

This week's post is up on Angry Bear: The Debtor Society. Also, the FOMC will meet on Tuesday. Check out Dr. Duy's Fed Watch: What Will Be the Fed's Message? and Professor Polley's Picking up the (measured) pace? Of course the media is reporting: Katrina May Persuade Fed to End Rate Hikes

I hope everyone stays safe in the Florida Keys and the Gulf Coast later this week. Best Regards to all.

by Calculated Risk on 9/19/2005 12:15:00 AM

Once again a possible hurricane is threatening the Gulf of Mexico (GOM). As I wrote last week on Angry Bear, the oil and gas situation seems stable but precarious.


Click on map for larger image.

Long range hurricane forecasts are subject to large amounts of error, but right now Tropical Storm Rita is projected to hit the Texas coast late next week as a hurricane. This could threaten oil and gas producing interests in the GOM and refineries along the Texas coast.

Here is a map of oil and gas interests in the GOM. Also, a Simmons report on the impact of GOM hurricanes (a couple of years old).


When I initially wrote about the possible economic impact of Katrina (several days before the storm hit the gulf coast), I was concerned about the low inventories of gasoline.

Now we have the added worry that a significant portion of oil and gas production is already shut-in due to Katrina. The graph from the EIA's Daily Report compares the recovery from Katrina as compared to Ivan last year.

Hopefully the storm will dissipate, although on its current track it is expected to cross very warm waters and encounter little shear. Rita bears watching as the week progresses.