by Calculated Risk on 8/17/2009 01:00:00 PM

Click on graph for larger image in new window.

This graph shows the builder confidence index from the National Association of Home Builders (NAHB).

The housing market index (HMI) increased to 18 in August from 17 in July. The record low was 8 set in January.

This is still very low - and this is what I've expected - a long period of builder depression.

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

This second graph compares the NAHB HMI (left scale) with new home sales and single family housing starts (right scale). This is the August release for the HMI compared to the June data for starts and sales.

This shows that the HMI, single family starts and new home sales mostly move in the same direction - although there is plenty of noise month-to-month.

NOTE: For purposes of determining if starts are above or below sales, you have to use the quarterly data by intent. You can't compare the monthly total single family starts directly to new home sales, because single family starts include several categories not included in sales (like owner built units and high rise condos).

Press release from the NAHB (added):

Builder confidence in the market for newly built, single-family homes rose one point in August to its highest level in more than a year, according to the latest reading of the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. Building on a two-point gain in July, the HMI reached 18 this month, its highest point since June of 2008.

“Home builder expectations have been buoyed by the success of the first-time home buyer tax credit and its anticipated boost to buying activity leading up to the Nov. 30 expiration date,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “The question is what happens after that ..."
...
“One very positive aspect of today’s report is the big gain registered in the component gauging home builders’ expectations for the next six months,” noted NAHB Chief Economist David Crowe. “This reflects anticipated sales stemming from the tax credit as well as recent signs that an economic recovery has begun. There is definitely a sense of hope among builders that the worst of the downturn is over and that a turning point is near at hand.”
...
NAHB is calling on Congress to extend the first-time home buyer tax credit for another year and to offer it to all income-eligible buyers.

by Calculated Risk on 8/17/2009 11:03:00 AM

Just a note: The NAHB Housing Market Index will be released today at 1 PM ET, and the Fed Senior Loan Officer survey for July will probably be released today or tomorrow.

Click on graph for larger image in new window.

The Shanghai SSE composite index is cliff diving again following the recent large increase. The index was off 5.8% on Friday today.

I've also added the S&P 500 for comparison (dashed blue line).

by Calculated Risk on 8/17/2009 08:33:00 AM

From the NY Fed: Empire State Manufacturing Survey

For the first time in considerably more than a year, the Empire State Manufacturing Survey indicates that conditions for New York manufacturers have improved. The general business conditions index increased 13 points, to 12.1, its highest level since November of 2007. Although the inventories index remained well below zero, the new orders and shipments indexes rose to their highest levels in many months. The prices paid index was positive, while the prices received index continued to be negative. Employment indexes were much improved from their recent low levels, although they remained below zero. Future indexes generally rose from last month and conveyed optimism about the six-month outlook; the capital expenditures index rose to its highest level in over a year.

Here is the general business conditions index. Note that the data only goes back to July 2001 (chart to Jan 2002). Any reading above zero is expansion, so this index shows manufacturing is expanding in August.

by Calculated Risk on 8/17/2009 08:17:00 AM

Press Release from Lowe's:

Lowe's Companies, Inc. ... the world's second largest home improvement retailer, today reported net earnings of $759 million for the quarter ended July 31, 2009, a 19.1 percent decline from the same period a year ago.
...
"Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter," commented Robert A. Niblock, Lowe's chairman and CEO. "Cautious consumers remain reluctant to take on discretionary projects until signs of economic improvement are more evident."
...
In response to the challenging economic environment, which has resulted in declining demand for home improvement products, the company has re-evaluated its future store expansion plans. For 2010, expansion in North America will be below previously anticipated levels, and new store openings will likely be in the range of 35 to 45. Given this, the company has evaluated the pipeline of potential future store sites and made the decision to no longer pursue several projects.
emphasis added

According to the BEA data, home improvement has held up better than other areas of residential investment:

Click on graph for updated image in new window.

This graph shows home improvement investment as a percent of GDP.

Home improvement is at 1.08% of GDP, well off the high of 1.31% in Q4 2005 - but just back to the average of the last 50 years of 1.07%.

This would seem to suggest there remains downside risk to home improvement spending. Home Depot and Lowes are the largest home improvement retailers, and their results are something to watch.

NOTE: Home improvement is a rough estimate by the BEA - and could be lower. Also, there could be changes in spending patterns leading to a higher percentage of GDP on home improvement.

by Calculated Risk on 8/16/2009 10:40:00 PM

The Financial Times is reporting that regulators have ask prospective buyers to submit bids for Guaranty Bank on Monday.

Guaranty Bank had $14.4 billion in assets at the end of Q1.

From Reuters: Regulators want Guaranty bids by Monday: report

Regulators are hoping that three banks that had bid for Colonial Bank -- Canada's Toronto Dominion, JPMorgan and Spain's BBVA -- will step in to bid for Guaranty ... private equity consortium, which includes Blackstone Group LP, Carlyle, Oak Hill Capital, TPG and the Texas banker Gerald Ford, is also considering a bid for Guaranty

Sounds like another fairly large bank failure this week.