by Calculated Risk on 11/23/2009 08:11:00 PM

From Bloomberg: Fed Said to Ask Banks to Submit Plans to Repay TARP (ht MrM)

The central bank this month asked Bank of America Corp. and eight other banks to [submit repayment plans with a timetable]. ... Together the nine banks have received about $142 billion in TARP funds ... The banks in the stress test that have yet to repay TARP are Bank of America, PNC, Citigroup Inc., Fifth Third Bancorp, GMAC Inc., KeyCorp, Regions Financial Corp., SunTrust Banks Inc. and Wells Fargo & Co.

I'd like to see the plans made public. I'd especially like to see Citi's, BofA's, and GMAC's plans.

The Fed conducted the stress tests, but didn't the Treasury loan the money? Shouldn't the Treasury be asking for the repayment plans? Just asking ...

by Calculated Risk on 11/23/2009 05:32:00 PM

From Bloomberg: Late Card Payments Rose in October, Moody’s Reports

Loans at least 30 days overdue, a signal of future defaults, rose to 6.12 percent in October from 5.97 percent in September, Moody’s said ... defaults fell last month to 10.04 percent from 10.72 percent in September, reflecting lower delinquency rates earlier in the year.
...
Write-offs may peak at 12 percent to 13 percent in 2010, Moody’s analysts Will Black and Jeffrey Hibbs said in the report.

This is the highest delinquency rate since February. At noted in the article, credit card defaults tend to track unemployment, so the default rate will probably continue to rise.

by Calculated Risk on 11/23/2009 01:45:00 PM

After the expected spike in existing home sales last month, I quoted legendary basketball coach John Wooden:

"Never mistake activity for achievement."

It is worth repeating this month.

First, it is important to remember that existing home sales are largely irrelevant for the economy. What matters for the economy are new home sales, housing starts and residential investment. And there has been little improvement in these key indicators.

This really shows up on the following graph:

Click on graph for larger image in new window.

This graph shows existing home sales (left axis) through October, and new home sales (right axis) through September.

The initial gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn't compete with the low prices of all the foreclosed properties.

The recent spike in existing home sales was due primarily to the first time homebuyer tax credit.

But what matters for the economy - and jobs - is new home sales, and new home sales are still very low because of huge overhang of existing home inventory and rental properties.

Second, normally a decline in inventory and the months-of-supply would be considered a positive for the existing home market, however much of the apparent recent improvement in months-of-supply is related to the artificial - and likely short lived - boost in activity.

It is not all bad news. The second graph shows the year-over-year change in existing home inventory.

This inventory has been declining for some time, and is off almost 15% compared to last year. However the level of inventory is still high, and much of the recent inventory "improvement" has come at the expense of vacant rental units; the rental vacancy rate is now at a record 11.1%.

The key to reducing the overall inventory is new household formation, and the key to new household formation is jobs. Encouraging renters to become owners accomplishes nothing in reducing the overall housing inventory, and leads some analysts to mistake activity for achievement.

by Calculated Risk on 11/23/2009 10:42:00 AM

Here is another way to look at existing homes sales: Monthly, Not Seasonally Adjusted (NSA):

This graph shows NSA monthly existing home sales for 2005 through 2009. For the fifth consecutive month, sales were higher in 2009 than in 2008.

And for the second straight month, sales in 2009 were higher than in 2007 (two years ago).

Of course many of these transactions in October were due to first-time homebuyers rushing to beat the expiration of the tax credit (that has now been extended). This has pushed sales far above the historical normal level; based on normal turnover, existing home sales would be in the 4.5 to 5.0 million SAAR range.

The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 3.57 million in October from the upwardly revised 3.71 million in September. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted.

Typically inventory peaks in July or August, so some of this decline is seasonal.

The third graph shows the 'months of supply' metric for the last six years.

Months of supply declined to 7.0 months in October.

Sales increased sharply, and inventory decreased, so "months of supply" declined. A normal market has under 6 months of supply, so this is still high - and especially considering sales were artificially boosted by the tax credit.

by Calculated Risk on 11/23/2009 10:00:00 AM

The NAR reports: Existing-Home Sales Record Another Big Gain, Inventories Continue to Shrink

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
...
Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply2 at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.

Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in Oct 2009 (6.10 million SAAR) were 10.1% higher than last month, and were 23% higher than Oct 2008 (4.94 million SAAR).

I'll have more soon ...