by Calculated Risk on 6/10/2010 11:59:00 AM

The Federal Reserve released the Q1 2010 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth is now off $11.4 Trillion from the peak in 2007, but up $6.3 trillion from the trough in Q1 2009. A majority of the decline in net worth is from real estate assets with a loss of about $6.4 trillion in value from the peak. Stock market losses are still substantial too.

Click on graph for larger image in new window.

This is the Households and Nonprofit net worth as a percent of GDP.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

Note that this ratio was relatively stable for almost 50 years, and then we saw the stock market and housing bubbles.

This graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices collapsed in 2007 and 2008.

In Q1 2010, household percent equity (of household real estate) was up to 38.2% from the all time low of 33.3% last year. The increase was due to both an increase in the value of household real estate and a $99 billion decline in mortgage debt.

Note: something less than one-third of households have no mortgage debt. So the approximately 50+ million households with mortgages have far less than 38.2% equity.

The third graph shows household real estate assets and mortgage debt as a percent of GDP. Household assets as a percent of GDP decreased slightly in Q1 as the value of real estate assets declined slightly, and GDP increased.

Mortgage debt declined by $99 billion in Q1. Mortgage debt has now declined by $377 billion from the peak.

by Calculated Risk on 6/10/2010 11:20:00 AM

This is the new UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index^TM

Press Release: PCI Strikes Optimistic Note For U.S. Economy with 3.1 Percent Gain in May

With a monthly increase not seen since February 1999, the Ceridian-UCLA Pulse of Commerce Index™ (PCI) by UCLA Anderson School of Management climbed 3.1 percent in May. The increase represents the strongest indicator yet from the PCI that the U.S. economy is on the upswing.
...
“Absent good news from the usual recovery indicators – consumer optimism expressed by buying homes and cars, and business optimism expressed by hiring – the spike in the PCI is indeed very welcome news for the economy,” said Ed Leamer, the PCI’s chief economist. “One month does not make a trend, but at least we are back in a recovery groove.”

The May result makes up for April’s decline of 0.3 percent and for the PCI’s flat, overall performance during the first four months of 2010.
...
The PCI is based on an analysis of real-time diesel fuel consumption data ...

Click on graph for larger image in new window.

This graph shows the index since January 1999.

Note: This index appears to lead Industrial Production (IP), but there is a significant amount of monthly noise. This is a new index and might be interesting to follow along with the Trucking and Railroad data.

Here is a video of Leamer's comments on the report. After a few months of almost no growth, this index increased sharply in May.

by Calculated Risk on 6/10/2010 09:07:00 AM

The Census Bureau reports:

[T]otal April exports of $148.8 billion and imports of $189.1 billion resulted in a goods and services deficit of $40.3 billion, up from $40.0 billion in March, revised. April exports were $1.0 billion less than March exports of $149.8 billion. April imports were $0.8 billion less than March imports of $189.9 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through April 2010.

On a year-over-year basis, exports are up 20% and imports are up 24%. This is an easy comparison because of the collapse in trade at the end of 2008 and into early 2009.

The second graph shows the U.S. trade deficit, with and without petroleum, through April.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices increased slightly to $77.13 in April - and are up 97% from the low of February 2009 (at $39.22). Oil import volumes were down in April.

Although both imports and exports were off slightly in April, both have been increasing sharply - but are still below the pre-crisis levels. Once again China and oil are the major contributors to the trade deficit.

by Calculated Risk on 6/10/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending June 5, the advance figure for seasonally adjusted initial claims was 456,000, a decrease of 3,000 from the previous week's revised figure of 459,000 [revised up from 453,000]. The 4-week moving average was 463,000, an increase of 2,500 from the previous week's revised average of 460,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending May 29 was 4,462,000, a decrease of 255,000 from the preceding week's revised level of 4,717,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The four-week average of weekly unemployment claims increased this week by 2,500 to 463,000.

The dashed line on the graph is the current 4-week average. Initial weekly claims first fell to this level in December 2009, and have been at the same level for about 6 months. The current level of 456,000 (and 4-week average of 463,000) is still high, and suggests ongoing weakness in the labor market.

by Calculated Risk on 6/09/2010 10:05:00 PM

Under California law, purchase money loans are non-recourse. However once a homeowner refinances, the entire mortgage is recourse ... that is probably going to change:

From Jim the Realtor: SB 1178 – Amended

SB 1178, the bill passed by the California State Senate by a 30-4 vote, is on its way to the Assembly.

The new intent:

This bill preserves a borrowers protection from a deficiency judgment when loans are refinanced, but only to the extent that the refinance is used to pay debt incurred to purchase the real property. The provisions of this bill become operative on June 1, 2011.

Yes, there was an amendment slipped in last week that eliminated the cash-out refinances, even those used for home improvement. The current bill is only applies to those who refinanced the mortgage used to purchase the home.

Jim wonders if some homeowners will wait until June 1, 2011 to default. I doubt it. Most borrowers I've spoken with have no idea about recourse vs. non-recourse, and purchase money vs. refinance.

Note that additional money borrowed above the original purchase loan amount will still be recourse if this becomes law.