by Calculated Risk on 6/28/2010 10:00:00 AM

Note: This is a composite index based on a number of economic releases.

From the Chicago Fed: Index shows economic activity continued to expand in May

The index’s three-month moving average, CFNAI-MA3, rose to its highest level since March 2006, increasing to +0.28 in May from +0.05 in April. May’s CFNAI-MA3 suggests that growth in national economic activity was above its historical trend. Moving above +0.20, the index’s three-month moving average in May also reached a level historically associated with a mature economic recovery following a recession.

Click on table for larger image in new window.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

This is the highest level in the index since March 2006, and indicates growth slightly above trend.

by Calculated Risk on 6/28/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, April 2010

Personal income increased $53.7 billion, or 0.4 percent ... Personal consumption expenditures (PCE) increased $24.4 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in May, in contrast to a decrease of less than 0.1 percent in April
...
Personal saving as a percentage of disposable personal income was 4.0 percent in May, compared with 3.8 percent in April.

The following graph shows real Personal Consumption Expenditures (PCE) through May (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for large image.

The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.

Even with no growth in June, PCE growth in Q2 would be 2.3% 2.5%. It looks like my earlier estimate of 3% PCE growth in Q2 will be about right.

The National Bureau of Economic Research (NBER) uses several measures to determine if the economy is in recession. One of the measures is real personal income less transfer payments (see NBER memo). This increased in May to $9,113.9 billion (SAAR) and is barely above the low of October 2009 ($8,987 billion).

This graph shows real personal income less transfer payments since 1969.

This measure of economic activity is moving sideways - similar to what happened following the 2001 recession.

This month income increased faster than spending ... meaning the saving rate increased.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the May Personal Income report. The saving rate increased to 4.0% in April (increased to 3.7% using a three month average).

I still expect the saving rate to rise over the next couple of years slowing the growth in PCE.

The increase in income was good news, but personal income less transfer payments are still only 1.4% above the low of last year.

by Calculated Risk on 6/27/2010 11:59:00 PM

From Paul Krugman in the NY Times: The Third Depression

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.
...
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

From CR: I'm not as pessimistic as Professor Krugman, but I do think with almost double digit unemployment, the focus of policymakers should be jobs, jobs, jobs ...

by Calculated Risk on 6/27/2010 08:13:00 PM

Here is a table of various housing supply measures (just putting this in one place with links to the source data).

Note: here is the Weekly Summary and a Look Ahead. It will be a busy week!

Housing Supply Overview
Total delinquent loans1	7.3 million
Seriously delinquent loans1,2	5.0 million
Total REO Inventory3	0.5 million
Fannie, Freddie, FHA REO4	210 thousand
Homeowners with Negative Equity5	11.2 million
Homeowner vacancy rate6	2.6%
Rental vacancy rate6	10.6%
Excess Vacant Units6,7	1.7 million
Existing Home Inventory8	3.89 million
Existing Home Months of Supply8	8.3 months
New Home Inventory9	213 thousand
New Home Months of Supply9	8.5 months

¹ Source: estimate based on the Mortgage Bankers Association’s (MBA) Q1 2010 National Delinquency Survey. "MBA’s National Delinquency Survey covers about 44.4 million first lien mortgages on one-to four-unit residential properties ... The NDS is estimated to cover around 85 percent of the outstanding first-lien mortgages in the country."

² This is based on the MBA's estimate of loans 90+ days delinquent or in the foreclosure process.

³ Source: Radarlogic and Barclays as of Feb 2010.

⁴ Source: Fannie Mae, Freddie Mac and FHA. Fannie, Freddie, FHA REO Inventory Surges 22% in Q1 2010

⁵ Source: CoreLogic Q1 2010 Negative Equity Report

⁶ Source: Census Bureau Residential Vacancies and Homeownership in the First Quarter 2010

⁷ CR calculation.

⁸ Source: National Association of Realtors

⁹ Source: Census Bureau New Residential sales

by Calculated Risk on 6/27/2010 04:45:00 PM

From Thomas Curwen in the LA Times: Undone by their dreams

In 2005:

Amid the imposing two-story designs, they settled on a modest single-story home — yet with 2,400 square feet, it was large enough for their growing family. The sales representatives told them ... if they put down a $3,000 deposit they could lock in the price at $365,000.

They could barely scrape together the deposit, and they didn't have a down payment for the mortgage. The sales representatives didn't seem worried. ... Countrywide Financial Corp. turned them down. [they had filed bankruptcy 4 years earlier] Freedom Plus Mortgage said yes.
...
Every weekday morning at 6:30, the family would get into the minivan and head over the Cajon Pass. The commute was a little more than an hour.

And the result in 2009:

They spoke to the bank but were told that they didn't qualify for a loan modification ... In October, the house was sold for $125,000.

The buyers could "barely scrape together" a 1% deposit, they could hardly qualify (even Countrywide turned them down!), their commute to work was more than an hour each way ... the 2,400 sq ft tract house could probably be built for under $150K today on land that is very cheap ...

Update: I've upped the cost estimate. This is very low end construction (the only "upgrade" was a microwave). Perhaps my original estimate was too low (based on info from a builder), but I've heard some very low quotes recently. This could still be low.

This was an interesting story of boom and bust, but the ending was very predictable.