by Calculated Risk on 1/25/2011 08:42:00 PM

Update:
Text of Obama’s State of the Union speech

From the NY Times: Obama Sees Global Fight for U.S. Jobs

From the WSJ: Obama: Freeze Spending

Earlier posts on Case-Shiller Home Price indexes:
• Case-Shiller: U.S. Home Prices Keep Weakening as Eight Cities Reach New Lows in November
• House Prices and Months-of-Supply, and Real House Prices
• House Price graph gallery

by Calculated Risk on 1/25/2011 06:59:00 PM

From Patrick Coolican at the Las Vegas Sun: Generation Y wants housing Las Vegas has in short supply

[D]evelopers filled the valley and made piles of money with suburban tract homes that carry little appeal for the next generation of housing consumers, according to an emerging body of survey data of the so-called Millennials or Generation Y.

That’s the generation — about 80 million strong, which is larger than the postwar Baby Boom — born from about the mid-1970s to the early 2000s.

At the recent homebuilders trade show in Orlando, Fla., Melina Duggal of the real estate consulting firm RCLCO laid out the data on the next generation of housing consumers. Her firm asked young renters where they would move to if they had the opportunity. More than 80 percent said they would choose an urban area, or a suburban area that qualified as “urban lite,” such as Arlington, Va., or Bethesda, Md. These are suburbs that feature walkability and easy access to urban amenities.

As Patrick notes, this preference for urban living can partially be explained by their current age:

"[T]hey may want the urban experience now, but eventually they’ll marry and have children and want to live near good suburban schools and have a bigger home with a yard."

Maybe ... I'm not in Generation Y (or even close), but I desire walkability and to be close to some urban amenities. Maybe tastes are changing.

by Calculated Risk on 1/25/2011 03:55:00 PM

Earlier today I posted the usual graph of the state unemployment rate (with highs and lows since 1976).

Reader picosec suggested comparing the current state unemployment rates against the peak unemployment rates for each state during the recent recession. He writes: "This would indicate the relative rate that each state is recovering and might inspire discussion about why certain states are recovering faster/slower than others."

The following graph shows the current unemployment rate for each state (blue), and the max during the recession (red). If there is no red, the state is currently at the maximum during the recession.

Click on graph for larger image in graph gallery.

The states are ranked by the largest percentage decline from the peak. New Hampshire's unemployment rate has declined from 7.1% to 5.5% currently (the largest percentage decline). Michigan's rate has declined from 14.5% to 11.7%, the largest percentage point decline, but less as percentage than New Hampshire or Vermont.

The auto states - led by Michigan - tend to be on the left side of the graph with improving employment. The worst housing bubble states - California, Arizona, Florida and Nevada - are mostly on the right side of the graph.

Six states are at the recession maximum (no improvement): Arkansas, Colorado, Idaho, Nevada, Texas and West Virginia.

by Calculated Risk on 1/25/2011 12:26:00 PM

This morning S&P/Case-Shiller released the monthly Home Price indexes for November (a three month average). Here is a look at house prices and existing home months-of-supply, and also real house prices (2nd graph).

Click on graph for larger image in graph gallery.

This graph shows existing home months-of-supply (left axis), and the annualized change in the Case-Shiller composite 20 house price index (right axis, inverted).

House prices are through November using the composite 20 index. Months-of-supply is through December. Based on this general relationship, I expect house prices to fall further.

The months-of-supply declined to 8.1 months in December, but I think there is a good chance that the months-of-supply will increase again in the spring of 2011. The months-of-supply uses the seasonally adjusted sales rate, but the not seasonally adjusted inventory - even though there is a clear seasonal pattern for inventory (low in December and January and higher during the summer).

We will need to watch inventory and months-of-supply very closely over the next few months for hints about house prices.

Note: there have been periods with high months-of-supply and rising house prices (see: Lawler: Again on Existing Home Months’ Supply: What’s “Normal?” ) so this is just a guide.

The following graph shows the Case-Shiller Composite 20 index, and the CoreLogic House Price Index in real terms (adjusted for inflation using CPI less shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, both indexes are back to early 2001 prices. Also both indexes are at post-bubble lows.

A few key points:
• The real price indexes are at post-bubble lows. Those who argued prices bottomed some time ago are already wrong in real terms, and will probably be wrong in nominal terms soon.

• Don't expect real prices to fall to '98 levels. In many areas - if the population is increasing - house prices increase slightly faster than inflation over time, so there is an upward slope in real prices.

• Real prices are still too high, but they are much closer to the eventual bottom than the top in 2005. This isn't like in 2005 when prices were way out of the normal range.

• Prices will probably fall some more and my forecast is for a decline of 5% to 10% from the October 2010 levels for the national price indexes. We will need to watch inventory (and months-of-supply) closely over the next few months to forecast house prices.

by Calculated Risk on 1/25/2011 10:53:00 AM

Several items ...

• From the Telegraph: UK economy shrinks 0.5pc

Gross domestic product fell 0.5pc in the fourth quarter, the most in more than a year, the Office for National Statistics reported on Tuesday.

Double dip?

• From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed in December. ... Nevada continued to register the highest unemployment rate among the states, 14.5 percent in December. The states with the next highest rates were California, 12.5 percent, and Florida, 12.0 percent. The Nevada rate was the highest in its series.

Click on graph for larger image in new window.

This graph shows the high and low unemployment rates for each state (and D.C.) since 1976. The red bar is the current unemployment rate (sorted by the current unemployment rate).

Ten states now have double digit unemployment rates.

• From the Richmond Fed: Manufacturing Activity Continues to Expand in January; Expectations Remain Upbeat

In January, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — fell seven points to 18 from December's reading of 25. Among the index's components, shipments dropped seven points to 23, new orders lost twelve points to finish at 17, and the jobs index was unchanged at 14.

This was below expectations of a decline to 22.

• The Conference Board reported their consumer confidence index was at 60.6 (1985=100), up from 52.5 in December. This was above expectations of an increase to 54.2. Confidence is a coincident indicator and this suggests improvement in January.

Earlier:
• Case-Shiller: U.S. Home Prices Keep Weakening as Eight Cities Reach New Lows in November