by Calculated Risk on 4/17/2011 02:03:00 PM

Special Note: Dr. James Kennedy has a new method for calculating equity extraction: "A Simple Method for Estimating Gross Equity Extracted from Housing Wealth". I haven't evaluated his method yet (here is a companion spread sheet), so the following is using my old "simple" method.

Note 2: This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008.

The following data is calculated from the Fed's Flow of Funds data and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity (hence the name "MEW", but there is little MEW right now!), normal principal payments and debt cancellation.

Click on graph for larger image in new window.

For Q4 2010, the Net Equity Extraction was minus $77 billion, or a negative 2.7% of Disposable Personal Income (DPI). This is not seasonally adjusted.

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding declined sharply in Q4. Mortgage debt has declined by $550 billion over the last eleven quarters. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. Note: most homeowners pay down their principal a little each month unless they have an IO or Neg AM loan, so with no new borrowing, equity extraction would always be slightly negative.

Earlier:
• First Look at 2012 Cost-Of-Living Adjustments and Maximum Contribution Base
• Summary for Week ending April 15th
• Schedule for Week of April 17th

by Calculated Risk on 4/17/2011 08:15:00 AM

Earlier:
• Summary for Week ending April 15th
• First Look at 2012 Cost-Of-Living Adjustments and Maximum Contribution Base

Three key housing reports will be released this week: April homebuilder confidence on Monday, March housing starts on Tuesday, and March existing home sales on Wednesday.

----- Monday, April 18th -----
8:00 AM ET: Citigroup First Quarter 2011 Results (included for possible comments on foreclosures)

10 AM: The April NAHB homebuilder survey. The consensus is for a reading of 17, unchanged from March. Any number below 50 indicates that more builders view sales conditions as poor than good. This index has been below 25 for forty five consecutive months (almost 4 years).

----- Tuesday, April 19th -----
8:00 AM ET: Goldman Sachs First Quarter 2011 Results

8:30 AM: Housing Starts for March. After collapsing following the housing bubble, housing starts have mostly moved sideways at a very depressed level for over two years.

Click on graph for larger image in graph gallery.

This graph shows total and single unit starts since 1968.

Total housing starts were at 479 thousand (SAAR) in February, down 22.5% from the revised January rate of 618 thousand, and barely up from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959). Single-family starts decreased 11.8% to 375 thousand in February - the lowest level since early 2009.

The consensus is for an increase to 525,000 (SAAR) in March.

10:00 AM: Regional and State Employment and Unemployment for March 2011

----- Wednesday, April 20th -----
Early: The AIA's Architecture Billings Index for March (a leading indicator for commercial real estate).

This graph shows the Architecture Billings Index since 1996. The index showed billings were slightly higher in February (at 50.6).

This index usually leads investment in non-residential structures (hotels, malls, office) by 9 to 12 months.

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through May 2011.

8:00 AM: Wells Fargo First Quarter 2011.

10:00 AM: Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for sales of 5.0 million at a Seasonally Adjusted Annual Rate (SAAR) in March, up about 2.5% from the 4.88 million SAAR in February. Economist Tom Lawler is projecting sales of 5.08 million in March.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in February 2011 (4.88 million SAAR) were 9.6% lower than last month, and were 2.8% lower than February 2010.

In addition to sales, the level of inventory and months-of-supply will be very important (since months-of-supply impacts prices).

----- Thursday, April 21st -----
7:30 AM: Morgan Stanley First Quarter 2011

8:30 AM: The initial weekly unemployment claims report will be released. The number of initial claims increased last week to 412,000, but the trend has been down over the last few months. The consensus is for a decrease to 390,000 from 412,000 last week.

10:00 AM: Philly Fed Survey for April. This survey was at the highest level since 1984 in March. The consensus is for a strong reading of 36.8, down from the very high 43.4 in last month.

10:00 AM: Conference Board Leading Indicators for March. The consensus is for a 0.3% increase for this index.

10:00 AM: FHFA House Price Index for February. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

----- Friday, April 22nd -----
All US markets will be closed for Good Friday.

After 4:00 PM: The FDIC might be working Friday afternoon ...

Best Wishes to All!

by Calculated Risk on 4/16/2011 11:59:00 PM

Earlier:
• Summary for Week ending April 15th
• First Look at 2012 Cost-Of-Living Adjustments and Maximum Contribution Base

This house sold for $1.8 million in 2006. The asking price is $902 thousand. Half off! Also Jim says REO activity is picking up ...

by Calculated Risk on 4/16/2011 09:15:00 PM

From CoStar: CoStar Pricing Performance Varies Significantly Between Different Regions and Property Types

• The Composite Index, which is an equal-weighted analysis repeat sale pricing index incorporating both the Investment Grade and General Grade indices and a reflection of the broad overall market, posted a slight increase in property value for the month of February of 0.6%, reflecting the strong monthly increase in the General Grade repeat sale index. The Composite Index is down 7.5% year over year. [this is off 30.5 from the peak in August 2007]

• At the national level, CoStar’s Investment Grade Commercial Repeat-Sale Index is up 6.8% compared with the same period last year, even after four consecutive months of declines, including a very slight 0.3% decline in February. [this is off 34.8% from the peak in June 2007]

• CoStar’s General Grade Index is down 10.9% compared with the same period last year, although this pricing index has trended upward recently, posting two consecutive months of increases, including a strong 0.8% increase from January to February. [this is off 29.0% from the peak in June 2007]

Click on graph for larger image in new window.

This graph from CoStar shows the indexes for investment grade, general commercial and a composite index. The Investment Grade was down, the other two were up slightly in February.

It is important to remember that there are very few CRE transactions (compared to residential), and that there is a high percentage of distressed sales, so prices are very volatile. Also CoStar is seeing significant variations in pricing performance between different regions and property types. A couple of examples:

• Multifamily pricing in the Northeast at the end of 2010 stood within 4.8% of its peak level according to CoStar’s Northeast Multifamily pricing index.

• At the other end of the spectrum, CoStar’s West Office pricing index remains 43% below its peak-pricing level.

With apartment vacancy rates falling rapidly, and rents rising, it is no surprise that multifamily is the best performing property type.

Earlier:
• Summary for Week ending April 15th
• First Look at 2012 Cost-Of-Living Adjustments and Maximum Contribution Base

by Calculated Risk on 4/16/2011 04:38:00 PM

Getting closer to default ...

From the WSJ: IMF Believes Greece Should Consider Debt Restructuring By 2012

The International Monetary Fund believes Greece's debt is unsustainable and has told European government and central bank officials that Athens should consider restructuring by next year, three people familiar with the situation said Saturday.

... The scenario to be examined first will involve extending debt repayments by as much as 30 years, the first official said, where private bondholders could be offered new bonds in exchange for old bonds with the same coupon, but with a longer maturity. Another scenario could involve reducing Greece's coupon payments and extending maturity dates.

Earlier:
• Summary for Week ending April 15th