by Calculated Risk on 5/16/2011 11:22:00 PM

Just an update from Reuters: Gasoline price falls first time in 8 weeks: Energy Department

Regular unleaded gasoline declined half a penny over the last week to a national price of $3.96 a gallon, which is still up $1.10 from a year ago.

Not much of a decline yet nationally, but GasBuddy.com is showing a 6 cent decline in my area from the peak.

I think high oil and gasoline prices the biggest downside risk to the U.S. economy - and a decline in prices would definitely be helpful.

Bloomberg is showing WTI futures at $96.86 per barrel tonight (down from $114 at the end of April), and Brent at $110.

Earlier:
• NAHB Builder Confidence index unchanged at low level in May
• And this weekend post has generated a lot of feedback: The upward slope of Real House Prices.

by Calculated Risk on 5/16/2011 07:05:00 PM

The housing bubble and bust exposed the poor quality of publicly available U.S. housing data. One area of improvement is the various house price indexes now available that didn't exist in January 2005 when I started this blog. But that data isn't always timely, and the details aren't always public.

There is a long long ways to go. The NAR data for existing home sales and inventory is still suspect, the Census Bureau could change their methodology so new home sales matched up better with builder reports (change the timing of sales and handling of cancellations), there is no good data available for housing demolitions, the total housing stock numbers are almost useless for analyzing the excess supply, and there is no timely data for household formation. But maybe we will have better publicly available data for foreclosures and delinquencies soon:

From Alex Ulam at National Mortgage News: Should Mortgage Servicing Data Be a Public Utility

[T]hanks to a little-discussed provision of the Dodd-Frank Act, legislators, regulators and even nonprofit housing activists may eventually get a more comprehensive picture of the mortgage servicing industry.

Section 1447 of the law calls for the Department of Housing and Urban Development to establish and maintain a comprehensive national database on foreclosures and defaults on mortgages and to make the information publicly available. The data is supposed to drill down to the census tract level and include the number and percentage of loans that are delinquent by more than 30 days; those that are in the foreclosure process; and those that are underwater.

Hopefully the database will include the number of REOs, the number of mortgages in the foreclosure process, and all the deliquency data by census tract. That would help.

by Calculated Risk on 5/16/2011 03:52:00 PM

• From economist Tom Lawler:

Based on my regional tracking – with a caveat that some local MLS are late in issuing statistical reports – I estimate that existing home sales ran at a seasonally adjusted annual rate of 5.15 million in April, up 1% from March’s pace, but down 11.2% from last April’s tax-credit-goosed pace. Unadjusted sales should show a larger YOY decline of about 13.9%, reflecting one fewer business day this April than last April. Seasonal adjustment is a bit tricky this April, given the exceptionally late Easter. Sales in areas that last April saw the largest YOY gains generally saw the largest YOY declines, while sales in many “distressed” areas show much less “tax-credit-related” swings.

My tracking of homes listing for sale suggests a modest 1.5-2.0% increase from March to April. However, in each of the last two years the NAR has “shown” a MASSIVELY higher monthly increase in listings from March to April. Looking at year-ago numbers, I’d “guesstimate” that homes listing for sale were down about 8% nationwide at the end of this April vs. last April. If NAR numbers show comparable YOY declines, then NAR would report a 4.4% monthly increase. Listings in Florida compared to a year ago are down especially sharply.

These aggregate forecasts aren’t much different from “consensus,” and as such are not very interesting.

CR Note: they are interesting to me! The NAR reports on Thursday and the consensus is for sales of 5.2 million (SAAR).

• An addition to the weekly schedule (updated every Sunday in the menu bar above). On Thursday at 10:00 AM ET: Mortgage Bankers Association (MBA) 1st Quarter 2011 National Delinquency Survey (NDS). This is expected to show a significant decline in overall delinquencies. I'll be on the conference call at 10:30 AM.

• From the LA Times: Unexpected state revenue leaps to $6.6 billion. The state is now forecasting $6.6 billion more in revenue of the next year (probably thanks to the tech boom).

• And this weekend post has generated a lot of feedback: The upward slope of Real House Prices.

Best to all

by Calculated Risk on 5/16/2011 01:47:00 PM

In discussions of the debt ceiling, I keep seeing comparisons to the 1995/1996 government shutdown (here is an example from the WSJ)

In fiscal 1995, the economy was in the middle of a strong expansion with the unemployment rate around 5.6%. There was no cyclical deficit (from a recession), just a left over structural deficit that was steadily being reduced. The deficit in fiscal 1995 was 2.2% of GDP (about 10.8% of outlays).

This year, the economy is fragile, the unemployment rate is at 9.0%, and the deficit is a combination of both a structural deficit and a cyclical deficit (from the great recession). The total deficit is now close to 9% of GDP and about 37% of outlays.

In fiscal 1995, the government could do the same "extraordinary measures" as today to delay the day of reckoning, and then eventually cut off all non-essential discretionary outlays (the "government shutdown"). That was enough to buy more time, and the government didn't have to default on the debt, or cut Social Security or Medicare payments.

Now there is a cyclical deficit on top of an even larger structural deficit. It is impossible to just shutdown non-essential discretionary outlays - the cuts will have to go deeper. So the comparison isn't valid.

From the numbers, here is the CBO analysis and historical data.

Clearly Stanley Druckenmiller (quoted in the WSJ article) is wrong in assessing the impact by comparing to 1995. Interesting that Mr. Druckenmiller was apparently warning about the long term deficit in the mid-'90s, so I find it strange that there is no mention of his stance on the "surpluses forever" position of Greenspan and the Bush administration in 2001 - since that was a key turning point and led to the large structural deficits. (note: if someone has Druckenmiller's 2001 comments on the deficit, please send them to me).

The good news is the cyclical deficit will decline over the next few years, and (hopefully) be gone by 2015 or so. That will still leave us with the structural deficit - and we will need to address the long term costs of health care - but I think those issues are solvable.

by Calculated Risk on 5/16/2011 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) was unchanged at 16 in May, the same level as in April. This was below expectations for a reading of 17. Confidence remains very low ... any number under 50 indicates that more builders view sales conditions as poor than good.

Click on graph for larger image in new window.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the May release for the HMI and the March data for starts (April housing starts will be released tomorrow).

Both confidence and housing starts have been moving sideways at a very depressed level for several years.

Press release from the NAHB: Builder Confidence Unchanged in May

Builder confidence in the market for newly built, single-family homes held unchanged at the low level of 16 in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The index has now remained at this level for six out of the past seven months.
...
“The HMI component index measuring traffic of prospective buyers increased by one point for the second time this year as prospective buyers show growing interest but remain extremely hesitant due to a number of factors,” said NAHB Chief Economist David Crowe. “Asked to identify reasons that potential customers are holding back at this time, 90 percent of builders surveyed said clients are concerned about being able to sell their existing home at a favorable price, while 73 percent said consumers think it will be difficult for them to get financing.”
...
Both the index gauging current sales conditions and the index gauging traffic of prospective buyers inched up one point in May, to 16 and 14, respectively. While still very low, the traffic gauge is now at its highest point since May of 2010. Meanwhile, the index gauging sales expectations in the next six months declined two points to 20 in May.

Builders are still depressed, and the HMI has been below 25 for forty-seven consecutive months - almost 4 years.