by Calculated Risk on 7/17/2011 05:05:00 PM

Yesterday:
• Summary for Week Ending July 15th
• Schedule for Week of July 17th

Several readers have asked me for source data on U.S. government receipts and outlays. I've also been asked if receipts are really near a record low since WWII as a percent of GDP.

First, here is the budget data from the Congressional Budget Office (CBO). Under "Supplemental Material", the CBO provides historical budget data in both PDF and excel formats.

The White House also provides historical data on budget receipts and outlays. This is from the CBO for 2010 and earlier.

The data shows that total receipts are near a record low as a percent of GDP since WWII. The record low was in 1950, and it will be close this year (in fiscal 2011). But that masks some significant change in the mix of receipts.

The following graph shows receipts by source as a percent of GDP since WWII.

Both income (blue) and corporate taxes (red) are near record lows. Combined income and corporate taxes could rise almost 50% (as a percent of GDP) and receipts would still only be at the median for the 50 years from 1946 through 1996.

Notice the sharp decline in off-budget social insurance in 2011 (Social Security insurance). That is mostly the reduction in the payroll taxes for this year.

Also hidden in the "other" category has been the sharp reduction in the estate tax.

by Calculated Risk on 7/17/2011 12:03:00 PM

From Roger Vincent at the LA Times: Apartments are the development du jour among builders

If you see a building under construction, it's most likely an apartment complex.
...
Homeownership goes in and out of favor, UCLA professor Stuart Gabriel said, and now it's in decline.

"The pendulum swings back and forth a bit," Gabriel said. "Homeownership is not dead, it's just in a period of adjustment."

Least popular are homes in remote "exurbs" far from cities, he said. With gasoline prices at sustained highs, many people want to be closer to their jobs in urban centers where the most affordable housing is often apartments.

Demographics and generational trends are also working in favor of apartments. Many renters in their 20s and 30s are delaying marriage and childbearing ... and cherish the mobility to move where their careers take them. Other young people who have moved back home with their parents or doubled up with friends can be expected to rent their own apartments when they get jobs or feel more secure about their employment.
...
Permits to build nearly 1,000 apartments were issued in May in the city of Los Angeles, the most since November 2008, the Construction Industry Research Board said.

The pickup in apartment construction is one of the few bright spots for construction employment and residential investment. If there was an increase in housing starts in June, the increase was probably from multi-family starts. (June housing starts will be released on Tuesday).

It is important to note that even with a strong increase in multi-family construction, it is from a very low level, and multi-family is a small part of residential investment (RI).

However - don't expect much new office construction any time soon, from the LA Times: It's still an office tenant's market in the Southland

by Calculated Risk on 7/17/2011 08:47:00 AM

From David Leonhardt at the NY Times: How the Bursting of the Consumer Bubble Continues to Hold the Economy Back (ht Ann)

THERE is no shortage of explanations for the economy’s maddening inability to leave behind the Great Recession and start adding large numbers of jobs ... the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble ...

The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem.

The Federal Reserve Bank of New York recently published a jarring report on what it calls discretionary service spending, a category that excludes housing, food and health care and includes restaurant meals, entertainment, education and even insurance. Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.
...
Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future

Here is the NY Fed paper by Jonathan McCarthy that Leonhardt mentions: Discretionary Services Expenditures in This Business Cycle

The pronounced weakness in personal consumption expenditures (PCE) for services has been an unusual feature of the 2007-09 recession and the slow recovery from it. Even in 2010:Q4, when real PCE increased at a relatively robust 4.1 percent annual rate, real PCE on services rose at only a 1.4 percent rate. This weakness has been especially evident in “discretionary” services (to be defined below), which fell more in the recent recession than in previous recessions and since have rebounded more sluggishly. In this post, I suggest that the continued sluggishness in these expenditures lends a note of caution regarding the sustainability of recent PCE strength. ... this in turn raises some concern about the future strength of the recovery.

The chart below shows how much real per capita (to account for differing rates of population growth over time) discretionary services expenditures fell from their previous peak—a zero value in this chart means that these expenditures were above their previous peak. The drop in discretionary services expenditures in the last recession was much more severe than in previous recessions ...

Click on graph for larger image in graph gallery.

Because many of these expenditures can be deferred when economic conditions are strained (for example, eating at home rather than eating out, or passing on the visit to Disney World) and given the increasing share of services in the economy, discretionary services will remain a significant factor in business cycles. In the recent recession, the large rise in unemployment and the sharp drop in household wealth appear to have led households to reduce discretionary services expenditures to a greater extent than we have seen previously, as they attempted to maintain a smoother path of non-discretionary services expenditures.

... the fact that discretionary services expenditures remain significantly below their previous peaks is of concern for the overall economic outlook. Although these expenditures can be deferred in instances of temporary income drops, the sluggish recovery in these expenditures suggests, consistent with the permanent income/life cycle hypothesis, that households may perceive more persistent shocks to their overall wealth. ... Accordingly, the continued sluggishness of discretionary service expenditures at this point in the expansion lends a note of caution regarding the recently improved economic growth outlook.

This is one of the reasons I track some items of discretionary spending like hotels and restaurants.

To take this a step further - with the lack of demand, there is still too much excess capacity in most areas of the economy for a large contribution from new investment (except in equipment and software). We see this excess in housing (there is an excess supply of vacant housing units), and excess capacity in overall industrial production. There is also excess existing supply in office space, retail space, and other categories of commercial real estate.

In addition, household debt, as a percent of income, remains very high and household deleveraging is ongoing. That is why so many companies identify their number one problem as "lack of customers" (see the small business survey released this week).

Until the excess capacity (and excess supply) is absorbed, and household balance sheets are back in order, the recovery will remain sluggish.

by Calculated Risk on 7/16/2011 10:33:00 PM

Last month, Tom Lawler posted on how the NAR estimates existing home inventory. The NAR does NOT aggregate data from the local boards (see Tom's post for how the NAR estimates inventory). Sometime this summer, I expect the NAR to revise down their estimates of inventory and sales for the last few years. Also the NAR methodology for estimating sales and inventory will likely (hopefully) be changed.

While we wait for the NAR, I think the HousingTracker data that Tom mentioned might be a better estimate of changes in inventory (and always more timely). Ben at HousingTracker.net is tracking the aggregate monthly inventory for 54 metro areas.

Click on graph for larger image in graph gallery.

This graph shows the NAR estimate of existing home inventory through May (left axis) and the HousingTracker data for the 54 metro areas through mid-July. The HousingTracker data shows a steeper decline (as mentioned above, the NAR will probably revise down their inventory estimates this summer).

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the mid-July listings - for the 54 metro areas - declined 10.9% from last year.

Of course there is a large percentage of distressed inventory, and various categories of "shadow inventory" too. But the decline in listed inventory will put less downward pressure on house prices and is something to watch carefully all year.

Earlier:
• Summary for Week Ending July 15th
• Schedule for Week of July 17th

by Calculated Risk on 7/16/2011 06:02:00 PM

Earlier:
• Summary for Week Ending July 15th

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

The Philly Fed manufacturing survey will be released on Thursday. Also the speech by NY Fed VP Brian Sack on Wednesday might be interesting.

----- Monday, July 18th -----
10 AM ET: The July NAHB homebuilder survey. The consensus is for a reading of 14, up slightly from 13 in June. Any number below 50 indicates that more builders view sales conditions as poor than good. This index has been below 25 for four years.

----- Tuesday, July 19th -----
8:30 AM: Housing Starts for June. After collapsing following the housing bubble, housing starts have mostly been moving sideways for over two years - with slight ups and downs due to the home buyer tax credit.

Total housing starts were at 560 thousand (SAAR) in May, up 3.5% from the revised April rate of 541 thousand. Single-family starts increased 3.7% to 419 thousand in May.

The consensus is for an increase to 575,000 (SAAR) in June.

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

This graph shows the Architecture Billings Index since 1996. The index decreased in May to 47.2 from 47.6 in April. Anything below 50 indicates a decrease in billings.

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 summer (not counting all cash purchases).

10:00 AM: Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for sales of 4.9 million at a Seasonally Adjusted Annual Rate (SAAR) in June, up from 4.81 million SAAR in May.

Note: the NAR is working on benchmarking existing home sales for previous years with other industry data (expectations are for large downward revisions). Perhaps the NAR will provide an update on when these revisions will be released.

Expected: The Moody's/REAL Commercial Property Price Indices (commercial real estate price index) for May.

6:15 PM: NY Fed Vice President Brian Sack speaks before the Money Marketeers of New York University.

----- Thursday, July 21st -----
8:30 AM: The initial weekly unemployment claims report will be released. The number of claims has been elevated for the last couple of months. The consensus is for an increase to 415,000 from 405,000 last week.

10:00 AM: Philly Fed Survey for July. The consensus is for a reading of 5.0 (above zero indicates expansion), up from -7.7 last month.

10:00 AM: Conference Board Leading Indicators for June. The consensus is for a flat reading for this index.

10:00 AM: FHFA House Price Index for May 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

10:00 AM: Fed Chairman Ben Bernanke on the Dodd-Frank Act, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate.

----- Friday, July 22nd -----
10:00 AM: Regional and State Employment and Unemployment for June 2011