by Calculated Risk on 9/27/2011 08:41:00 AM

From the NY Times: German Leader Reaffirms Backing for Greece

Promising that Athens would live up to its commitments, the Greek prime minister urged Europe to pull together to take the steps needed to head off a potentially disastrous escalation in the sovereign debt crisis.

In a speech to the same group of German business leaders, Chancellor Angela Merkel said Germany would provide all the help it could to stabilize Greece.
...
Mrs. Merkel urged lawmakers to back the bill “in a spirit of friendship, a spirit of partnership, not in a spirit of imposing something.”

“If Europe isn’t doing well, then over the medium term Germany won’t do well,” she said.

And from the Financial Times: Rolling blog: the eurozone crisis

Our Athens reporter, Dimitris Kontogiannis, has set out the main details of the property tax ...
• The new tax will apply, with a few exceptions, to all electricity-powered buildings
• Those who refuse to pay will have their electricity cut off...
• The government estimates the new tax could raise €2bn-€2.5bn a year...

It sounds like the property tax will pass - and that the German parliament will approve the changes to the EFSF on Thursday.

by Calculated Risk on 9/26/2011 10:21:00 PM

To help keep track ...
• There is a vote on Tuesday in Greece concerning the new property tax around 12 PM ET (there will be protests too). I think this also includes some cuts in public sector too.

• Prime Minister George Papandreou will be in Germany on Tuesday for a meeting with Chancellor Angela Merkel.

• The "troika" inspectors (EU-IMF-ECB) will not return until the new legislation is passed.

• The EU Finance Ministers meet on Monday, October 3rd, and there is very little time for the inspectors to complete their work and still allow the Finance Ministers to vote on the release of the next loan installment. Greece needs the disbursement by mid-October to meet their obligations through the end of the year.

• On Thursday, the German Parliament will vote on increasing the European Financial Stability Facility (EFSF) according to the agreement reached on July 21st.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 07:35:00 PM

Alejandro Lazo at the LA Times wrote today: New home sales stuck at the bottom in August

"This year is shaping up to be the worst year on record for new home sales," [Patrick Newport, U.S. economist with IHS Global Insight] wrote in a note.

The Census Bureau started tracking New Home sales in 1963, and the record low was 412,000 in 1982 - until that record was broken in 2009 - and then again in 2010 - and it looks another new record in 2011.

Here is a table of the last ten years - remember that sales in 2009 and 2010 were boosted by the tax credit.

New Home Sales
Year	Total	Total through August
2000	877	608
2001	908	644
2002	973	670
2003	1,086	759
2004	1,203	841
2005	1,283	906
2006	1,051	756
2007	776	577
2008	485	365
2009	375	261
2010	323	231
2011	3031	211
1Current 2011 Pace

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 03:55:00 PM

From CNBC: Officials Working on a Sovereign Debt TARP for Europe?

European officials are working on a detailed plan aimed at shoring up European bank stability, according to an official who spoke with CNBC’s Steve Liesman.

The plan appears to have a lot of moving parts. It would involve money from the European Financial Stability Facility (EFSF), a bailout vehicle created in 2010 to alleviate the sovereign debt crisis in Europe, to capitalize a special purpose vehicle that would be created by the European Investment Bank, a bank owned by the member states of the European Union.

More details at the article.

The Greek 2 year yield was up to 71%. The Greek 1 year yield is at 138%.

The Portuguese 2 year yield is up to 18.2% and the Irish 2 year yield was down to 8.8%.

The Italian 10 year yield was up slightly to 5.6%.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 12:09:00 PM

On New Home sales: Since new home sales are reported when contracts are signed, and consumer sentiment fell off a cliff in August following the debt ceiling debate, I thought we might see an even large decline for August new home sales. This was still a weak report - the 16th month in a row with sales around 300 thousand SAAR - but I thought it might even be worse.

• Dallas Fed: Texas Manufacturing Activity Picks Up

Texas factory activity increased in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 1.1 to 5.9, suggesting growth picked up this month after stalling in August.

Most other measures of current manufacturing conditions also indicated growth in September. The new orders index edged down from 4.8 to 3.6 this month, suggesting order volumes continued to increase, but at a slightly decelerated pace. The shipments index rose from 6.7 to 9.4, reaching its highest level since March. The capacity utilization index remained in negative territory in September but rose from –2.8 to –1.3.

Perceptions of general business conditions worsened in September. The general business activity index remained negative for the fifth month in a row and fell from –11.4 to –14.4; ten percent of manufacturers perceived an increase in activity this month, while one quarter noted a decrease. The company outlook index fell from 7.2 in August to a near-zero reading in September. Still, the great majority of respondents said their outlooks were unchanged or improved from last month.

Labor market indicators reflected higher labor demand growth. The employment index came in at 13.4, up notably from 5.4 in August. One quarter of manufacturers reported hiring new workers, while 12 percent reported layoffs. The hours worked index moved back into positive territory in September, suggesting average workweeks lengthened.

Some improvement. There will be two more regional manufacturing surveys released this week and the ISM survey next week.

• Distressing Gap: The following graph shows existing home sales (left axis) and new home sales (right axis) through August. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Then along came the housing bubble and bust, and the "distressing gap" appeared due mostly to distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

Click on graph for larger image in graph gallery.

I expect this gap to close over the next few years once the number of distressed sales starts to decline.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different. Also the National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers and I expect significant downward revisions to sales estimates for the last few years - perhaps as much as 10% to 15% for 2009 and 2010. Even with these revisions, most of the "distressing gap" will remain.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales