by Calculated Risk on 10/21/2011 08:58:00 AM

Via the Financial Times Eurozone crisis: live blog from Peter Spiegel in Brussels:

Jean-Claude Juncker, the Luxembourg prime minister who chairs today’s meeting of eurozone finance ministers, has entered the gathering and was characteristically blunt on his way in.

He said he believed that the ministers will sign off on the €8bn aid tranche for Greece – “at least I hope it will happen this way” – but warned that because of the decision to hold a second summit, most every other major decision may have to be delayed.

There will still be news on Sunday, but the important news will probably be later in the week - or delayed even more.

by Calculated Risk on 10/21/2011 12:22:00 AM

For discussion ... from the WSJ: Fed Is Poised for More Easing

Federal Reserve officials are starting to build a case for a new program of buying mortgage-backed securities to boost the ailing economy, though they appear unlikely to move swiftly.
...
"I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities," Federal Reserve governor Dan Tarullo said in a speech Thursday at Columbia University.

A new Fed mortgage-bond-buying program isn't a certainty.

Here is the speech by Dan Tarullo: Unemployment, the Labor Market, and the Economy

I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities (MBS), something the FOMC first did in November 2008 and then in greater amounts beginning in March 2009 in order to provide more support to mortgage lending and housing markets.
...
A large-scale MBS purchase program has many of the benefits associated with purchases of longer-duration Treasury securities, such as inducing investors to shift to other assets, including bonds and equities. But it could also have more direct effects on the housing market. By increasing demand for MBS, such a program should reduce the effective yield on those MBS, which in turn should put downward pressure on mortgage rates. The aggregate demand effect should be felt not just in new home purchases, but also in the added purchasing power of existing homeowners who are able to refinance. Indeed, homeowners who refinance get the equivalent of a permanent tax cut.
...
[T]he effectiveness of an MBS purchase program would be amplified, perhaps significantly, if certain nonmonetary policies were changed.

Proposals for promoting refinancing have been made by many academics, policymakers, and policy analysts. Any proposals that could sensibly and effectively be implemented would increase the effect of an MBS purchase program. For example, action could be taken to bring the benefits of refinancing to underwater borrowers. ... In practice, though, numerous obstacles have kept the program from helping many potentially eligible borrowers. Underwater borrowers whose loans are not guaranteed by GSEs are essentially unable to refinance at all. Policy changes directed at this last, larger group of homeowners would have to be carefully designed so as not to transfer credit risk from private investors to the government, and could well require legislation.

And from the WaPo: Bernanke shares concerns on European debt, action on housing

Federal Reserve Chairman Ben S. Bernanke delivered a stern warning Thursday to Senate Democrats regarding the European debt crisis and offered insight into stabilizing the ailing housing market, according to senators and aides who attended the meeting.

... much of the senators’ conversation with Bernanke revolved around “the growing recognition from everyone—economists across the board—that there needs to be some more dramatic action in housing.”

Bernanke declined to answer questions from reporters as he emerged from the Capitol Hill meeting. But, senators said, Bernanke told the caucus that some relief could come next week when the Federal Housing Finance Agency announces new plans to try to enable homeowners who are under water to refinance.

by Calculated Risk on 10/20/2011 07:05:00 PM

The Case-Shiller House Price index for August will be released Tuesday, Oct 25th. Two other indexes were released today:

• From FNC: Home Prices End Recent Seasonal Rebound with 0.8% Decline in August

FNC’s latest Residential Price Index, released Thursday, indicates U.S. home prices declined in August despite strong existing home sales during the month. This decline reverses a modest fourth-month long seasonal uptrend.
...
Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index™ 1 (RPI) indicates that single-family home prices fell in August to a seasonally unadjusted rate of 0.8%. As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are often sold with large price discounts due to poor property conditions.

The FNC index tables for three composite indexes and 30 cities are here.

• From Radar Logic today Radar Logic Sees Nothing But Weakness in Recent Housing Data

The seasonal decline in home prices shifted into high gear in August. The 25-metropolitan-area RPX Composite Price declined 0.8 percent from July to August, the largest decline for this time of year since the crash of 2008. The RPX Composite price declined 4.7 percent relative to August 2010 ...

Last month, we predicted that the S&P/Case-Shiller 10-City composite for July 2011 would be about 156 and the 20-City composite would be roughly 143. In fact, the 10-City composite was 156.23 and the 20-City composite was 142.77.

The August 2011 10-City composite index will be about 156, and the 20-City index will be roughly 142.

• CoreLogic reported earlier this month for August: Home prices decreased 0.4 percent on a month-over-month basis

August Home Price Index (HPI) which shows that home prices in the U.S. decreased 0.4 percent on a month-over-month basis, the first monthly decline in four months. According to the CoreLogic HPI, national home prices, including distressed sales, also declined on a year-over-year basis by 4.4 percent in August 2011 compared to August 2010.... Excluding distressed sales, year-over-year prices declined by 0.7 percent in August 2011 compared to August 2010 and by 1.7 percent in July 2011 compared to July 2010. ...

“Although the calendar says August, the end of the summer traditionally marks the beginning of ‘fall’ for the housing market as it begins to prepare for ‘winter.’ So the slight month-over-month decline was predictable ...” said Mark Fleming, chief economist for CoreLogic.

Case-Shiller is a 3 month average (June, July and August), but even with prices for June and July averaged in, the index will probably show price declines for August NSA. The expected seasonal decline in house prices has started.

On a Not Seasonally Adjusted (NSA) basis, as of July, the Case-Shiller composite 10 index was 3.8% above the post-bubble low. The Composite 20 index was 3.7% above the post-bubble low (NSA). Prices will probably fall to new lows (NSA) later this year or early in 2012.

Earlier:
• Existing Home Sales in September: 4.91 million SAAR, 8.5 months of supply
• Philly Fed Survey shows Expansion, Existing Home Sales NSA Graph
• Existing Home Sales graphs

by Calculated Risk on 10/20/2011 04:35:00 PM

Earlier:
• Existing Home Sales in September: 4.91 million SAAR, 8.5 months of supply
• Philly Fed Survey shows Expansion, Existing Home Sales NSA Graph
• Existing Home Sales graphs

On Tuesday, in a discussion of "builder confidence", I mentioned that "the builders delivered a record low number of housing units last year - and will probably break that record again this year."

I should have left out the "probably"; the builders will deliver a record low number of housing units this year (see the table at the bottom).

I am upping my forecast for multi-family deliveries this year. Usually it takes over a year on average to complete multi-family projects - and multi-family starts were at a record low last year. I still expect a record low number of multi-family units completed this year, however the builders have clearly accelerated construction on some projects (shorter time to completion).

The following graph shows the lag between multi-family starts and completions using a 12 month rolling total.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

Click on graph for larger image in graph gallery.

The rolling 12 month total for starts (blue line) is now above the rolling 12 month for completions (red line). However completions are now moving up too.

It is important to note that even with a strong increase in multi-family construction, it is 1) from a very low level, and 2) multi-family is a small part of residential investment (RI). Still this is bright spot for construction.

Below is a table of net housing units added to the housing stock since 1990. Note: Demolitions / scrappage estimated.

This means there will be a record low number of housing units added to the housing stock this year (good news with all the excess inventory), and that the overhang of excess inventory should decline significantly in 2011 depending on the rate of household formation (and that depends on jobs).

Housing Units added to Stock (000s)
	1 to 4 Units	5+ Units	Manufactured Homes	Sub-Total	Demolitions / Scrappage	Total added to Stock
1990	1010.8	297.3	188.3	1496.4	200	1296.4
1991	874.4	216.6	170.9	1261.9	200	1061.9
1992	999.7	158	210.5	1368.2	200	1168.2
1993	1065.7	127.1	254.3	1447.1	200	1247.1
1994	1192.1	154.9	303.9	1650.9	200	1450.9
1995	1100.2	212.4	339.9	1652.5	200	1452.5
1996	1161.6	251.3	363.3	1776.2	200	1576.2
1997	1153.4	247.1	353.7	1754.2	200	1554.2
1998	1200.3	273.9	373.1	1847.3	200	1647.3
1999	1305.6	299.3	348.1	1953	200	1753
2000	1269.1	304.7	250.4	1824.2	200	1624.2
2001	1289.8	281	193.1	1763.9	200	1563.9
2002	1360.1	288.2	168.5	1816.8	200	1616.8
2003	1417.8	260.8	130.8	1809.4	200	1609.4
2004	1555	286.9	130.7	1972.6	200	1772.6
2005	1673.4	258	146.8	2078.2	200	1878.2
2006	1695.3	284.2	117.3	2096.8	200	1896.8
2007	1249.8	253	95.7	1598.5	200	1398.5
2008	842.5	277.2	81.9	1201.6	200	1001.6
2009	534.6	259.8	49.8	844.2	150	694.2
2010	505.2	146.5	50	701.7	150	551.7
2011 (est)	430	135	46	611	150	461

by Calculated Risk on 10/20/2011 01:51:00 PM

Via Google Translate:

FRANCO-GERMAN PRESS

The President and German Chancellor spoke today by telephone to prepare the European dates in the coming days.

The President and the Chancellor have agreed to provide a comprehensive and ambitious global response to the current crisis in the euro area.

This response will include the following:

- The operational implementation of new forms of intervention EFSF.

- A plan to strengthen the capital of European banks.

- The implementation of the economic governance of the euro area and the strengthening of economic integration.

For a lasting solution to the situation in Greece, the Greek authorities will have to make ambitious commitments to address the situation of their economies as part of a new program. Based on the report of the troika and the analysis of debt sustainability Greece, France and Germany call for immediately undertake negotiations with the private sector to reach an agreement for strengthening sustainability.

The President and the Chancellor will meet Saturday night in Brussels ahead of the European Council summit in the euro area on Sunday.

France and Germany have agreed that all elements of this ambitious and comprehensive response will be discussed in depth at the summit on Sunday in order to be finally adopted by the Heads of State and Government at a second meeting later than Wednesday.

And in French:

COMMUNIQUÉ FRANCO-ALLEMAND

Le président de la République et la chancelière allemande se sont entretenus ce jour par téléphone pour préparer les échéances européennes de ces prochains jours.

Le président et la chancelière ont marqué leur accord complet pour apporter une réponse globale et ambitieuse à la crise que traverse actuellement la zone euro.

Cette réponse comportera notamment les éléments suivants :

- la mise en œuvre opérationnelle des nouvelles modalités d’intervention du FESF.

- Un plan de renforcement du capital des banques européennes.

- La mise en place de la gouvernance économique de la zone euro et le renforcement de l’intégration économique.

En vue d’une solution durable à la situation de la Grèce, les autorités grecques devront prendre des engagements ambitieux pour redresser la situation de leur économie dans le cadre d’un nouveau programme. Sur la base du rapport de la troïka et de l’analyse de la soutenabilité de la dette grecque, la France et l’Allemagne demandent que les négociations s’engagent immédiatement avec le secteur privé pour trouver un accord permettant de renforcer cette soutenabilité.

Le président de la République et la chancelière se retrouveront samedi soir à Bruxelles en amont du Conseil européen et du sommet de la zone euro de dimanche.

La France et l’Allemagne sont convenues que l’ensemble des éléments de cette réponse globale et ambitieuse sera examiné de manière approfondie lors du sommet de dimanche pour pouvoir être adopté définitivement par les chefs d’Etat et de gouvernement lors d’une deuxième rencontre au plus tard mercredi.

Earlier:
• Existing Home Sales in September: 4.91 million SAAR, 8.5 months of supply
• Philly Fed Survey shows Expansion, Existing Home Sales NSA Graph
• Existing Home Sales graphs