by Calculated Risk on 11/14/2011 01:24:00 PM

The Italian 10 year bond yield is up to 6.7%.

And keep an eye on Spain ... The Spanish 10 year bond yield has increased to 6.1%. The Spanish 2 year yield is up to 5.0%

From Bloomberg: Merkel’s CDU Delegates at Party Gathering Support Allowing Exits From Euro

“We’re not throwing anybody out,” Finance Minister Wolfgang Schaeuble said in an interview from Leipzig with broadcaster Phoenix. “We want Greece to stay in, that everybody stays in,” he said. “But if a country can’t carry the burden or doesn’t want to carry the burden, and the Greek people have to carry a heavy load, then we have to respect the country’s decision.”

Earlier today, the Greek New Democracy opposition leader Antonis Samaras was quoted as saying his party would not vote for any austerity measures, and he would not sign any letter pledging a commitment to austerity measures. If so, Greece will probably be leaving the euro sooner rather than later.

by Calculated Risk on 11/14/2011 09:47:00 AM

Another house price index ...

The LPS HPI is a repeat sales index that uses public disclosure by county recorders or loan origination data for purchase loans (if the sales price isn't disclosed).

From LPS: Lender Processing Services’ Home Price Index Shows 3.8 Percent Year-Over-Year Decline in U.S. Home Prices in August; Nearly 30 Percent Off Market Peak

“In August sales transactions data, we saw the national average home price decline 0.9 percent, following a decline of 0.4 percent in July. This ended a series of increases during the spring of this year; a pattern that has occurred each year since 2009. In addition, the early, partial data for September sales indicates a likely further decline of approximately 1.1 percent to come. As of the end of August, the national average home price was $205,000. This is down 3.8 percent from August last year, and down 0.4 percent from January 1, 2011.”

Click on graph for larger image.

Home prices in August continued the downward trend begun after the market peak in June 2006. The LPS HPI average national home price has declined 28.3 percent since then. The total value of U.S. housing inventory covered by the LPS HPI stood at $10.6 trillion at the peak. As of the end of August 2011, it was $7.65 trillion. During the period of most rapid price changes, from July 31, 2007, through December, 2009, prices declined $56,000 from $282,000. The average annual decline during that time was 13.8 percent.

Since December 2009, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. Since then, the LPS HPI national average home price has fallen $20,000 from $225,000. This corresponds to an average annual decline of 3.6 percent.
...
Average prices declined during August in all but three of the 26 largest MSAs in the country that both the LPS HPI and Bureau of Labor Statistics’ economic data cover: Chicago, Detroit and Minneapolis remained essentially unchanged. Changes ranged from -0.3 percent in Honolulu to -2.8 percent in Atlanta (Table 1).

In 2005 - at the peak of the bubble - most reporting focused on NAR median house prices. However median prices can be distorted by the mix of homes sold. The most followed repeat sales price index in 2005 was the OFHEO HPI (now FHFA), but that index was only for the GSEs - and missed the worst loans. The Case-Shiller index didn't become widely followed until 2007, and now we have a number of house price indexes!

It appears all of the indexes will show new post-bubble lows later this year - or early in 2012.

by Calculated Risk on 11/14/2011 08:44:00 AM

From the NY Times: France Keeps a Watchful Eye on Turmoil in Italy

While Italy has replaced Greece as the focus of anxiety amid Europe’s worsening debt crisis, investors are increasingly concerned about the outlook for France, whose banks are among the world’s biggest and are closely linked with their counterparts in the United States.

One crucial gauge of investor sentiment, the difference between what France pays to borrow versus what Germany pays, has doubled since the beginning of October ...

From the WSJ: Italy Passes Bond Test — At a Cost

Italy cleared its first hurdle since economist Mario Monti agreed to form a caretaker government to force through tough fiscal reforms, comfortably selling €3 billion of short-dated bonds Monday ... The five-year bonds were sold at an average yield of 6.29%, up from 5.32% at the last tap in October, the Bank of Italy said. That was the most Italy had to pay for five-year funds at an auction during the euro era, but the yields were sharply below the peaks of 7.73% seen last week when the country's political crisis escalated.

The bonds got bids for 1.47 times the amount on offer, up from 1.34 times at the previous auction.

From the Financial Times: Eurozone crisis: live blog

[German chancellor Angela Merkel] spelt out her determination to use the crisis to forge closer EU integration in the long-term, with “political union” as the ultimate goal.

“It is time for a breakthrough to a new Europe,” she declared. “That means to build Europe in such a way that the euro has a future.”

It meant an end to eurozone governments financing their spending with debt – at the expense of future generations, she said. EU treaty change would be needed to embed budget discipline in the fundamental rules, including automatic sanctions for those who exceeded the limits on their debt and budget deficits.

From the Athens News: Samaras will not support new measures

The New Democracy leader Antonis Samaras said on Monday that his party would not vote for any new austerity measures and said the mix of policies demanded by international lenders should be changed.

"We will not vote for any new measures," Samaras told a meeting of his own MPs.

He added that he would not sign any letter pledging a commitment to austerity measures, as has been demanded by EU Economic and Monetary Affairs Commissioner Olli Rehn, and that a verbal pledge should be sufficient.

Without his support, Greece will probably not receive additional aid.

Below is a table for several European bond yields (links to Bloomberg).

The Italian 10 year bond yield is up to 6.6%.

The Spanish 10 year bond yield has increased to 6.0%. The Spanish 2 year yield is up to 4.8%.

The French 10 year bond yield is at 3.4%.

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year

by Calculated Risk on 11/13/2011 07:09:00 PM

This morning I linked to an LA Times article about marijuana grow houses in Las Vegas ... here is another use for vacant homes:

From Patricia Leigh Brown at the NY Times: Animal McMansion: Students Trade Dorm for Suburban Luxury

While students at other colleges cram into shoebox-size dorm rooms, Ms. Alarab, a management major, and Ms. Foster, who is studying applied math, come home from midterms to chill out under the stars in a curvaceous swimming pool and an adjoining Jacuzzi behind the rapidly depreciating McMansion that they have rented for a song.

Here in Merced, a city in the heart of the San Joaquin Valley and one of the country’s hardest hit by home foreclosures, the downturn in the real estate market has presented an unusual housing opportunity for thousands of college students. Facing a shortage of dorm space, they are moving into hundreds of luxurious homes in overbuilt planned communities.

Sounds like fun - and definitely better than the dumps I lived in going to college. Unfortunately these might be the nicest homes they live in for a number of years ...

Earlier:
• Schedule for Week of Nov 13th
• Summary for Week Ending Nov 11th
• Downside Risks for the U.S. economy.

by Calculated Risk on 11/13/2011 04:44:00 PM

No surprise ...

From the WSJ: Italy's Monti to Form New Government

"We need to fix Italy's financial situation and restart growth while paying particular attention to creating an equitable society," Mr. Monti said in a speech ...

Mr. Monti said he would name a cabinet quickly. Before the new administration can start operating, it needs approval from both houses of Parliament—a green light that is expected within days.
...
Though Mr. Monti's new government is likely to be approved quickly by Parliament, any honeymoon period will be short. First off are likely to be more budget cuts than those already announced by Italy last summer in order to balance its budget by 2013.

I wonder what Monti's proposals are to restart growth and to create a more equitable society?

From the NY Times: Mario Monti Tapped to Lead Italy Out of Debt Crisis

[I]n a sign of political wrangling to come, the leader of Mr. Berlusconi’s People of Liberty party said that the party would support a Monti government for only as long as it could fulfill its mandate to push through measures to help reduce Italy’s $2.6 trillion public debt and increase growth to keep the country competitive. The party had been pushing for early elections, and media reports said that Mr. Monti hoped to serve until the end of the current legislature in 2013.
...
On Monday, Mr. Monti was expected to present a cabinet of nonpoliticians and introduce his program before Parliament, where a majority must vote confidence in his government.

Yesterday:
• Schedule for Week of Nov 13th
• Summary for Week Ending Nov 11th