by Calculated Risk on 12/13/2011 10:15:00 PM

From DataQuick: Southland November Home Sales Rise; Median Price Still Below Year Ago

The number of homes sold in Southern California rose modestly last month from both October and a year earlier as investors and first-time buyers targeted homes priced below $400,000. Sales above $500,000 fell nearly 16 percent from a year earlier amid a troubled market for larger home loans ...

While November sales of existing (not new) houses and condos combined rose 5.8 percent from a year earlier, sales of newly built homes fell 15.2 percent to the lowest level on record for a November. [CR note: the Census Bureau reports new home sales when contracts are signed, DataQuick reports at closing - so this fits with the record low contracts reported earlier this year]
...
Distressed property sales accounted for 51.3 percent of the Southland resale market last month, down from 52.3 percent in October and down from 53.4 percent a year earlier. Nearly one out of three homes resold last month was a foreclosure, while roughly one in five was a “short sale.”
...
Absentee buyers, mainly investors and vacation-home buyers, purchased a near-record 24.8 percent of the Southland homes sold in November, paying a median $200,000.

Over half of existing home sales in SoCal were distressed sales in November; a very unhealthy market.

NAR is scheduled to report November existing home sales on Wednesday, December 21st. The big story this month will be the downward revisions to sales and inventory for the years 2007 through 2011.

I expect the NAR to report sales in November in the low 4 million range on a seasonally adjusted annual rate basis (the NAR reported October sales at 4.97 million SAAR, but that will be revised down significantly).

Earlier:
• Retail Sales increased 0.2% in November
• BLS: Job Openings "essentially unchanged" in October
• Ceridian-UCLA: Diesel Fuel index increased 0.1% in November
• NFIB: Small Business Optimism Index increases in November
• Lawler on NAR Revisions for 2007 through 2011

by Calculated Risk on 12/13/2011 06:42:00 PM

I posted yesterday about some speculation that the losses at MF Global might be related to rehypothecation. Several people who know better than me have told me that is unlikely.

Terrence Duffy, the chief executive of the CME Group, suggested today that there was a "loan" of customer money to MF Global.

From the NY Times DealBook on the Senate Panel Hearing on MF Global

Terrence Duffy, the chief executive of the CME Group, the exchange responsible for regulating MF Global, says he has information that indicates Mr. Corzine knew about some of the missing customer money.
...
Mr. Duffy is claiming that he was told of this revelation on Saturday by someone in his legal department, and did not know it when he testified before Congress last week.

“Somebody went in and violated the rules of the CME and the rules of the government,” he said.
...
While Mr. Duffy clearly aimed to throw the attention on what Mr. Corzine knew of the illegal transfers, subsequent guidance (or lack thereof) from CME has softened the accusation. They are now saying that the information they received indicated Mr. Corzine knew about the loans, but not whether they knew these loans were illegal or improper. They cannot comment on that, they said.

by Calculated Risk on 12/13/2011 03:35:00 PM

CR Note: Economist Tom Lawler first noted that the NAR appeared to be overestimating sales in 2009. In late 2010 other economists approached NAR with questions. From Nick Timiraos at the WSJ in Feb 2010: Home Sales Data Doubted

Several economists approached NAR late last year [late 2010] with questions about its modeling. NAR economists promised to study the issue during a December conference call that included economists from the Mortgage Bankers Association, Fannie Mae, Freddie Mac, the Federal Reserve, the Federal Housing Finance Agency and CoreLogic.

In January, I hinted about this meeting and that there would be significant downward revisions. The revisions will be announced on Dec 21st.

From economist Tom Lawler: NAR to Release Existing Home Sales Revisions this Month

The National Association of Realtors yesterday sent out a media advisory [announcing] that it would release its benchmark revisions to its existing home sales estimates on December 21st. Here is what the NAR sent out:

The National Association of Realtors will release benchmark revisions to existing-home sales at the December 21 lock-up news briefing for the November report, which will begin 30 minutes before the normal briefing at 9:30 a.m. for monthly data. All data can be released at 10:00 a.m. EST.

Although there are downward revisions for total sales in recent years, there is little change to previously reported monthly comparisons or characterizations based on percentage change. There is a comparable downward revision to unsold inventory, so there is no change to relative month’s supply. Also, there is no change to median home prices.

An up-drift in sales projections developed over time between the fixed model for calculating sales rates and the actual marketplace, including growth in multiple listing service coverage areas, geographic population shifts, a decline in for-sale-by-owner transactions, some new-home sales trickling into MLS data and some individual sales being recorded in more than one MLS. Divergence of the data with other housing data metrics began in 2007, so revisions for 2007 through the present will be released.

NAR began to capture a larger share of actual transactions than was assumed in the calculation model based on the 2000 Census; resolving these issues has taking longer than anticipated in the absence of decennial data from the U.S. Census Bureau, which are no longer collected. Other major statistical series such as Gross Domestic Product and employment figures go through comparable periodic benchmark revisions to produce the most accurate data possible; the new benchmark process will permit much more frequent revisions.

NAR began its normal process for benchmarking sales at the beginning of this year in consultation with outside housing market experts. Data for the new benchmark was presented to and discussed with representatives of organizations including the Federal Reserve Board, Department of Housing and Urban Development, Freddie Mac, Fannie Mae, Mortgage Bankers Association, National Assocation of Home Builders, CoreLogic, etc.; and some individual economists.

Normal annual revisions will be released with January existing-home sales on February 22, 2012. Those revisions are expected to be minor and will fine-tune the data back though 2007.

While the NAR did not hint at the magnitude of the downward revisions, the “consensus” is that 2010 existing home sales will be revised downward by about 13% or so (yup, there’s a “consensus” for everything!).

In the past the NAR has done benchmark revisions based on decennial Census data (for owner-occupied transactions) and the decennial Residential Finance Survey (for “investor/vacant home” transactions, with this latter estimate being pretty “squishy"). Because of data availability lags, past benchmark revisions have not been released until MANY years after the end of a decade. The benchmark revisions for 1999 were not released until February 2005, and resulted in decline in estimated existing SF home sales of about 11%.

This decade, of course, the NAR could not continue with the same methodology, as the decennial Census no longer included the so-called “long form” with the data needed for the benchmarking (the “long form” is used in the ACS).

What drove the ACCELERATED benchmarking, however, were reports indicating that in many parts of the country existing home sales based on publicly recorded sales were showing SUBSTANTIALLY lower sales [than] the NAR estimates.

E.g., long-time readers will remember that I first started writing about this trend back in 2009, with my first piece focused on the widening “gap” between the NAR’s estimate of existing home sales in California and Dataquick’s data on “arms-length” existing home sales based on deeds recorded in the Golden State. DQ’s coverage of transactions in California is pretty complete, and its process for weeding out “non-arms-length” transactions seems pretty robust.

This issue got more media attention, however, when CoreLogic wrote a piece in its February 2011 “U.S. Housing and Mortgage Trends” report indicating that its data on existing sales based on public records covering “over 80%” of the US housing market strongly suggested that the NAR’s existing home sales estimates during the housing downturn were significantly overstated.

Many analysts were hoping that the NAR’s new methodology would be based on publicly recorded transactions, and apparently the NAR’s staff actually did explore this avenue. Rumor has it, however, that the new “benchmark” revisions will NOT be based on publicly recorded transactions – in part, apparently, because data coverage in many states is not comprehensive; data quality in many states/counties is poor; AND there are disparities among various private vendor estimates of sales based on publicly-recorded transactions.

An alternative for the NAR would be to use an approach similar to its old “Census/RFS” approach, but instead (1) to use the American Community Survey data for owner-occupied existing transactions; and (2) to make “crude” assumptions about turnover rates (and use some American Housing Survey data (ick!) to “guesstimate” transactions on investor/vacant homes.

Any approach, however, will result in a material reduction in estimated sales over the last few years – though the result will still be estimates and not actuals.

CR Note: This was from economist Tom Lawler.

by Calculated Risk on 12/13/2011 02:16:00 PM

FOMC Statement:

Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.

by Calculated Risk on 12/13/2011 12:44:00 PM

This is the UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index Increased 0.1 Percent in November

The Ceridian-UCLA Pulse of Commerce Index®(PCI®), issued today by the UCLA Anderson School of Management and Ceridian Corporation, rose 0.1 percent in November following a 1.1 percent increase in October.

On a year-over-year basis, the PCI grew 0.9 percent in November compared to the 1.3 percent year-over-year increase in October. “The continuing weakness in the PCI is out-of-sync with real retail sales. The year-over-year increase in real retail sales through October was 3.6 percent compared with an increase in the PCI of 1.3 percent. The disconnect between real retail sales and the PCI suggests that retailers have learned to better manage their inventory. Therefore, shoppers can anticipate fewer bargains in the month ahead, and relatively little stock left for the after-Christmas sales,” said Ed Leamer, chief economist for the Ceridian-UCLA Pulse of Commerce Index and director of the UCLA Anderson Forecast.
...
Based on the latest PCI data, our forecast for November Industrial Production is a 0.06 percent increase when the government estimate is released on December 15.

Click on graph for larger image.

This graph shows the index since January 2000.

This index declined sharply in late summer and has only partially rebounded over the last two months. Mostly this has been sideways this year (only up 0.9% from November 2010).

Note: This index does appear to track Industrial Production over time (with plenty of noise).


All current Transportation graphs