by Calculated Risk on 12/19/2011 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) increased in December to 21 from 19 in November. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Rises for the Third Consecutive Month

Builder confidence in the market for newly built, single-family homes edged up two points from a downwardly revised number to 21 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December, released today. This marks a third consecutive month in which builder confidence has improved, and brings the index to its highest point since May of 2010.
...
“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” said NAHB Chief Economist David Crowe. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”
...
Each of the HMI’s three component indexes registered a third consecutive month of improvement in December. The component gauging current sales conditions rose two points in the latest month to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May of 2008.

Builder confidence primarily gained strength in the South in December, where a four-point gain to 25 brought that region’s HMI score to its highest level since March of 2008. A one-point gain to 16 was registered in the West, while the Midwest held unchanged at 24 and the Northeast slipped one point to 15.

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the December release for the HMI and the October data for starts (November housing starts will be released tomorrow).

Both confidence and housing starts have been moving sideways at a very depressed level for several years - but confidence seems to be moving up a little now. This is still very low, but this is the highest level since May 2010 - and that boost was due to the housing tax credit. Not counting the tax credit, the last time the index was above this level was in 2007.

All Housing Graphs
Weekend:
• Summary for Week ending Dec 16th
• Schedule for Week of Dec 18th
• Ten Economic Questions for 2012

by Calculated Risk on 12/19/2011 08:30:00 AM

The BuildFax Residential Remodeling Index increased for the twenty-fourth straight month in October to 147.6, a new high for the index. This was up from 141.4 in September, and up 39% year-over-year from 105.8 in October 2010. This is based on the number of properties pulling residential construction permits in a given month.

In October 2011, all four regions - West, Midwest, Northeast and South - had gains. The West is at a new all time high, and is up 52% year-over-year. The Midwest is near an all time high, and is up 20% year-over-year. The South is up 11% year-over-year and the Northeast was up from September but is still down 4% year-over-year.

Click on graph for larger image.

This graph shows the NSA index by region. Most of the recent increase is in the West and Midwest. The South is also starting to increase.

Note: Permits are not adjusted by value, so this doesn't mean there is more money being spent, just more permit activity. Also some smaller remodeling projects are done without permits and the index will miss that activity.

Since there is a strong seasonal pattern for remodeling, the second graph shows the year-over-year change from the same month of the previous year.

Even though new home construction is still moving sideways, two other components of residential investment are doing better: multi-family construction and home improvement. Data Source: BuildFax, Courtesy of Index.BuildFax.com

All Housing Graphs

by Calculated Risk on 12/19/2011 12:09:00 AM

From CNN: North Korea's longtime leader Kim Jong Il dead at 69. A little more uncertainty ...

The Asian markets are red tonight. The Nikkei is down about 1%, and the Hang Seng is down 2.5%. The Seoul Composite is down over 3%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are down 7.5 and Dow futures are down 70.

Oil: WTI futures are down to $92.67 and Brent is down to $102.50 per barrel.

Earlier:
• Summary for Week ending Dec 16th
• Schedule for Week of Dec 18th
• Ten Economic Questions for 2012

by Calculated Risk on 12/18/2011 07:45:00 PM

From the Financial Times: Draghi warns on eurozone break-up

Here is the transcript of the interview with ECB president Mario Draghi. A few excerpts:

Financial Times: ... these austerity programmes are very harsh. Don’t think that some countries are really in effect in a debtor’s prison?

Mario Draghi: Do you see any alternative?

FT: They could leave the eurozone?

MD: ... Leaving the euro area, devaluing your currency, you create a big inflation, and at the end of that road, the country would have to undertake the same reforms that were due to begin with, but in a much weaker position.

There are alternatives, as an example see Tim Duy's Europe Still Heading For Collapse

This sounds like "an endless vista of austerity", and that will not survive the polling booths for long.

Earlier:
• Summary for Week ending Dec 16th
• Schedule for Week of Dec 18th
• Ten Economic Questions for 2012

by Calculated Risk on 12/18/2011 02:01:00 PM

Last year I listed Ten Economic Questions for 2011. These are still important questions for 2012, so once again I'll try to add some thoughts on these questions - and a few predictions - before the end of year.

1) House Prices: How much further will house prices fall on the national repeat sales indexes (Case-Shiller, CoreLogic)?

2) Residential Investment: Residential investment (RI) made a modest positive contribution to GDP growth in 2011, the first positive contribution since 2005. RI is mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales. Historically RI has been the best leading indicator for the economy, but the growth in RI will probably be modest again in 2012. How much will RI increase in 2012?

3) Distressed house sales: Foreclosure activity is still very high, although activity slowed in 2011 because of "foreclosure gate" issues. The number of REOs (Real Estate Owned by lenders) also declined in 2011. Will foreclosure activity pick up in 2012?

4) Economic growth: It appeared GDP growth would increase a little in 2011, but then the economy was hit by a series of shocks including extreme weather (significant snow storms, flooding, hurricane Irene), the oil price increase related to the "Arab Spring", the tsunami in Japan, and the debt ceiling debate in D.C. during late July and early August. Even with all these shocks, 2011 real GDP growth was still positive, but below trend.

Heading into 2012 there are significant downside risks from the European financial crisis and from U.S. fiscal tightening. Will the U.S. economy grow in 2012? Or will there be another recession?

5) Employment: The U.S. economy added about 132 thousands payroll jobs per month in 2011 through November (156 thousand private sector). Although this was an improvement from 2010, this was still weak payroll growth for a recovery. How many payroll jobs will be added in 2012?

6) Unemployment Rate: The unemployment rate is still elevated at 8.6% in November. Last year, my prediction was for the unemployment rate to still be above 9% in December 2011. I thought the participation rate would increase a little in 2011 - however the participation rate continued to decline - and that pushed down the unemployment rate.

I still think we will see some bounce back in the participation rate - and that will put upward pressure on the unemployment rate. What will the unemployment rate be in December 2012?

7) State and Local Governments: It is starting to look like there will be less drag in 2012 than in 2011. How much of a drag will state and local budget problems have on economic growth and employment?

8) Europe and the Euro: What will happen in Europe in 2012? How much of a drag will the problems in Europe have on U.S. growth?

9) Inflation: Will the inflation rate rise or fall in 2012?

10) Monetary Policy: Will the Fed introduce QE3? Will the Fed change their communication strategy and include the likely future path of the Fed Funds rate?

Earlier:
• Summary for Week ending Dec 16th
• Schedule for Week of Dec 18th