by Calculated Risk on 1/11/2012 02:00:00 PM

Fed's Beige Book:

Contact reports from the twelve Federal Reserve Districts suggest that national economic activity expanded at a modest to moderate pace during the reporting period of late November through the end of December. Seven Districts characterized growth as modest; of the remaining five, New York and Chicago noted a pickup in the pace of growth, Dallas and San Francisco reported moderate growth, and Richmond indicated that activity flattened or improved slightly. Compared with prior summaries, the reports on balance suggest ongoing improvement in economic conditions in recent months, with most Districts highlighting more favorable conditions than identified in reports from the late spring through early fall.
...
Consumer spending picked up in most Districts, reflecting significant gains in holiday retail sales compared with last year's season, and activity in the travel and tourism sector expanded in most areas.
...
Upward price pressures and price increases remained quite limited for most categories of final goods and services, as the effects of prior increases in the costs of selected inputs have eased.

And on real estate:

Activity in residential real estate markets largely held steady at very low levels, with the exception of further increases in the construction of multifamily residences. The pace of single-family home sales remained quite sluggish throughout the country, although the Dallas District reported a modest increase over the prior reporting period. Some Districts, such as Boston and Atlanta, noted that home sales exceeded levels from twelve months earlier, but mainly because the earlier levels reflected a substantial drop following the expiration of the homebuyers' tax credit in mid-2010. Prices were largely stable on a short-term basis in most areas but in many instances were below their levels from twelve months earlier. Extensive inventories of distressed properties were reported to be a source of price restraint in the Boston, Richmond, Chicago, and San Francisco Districts.
...
Demand for nonresidential real estate remained somewhat soft overall but improved in a number of Districts. Vacancy rates and other indicators in markets for office space were largely unchanged in the major metropolitan markets in the Boston, Philadelphia, Cleveland, Richmond, and St. Louis Districts. By contrast, New York reported that demand for office space "picked up in late 2011," causing vacancy rates to edge down and asking rents to rise.

This was based on data gathered on or before December 30th. More sluggish growth...

by Calculated Risk on 1/11/2012 12:53:00 PM

A few comments from Herman Van Rompuy, president of the European Council (translation via Google Translate):

It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an "optimum currency area"

It's not just government, to "sovereign debt" but also excesses in the financial sector, real estate etc.

We must do everything to avoid recession. ... We need a fiscal strategy that is "growth friendly"

Fiscal consolidation will not tell us to say "no" to all or which is cut everywhere. We must "prioritize"

We ask each member state to establish a "job plan", we make commitments we can evaluate

This is a prelude to the next European Union summit meeting in Brussels on January 30th - the key topic will be a growth agenda.

Maybe even Germany will pay attention to growth now that the German economy appears headed into recession too (no surprise since they export to other EU countries that are already in recession), from the WSJ: German Economy Shrank Slightly at End of 2011

Germany's statistics office said GDP slid around 0.25% in the fourth quarter from the third, ending a two-year expansion.

by Calculated Risk on 1/11/2012 11:10:00 AM

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: LPS Home Price Index Shows U.S. Home Prices Declined 0.8 Percent to Late 2002 Levels in October; Early Data Suggest 0.5 Percent Drop in November Likely

The LPS HPI national average home price for transactions during October 2011 was $200,000 – a decline of 0.8 percent during the month relative to September, reaching a price level not seen since October of 2002. This is the fifth consecutive month of decreases in prices. The partial data available for November suggests more moderation of price declines to approximately 0.5 percent.

Click on graph for larger image.

Figure 1: "Prices have fallen since autumn 2008 with brief interruptions each spring. Prices have not been at the current level since October 2002."

During the period of most rapid price declines, from June 2007 through December 2008, the LPS HPI national average home price dropped $56,000 from $282,000, which corresponds to an average annual decline of 13.8 percent. Since December 2008, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. During this period of more slowly declining prices, the national average price has fallen approximately $26,000 from $226,000.

The October national average price is down 2.7 percent from the average price at the beginning of the year.

The LPS index is already showing a new post-bubble low, and it appears all of the price indexes will show new post-bubble lows later this year - or early in 2012.

by Calculated Risk on 1/11/2012 08:20:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 4.5 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending January 6, 2012. The results include an adjustment to account for the New Year's Day holiday.
...
The Refinance Index increased 3.3 percent from the previous week. The seasonally adjusted Purchase Index increased 8.1 percent from one week earlier. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.11 percent from 4.07 percent ...

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.34 percent from 4.41 percent ...

The following graph shows the MBA Purchase Index and four week moving average since 1990.

Click on graph for larger image.

The purchase index increased last week, and the 4-week average decreased slightly. This index has mostly been sideways for the last 2 years - and at about the same level as in 1997.

by Calculated Risk on 1/11/2012 12:47:00 AM

From the WSJ: Trouble Is Brewing for Office Market

[M]any [office] owners who have been able to keep their heads above water are being undone by tenant contractions and the expiration of five-year leases that were signed at the peak of the boom.

Rents in most markets are still well below what they were in 2007, with the drop in some areas as much as 26%, according to data firm Reis Inc. Because of the weak market, landlords with empty space or expiring leases also have to spend large amounts on incentives to attract tenants, like free rent and interior work.

Defaults and foreclosures are rising. The delinquency rate of office loans that were securitized hit 9% in December, up from 7.4% in June.

As these older leases expire, the tenants are demanding lower rents - or they are moving. Since some of these owners are barely "keeping their heads above water" with the old lease rates, lower rents or higher vacancies are leading to more defaults.

Even with a little improvement in the economy there is still more pain to come for commercial real estate, especially for offices and malls.