by Calculated Risk on 2/19/2012 12:44:00 PM

The Census Bureau will report new home sales on Friday, and the consensus is for sales of 315 thousand on a seasonally adjusted annual rate (SAAR) basis. This is up less than 2% from the 310 thousand SAAR sales reported in January 2011.

That seems a little puzzling. Consider the following ...

First, look at the NAHB builder Housing Market Index. More builders still view sales as "poor" as opposed to "fair" or "good", but the HMI - and all of the components - are up sharply from a year ago (the most recent report was for February, but compare January 2012 to January 2011):

	Housing Market Index	Traffic of Prospective Buyers	Current Sales
Jan-11	16	12	15
Jan-12	25	21	25
Feb-12	29	22	30

This would seem to suggest more than a 1% or 2% increase in sales.

Second, look at the recent builder reports (from Tom Lawler):

	Settlements			Net Orders			Backlog
	End 2011	End 2010	End 2009	End 2011	End 2010	End 2009	End 2011	End 2010	End 2009
D.R. Horton	4,118	3,637	5,529	3,794	3,363	4,037	4,530	3,854	4,136
PulteGroup	4,303	4,405	6,200	3,084	3,044	3,748	3,924	3,984	5,931
NVR	2,391	2,639	2,550	2,158	1,765	2,000	3,676	2,916	3,531
The Ryland Group	1,040	909	1,666	915	775	969	1,514	1,187	1,732
Meritage Homes	894	837	1,202	749	713	621	915	778	1,095
Beazer Homes	882	549	961	724	553	728	1,309	800	950
MDC Holdings	950	865	1,109	523	519	637	1,043	842	826
Standard Pacific	782	619	943	615	428	547	681	414	599
M/I Homes	667	650	858	505	460	448	676	532	650
Total	16,027	15,110	21,018	13,067	11,620	13,735	18,268	15,307	19,450
YoY % Change	6.1%	-28.1%		12.5%	-15.4%		19.3%	-21.3%

From economist Tom Lawler on February 7th:

The latest Census report on new SF sales showed a YOY increase in Q4/2011 sales of just 3%, and a YOY decline in Q4/2010 sales of 20.5%.

The nine-builder group’s order backlog at the end of 2011 was up 19.3% from the end of 2010.

As I’ve noted many times, Census’ methodology for measured new SF sales is not directly comparable to reports from builders. I’m guessing that part of the “stronger than Census” builder reports reflect gains in market share, but I’m also guessing that overall new home sales were a bit better than preliminary Census data suggested.

The combination of higher order backlogs, stronger sales, and unusually mild weather in much of the country is likely to result in single-family starts numbers in the first few months of 2012 that are significantly higher than “consensus.”

Click on graph for larger image.

Sure enough. Single family housing starts were revised up sharply for December and were above 500 thousand SAAR in January. As Lawler notes, some of this was probably weather related, but some of the pick up was evident in the builder reports.

So if the builders are reporting a “stronger than Census” increase in sales (even accounting for market share gains), confidence is up (actually less pessimism), and single family starts are up sharply from a year ago, it seems surprising that new home sales were essentially unchanged in January.

Goldman Sachs is forecasting sales of 310 thousand SAAR in January 2012 (no change year-over-year), and Merrill Lynch is forecasting 315 thousand. I think I'll take the over.

by Calculated Risk on 2/19/2012 09:58:00 AM

The causes of the Great Recession were similar to the Great Depression - as opposed to most post war recessions that were caused by Fed tightening to slow inflation - and I'm frequently asked if we could compare the percent job losses during the two periods. Unfortunately there is very little data for the Great Depression, although there are some annual estimates.

From BLS economist Steven Haugen: Measures of Labor Underutilization from the Current Population Survey

It is estimated that in 1933, at the depth of the Great Depression, about 13 million persons in the U.S. were unemployed, which translates into an unemployment rate of about 25 percent.¹ However, those estimates were not available at the time. Throughout the Great Depression, there was little information on the extent of unemployment in the country. More important, there was no good way to assess whether the situation was getting better or worse. The wealth of timely statistical information on the labor market that we now take for granted simply didn’t exist.

¹ Stanley Lebergott, “Labor Force, Employment, and Unemployment, 1929-39: Estimating Methods,” Monthly Labor Review, July 1948.

However we can use some of the annual estimate to get a rough idea of the comparison to the current recession:

Click on graph for larger image.

This graph compares the job losses from the start of the employment recession, in percentage terms for the Great Depression (rough estimate) and the 2007 recession.

Although the 2007 recession is much worse than any other post-war recession, the employment impact was much less than during the Depression. Note the second dip during the Depression - that was in 1937 and the result of austerity measures.

This graph shows the job losses from the start of the employment recession, in percentage terms for the post war recessions. This shows the depth of the employment recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis - similar to the lingering effects of the Depression.

Yesterday:
• Summary for Week ending February 17th
• Schedule for Week of February 19th

by Calculated Risk on 2/18/2012 10:51:00 PM

The debt deal needs to be finalized before March 20th when €14.4bn of Greek bonds mature. Without the debt deal, Greece would default on March 20th.

On Monday Feb 20th, euro-area finance ministers are expected to meet in Brussels and approve the deal. According to Reuters:

Some officials in the 17-nation currency union warn chances of a deal at a euro zone meeting on Monday are little higher than 50-50.

Obviously approval isn't assured.

Sometime next week the Greek parliament is expected to pass legislation to insert "collective action clauses" in bonds to force all private holders to accept the deal. The final details of the swap are expected to be set at the Monday finance minister meeting, and the swap is scheduled to take place between March 8th and March 11th (cutting it close!). See Financial Times: Greece sets date for €200bn debt swap

Even with all the austerity and severe recession, most Greeks still want to stay in the euro, from Reuters:

A survey by pollster MRB for Sunday's Realnews newspaper showed 72.7 percent of Greeks want the country to stay in the euro

Here is a list of key dates:

Feb 20th: Euro-area finance ministers meet in Brussels.
Week of Feb 20th: Greek parliament to vote on legislation to insert "collective action clauses" in bonds.

March 1st and 2nd: EU leaders meet in Brussels.
March 8th: ECB holds rate meeting
March 8th - 11th: €200bn private sector bond swap is scheduled.
March 12th: Euro-area finance ministers meet in Brussels
March 20th: €14.4bn of Greek bonds mature.

Earlier:
• Summary for Week ending February 17th
• Schedule for Week of February 19th

by Calculated Risk on 2/18/2012 05:22:00 PM

From the Mercury News: Gas prices surging beyond $4 a gallon -- and they will go higher

Gasoline prices are rising at an almost unheard-of pace, and painfully so in California, where the cost for a fill-up now exceeds $4 a gallon in five cities and is approaching that dreaded mark in numerous others, including San Jose and Oakland.

The statewide average of $3.96 on Friday is 25 cents higher than just a month ago and 46 cents more than this time last year. ... Some oil analysts predict $4.50 a gallon or more by Memorial Day on the West Coast and major cities across the United States such as Chicago, New York and Atlanta.

High gasoline prices is one reason American are driving less. Brad Plumer at the WaPo discusses a few other reasons: Driving, gas prices and the end of retail

Americans have cut way back on driving in recent years. Total vehicle-miles traveled has stagnated since 2007. One big question is whether this is a temporary blip due to the downturn — unemployed people, after all, don’t commute — or evidence of a long-term structural shift.

Theories for a structural shift generally involve demographics: America’s swelling ranks of retirees don’t drive as much, while kids these days prefer Facebook to motoring around with friends. But there’s another possible factor: the torrid growth of online shopping. Phil Izzo has the numbers, which are striking.

And below is a graph of gasoline prices. Gasoline prices bottomed in December and have been moving up again. Note: The graph below shows oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 2/18/2012 01:15:00 PM

Earlier:
• Summary for Week ending February 17th

The key reports this week are the January existing home sales report on Wednesday and the new home sales report on Friday. The AIA's Architecture Billings Index for January will also be released on Wednesday.

On Friday, the US Monetary Policy Forum will be held in New York. The discussion will focus on a paper titled: “Housing, Monetary Policy and the Recovery”.

In Europe, the euro-area finance ministers will meet on Monday.

----- Monday, Feb 20th-----
All US markets will be closed in observance of Presidents' Day.

Euro-area finance ministers meet in Brussels to discuss the Greek debt deal.

----- Tuesday, Feb 21st -----
8:30 AM ET: Chicago Fed National Activity Index (January). This is a composite index of other data.

----- Wednesday, Feb 22nd -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been weak this year, although this does not include all the cash buyers.

10:00 AM: Existing Home Sales for January from the National Association of Realtors (NAR).

The consensus is for sales of 4.69 million on seasonally adjusted annual rate basis.

Economist Tom Lawler estimates the NAR will report sales of 4.66 million, up slightly from December’s pace. It is possible that months-of-supply will be under 6 months for the first time since early 2006, and that listed inventory will be at the lowest level since early-2005.

During the day: The AIA's Architecture Billings Index for January (a leading indicator for commercial real estate).

----- Thursday, Feb 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 355,000 from 348,000 last week.

10:00 AM: FHFA House Price Index for December 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

11:00 AM: Kansas City Fed regional Manufacturing Survey for January. The consensus is for an increase in this survey to 9 from 7 in January (above zero is expansion).

----- Friday, Feb 24th -----
10:00 AM ET: New Home Sales for January from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the current sales rate.

The consensus is for a slight increase in sales to 315 thousand Seasonally Adjusted Annual Rate (SAAR) in January from 307 thousand in December. The consensus might be a little low based on the homebuilder confidence survey.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for February). The consensus is for a slight increase to 72.9 from from the preliminary reading of 72.5.

During the day: 2012 US Monetary Policy Forum

[T]here will be a presentation on this year’s report on housing and the state of the recovery, which explores first, how bad is the physical and debt overhang of housing in the US economy? And secondly, does the peculiar state of the US housing market substantially limit the effectiveness of monetary policy that lowers long rates? The report titled "Housing, Monetary Policy and the Recovery," is being written by Mike Feroli (JP Morgan), Ethan Harris (Bank of America), Amir Sufi (Chicago Booth), and Ken West (University of Wisconsin). James Bullard (Federal Reserve Bank of Saint Louis) and John Williams (Federal Reserve Bank of San Francisco) will discuss the report.