by Calculated Risk on 4/09/2012 04:31:00 PM

High gasoline and oil prices are a downside risk for the economy. So far - as Professor Hamilton noted in the previous post - prices haven't been too "disruptive". With Memorial Day still a month and a half away (May 28th), and it seems a little early to call the peak in gasoline prices for the spring ...

From Ronald White at the LA Times: Gasoline prices may have finally peaked for now

[T]he uncertainty over whether prices have peaked comes from the fact that 15 of the 23 states with the most expensive gasoline are still higher than they were at this time last week. Still, there was some guarded optimism among analysts.

"Gasoline prices in the hardest-hit areas have finally shown signs of relief with prices falling now in Chicago as they have for a few weeks in California," said Patrick DeHaan, senior petroleum analyst for GasBuddy.com. "We may see an earlier peak than we have in prior years."

From the Chicago Sun-Times: Gasoline prices in Chicago area fall double digits from record highs

In the Chicago area, the average price of unleaded regular gas Monday was $4.34 a gallon, down 17 cents from the record high of $4.506 reached March 27 and down 11 cents from April 2, according to AAA, Wright Express and the Oil Price Information Service.

In the city of Chicago, the average price was down 8 cents from a week earlier at $4.57 a gallon and down 11 cents from the record high of $4.678, also reached on March 27.

Note: The graph 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 4/09/2012 01:27:00 PM

Professor Hamilton reviews the current situation at Econbrowser: Current economic conditions

An excerpt on the impact oil and gasoline prices:

One of the big concerns of many analysts was that rising oil prices of the last 5 months might significantly slow down economic growth. My view is that the main mechanism by which oil prices can sometimes have a disproportionately disruptive effect on the economy is if they result in sudden shifts in the patterns of spending. One typical channel is a plunge in sales of the larger vehicles manufactured in the U.S., which then leads to further losses of income and jobs in the auto sector. But the evidence suggests that an oil price increase that just reverses a previous oil price decrease-- and that is basically what we've experienced so far in 2012-- is not nearly as disruptive as if the price were rocketing into uncharted territory. One reason for this is that recent consumers' vehicle purchase plans were already taking into account the possibility that $4 gas could soon return.

See Hamilton's post for much more on oil.

Hamilton concludes: "the economy undeniably continues to grow, the rate of that growth continues to disappoint".

by Calculated Risk on 4/09/2012 09:14:00 AM

Notes: The timing of different house prices indexes can be a little confusing. LPS uses January closings - other indexes usually report sales recorded in a month, and there is frequently a lag between closings and recording - so this is closer to what other indexes report for February (without the weighting of several months).

From LPS: LPS Home Price Index Shows U.S. Home Price Decline of 0.9 Percent in January; Early Data Suggests Slowing Likely in February, to 0.3 Percent Drop

LPS ...that starting with this month’s report, results are based on an updated view that more accurately tracks price changes for non-distressed homes. In addition to foreclosure price data the LPS HPI now accounts for the impact of short sale on estimates of normal market prices.

The updated LPS HPI national average home price for transactions during January 2012 declined 0.9 percent to a price level not seen since March 2003.

LPS excludes both foreclosures and short sales from the index - so this is non-distressed properties only. From LPS:

Among the 26 MSAs for which LPS and the Bureau of Labor Statistics both provide data, average prices in January increased only in Washington, D.C.

Fourteen of these MSAs saw declines of more than 1.0%, and three, San Francisco, Cleveland and Chicago declined more than 1.5%.

Note: Based on early data, LPS expects to report prices fell 0.3% in February.

by Calculated Risk on 4/08/2012 10:31:00 PM

A couple of updates to the weekly schedule:
Monday: LPS House Price Index for January.

Tuesday, 9:30 AM ET: Speech by FHFA acting director Edward DeMarco: "Addressing the Weak Housing Market: Is Principal Reduction the Answer?" at the The Brookings Institution, 1775 Massachusetts Ave., NW Washington, DC.

The Spanish 10 year yield is up to 5.76%.

The Asian markets are red tonight. The Nikkei is down about 1.1%, the Shanghai Composite is down 0.6%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are down 17, and Dow futures are down 140.

Oil: WTI futures are down to $101.99 and Brent is down to $122.38 per barrel.

Yesterday:
• Summary for Week Ending April 6th
• Schedule for Week of April 8th

by Calculated Risk on 4/08/2012 01:01:00 PM

On Friday I noted that Reis reported the mall vacancy rate declined slightly in Q1. The strip mall vacancy rate declined to 10.9% from 11.0% in Q4 2011, and the regional mall vacancy rate declined to 9.0% from 9.2% in Q4.

Here are a few more comments and a long term graph from Reis.

Comments from Reis Senior Economist Ryan Severino:

[Strip mall] Vacancies finally began to fall during the first quarter, declining by 10 bps. This is the first quarterly decline in the vacancy rate since the second quarter of 2005. In the periods leading up to the recession, excess building was to blame for the increase in vacancies. Since the advent of the recession, supply growth has been virtually nonexistent, but anemic demand drove vacancies upward.

Despite the first quarterly decline in vacancy since 2005, Reis is not yet convinced that a recovery for shopping centers has commenced. However, this says just as much about the limited increases in supply as it does about resurgent demand. New completions remain near historically low levels. With such low levels of supply growth, any semblance of healthy demand would have pushed vacancy rates downward in a more pronounced fashion. ... With construction projected to remain at low levels, Reis expects vacancies to begin moving downwards slowly in 2012 as demand for space slowly begins to return.
...
Regional malls posted relatively healthy results in the first quarter, with national vacancies declining by 20 bps to 9.0% This was the second consecutive quarter of vacancy declines. Asking rents grew by 0.2%, marking the third consecutive quarter of rent increases. Although regional malls are faring better then neighborhood and community centers at this juncture, this has as much to do with supply as demand. While demand for malls, particularly higher‐quality malls, is arguably stronger than demand for neighborhood and community center space, regional malls did not experience massive supply increases before the recession the way neighborhood and community centers did. In fact, the first new regional mall in the U.S. in six years opened during the first quarter of 2012.

The outlook for 2012 remains muddled. Although demand appears to be gathering strength, the developments are not uniformly positive. Best Buy recently announced that it was closing 50 big‐box stores, but opening 100 new, smaller Best Buy Mobile stores. Although the net effect is a reduction in occupied square footage, it will have a detrimental impact on power centers while benefitting other subtypes such as regional malls.

Click on graph for larger image.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the '00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to a higher vacancy rate even before the recession, and then a sharp increase during the recession and financial crisis.

Mall investment has essentially stopped following the financial crisis.

The good news is, as Severino noted, mall "completions remain near historically low levels", and the vacancy rate will probably continue to decline slowly.

Mall vacancy data courtesy of Reis.

Yesterday:
• Summary for Week Ending April 6th
• Schedule for Week of April 8th