by Calculated Risk on 5/08/2012 12:54:00 PM

First a bit of an apology: Back in February, when I wrote “The Housing Bottom is Here”, I received a number of positive emails (even from people who disagreed with me), and many more negative emails. One person wrote: “No credible informed analyst would call the housing bottom now. You are doing a disservice to your readers.” I’d like to think I’m impervious to criticism, but I admit that comment bothered me.

That is why I posted the list yesterday of “informed” analysts who now believe we are at or near the bottom for house prices. Of course we could all be wrong – these are just forecasts – and house prices don’t care who calls the bottom. But I’d only be doing a disservice to my readers if I didn’t write what I believe – and I do think there is a good chance nominal house prices have bottomed on a national basis.

Just to be clear: there are also informed and credible analysts who think house prices will fall further.

But if I’m correct about house prices – and the CoreLogic report released this morning is another indicator that prices may be stabilizing - I think we should start asking what the economic impact of stabilizing house prices will be.

Prices don’t have to start increasing to have a positive impact on the economy; just stop falling. As an example, Freddie Mac just noted that “stabilizing home prices in certain geographical areas with significant REO activity” led to lower REO expenses in Q1.

We are probably already seeing the impact of stabilizing prices on housing inventory. If potential sellers think prices will fall further, then they will rush to sell and list their homes right away. But if potential sellers think prices are stabilizing, and may even increase, they are more willing to wait for a better market or to sell when it is most convenient. I think we are seeing that right now.

More importantly, I think stabilizing prices will give hope to some “underwater” homeowners and we will probably see mortgage default rates fall quicker. And over time, buyers will gain confidence that prices have stopped falling, and I expect demand to increase – and also for more private lenders to reenter the mortgage market and help support that demand (here is an example).

And this demand will also boost homebuilding and new home sales – since homebuilders will have a better idea of the pricing needed to compete in a market (falling prices makes it hard to plan).

These are just some preliminary thoughts ...

by Calculated Risk on 5/08/2012 10:37:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 3.7 million job openings on the last business day of March, little changed from February but up significantly from a year earlier, the U.S. Bureau of Labor Statistics reported today.
...
The number of total nonfarm job openings has increased by 1.3 million since the end of the recession in June 2009.
...
The quits rate can serve as a measure of workers’ willingness or ability to change jobs. In March, the quits rate was unchanged for total nonfarm, total private, and government. The number of quits was 2.1 million in March 2012, up from 1.8 million at the end of the recession in June 2009.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for March, the most recent employment report was for April.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in March to 3.737 million, up from 3.565 million in February. The number of job openings (yellow) has generally been trending up, and openings are up about 17% year-over-year compared to March 2011. This is the highest level for job openings since July 2008.

Quits increased in March, and quits are now up about 8.5% year-over-year and quits are now at the highest level since 2008. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").
All current employment graphs

by Calculated Risk on 5/08/2012 09:04:00 AM

Notes: This CoreLogic House Price Index report is for March. The Case-Shiller index released two weeks ago was for February. Case-Shiller is currently the most followed house price index, however CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® March Home Price Index Shows Slight Year-Over-Year Decrease of Less Than One Percent

[CoreLogic March Home Price Index (HPI®) report] shows that nationally home prices, including distressed sales, declined on a year-over-year basis by 0.6 percent in March 2012 compared to March 2011. On a month-over-month basis, home prices, including distressed sales, increased by 0.6 percent in March 2012 compared to February 2012, the first month-over-month increase since July 2011.

Excluding distressed sales, month-over-month prices increased for the third month in a row. The CoreLogic HPI also shows that year-over-year prices, excluding distressed sales, rose by 0.9 percent in March 2012 compared to March 2011. Distressed sales include short sales and real estate owned (REO) transactions.

“This spring the housing market is responding to an improving balance between real estate supply and demand which is causing stabilization in house prices,” said Mark Fleming, chief economist for CoreLogic. “Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales.”

“While housing prices remain flat nationally, in many markets tighter inventories are beginning to lift home prices,” said Anand Nallathambi, president and chief executive officer of CoreLogic.

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.6% in March, and is down 0.6% over the last year.

The index is off 34% from the peak - and is just above the post-bubble low set last month.

The second graph is from CoreLogic. The year-over-year declines are getting smaller - this is the smallest year-over-year decline since 2010 when prices were impacted by the housing tax credit.

The year-over-year change will probably turn positive in April or May. The "stabilization" of house prices is a significant story.

by Calculated Risk on 5/08/2012 08:06:00 AM

From the National Federation of Independent Business (NFIB): Small-Business Optimism Gains Two Points in April

After taking a dip in March, the Index of Small Business Optimism gained 2 points in April, settling at 94.5. The reading is the highest since December 2007, however, April’s gain only returns the Index to its February 2011 level, indicating that in a year, the net gain has been zero. While March did not post strong job creation numbers, labor market indicators did improve, suggesting better job growth in the next few months.
...
“While the Index remains historically weak, there was good news in the details of April’s report. Job creation plans, job openings and capital spending plans all increased. Hopefully, this performance will hold in the coming months,” said NFIB Chief Economist Bill Dunkelberg.
...
The percent of owners reporting positive sales trends quarter on quarter reached the highest level seen since April 2006.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image.

This graph shows the small business optimism index since 1986. The index increased to 94.5 in April from 92.5 in March. This ties February 2011 as the highest level since December 2007.

Another positive sign is that the "single most important problem" was not "poor sales" in April - for the first time in years. In the best of times, small business owners complain about taxes and regulations, and that is starting to happen again.

This index remains low, but as housing continues to recover, I expect this index to increase (there is a high concentration of real estate related companies in this index).

by Calculated Risk on 5/07/2012 11:17:00 PM

From the NY Times: Bank of America Starts Mortgage Reduction Effort (ht bearly)

Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each.

The reduction for qualifying homeowners could amount to monthly savings of up to 35 percent on mortgage payments, Bank of America said in a news release on Monday evening.

The principal reduction offers from Bank of America Home Loans are the result of a $25 billion settlement agreement earlier this year ...