by Calculated Risk on 5/24/2012 10:45:00 AM

The FDIC released the Quarterly Banking Profile today for Q1 2012.

Here is the press released from the FDIC: FDIC - Insured Institutions Earned $35.3 Billion in the First Quarter of 2012

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $35.3 billion in the first quarter of 2012, a $6.6 billion improvement from the $28.8 billion in net income the industry reported in the first quarter of 2011. This is the 11th consecutive quarter that earnings have registered a year-over-year increase. However, loan balances declined by $56.3 billion (0.8 percent) after three consecutive quarterly increases.

FDIC Acting Chairman Martin J. Gruenberg said, "The condition of the industry continues to gradually improve. Insured institutions have made steady progress in shedding bad loans, bolstering net worth, and increasing profitability." He also noted, "The overall decline in loan balances is disappointing after we saw three quarters of growth last year. But we should be cautious in drawing conclusions from just one quarter."
...
The number of "problem" institutions fell for the fourth quarter in a row. The number of "problem" institutions declined from 813 to 772. This is the smallest number of "problem" banks since year-end 2009. Total assets of "problem" institutions declined from $319 billion to $292 billion. Sixteen insured institutions failed during the first quarter. This is the smallest number of failures in a quarter since the fourth quarter of 2008, when there were 12.

The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance — the net worth of the fund — rose to $15.3 billion at March 31 from $11.8 billion at the end of 2011. Assessment revenue and fewer bank failures continued to drive growth in the fund balance.

On 1-4 family Real Estate Owned (REO), the report showed that REO by FDIC insured institutions declined to $11.08 billion in Q1, from $11.64 billion in Q4 2011. FDIC insured institutions REO peaked at $14.8 billion in Q3 2010.

Unfortunately the FDIC does not collect data on the number of properties held by FDIC-insured institutions, instead they aggregate the carrying value of 1-4 family residential REO on FDIC-insured institutions’ balance sheets.

Click on graph for larger image in new window.

Here is a graph of the 1-4 family REO carrying value for FDIC insured institutions since Q1 2003.

Note: FDIC insured institutions have other REO and this is just the 1-4 family residential REO (other REO includes Construction & Development, Multi-family, Commercial, Farm Land).

Of course this is just a small portion of the total 1-4 family REO. The FHA, Fannie and Freddie have already reported that REO declined in Q1. I'll have more on REO soon.

by Calculated Risk on 5/24/2012 08:30:00 AM

The DOL reports:

In the week ending May 19, the advance figure for seasonally adjusted initial claims was 370,000, a decrease of 2,000 from the previous week's revised figure of 372,000. The 4-week moving average was 370,000, a decrease of 5,500 from the previous week's revised average of 375,500.

The previous week was revised up from 370,000 to 372,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 370,000.

The 4-week average has declined for three consecutive weeks. The average has been between 363,000 and 384,000 all year.

And here is a long term graph of weekly claims:


This was close the consensus forecast of 371,000.

All current Employment Graphs

by Calculated Risk on 5/23/2012 09:01:00 PM

The Greek election is June 17th, and Greece will be funded through the election. But the contingency planning has started ... from the WSJ: Europe Plans for Greece Exit

Finance-ministry officials from the 17 countries that use the euro agreed earlier this week on the need to develop national contingency plans in case Greece drops out of the common currency, euro-zone officials said. The plans would seek to address what would be an unprecedented event in the modern financial system: how to buffer government bond markets, the banking sector and other financial markets in the event of a Greek exit.
...
Europe's leaders emphasize they want to avoid a Greek exit and warn of turmoil in Greece and beyond if the country leaves.

From the Athens News: Euro exit fears hinder tax collecting efforts

Two tax officials who declined to be named told Reuters that May revenues fell by 15-30 percent in tax offices away from the major cities and relative wealth centres of Athens and Thessaloniki.

"People are suspending some payments because we are in a pre-election period and also because of uncertainty stemming from a potential Greek euro exit," said the finance ministry official

And on Thursday:

• At 8:30 AM ET, the Census Bureau is scheduled to release the Durable Goods report for April. The consensus is for a 0.5% increase in durable goods orders.

• At 8:30 AM, the Department of Labor will release the Unemployment Insurance Weekly Claims report. The consensus is for claims to be essentially unchanged at 371 thousand compared to 370 thousand last week.

• Also the Kansas City Fed regional Manufacturing Survey for May will be released at 11:00 AM, and NY Fed Predisent William Dudley speaks at 10:30 AM.

Earlier on new home sales:
• New Home Sales increase in April to 343,000 Annual Rate • New Home Sales Comments
• New Home Sales graphs

by Calculated Risk on 5/23/2012 05:16:00 PM

CR Note: This is from Trulia chief economist Jed Kolko:

Dissecting the House Price Indices

Each month, several data releases track house price changes. Case-Shiller, CoreLogic, the Federal Housing Finance Agency (FHFA), the National Association of Realtors (NAR) and others report monthly sales-price trends, and the Trulia Price Monitor reports trends in asking prices, a leading indicator of sales prices. These indices often show different trends even for the same time period. Some of the differences among these indices are well-known, such as the fact that FHFA’s traditional index is based on transactions involving conforming, conventional Fannie Mae & Freddie Mac mortgages, while other indices (including the newer FHFA expanded-data index) cover a broader set of homes. But other, more technical differences help account for why some indices go up while others go down, including how they handle:

• The mix of homes listed and sold.
• Seasonal patterns in home prices.
• Weighting of homes and metros.

How much do these issues really matter for price trends? A lot, it turns out. In constructing the Trulia Price Monitor, we (1) adjust for the mix of homes listed, (2) adjust for seasonality, and (3) “weight” homes equally so that our national trend best represents what’s going on with the typical home in the largest 100 metros. Using this approach, we found that asking prices nationally rose 0.2% year-over-year and 1.9% quarter-over-quarter in April. Other price indices take different approaches, and mix-adjustment, seasonal adjustment, and value-weighting all have pros and cons. To see how much these issues matter, we used our data to see what the price trends would look like using different technical approaches.

Mix of homes listed and sold.

The price of a home depends on its size, location, and many other factors. For example, if larger homes or homes in more expensive neighborhoods happen to be listed or sold, the average (or median) listing or sales price will rise. That doesn’t mean that the typical home has increased in value – which is what most owners, buyers, sellers, and investors really care about. To know how the typical home’s value has changed, most price indices adjust for the mix of homes that are listed or sold, either by factoring in specific attributes of the home like its size and location (hedonic models, which the Trulia Price Monitor and FNC use) or by looking only at how prices have changed for the same home over time (repeat-sales models, which Case-Shiller, FHFA, and CoreLogic use). How much does the changing the mix of homes matter? The Trulia Price Monitor for April 2012 showed that prices nationally increased 0.2% year-over-year; this adjusts for the mix of homes. But without adjusting for home size, neighborhood, and other factors, the median listing price increased by 8.1% year-over-year. That’s a huge difference and that can partly be attributed to the fact that homes listed today are, on average, 6.2% larger than a year ago. They also tend to be located in slightly more expensive neighborhoods.

The shift toward larger homes on the market means that price indices that don’t adjust for the mix of homes are showing much larger price increases than what the typical home is experiencing. So why look at any price trends that don’t adjust for the mix of homes? Unadjusted price trends do reflect how typical transaction amounts are changing, which affects real estate commissions and the health of the real estate industry.

Seasonal patterns in home prices.

Home prices – both asking and sales – follow predictable seasonal patterns, dipping in winter and rising in spring and summer. (Other housing activities, like sales volume and construction starts, swing even more with the seasons than prices do.) Comparing home prices at the same time of the year takes out any seasonal effect, but quarter-over-quarter or month-over-month changes can be strongly affected by seasonal patterns.

The Trulia Price Monitor for April 2012 showed that prices increased nationally quarter-over-quarter by 1.9%, seasonally adjusted, but by 4.8% without adjusting for seasonality since the adjustment removes the regular springtime price jump.

Seasonal adjustment has its challenges. If the seasonal pattern changes over time – like if winters get warmer and cause housing activity to drop off less in winter – seasonal adjustment methods need to reflect those changes. Not-seasonally-adjusted trends are still useful because they show what buyers and sellers are actually experiencing in the market right now and can help them time when in the year to buy or sell. But to detect if and when housing prices are finally reaching a sustained turnaround, seasonal adjustment is needed to distinguish the underlying trend from regular seasonal patterns.

The Trulia Price Monitor, Case-Shiller and FHFA report seasonally adjusted price changes, even though Case-Shiller emphasizes the non-seasonally-adjusted trends. Most other indices only report non-seasonally-adjusted trends.

Weighting of homes and metros.

In the Case-Shiller and CoreLogic indices, higher-priced homes count more – they are “value-weighted”; in contrast, the Trulia Price Monitor, the FHFA index, and most other indices don’t put extra weight on higher-priced homes. Why give more weight to pricier homes? Higher-priced homes should get more weight if the purpose of an index is to assess movements in the value of a real-estate portfolio. If, for instance, a $1,000,000 real estate portfolio consists of two homes, one initially worth $900,000 and one initially worth $100,000, the change in the overall value of the portfolio depends a lot more on the percentage change in the value of the $900,000 house than the $100,000 house. In other words, weighting by home price yields an index that shows how the value of a dollar invested in real estate changes. The Trulia Price Monitor weights homes equally, regardless of price, in order to show how the value of a typical home is changing – rather than the value of a dollar invested in real estate. (FHFA doesn’t use value-weighting, either.)

Value-weighting potentially matters a lot for price trends if high-priced and low-priced homes in a market are trending differently. We tested the potential impact of value-weighting by comparing the year-over-year price change in several metro areas from the Trulia Price Monitor with the price change we would have reported for those same metros over the same time period but with value-weighting. The Trulia Price Monitor for April 2012 showed that prices in New York decreased 2.6% year-over-year, but with value-weighting prices decreased just 0.3%. In Los Angeles, the Trulia Price Monitor showed that prices decreased 2.8% without value-weighting but increased 0.7% value-weighted. In Phoenix, the Trulia Price Monitor showed that prices increased 15.8% without value-weighting, but increased only 11.1% value-weighted. In short, value-weighting can change the price trend either up or down by several percentage points – a big difference for what sounds like an obscure technical issue.

Finally, value-weighting can lead to expensive metro areas counting heavily in a broad home price index. The New York and Los Angeles metros together account for 48% of the Case-Shiller Composite 10 index and 35% of the Composite 20 index (based on weights in the published methodology) -- not only because those metros are large but also because they are expensive. At the same time, Houston and Philadelphia, which are among the ten largest metros in the US, are not included in the Case-Shiller Composite 20 – even though much smaller metros, like Charlotte, NC, and Portland, OR, are.

To sum up: home-price indices can disagree with each other by several percentage points depending on whether they adjust for the mix of homes, whether they adjust for seasonal patterns, and how they weight homes and local markets in the index. These technical issues help explain why different indices looking at the same market at the same time can tell very different stories.

by Calculated Risk on 5/23/2012 01:55:00 PM

The Federal Housing Finance Agency (FHFA) releases several house prices indexes. The most followed are the Purchase Only repeat sales index, both monthly and quarterly, based on Fannie and Freddie loans only, and the quarterly "expanded data series" that includes data from FHA endorsed mortgages and county recorder data licensed from DataQuick.

Here are the key results released today:
1) The quarterly Q1 seasonally adjusted purchase-only house price index showed the first year-over-year (YoY) increase since 2007.

2) The monthly (March) purchase only house price index showed a larger YoY increase of 2.7% in March compared to a 0.3% YoY increase in February. This is the largest YoY increase since 2006.

3) The expanded data series showed a smaller YoY decline of 1.3% in Q1 (smaller than the 3.0% YoY decline in Q4).

From the FHFA: HPI Shows Quarterly Increase and First Annual Increase Since 2007

U.S. house prices rose modestly in the first quarter of 2012 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The FHFA HPI was up 0.6 percent on a seasonally adjusted basis since the fourth quarter of 2011. The HPI is calculated using home sales price information from Fannie Mae and Freddie Mac mortgages. ... FHFA’s seasonally adjusted monthly index for March was up 1.8 percent from February.

FHFA’s expanded-data house price index, a metric introduced in August 2011 that adds transactions information from county recorder offices and the Federal Housing Administration to the HPI data sample, rose 0.2 percent over the latest quarter. Over the latest four quarters, the index is down 1.3 percent.