by Calculated Risk on 6/11/2012 08:59:00 AM

CoreLogic released their June MarketPulse Report today.

Here is a brief excerpt from a piece by Sam Khater, CoreLogic senior economist, on the impact of negative equity on housing supply:

While the rapid decline in months’ supply is typically good news because it indicates a better balance between demand and supply, this decline is occurring less because of an increase in sales and more because of a drop in unsold inventory as a result of negative equity. Negative equity is typically a demand-side obstacle to sales and refinances, but currently is also restricting the supply of homes for sale. Analysis of the 50 largest markets reveals the metropolitan areas with the lowest levels of months’ supply also have the higher shares of negative equity. Markets with negative equity share of 50 percent or more have an average months’ supply of 4.7 months, compared to 8.3 months’ supply for markets with less than a 10 percent negative equity share. The presence of negative equity not only drives foreclosures, reduces the availability of purchase down payments and impedes refinances, but also restricts the ability of owners to list their homes for sale as the demand side of the market improves.

Paradoxically, as the flow of REOs has slowed over the last 18 months, negative equity has become a positive force in real estate markets by restricting supply in the face of increasing demand.

Although negative equity is probably contributing to the decline in inventory - especially in certain markets with high levels of negative equity - I think price expectations are a bigger factor in the recent decline in inventory.

by Calculated Risk on 6/10/2012 09:24:00 PM

There are no US economic releases scheduled for Monday. The big story will be the aid for Spanish Banks. The next key event in Europe is the Greek election on Sunday June 17th.

The Asian markets are up tonight. The Nikkei is up about 2.3%, and the Hang Seng is up 2.6%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are up about 16, and Dow futures are up 150.

Oil: WTI futures are up to $86.48 (this is down from $109.77 in February) and Brent is back over $100 at $102.14 per barrel.

Saturday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

For the monthly economic question contest (three more questions for June later this week):

by Calculated Risk on 6/10/2012 01:15:00 PM

Another story on the sharp decline in home inventory ...

From Alejandro Lazo at the LA Times: Shortage of homes for sale creates fierce competition

Housing inventory has sunk to levels not seen since the bubble years. ... In Southern California, inventories have plunged over the last year. The number of homes listed for sale in April fell 35% in Los Angeles County and was down 42% in Orange, 39% in San Bernardino, 42% in Riverside, 53% in Ventura and 43% in San Diego counties, according to online brokerage Redfin.

Many people who bought at the top of the cycle are so deeply underwater, they can't get the price they need to sell and are therefore not bothering to put their homes on the market.

"We know negative equity holds back home sales, but it also holds back the listing of sales," said Sam Khater, an economist with CoreLogic ...

Glenn Kelman, chief executive of Redfin, said the recovery remains tentative but the market has grown competitive because sellers feel they have time on their side, while buyers feel a sense of urgency given low interest rates and relatively cheap prices compared with the bubble years.

"It is a precarious situation, but the real issue is that nobody wants to sell a house right now," Kelman said. "So now we have classes for our real estate agents on how to win a bidding war."

Negative equity is keeping some people from selling, however most homeowners have positive equity (there are about 75 million owner occupied homes, and about 11 million have negative equity). I think a more important driver of the decline in inventory is price expectations. I agree with Redfin's Kelman who pointed out that "sellers feel they have time on their side".

Earlier I argued:

When the expectation is that prices will fall further, marginal sellers will try to sell their homes immediately. And marginal buyers will decide to wait for a lower price. This leads to more inventory on the market.

But when the expectation is that prices are stabilizing (the current situation), sellers will wait until it is convenient to sell. And buyers will start feeling a little more confident.

This leads to less inventory on the market.

Yesterday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

by Calculated Risk on 6/10/2012 09:16:00 AM

From the WSJ: China Data Signal Some Strength

A raft of data released over the weekend by the Chinese government present a mixed picture, but overall suggest an economy stronger than many market players feared at the end of last week.

Some of the data from the WSJ article:

Industrial production was up 9.6% year-over-year (YoY) in May, a stronger pace than in April (9.3%) - however that isn't saying much since April saw the slowest YoY growth since 2009.

CPI increased 3.0% YoY in May, the slowest since June 2010.

Both exports and imports were up in May. Exports were up 15.3% YoY, and import up 12.7%.

Auto sales were up 22.6% YoY, increasing at a faster pace than in April (12.5%).

However overall retail sales increased at a slower pace in May; 13.8% year-over-year compared to 14.1% in April.

Overall this was slightly better than expected.

Yesterday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

by Calculated Risk on 6/09/2012 07:36:00 PM

This is an unofficial list of Problem Banks compiled only from public sources. (Only US banks).

Here is the unofficial problem bank list for June 8, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

Four failures meant four removals from the Unofficial Problem Bank List. The list stands at 923 institutions with assets of $355.7 billion. A year ago, the list held 1,002 institutions with assets of $417.4 billion. After three weeks off, the FDIC got back to closings leading to the following removal s -- Waccamaw Bank, Whiteville, NC ($533 million Ticker: WBNK); Carolina Federal Savings Bank, Charleston, SC ($54 million); First Capital Bank, Kingfisher, OK ($46 million); and Farmers' and Traders' State Bank, Shabbona, IL ($43 million).

F & M Bank, Edmond, Oklahoma paid a 7.65 percent deposit premium to acquire First Capital Bank. This appears to be the highest deposit premium paid to complete an assisted acquisition during this crisis. Although the FDIC likes to receive a deposit premium when selling a failed bank, buyers have only been willing to pay one in about one-third of the 443 failures since 2008 and in four transactions buyers have bid a discount.. When paid, the average deposit premium is 1.09 percent. Thus, the premium paid by F&M Bank is very high at 4.7 standard deviations above the average. In a few months, the FDIC will release bidding information for First Capital Bank, which should allow some insight if the premium paid F&M Bank was necessary to close the deal. There have been some transactions where bidders have been too aggressive. For instance, in January 2010, United Valley Bank, Cavalier, ND, paid a 7.35 percent deposit premium to acquire the failed Marshall Bank, National Association, Hallock, MN with the next highest bid was a 1.32 percent premium.

Next week, we anticipate the OCC will release its actions through mid-June 2012.

Earlier:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

And on Spain:
• Eurogroup statement on Spain
• WSJ: Spain Asks EU for Aid For Its Banks
• NY Times: Spain to Accept Rescue From Europe for Its Ailing Banks
• Financial Times: Spain seeks eurozone bail out