Calculated Risk

Sunday, July 29, 2012

When will the Case-Shiller house price index turn positive Year-over-year?

by Calculated Risk on 7/29/2012 10:14:00 AM

The CoreLogic index turned positive year-over-year in March: CoreLogic® Home Price Index Shows Year-Over-Year Increase of Just Over One Percent

Home prices nationwide, including distressed sales, increased on a year-over-year basis by 1.1 percent in April 2012 compared to April 2011. This was the second consecutive year-over-year increase this year ...

And the FHFA index turned positive year-over-year in February: FHFA House Price Index Up 0.3 Percent in February

For the 12 months ending in February, U.S. prices rose 0.4 percent, the first 12-month increase since the July 2006 - July 2007 interval.

However we are still waiting on Case-Shiller.

On Friday I posted Zillow's forecasts for the May Case-Shiller indexes to be released this coming Tuesday. The year-over-year (YoY) decline in Case-Shiller prices has been getting smaller all year, and the Zillow forecast suggests the YoY decline will be even smaller in the May report - and be the smallest YoY decline since the expiration of the housing tax credit.

I looked at the recent improvement in prices (comparing the month-to-month changes for the NSA index to last year). If the Zillow forecast is close, at the current pace of improvement, it looks like the YoY change will turn positive in the July report - it could even happen in the June report (to be released next month).

Click on graph for larger image.

Here is a graph of the YoY change in the Case-Shiller Composite 10 and 20 indexes. In April, the indexes were down 2.2% and 1.9%, respectively.

Zillow is forecasting the Composite 10 index will be down 1.3% YoY in the May report, and the Composite 20 index will be down 1.0%.

Earlier this year, when I argued prices were near the bottom for the Not Seasonally Adjusted (NSA) repeat sales indexes, I thought the year-over-year change would turn positive late this year or early in 2013. Right now it looks like the July report.

Saturday, July 28, 2012

Unofficial Problem Bank list declines to 900 Institutions

by Calculated Risk on 7/28/2012 08:57:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for July 27, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

As anticipated, the FDIC released its enforcement actions through June 2012, which led to many change to the Unofficial Problem Bank List. For the week, there were seven removals and two additions leaving the list at 900 institutions with assets of $349.5 billion. A year ago, the list held 995 institutions with $415.4 billion in assets. For the month of July 2012, there were 12 additions and 29 removals, with 20 from action termination, six from failure, two from unassisted mergers, and one from voluntary liquidation.

The seven removals this week came from action termination including Community Commerce Bank, Claremont, CA ($299 million); Traverse City State Bank, Traverse City, MI ($188 million); Security Bank, S.B., Springfield, IL ($160 million); Professional Bank, Coral Gables, FL ($152 million); Progrowth Bank, Nicollet, MN ($133 million); Capital Community Bank, Provo, UT ($122 million); and Colonial American Bank, Horsham, PA ($60 million). Professional Bank is only the 5th bank from Florida to be removed from the list because of action termination. Oregon and Georgia have only seen one bank and two banks, respectively, removed from the list. For the second week in a row, there was a failure in Georgia -- Jasper Banking Company, Jasper, GA -- that failed without being under an formal enforcement action.

The two additions were South Valley Bank & Trust, Klamath Falls, OR ($854 million) and First Security Bank of Helena, Helena, MT ($42 million).

The FDIC [issued] Prompt Corrective Action orders against Sevier County Bank, Sevierville, TN ($323 million) and Westside Community Bank, University Place, WA ($113 million).

Earlier:
• Summary for Week Ending July 27th
• Schedule for Week of July 29th

Lawler: Expect "significant" upward revisions for Q2 New Home Sales

by Calculated Risk on 7/28/2012 04:37:00 PM

From economist Tom Lawler:

D.R. Horton, the largest US home builder in 2011, reported that net home orders in the quarter ended June 30th, 2012 totaled 6,079, up 24.7% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 23% last quarter, down from 27% a year ago. Home deliveries last quarter totaled 4,957, up 8.8% from the comparable quarter of 2011, at an average sales price of $224,975, up 5.2% from a year ago. The company’s order backlog at the end of June was 7,311, up 30.6% from last June.

Standard Pacific Corp., the 13th largest US home builder in 2011, reported that net home orders in the quarter ended June 30th, 2012 (ex JVs) totaled 1,108, up 45.0% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 11% last quarter, down from 14% a year ago. Home deliveries totaled 815, up 33.6% from the comparable quarter of 2011, at an average sales price of $337,000, up 0.6% from a year ago. The company’s order backlog at the end of June was 1,266, up 62.1% from last June.

Here are some summary stats of orders, deliveries, and backlog for builders who have reported results for last year.

	Settlements			Net Orders			Backlog
	6/12	6/11	6/10	6/12	6/11	6/10	6/12	6/11	6/10
D.R. Horton	4,957	4,555	6,805	6,079	4,874	4,921	7,311	5,600	4,430
PulteGroup	3,816	3,633	5,030	5,578	4,222	4,218	7,560	5,777	5,644
NVR	2,475	2,207	3,354	2,614	2,468	2,559	5,048	3,946	3,766
The Ryland Group	1,149	885	1,505	1,415	1,065	959	2,289	1,646	1,368
Meritage Homes	1,042	856	1,207	1,353	910	900	1,611	994	1,044
Standard Pacific	815	610	891	1,108	764	719	1,266	781	649
M/I Homes	625	590	790	826	635	602	1,168	833	748
Total	14,879	13,336	19,582	18,973	14,938	14,878	26,253	19,577	17,649
YoY % Change	11.6%	-31.9%		27.0%	0.4%		34.1%	10.9%

Obviously, the net orders of the above builders showed considerably stronger YOY growth than 19.5% (not seasonally adjusted) YOY growth rate for Q2/12 reported in the preliminary Census Bureau’s new SF home sales reports. While Census’ treatment of cancellations differs from the builders’ net orders, and while historical data suggest there may be a timing difference between when a builder records a sale vs. when Census counts a home as sold, these results in my view suggest (based on past relationships) that Census new SF home sales numbers for the second quarter of 2012 will be revised upward significantly — and by about the same about as Q1 sales were revised upward from the March new SF sales report.

CR Note: Back in April, based on public builder reports, Tom Lawler estimated that the Census Bureau would revise up Q1 New Home sales from the then reported 337 thousand SAAR (seasonally adjusted annual rate) to around 350 thousand. In the most recent report, Census has revised up Q1 to 352 thousand.

For Q2, in the most recent new home sales report, the Census Bureau estimated sales at 363 thousand SAAR. Based on builder reports, Lawler estimates that this will be revised up to around 380 thousand.

Schedule for Week of July 29th

by Calculated Risk on 7/28/2012 01:01:00 PM

Earlier:
• Summary for Week Ending July 27th

The key report for this week will be the July employment report to be released on Friday, Aug 3rd. Other key reports include the May Case-Shiller house price indexes on Tuesday, the ISM manufacturing index on Wednesday, vehicle sales on Wednesday, and the ISM non-manufacturing (service) index on Friday.

On Wednesday, the FOMC concludes a two day meeting, and there is the possibility of additional policy accommodation. The European Central Bank (ECB) holds a meeting on Thursday, and there will be a focus on ECB President Mario Draghi's comments following the meeting.

----- Monday, July 30th -----
10:30 AM: Dallas Fed Manufacturing Survey for July. This is the last of regional surveys for July. The consensus is for 2.5 for the general business activity index, down from 5.8 in June.

----- Tuesday, July 31st -----
8:30 AM ET: Personal Income and Outlays for June. The consensus is for a 0.2% increase in personal income in June, and for 0.1% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:00 AM: S&P/Case-Shiller House Price Index for May. Although this is the May report, it is really a 3 month average of March, April and May.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through April 2012 (the Composite 20 was started in January 2000).

The consensus is for a 1.4% decrease year-over-year in Composite 20 prices (NSA) in May. The Zillow forecast is for the Composite 20 to decline 1.0% year-over-year, and for prices to increase 0.8% month-to-month seasonally adjusted. The CoreLogic index increased 1.8% in May (NSA).

9:45 AM: Chicago Purchasing Managers Index for July. The consensus is for a decrease to 52.5, down from 52.9 in June.

10:00 AM: Conference Board's consumer confidence index for July. The consensus is for a decrease to 61.5 from 62.0 last month.

----- Wednesday, Aug 1st -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

All day: Light vehicle sales for July. Light vehicle sales are expected to decrease to 14.0 million from 14.1 million in June (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the June sales rate.

TrueCar is forecasting:

The July 2012 forecast translates into a Seasonally Adjusted Annualized Rate (“SAAR”) of 14.1 million new car sales, up from 12.2 million in July 2011 and down from 14.1 million in June 2012

Edmunds.com is forecasting:

An estimated 1,166,665 new cars will be sold in July for a Seasonally Adjusted Annual Rate (SAAR) of 14.0 million light vehicles, according to the latest auto sales forecast by Edmunds.com.

8:15 AM: The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 120,000 payroll jobs added in June, down from the 176,000 reported last month.

10:00 AM ET: ISM Manufacturing Index for July.

Here is a long term graph of the ISM manufacturing index. Last month saw the first contraction in the ISM index since the recession ended in 2009. The consensus is for an increase to 50.1, up from 49.7 in June. (below 50 is contraction).

10:00 AM: Construction Spending for June. The consensus is for a 0.5% increase in construction spending.

2:15 PM: FOMC Meeting Announcement. No changes are expected to interest rates, however additional policy accommodation is possible.

----- Thursday, Aug 2nd -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 370 thousand from 353 thousand last week.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for May. The consensus is for a 0.7% increase in orders.

----- Friday, Aug 3rd -----

8:30 AM: Employment Report for July. The consensus is for an increase of 100,000 non-farm payroll jobs in July, up from the 80,000 jobs added in June.

The consensus is for the unemployment rate to remain unchanged at 8.2%.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through June.

The economy has added 3.84 million jobs since employment bottomed in February 2010 (4.37 million private sector jobs added, and 0.53 million public sector jobs lost).

There are still 4.5 million fewer private sector jobs now than when the recession started in 2007. (4.9 million fewer total nonfarm jobs).

10:00 AM: ISM non-Manufacturing Index for July. The consensus is for a decrease to 52.0 from 52.1 in June. Note: Above 50 indicates expansion, below 50 contraction.

Summary for Week ending July 27th

by Calculated Risk on 7/28/2012 08:02:00 AM

This was one of those weeks were Europe stole the headlines, especially comments from ECB President Mario Draghi. Of course Draghi has said before that the ECB would do “whatever it takes”, so this wasn’t really new news.

Here was Lou Barnes reaction:

Sentiment turned yesterday on ECB President Mario Draghi's "...The ECB is ready to do whatever it takes to preserve the euro. Believe me, it will be enough." He went on to announce his plans to date Jennifer Lopez tonight, Kim Bassinger tomorrow, and win the decathlon gold next week.

If a central bank has to promise to preserve something, odds are high that it is already dead. This is the talk of 0-10 football coaches. Imagine if an American Fed Chair said he would "preserve the dollar." Not defend its value versus other currencies; not prevent inflation or deflation, but preserve its existence? Elbow the women and children out of the lifeboats.

Once again the economic data was weak. Real GDP for Q2 was reported at a 1.5% annualized rate. And even new home sales were below expectations, although with upward revisions to previous months – and an expected upward revision to the June sales rate – the report was actually fairly solid.

Manufacturing data was weak again, with the Richmond survey falling off a cliff, and the MarkIt Flash PMI declining in July. However the Kansas City manufacturing survey showed modest growth.

In other data, consumer sentiment was up slightly, weekly initial unemployment claims were down, and the trucking index increased. All of this data suggests more sluggish growth.

Here is a summary of last week in graphs:

• Real GDP increased 1.5% annual rate in Q2

The Q2 GDP report was weak, but slightly better than expected. Final demand weakened in Q2 as personal consumption expenditures increased at only a 1.5% annual rate, and residential investment increased at a 9.7% annual rate.

Click on graph for larger image.

This graph shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter centered average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

For this graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Residential Investment (RI) made a positive contribution to GDP in Q2 for the fifth consecutive quarter. Usually residential investment leads the economy, but that didn't happen this time because of the huge overhang of existing inventory, but now RI is contributing. The good news: Residential investment has clearly bottomed.

Residential Investment as a percent of GDP is still near record lows, but it is increasing. Usually RI bounces back quickly following a recession, but this time there is a wide bottom because of the excess supply of existing vacant housing units.

Last year the increase in RI was mostly from multifamily and home improvement investment. Now the increase is from most categories including single family. I'll break down Residential Investment (RI) into components after the GDP details are released this coming week. Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Overall the revisions to the last three years were pretty minor.

This graph shows GDP per quarter as a percent change annualized.

There were some downward revisions in Q1 and Q2 2010, and some upward revisions in 2011.

This was slightly above expectations.

• New Home Sales declined in June to 350,000 Annual Rate

The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 350 thousand. This was down from a revised 382 thousand SAAR in May (revised up from 369 thousand). Sales in March and April were revised up too.

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

Even though sales are still very low, new home sales have clearly bottomed. New home sales have averaged 358 thousand SAAR over the first 6 months of 2012, after averaging under 300 thousand for the previous 18 months. All of the recent revisions have been up too.

So even though sales in June were below the consensus forecast of 370,000, this was still a fairly solid report given the upward revisions to previous months. Based on recent revisions, sales in June will probably be revised up too.
New Home Sales graphs
• Weekly Initial Unemployment Claims decline to 353,000

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined to 367,250.

The sharp swings over the last few weeks are apparently related to difficulty adjusting for auto plant shutdowns.

This was well below the consensus forecast of 380,000 and is the lowest level for the four week average since March.
All current Employment Graphs
• Final July Consumer Sentiment at 72.3

The final Reuters / University of Michigan consumer sentiment index for July increased to 72.3 from the preliminary reading of 72.0, and was down from the June reading of 73.2.

This was slightly above the consensus forecast of 72.0 and the lowest level this year. Overall sentiment is still weak - probably due to a combination of the high unemployment rate and the sluggish economy.

• ATA Trucking index increased in June