by Calculated Risk on 7/29/2012 06:19:00 PM

There is a chance that the FOMC will announce QE3 this week although some analysts expect QE3 in September and others after the election in November.

As an example, from Merrill Lynch last week:

There is quite a bit of uncertainty about the exact timing and shape of forthcoming Fed easing. Although there is a good chance of some QE3 at next week’s FOMC meeting, we still think it is an extension of the forward guidance language through “at least late 2015” is (slightly) more likely This would resemble the policy pattern last year, and would keep the Fed’s options open. It also would allow the Fed to make a compelling case that bad data, not politics, are driving QE3.

The "politics" argument cuts both ways - delaying action when projections show unemployment too high for years, and inflation too low - is also giving in to "politics".

Some arguments for waiting until September 13th are:
1) There will be more data available (two more employment reports for July and August, and the 2nd estimate of Q2 GDP on August 29th). Of course "waiting" always allows for "more data" - so people can always use this argument.
2) Housing data has been improving, and residential investment is usually the best leading indicator for the economy.
3) The FOMC members will update projections in September, and Fed Chairman Ben Bernanke will hold a news conference to explain the reasons for any action. There is no news conference scheduled following the meeting this week.
4) There are also some arguments that seasonal factors are distorting the recent data.

Probably the most compelling reason for waiting is the housing argument, but even though housing is recovering, the housing market is still very weak.

And the most recent projections are already becoming "untenable" (as Atlanta Fed President Lockhart recently noted). Here were the projections for GDP:

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2012	2013	2014
June 2012 Projections	1.9 to 2.4	2.2 to 2.8	3.0 to 3.5

¹ Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

Based on the Q2 advance GDP report released on Friday, GDP would have to increase at a 2.1% to 3.1% in the 2nd half of 2012 to meet the FOMC projections for 2012. That suggests a further downward revision in FOMC projections in September.

And the June projections were already very low - "shocking" as Tim Duy wrote) The FOMC members see unemployment in the 7% to 7.7% range at the end of 2014, and inflation also below target through 2014.

The data supports QE3 this week, but the data also supported QE3 in June. One of the reasons I thought QE3 was unlikely in June was the lack of foreshadowing from the Fed. There have been plenty of hints since then, so QE3 is very possible this week - but still uncertain.

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

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.

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

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.

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.