by Calculated Risk on 8/16/2012 11:22:00 AM

From Nick Timiraos at the WSJ: Shadow Inventory: How Low New Construction Helps the Outlook

There’s been a lot of attention over the last few years on the “shadow inventory” of potential foreclosures — a pent-up supply of homes that could smother an incipient housing recovery.

But there’s been comparatively less attention on the lack of new housing construction, which has helped to offset the potential damage from elevated levels of foreclosed properties. New home building has been at its lowest levels since World War II in 2009, 2010, and 2011.

The record low level of completions over the last four years - and record low level of housing units added to the housing stock - is an important reason for the budding recovery in housing. See: Housing: Record Low Total Completions in 2011. The last four years have seen record low completions, and 2012 will also be very low. This low level of completions means that a significant portion of the excess vacant housing supply has been absorbed. And completions in 2012 will still be very low even with the 20%+ increase in housing starts.

From Timiraos:

“Not too many people talk about the lack of new construction over the last several years, which has set the foundation for a snapback in pricing,” says Michael Sklarz, president of real-estate research firm Collateral Analytics.

Frank Nothaft, the chief economist at Freddie Mac, elaborated on this point in a research note published last week ... “the relatively small amount of new construction, coupled with increased household formation, has allowed much of the excess vacant inventory to be absorbed over the past few years,” he wrote.

Nothaft is using the Housing Vacancies and Homeownership (HVS) and that survey is not consistent with other measures (like the decennial Census and the ACS). The Census Bureau is looking into the differences between the surveys, but I'm not confident in using the HVS to estimate the excess vacant supply.

However I do agree with Nothaft that "much of the excess vacant" has been absorbed.

by Calculated Risk on 8/16/2012 08:57:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in July were at a seasonally adjusted annual rate of 746,000. This is 1.1 percent below the revised June estimate of 754,000, but is 21.5 percent above the July 2011 rate of 614,000.

Single-family housing starts in July were at a rate of 502,000; this is 6.5 percent below the revised June figure of 537,000. The July rate for units in buildings with five units or more was 229,000.

Building Permits:
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 812,000. This is 6.8 percent above the revised June rate of 760,000 and is 29.5 percent above the July 2011 estimate of 627,000.

Single-family authorizations in July were at a rate of 513,000; this is 4.5 percent above the revised June figure of 491,000. Authorizations of units in buildings with five units or more were at a rate of 274,000 in July.

Click on graph for larger image.

Total housing starts were at 746 thousand (SAAR) in July, down 1.1% from the revised June rate of 754 thousand (SAAR). Note that June was revised from 760 thousand.

Single-family starts decreased 6.5% to 502 thousand in July.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that total housing starts have been increasing lately after moving sideways for about two years and a half years.

Total starts are up 56% from the bottom start rate, and single family starts are up 42% from the low.

This was slightly below expectations of 750 thousand starts in July, but the key is starts are up solidly from last year. Right now starts are on pace to be up about 20% from 2011. Also note that total permits were at the highest level since 2008.

All Housing Investment and Construction Graphs

by Calculated Risk on 8/16/2012 08:30:00 AM

The DOL reports:

In the week ending August 11, the advance figure for seasonally adjusted initial claims was 366,000, an increase of 2,000 from the previous week's revised figure of 364,000. The 4-week moving average was 363,750, a decrease of 5,500 from the previous week's revised average of 369,250.

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 363,750.

This was at the consensus forecast of 365,000.


And here is a long term graph of weekly claims:

The 4-week average post-bubble low is 363,000; this week the average was just above that level at 363,750.

All current Employment Graphs

by Calculated Risk on 8/15/2012 09:54:00 PM

First, informative reading from Bond Girl at Nemo's site: The well-known story of municipal bond defaults

And from Jim Hamilton at Econbrowser: Recent developments in oil markets

And from Tim Duy at Economist'sView: Data Dump

• At 8:30 AM ET, Housing Starts for July will be released. The consensus is for total housing starts to decrease to 750,000 (SAAR) in July, down from 760,000 in June.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand from 361 thousand last week. Initial weekly unemployment claims have been declining recently, and the 4-week average last week was just above the post-bubble low of 363,000.

• At 10:00 AM, the Philly Fed Survey for August will be released. This has been negative the last three months with readings of -5.8, -16.6 and -12.9. The consensus is for another negative reading of -5.0 in August (above zero indicates expansion).


Another question for the monthly economic prediction contest:

by Calculated Risk on 8/15/2012 07:16:00 PM

The Kansas City Fed doesn't publicly release the dates of the symposium ahead of time. I'll post the schedule when it is available, but here are a few tentative details:

• Jackson Hole Economic Symposium, Thursday, August 30th through Saturday, Sept 1st.

• Fed Chairman Ben Bernanke speaks on Friday, August 31st at 10 AM ET.

• ECB President Mario Draghi speaks on Saturday, September 1st at 10 AM. 

Note: Markets will be closed the following Monday for Labor Day on September 3rd.

Here are a few other more dates:

• Political conventions: Republicans August 27–30 in Tampa, and Democrats September 3–6 in Charlotte. The election is on November 6th. 

• September 3rd, EU Finance Minsters Meeting.

• September 6th, Governing Council meeting of the European Central Bank in Frankfurt with a press conference to follow. ECB President Mario Draghi is expected to discuss how the ECB will help lower Spanish and Italian borrowing costs.

• September 12th at 6 AM ET, Germany's Constitutional Court is expected to rule on the new eurozone bailout fund and fiscal treaty.

• September 12th and 13th: the Federal Open Market Committee (FOMC) meets. After this meeting the FOMC will release updated Summary of Economic Projections, and Fed Chairman Ben Bernanke will hold a press conference. Major economic releases before the FOMC meeting: August 29th, second estimate of Q2 GDP, and September 7th, the August employment report. PCE price index for July will be released on August 30th.

• Mid-September: Euro-zone finance ministers' informal meetings in Nicosia.

• October 4th, Governing Council meeting of the European Central Bank in Ljubljana with a press conference to follow.

• October 8th, Finance Ministers meeting in Luxembourg.

• European Council meeting, October 18th and 19th in Brussels.

• October 23rd and 24th: the Federal Open Market Committee (FOMC) meets.