by Calculated Risk on 9/16/2012 09:55:00 PM

This could slow down the QE3 mortgage transmission mechanism, from the Financial Times: QE3 hit by mortgage processing delays

“In the very near term [QE3] has virtually no transfer mechanism whatsoever to the customer,” said one executive at a leading lender, who requested anonymity. “Originators are massively backlogged in terms of origination volumes.”
Excerpt with permission

The Asian markets are mixed tonight, with the Shanghai down 0.3% and the Hang Seng up 0.3%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P future are down almost 5 points, and the DOW futures down 32 points.

Oil prices are moving up WTI futures are at $99.00 and Brent is at $117.44 per barrel.

On Monday:
• At 8:30 AM ET, the NY Fed will release the Empire State Manufacturing Survey for September. The consensus is for a reading of minus 2.0, up from minus 5.8 in August (below zero is contraction).

Yesterday:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

Three more questions this week for the September economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 9/16/2012 01:29:00 PM

From Paul Krugman: How Could QE Work?

[A]t this point it’s not at all clear that we have an overhang of excess housing capacity; we might even have a shortfall.

And we’re seeing a modest housing recovery starting ...
...
This means that we actually can hope that the Fed’s new policy will boost housing as well as operating through other channels, and therefore that it can act more like conventional monetary policy in fostering recovery.

That said, I’m still skeptical about whether monetary policy alone can come close to doing enough — a skepticism shared by Ben Bernanke:

So looking at all the different channels of effect, we think it does have impact on the economy, it will have impact on the labor market but as again, the way I would describe it is a meaningful effect, a significant effect but not a panacea, not a solution for the whole issue.

We still need fiscal policy. But it’s good to see the Fed doing more.

This is similar to the argument I made last weekend:

[O]ne of the key transmission channels for monetary policy is through residential investment and mortgages. The previous rounds of QE (and "twist") have lowered mortgage rates and allowed homeowners with excellent credit and income to refinance. However this channel has been limited ...

As residential investment recovers, and house prices increase (or at least stabilize), this channel will probably become more effective.

Last month I summarized some of The economic impact of a slight increase in house prices. This includes mortgage lenders and appraisers becoming more confident in the mortgage and housing markets. I think that is starting to happen, and I think QE might have more traction now through the housing channel.

Note: Krugman's comment on "overhang of excess housing" is very important. Although there isn't good timely data on household formation and the housing stock, I do think most of the excess supply has been absorbed.

For another view on QE3, see Jim Hamilton's: Effects of QE3

I think the correct interpretation of QE3 is that the Fed has unambiguously signaled that it's not going to re-run the Japanese experiment to see what happens when the central bank stands by and watches wages and prices fall even while unemployment remains very high. The Fed can and will keep U.S. inflation from falling much below 2%, and that may help a little. Investors should expect that, and not a whole lot more.

And for those who think commodity prices will soar, I suggest Michael Pettis' analysis of supply and demand: By 2015 hard commodity prices will have collapsed

Yesterday:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

by Calculated Risk on 9/16/2012 10:00:00 AM

According to housingtracker, median asking prices are up 2.1% year-over-year in early September. We can't read too much into this increase because these are just asking prices, and median prices can be distorted by the mix. As an example, the median asking price might have increased just because there are fewer low priced foreclosures listed for sale.

Note: The Trulia asking price index is adjusted for both mix and seasonality, but the housingtracker data is just the median, the 25th percentile and 75th percentile - and is impacted by both changes in the mix and seasonality.

But with those caveats, here is a graph of asking prices compared to the year-over-year change in the Case-Shiller composite 20 index.

Click on graph for larger image.

The Case-Shiller index is in red. The brief period in 2010 with a year-over-year increase in the repeat sales index was related to the housing tax credit.

Also note that the 25th percentile took the biggest hit (that was probably the flood of low end foreclosures on the market).

Now the year-over-year change in median asking prices has been positive for ten consecutive months. We have to be careful about the mix (fewer foreclosures on the market), but this suggests year-over-year selling prices will stay positive.

On seasonality, asking prices peaked in June and are down slightly over the last three months. That is a reminder that the Not Seasonally Adjusted repeat sales indexes will show month-to-month declines later this year - and the focus will be on the year-over-year change.

Yesterday:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

by Calculated Risk on 9/15/2012 07:07:00 PM

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

Here is the unofficial problem bank list for Sept 14, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

There were two removals and one addition to the Unofficial Problem Bank List, which leaves it standing at 886 institutions with assets of $330.5 billion. A year ago, the list held 984 institutions with assets of $402.4 billion.

The failed Truman Bank, St. Louis, MO ($282 million) and Alliant Bank, Sedgwick, KS, which merged out of existence on an unassisted basis. Added this week was The State Bank of Geneva, Geneva, IL ($84 million). Next week, we anticipate the OCC will release its actions through mid-August 2012.

CR Note: The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

When the list was increasing, the official and "unofficial" counts were about the same. Now with the number of problem banks declining, the unofficial list is lagging the official list. This probably means regulators are changing the CAMELS rating on some banks before terminating the formal enforcement actions.

Earlier:
• Summary for Week Ending Sept 14th
• Schedule for Week of Sept 16th

by Calculated Risk on 9/15/2012 01:10:00 PM

Earlier:
• Summary for Week Ending Sept 14th

There are three key housing reports to be released this week: September homebuilder confidence on Tuesday, and August housing starts and August Existing Home sales, both on Wednesday.

For manufacturing, the September NY Fed (Empire state) and Philly Fed surveys will be released this week.

Also, for data nerds, the Fed's Q2 Flow of Funds report, and the Census Bureau's 2011 American Community Survey will be released.

----- Monday, Sept 17th----- 8:30 AM: NY Fed Empire Manufacturing Survey for September. The consensus is for a reading of minus 2.0, up from minus 5.8 in August (above zero is expansion).

----- Tuesday, Sept 18th ----- 10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 38, up from 37 in August. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.

----- Wednesday, Sept 19th ----- 7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

8:30 AM: Housing Starts for August.

Total housing starts were at 746,000 (SAAR) in July, down 1.1% from the revised June rate of 754,000 (SAAR).

The consensus is for total housing starts to increase to 768,000 (SAAR) in August, up from 746,000 in July.

10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR).

The consensus is for sales of 4.55 million on seasonally adjusted annual rate (SAAR) basis. Sales in July 2012 were 4.47 million SAAR.

A key will be inventory and months-of-supply.

During the day: The AIA's Architecture Billings Index for August (a leading indicator for commercial real estate).

----- Thursday, Sept 20th ----- 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 373 thousand from 382 thousand.

9:00 AM: The Markit US PMI Manufacturing Index Flash. This is a new release and might provide hints about the ISM PMI for September. The consensus is for a reading of 51.5, down from 51.9 in August.

10:00 AM: Philly Fed Survey for September. The consensus is for a reading of minus 4.0, up from minus 7.1 last month (above zero indicates expansion).

10:00 AM: Conference Board Leading Indicators for September. The consensus is no change in this index.

12:00 PM: Q2 Flow of Funds Accounts from the Federal Reserve.

Note: On Thursday, the Census Bureau will release the 2011 American Community Survey estimates.

----- Friday, Sept 21st ----- 10:00 AM: Regional and State Employment and Unemployment (Monthly) for August 2012