RSS Feed by Calculated Risk on 9/22/2012 01:05:00 PM
Saturday, September 22, 2012
Summary for Week Ending Sept 21st
Once again, the housing news was mostly positive last week and manufacturing was mostly disappointing.
Housing starts were a little below expectations - mostly because of the volatile multi-family sector - but starts are still up sharply from a year ago. Two-thirds of the way through 2012, single family starts are on pace for 515 thousand this year, and total starts are on pace for about 740 thousand.
In 2011, there were 609 total starts, and a record low 430 thousand single family starts. So housing starts are on pace for about a 20% increase from 2011. No wonder builder confidence was at the highest level since June 2006. That is a significant increase and will give the economy a boost.
Existing home sales increased too. The key numbers in the existing home sales report are inventory and months-of-supply. Inventory was down 18.2% year-over-year in August, and months-of-supply declined to 6.1 months - the lowest for the month of August since 2005.
The decline in inventory has been stunning, even for those of us expecting a significant decline - and I expect the year-over-year declines will start to decrease in the coming months.
Unfortunately both regional manufacturing surveys released this week (Empire State and Philly Fed) both showed contraction in September (although the Philly Fed index was close to unchanged).
A final note: The Fed's Flow of Funds survey showed household mortgage debt has decreased by over $1 trillion from the peak. Some of this decline is from homeowners paying down their mortgage (perhaps to refinance), but most of the decline was due to foreclosures or short sales (defaults). This reminded me of some of my posts from years ago ... new readers might not realize I was once one of the biggest bears around, see: The Trillion Dollar Bear
Here is a summary of last week in graphs:
• Housing Starts increased to 750 thousand in August
Click on graph for larger image.
Total housing starts were at 750 thousand (SAAR) in August, up 2.3% from the revised July rate of 733 thousand (SAAR). Note that July was revised from 746 thousand.
Single-family starts increased 5.5% to 535 thousand in August.
Total starts are up 57% from the bottom start rate, and single family starts are up 51% from the low.
This was below expectations of 768 thousand starts in August, but the key is starts are up solidly from last year. Right now starts are on pace to be up about 25% from 2011. Also total permits are up sharply from last year.
• Existing Home Sales in August: 4.82 million SAAR, 6.1 months of supply
The NAR reports: August Existing-Home Sales and Prices RiseThis graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in August 2012 (4.82 million SAAR) were 7.8% higher than last month, and were 9.3% above the August 2011 rate.
This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.Inventory decreased 18.2% year-over-year in August from August 2011. This is the eighteenth consecutive month with a YoY decrease in inventory.
Months of supply declined to 6.1 months in August.
This was above expectations of sales of 4.55 million. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing.
• AIA: Architecture Billings Index shows slight expansion in August
From AIA: Architecture Billings Index Inches Back into Positive TerritoryThis graph shows the Architecture Billings Index since 1996. The index was at 50.2 in August, up from 48.7 in July. Anything above 50 indicates expansion in demand for architects' services.
Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This suggests further weakness in CRE investment later this year and into next year (it will be some time before investment in offices and malls increases).
• Weekly Initial Unemployment Claims at 382,000
The DOL reports: "In the week ending September 15, the advance figure for seasonally adjusted initial claims was 382,000, a decrease of 3,000 from the previous week's revised figure of 385,000." The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 377,750.This was above the consensus forecast of 373,000.
• Empire State and Philly Fed Manufacturing Surveys show contraction in September
From the Philly Fed: September Manufacturing Survey "The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased 5 points, to a reading of -1.9."From MarketWatch: Empire State index hits nearly two-year low
This graph compares the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through September. The ISM and total Fed surveys are through August.
The average of the Empire State and Philly Fed surveys increased slightly in September, and has remained negative for four consecutive months. This suggests another weak reading for the ISM manufacturing index.
• Fed's Q2 Flow of Funds: Household Mortgage Debt down $1 Trillion from Peak
The Federal Reserve released the Q2 2012 Flow of Funds report this week: Flow of Funds.
This graph shows homeowner percent equity since 1952. Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.
In Q2 2012, household percent equity (of household real estate) was at 43.1% - up from Q1, and the highest since Q2 2008. This was because of a small increase in house prices in Q2 (the Fed uses CoreLogic) and a reduction in mortgage debt.
Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 52+ million households with mortgages have far less than 43.1% equity - and over 10 million have negative equity.
The third graph shows household real estate assets and mortgage debt as a percent of GDP. Mortgage debt declined by $51 billion in Q2. Mortgage debt has now declined by $1.05 trillion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).
The value of real estate, as a percent of GDP, was up slightly in Q2 (as house prices increased), but is still near the lows of the last 30 years. However household mortgage debt, as a percent of GDP, is still historically very high, suggesting more deleveraging (defaulting) ahead for households.
• Other Economic Stories ...
• LA area Port Traffic: Imports and Exports down YoY in August
• NAHB Builder Confidence increases in September, Highest since June 2006
• The Trillion Dollar Bear
Schedule for Week of Sept 23rd
by Calculated Risk on 9/22/2012 08:01:00 AM
Note: I'll post the weekly summary soon ... There are two key housing reports to be released this week: Case-Shiller house price index for July on Tuesday, and August New Home sales on Wednesday.
Other key reports include the third estimate of Q2 GDP on Thursday, and August Personal Income and Spending on Friday.
9:00 AM: LPS "First Look" Mortgage Delinquency Survey for August.
10:30 AM: Dallas Fed Manufacturing Survey for September. The consensus is for 0.5 for the general business activity index, up from -1.6 in August.
3:00 PM: San Francisco Fed President John Williams (voting member) speaks at The City Club of San Francisco, Jamison Roundtable Luncheon.
9:00 AM: S&P/Case-Shiller House Price Index for July. Although this is the July report, it is really a 3 month average of May, June and July. This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through June 2012 (the Composite 20 was started in January 2000).
The consensus is for a 1.2% year-over-year increase in the Composite 20 index (NSA) for July. The Zillow forecast is for the Composite 20 to increase 1.6% year-over-year, and for prices to increase 1.0% month-to-month seasonally adjusted.
10:00 AM: FHFA House Price Index for July 2012. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic). The consensus is for a 0.8% increase in house prices.
10:00 AM: Conference Board's consumer confidence index for September. The consensus is for an increase to 64.8 from 60.6 last month.
10:00 AM: Richmond Fed Survey of Manufacturing Activity for September. The consensus is for an increase to -4 for this survey from -9 in August (above zero is expansion).
10:00 AM ET: New Home Sales for August from the Census Bureau. This graph shows New Home Sales since 1963. The dashed line is the July sales rate.
The consensus is for an increase in sales to 380 thousand Seasonally Adjusted Annual Rate (SAAR) in August from 372 thousand in July. Watch for possible upgrades to the sales rates for previous months.
8:30 AM: Gross Domestic Product, 2nd quarter 2012 (third estimate); Corporate Profits, 2nd quarter 2012 (revised estimate) . This is the third estimate from the BEA. The consensus is that real GDP increased 1.7% annualized in Q2, unchanged form the second estimate.
8:30 AM: Durable Goods Orders for August from the Census Bureau. The consensus is for a 5.0% decrease in durable goods orders.
10:00 AM ET: Pending Home Sales Index for September. The consensus is for a 0.3% increase in the index.
11:00 AM: Kansas City Fed regional Manufacturing Survey for September. This is the last of the regional surveys for September. The consensus is for an a reading of 5, down from 8 in August (above zero is expansion).
9:45 AM: Chicago Purchasing Managers Index for September. The consensus is for an increase to 53.1, up from 53.0 in August.
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for September). The consensus is for a reading of 79.0, down from the preliminary September reading of 79.2, and up from the August reading of 74.3.
Friday, September 21, 2012
Sheila Bair: Former BofA CEO considered a "country bumpkin"
by Calculated Risk on 9/21/2012 06:43:00 PM
From former FDIC Chairperson Sheila Bair writing at Fortune: Sheila Bair and the bailout bank titans (ht Soylent Green is People)
I let my gaze drift toward Kenneth Lewis, who stood awkwardly at the end of the big conference table, away from the rest of the group. Lewis, the head of the North Carolina-based Bank of America (BAC) -- had never really fit in with this crowd. He was viewed somewhat as a country bumpkin by the CEOs of the big New York banks, and not completely without justification. He was a decent traditional banker, but as a dealmaker his skills were clearly wanting, as demonstrated by his recent, overpriced bids to buy Countrywide Financial, a leading originator of toxic mortgages, and Merrill Lynch, a leading packager of securities based on toxic mortgages originated by Countrywide and its ilk. His bank had been healthy going into the crisis but would now be burdened by those ill-timed, overly generous acquisitions of two of the sickest financial institutions in the country.I don't know about Lewis being a "country bumpkin", but the Countrywide acquisition had to be one of the worst ever - and it was obvious to many of us at the time.
Ouch!
Zillow forecasts Case-Shiller House Price index to show 1.6% Year-over-year increase for July
by Calculated Risk on 9/21/2012 02:22:00 PM
Note: The Case-Shiller report to be released next Tuesday is for July (really an average of prices in May, June and July).
Zillow Forecast: July Case-Shiller Composite-20 Expected to Show 1.6% Increase from One Year Ago
On Tuesday, Sept. 25, the Case-Shiller Composite Home Price Indices for July will be released. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will be up by 1.6 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will be up 1.1 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from June to July will be 1 percent for both the 20-City Composite and the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series and the July Zillow Home Value Index data, and national foreclosure re-sales.Zillow's forecasts for Case-Shiller have been pretty close.
Case-Shiller July data confirms what we have been seeing for several months in other data points: The housing market has started its recovery, albeit appreciation is not back to “normal” pre-housing recession levels and most likely won’t be for the next few years. Zillow’s Home Value Index for August was released on Wednesday and shows a small decline in home values across the nation after nine consecutive months of appreciation. We expect Case-Shiller indices to moderate and likely report monthly declines toward the end of the year tracking the Zillow Home Value Index. Monthly depreciation toward the end of the year is largely a function of declining overall monthly sales volume which will increase the percentage of foreclosure re-sales in the transactional mix being tracked by Case-Shiller.
| Case Shiller Composite 10 | Case Shiller Composite 20 | ||||
|---|---|---|---|---|---|
| NSA | SA | NSA | SA | ||
| Case Shiller (year ago) | July 2011 | 156.33 | 154.12 | 142.89 | 141.12 |
| Case-Shiller (last month) | June 2012 | 155.02 | 154.38 | 142.21 | 141.31 |
| Zillow June Forecast | YoY | 1.1% | 1.1% | 1.6% | 1.6% |
| MoM | 1.9% | 1.0% | 2.1% | 1.0% | |
| Zillow Forecasts1 | 158.0 | 155.9 | 145.2 | 143.1 | |
| Current Post Bubble Low | 146.52 | 149.19 | 134.10 | 136.45 | |
| Date of Post Bubble Low | Mar-12 | Jan-12 | Mar-12 | Jan-12 | |
| Above Post Bubble Low | 7.8% | 4.5% | 8.3% | 4.8% | |
| 1Estimate based on Year-over-year and Month-over-month Zillow forecasts | |||||
State Unemployment Rates increased in 26 States in August
by Calculated Risk on 9/21/2012 10:49:00 AM
From the BLS: Regional and State Employment and Unemployment Summary
Regional and state unemployment rates were generally little changed in August. Twenty-six states recorded unemployment rate increases, 12 states and the District of Columbia posted rate decreases, and 12 states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada continued to record the highest unemployment rate among the states, 12.1 percent in August. Rhode Island and California posted the next highest rates, 10.7 and 10.6 percent, respectively. North Dakota again registered the lowest jobless rate, 3.0 percent.
Click on graph for larger image in graph gallery.This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). Two states - New Jersey and New York - are at the maximum unemployment rate for the recession, and New Jersey set a new cycle high in August at 9.9%.
The states are ranked by the highest current unemployment rate. Only three states still have double digit unemployment rates: Nevada, Rhode Island, and California. This is the fewest since January 2009, although New Jersey is close. In early 2010, 18 states and D.C. had double digit unemployment rates.
