by Calculated Risk on 1/21/2013 07:08:00 PM

One of key questions for 2013 is Will Housing inventory bottom in this year?.

If inventory does bottom, we probably will not know for sure until late in the year. In normal times, there is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The NAR data is monthly and released with a lag.  However Ben at Housing Tracker (Department of Numbers) kindly sent me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year.

In 2010 (blue), inventory followed the normal seasonal pattern, however in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

So far - and this is very early - it appears inventory is increasing at a more normal rate.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

The key will be to see how much inventory increasses over the next few months. In 2010, inventory was up 8% by early March, and up 15% by the end of March.

For 2011 and 2012, inventory only increased about 5% at the peak.

So far in 2013, inventory is up 2%, and the next several weeks will be very interesting for inventory!

by Calculated Risk on 1/21/2013 03:35:00 PM

As a follow up to the post on New Home sales ... On Tuesday, the NAR will release the Existing Home Sales report for December. It looks like sales will be up over 9% in 2012, and inventory will be off over 19%.

One of my 10 question for 2013 was: Question #8 for 2013: Will Housing inventory bottom in 2013?. Here was my conclusion:

If prices increase enough then some of the potential sellers will come off the fence, and some of these underwater homeowners will be able to sell. It might be enough for inventory to bottom in 2013.

Right now my guess is active inventory will bottom in 2013, probably in January. At the least, the rate of year-over-year inventory decline will slow sharply. It will be very interesting to see how much inventory comes on the market during the spring selling season!

I'm looking at some data for clues if inventory is now at or near the bottom (I'll have more later today or this week).

This table shows the annual sales rate, inventory, and months-of-supply for the last six years (2012 estimated). Note that inventory and months-of-supply are for December.

Existing Home Sales
	Annual Sales	Annual Change	Annual Inventory	Annual Change	Months-of-Supply
2007	5,040,000		3,520,000		8.9
2008	4,110,000	-18.5%	3,130,000	-11.1%	10.4
2009	4,340,000	5.6%	2,740,000	-12.5%	8.8
2010	4,190,000	-3.5%	3,020,000	10.2%	9.4
2011	4,260,000	1.7%	2,320,000	-23.2%	8.2
12012	4,660,000	9.4%	1,870,000	-19.4%	4.5
1 Estimates for 2012

Existing home sales did not collapse as far as new home sales because of all the distressed sales. As the number of distressed sales declines, new home sales will increase - and it is possible that total existing home sales will stay flat or even decline. That will not be bad news for the housing market - the key is that the number of conventional sales has been increasing.

by Calculated Risk on 1/21/2013 10:08:00 AM

On Friday, the Census Bureau will release the New Home Sales report for December. It looks like sales will be up close to 20% in 2012, the first year-over-year increase since 2005.

This table shows the annual sales rate for the last eight years (2012 estimated).

Annual New Home Sales
Year	Sales (000s)	Change in Sales
2005	1,283	6.7%
2006	1,051	-18.1%
2007	776	-26.2%
2008	485	-37.5%
2009	375	-22.7%
2010	323	-13.9%
2011	306	-5.3%
20121	367	19.9%
1 Estimate for 2012

Even with the sharp increase in sales, 2012 will still be the third lowest year for new home sales since the Census Bureau started tracking sales in 1963. The two lowest years were 2010 and 2011.

A key question looking forward is how much sales will increase over the next few years. My initial guess was sales would rise to around 800 thousand per year, but others think the peak may be closer to 700 thousand.

Note: For 2013, estimates are sales will increase to around 450 to 460 thousand, or another 22% to 25% on an annual basis.

For the period 1980 through 2000, new homes sales averaged 664 thousand per year, with peaks at 750 thousand in 1986 (annual) and over 800 thousand in the late '90s - and two deep "busts" in the early '80 and early '90s.

I think the demographics support close to 800 thousand per year, but even if sales only rise to the average of 664 thousand for the '80s and '90s, sales would still increase over 80% from the 2012 level. 

For now I'll stick with my guess that sales will more than double from the 2012 level in a few years - but even a lower level would be a significant contribution to GDP and employment growth over the next few years.

by Calculated Risk on 1/21/2013 08:22:00 AM

Note: Clerical workers at the ports of Long Beach and Los Angeles went on strike starting Nov 27th and ending Dec 5th. The strike impacted port traffic for November and early December, but traffic bounced back quickly following the strike.

I've been following port traffic for some time. Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for December. LA area ports handle about 40% of the nation's container port traffic. Some of the LA traffic was routed to other ports in early December, so this data might not be as useful this month.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up slightly and outbound traffic down slightly compared to the rolling 12 months ending in November.

In general, inbound and outbound traffic has been mostly moving sideways recently.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March.

For the month of December, loaded outbound traffic was down 2% compared to December 2011, and loaded inbound traffic was down 5% compared to December 2011.

Maybe outbound traffic was impacted more by the strike than inbound, but it appears the strike had little impact on overall traffic in December.

by Calculated Risk on 1/20/2013 05:03:00 PM

Note: Tanta wrote the following post on May 8, 2007. Ownit had filed for bankruptcy a few months earlier, Countrywide was purchased by BofA in 2008, and Bear Stearns collapsed in March 2008 - both after Tanta wrote this post.

From Doris "Tanta" Dungey, May 2007:

CR used to like to quote this one every now and again, back in the days when this blog was just a little back-water hand-wringer in a sea of housing and mortgage bulls:

"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him."

John Maynard Keynes, "Consequences to the Banks of a Collapse in Money Values", 1931

It's amazing how ever-fresh this particular avoidance of blame is. There's the CEO of Countrywide:

"I've been doing this for 54 years," Mozilo recently said during a speech in Beverly Hills, California. For many years, he said, "standards never changed: verification of employment, verification of deposit, credit report."

But then new players came in with aggressive lending policies. Names like Ameriquest, New Century, NovaStar Financial and Ownit Mortgage Solutions set a new, lowered standard, changing the rules of the game, Mozilo said.

"Traditional lenders such as ourselves looked around and said, 'Well, maybe there's a (new) paradigm here. Maybe we've just been wrong. Maybe you can originate these loans safely without verifications, without documentation,"' Mozilo said.

There's Tom Marano of Bear Stearns:

But Tom Marano, who heads the mortgage business at Bear Stearns, disputed the contention that Wall Street pressure led to the loosening of credit standards. Investment banks, he said, do not directly make many loans.

“If enough independent companies set standards, that becomes the market,” he said. “Wall Street’s role is largely one where we assess risk, we purchase loans.”

And there is our famous Bill Dallas of Ownit Mortgage:

Bill Dallas, chief executive of Ownit, the nation's 20th-largest subprime lender in 2006, said he saw the handwriting on the wall in April 2005 after he overheard a rival account executive tell a customer how to get a better rate by committing occupancy or income fraud.

"I just went, 'We are hosed as an industry,"' Dallas said. "I told our guys, 'We're the problem."

The structure of the industry was part of the problem, he said: "Our account reps are talking to the mortgage broker, the mortgage broker is talking to the borrower, and they're teaching them all the wrong things."

Sound bankers, to a man.