by Calculated Risk on 5/30/2013 08:30:00 AM

Note: The BEA reported GDP for Q1 was revised down to a 2.4% annualized real growth rate from 2.5% in the advance report:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.4 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "second" estimate released by the Bureau of Economic Analysis. ... The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, real GDP increased 2.5 percent. With the second estimate for the first quarter, increases in private inventory investment, in exports, and in imports were less than previously estimated, but the general picture of overall economic activity is not greatly changed.

I'll have more on GDP later.

The DOL reports:

In the week ending May 25, the advance figure for seasonally adjusted initial claims was 354,000, an increase of 10,000 from the previous week's revised figure of 344,000. The 4-week moving average was 347,250, an increase of 6,750 from the previous week's revised average of 340,500.

The previous week was revised up from 340,000.

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 increased to 347,250.

Claims were above the 340,000 consensus forecast.

by Calculated Risk on 5/29/2013 09:00:00 PM

Tim Duy thinks the Fed might start to taper asset purchases in September: September Looking Good

A "few more months" I interpret as June, July, and August, which puts the beginning of tapering at the September FOMC meeting. I think that Fed speakers are sending pretty clear signals to prepare for a September policy change.

Some big names on Wall Street don't agree. Vincent Reinhart at Morgan Stanley believes the data will push the Fed back to December. The view at Goldman Sachs is reportedly similar. To be sure, the data might cut in that direction, but I think that the bar to tapering might be lower than believed by those looking for a shift in December. We may believe the Federal Reserve's dual mandate argues for a longer period of QE at its current pace, but I am thinking that for the Federal Reserve, the dual mandate has more to do with the lift-off date from ZIRP than the end of QE. They have tended to argue for more or less QE on the basis of "stronger and sustainable" improvement in labor markets, and, given the obvious shift in tone among Fed speakers, I think we have reached that benchmark. At this point, they are just looking for a little more confirmation, in their minds erring on the side of being "too easy."

A lot of data will be coming in the door over the next week and a half, culminating in the all-important employment report on Friday, June 5. I think even a moderately positive run of data will further cement a September shift.

Most analysts expect some economic slowdown in Q2 and Q3 due to the significant fiscal drag over the next couple of quarters. I expect the Fed will wait and see how much fiscal policy impacts growth and employment, so - unless the data is very strong - I think the Fed will wait until at least September before they start tapering.

Of course "tapering" is still very accommodative.

Thursday economic releases:
• At 7:00 AM ET, the BEA will release the second estimate of Q1 GDP. The consensus is that real GDP increased 2.5% annualized in Q1, unchanged from the advance report.

• Also at 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims at 340 thousand, unchanged from last week.

• At 10:00 AM, the NAR will release Pending Home Sales Index for April. The consensus is for a 1.4% increase in the index

by Calculated Risk on 5/29/2013 04:33:00 PM

From economist Tom Lawler:

The FDIC released its Quarterly Banking Profile for the first quarter of 2013, and according to the report the carrying value of 1-4 family residential real estate owned (REO) by FDIC-insured institutions at the end of March was $7.89 billion, down from $8.34 billion at the end of December, and down from $11.08 billion at the end of March 2012.

Assuming that the average carrying value of SF REO at FDIC-insured institutions is 50% higher than the average for Fannie Mae and Freddie Mac, here is a chart showing quarterly SF REO inventories at Fannie, Freddie, FHA, FDIC-insured institutions and private-label securities. (The source of my PLS data only had data through the end of February, which I used for Q1/2013).

Click on graph for larger image.

SF REO inventories at these entities totaled an estimated 341,439 at the end of March, down 24% from last March, down 39% from March 2011, and down 47% from September 2008.

by Calculated Risk on 5/29/2013 01:22:00 PM

From John Gittelsohn at Bloomberg: Carrington Stops Buying U.S. Rentals as Blackstone Adding (ht Soylent Green Is People)

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” [Bruce] Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of -- bluntly -- stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”
...
Carrington, which started in 2003 as a mortgage investment fund and has managed almost 25,000 rental homes for itself and others, has been joined by hundreds of institutional and international investors buying single-family homes after prices plunged following the housing crash.
...
Blackstone Group LP (BX), the largest investor in single-family rentals, has spent $4.5 billion to amass more than 26,000 homes and continues to buy, according to Eric Elder, a spokesman for Invitation Homes, the rental housing division of the world’s largest private equity firm. ... Blackstone’s net yields on its occupied houses are about 6 percent to 6.5 percent ...

Back in late 2008 and early 2009, I started reporting on small investor groups buying low end single family properties to rent. Since then rents have increased sharply and vacancy rates fallen.

Early last year I checked back with these small investors, and they had all stopped buying. The numbers no longer made sense with all the large institutional buyers.   Now it appears the numbers no longer make sense for at least one large buyer.

by Calculated Risk on 5/29/2013 12:03:00 PM

From J.D. Harrison at the WaPo: Small business lending freeze starting to thaw

The credit health of small companies across the country improved during the first quarter of 2013, according to a new report by Experian and Moody’s Analytics ... Sageworks, a financial information firm, released its latest private company report earlier this week, which shows that the average risk of business loan default has dropped to 4.1 percent from 5.1 percent last April.
...
“The improvement in default rates coupled with healthy sales and profitability show that private companies may be well positioned to borrow,” said Sageworks Chairman Brian Hamilton.

The small business lending Index from Direct Capital, which provides equipment leasing and business loans, backs up that claim, showing that small business borrowing demand ticked higher nationwide for the fourth straight month in April. Over that period, the number of small business owners seeking loans has surged 44 percent compared to the first four months of 2012.

But are they actually finding the capital they need? More and more of them, yes, according to online lending platform Biz2Credit’s monthly survey.

The report showed the nation’s largest banks approved 16.8 percent of small business loans in April, up from 15.7 percent in March and 10.6 percent in April 2012.

Small businesses have been slow to recover, partially because so many small businesses are real estate and retail related.  Improving credit is a positive sign and might lead to more small business hiring.