by Calculated Risk on 5/23/2014 09:48:00 PM

Excerpt from Goldman Sachs chief economist Jan Hatzius research: Sticking with Stronger

We currently estimate that real GDP fell -0.7% (annualized) in the first quarter, versus a December consensus estimate of +2½%. On the face of it, this is a large disappointment. It raises the question whether 2014 will be yet another year when initially high hopes for growth are ultimately dashed.

Today we therefore ask whether our forecast that 2014-2015 will show a meaningful pickup in growth relative to the first four years of the recovery is still on track. Our answer, broadly, is yes. Although the weak first quarter is likely to hold down real GDP for 2014 as a whole, the underlying trends in economic activity are still pointing to significant improvement.
...
The basic rationale for our acceleration forecast of late 2013 was twofold—(1) an end to the fiscal drag that had weighed on growth so heavily in 2013 and (2) a positive impulse from the private sector following the completion of the balance sheet adjustments specifically among US households. Both of these points remain intact.

I also remain optimistic that growth will pickup - I touched on this in February: Reasons for a 2014 Pickup in Economic Growth Intact

by Calculated Risk on 5/23/2014 05:19:00 PM

From the FDIC: United Fidelity Bank, fsb, Evansville, Indiana, Assumes All of the Deposits of Columbia Savings Bank, Cincinnati, Ohio

As of March 31, 2014, Columbia Savings Bank had approximately $36.5 million in total assets and $29.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.3 million. ... Columbia Savings Bank is the eighth FDIC-insured institution to fail in the nation this year, and the first in Ohio.

A bank failure two weeks in a row ... that hasn't happened recently.

by Calculated Risk on 5/23/2014 03:04:00 PM

Here are two graphs I haven't posted for some time ...

As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in April 2014 was $275,800; the average sales price was $320,100."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales. With fewer distressed sales now, it appears the builders have moved to higher price points.

The average price in April 2014 was $320,100, and the median price was $275,800.  Both are above the bubble high (this is due to both a change in mix and rising prices).

The second graph shows the percent of new homes sold by price. At the peak of the housing bubble, almost 40% of new homes were sold for more than $300K - and over 20% were sold for over $400K.

The percent of home over $300K declined to about 20% in January 2009. Now it has rebounded to almost 45% of homes over $300K.

And less than 5% of homes sold were under $150K in April 2014.  This is down from 30% in 2002 - and down from 20% as recently as August 2011.  Quite a change.

Earlier on New Home Sales:
• New Home Sales increase to 433,000 Annual Rate in April
• Comments on the New Home Sales report

by Calculated Risk on 5/23/2014 12:03:00 PM

The Census Bureau reported that new home sales this year, through April, were 148,000, Not seasonally adjusted (NSA). That is down 2.6% from 152,000 during the same four months in 2013 (NSA).

This disappointing start to the year is probably mostly due to higher mortgage rates and higher prices. Mortgage rates were at 3.45% in April 2013 and increased to 4.34% in April 2014.  Also there were probably supply constraints in some areas and credit remains difficult for many potential borrowers.

Note: There was a sharp increase in sales in the Midwest region in April, and that appears to be a bounce back from the severe weather.   In the Midwest, sales during the first four months are now essentially flat with the same period in 2013.

Maybe sales will move sideways for a little longer, but remember early 2013 was a difficult comparison period. Annual sales in 2013 were up 16.3% from 2012, but sales in the first four months of 2013 were up 26% from the same period in 2012!

Click on graph for larger image.

This graph shows new home sales for 2013 and 2014 by month (Seasonally Adjusted Annual Rate).

The comparisons to last year will be a little easier in a few months - especially in Q3 - and I still expect to see solid year-over-year growth later this year.

And here is another update to the "distressing gap" graph that I first started posting several years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through April 2014. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to decline some more or move sideways (distressed sales will slowly decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 5/23/2014 10:00:00 AM

The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 433 thousand.

March sales were revised up from 384 thousand to 407 thousand, and February sales were revised down from 449 thousand to 437 thousand.

Sales of new single-family houses in April 2014 were at a seasonally adjusted annual rate of 433,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.4 percent above the revised March rate of 407,000, but is 4.2 percent below the April 2013 estimate of 452,000.

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales have bounced around recently, but have mostly moved sideways over the last year.  Even with the increase in sales over the previous two years, new home sales are still near the bottom for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply decreased in April to 5.3 months from 5.6 months in March.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of April was 192,000. This represents a supply of 5.3 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, but moving up. The combined total of completed and under construction is also low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In April 2014 (red column), 41 thousand new homes were sold (NSA). Last year 43 thousand homes were also sold in April. The high for April was 116 thousand in 2005, and the low for April was 30 thousand in 2011.

This was above expectations of 420,000 sales in April, but still down year-over-year.

I'll have more later today .