by Calculated Risk on 11/01/2014 08:11:00 AM

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

Here is the unofficial problem bank list for Oct 31, 2014.

Changes and comments from surferdude808:

As expected, the FDIC provided an update on its enforcement action activities. Their disclosure has to be the shortest list of new actions and terminations since the on-set of the Great Recession. In all, there were three removals and two additions to the Unofficial Problem Bank List this week. After the changes, the list holds 422 institutions with assets of $133.5 billion. For the month of October, the list declined by a net 10 institutions after eight action terminations, three mergers, two failures, and three additions.

The FDIC terminated actions against Decatur State Bank, Decatur, AR ($144 million); Lone Star Bank, Houston, TX ($106 million); and The Bank of Kaukauna, Kaukauna, WI ($84 million).

New to the list is Polonia Bank, Huntingdon Valley, PA ($300 million Ticker PBCP) and Proficio Bank, Cottonwood Heights, UT ($199 million).

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 422.

by Calculated Risk on 10/31/2014 09:08:00 PM

Larry Kudlow wrote an absurd piece at CNBC today.

Of course Kudlow is usually wrong and frequently absurd ... as an example, in June 2005 Kudlow wrote "The Housing Bears are Wrong Again" and called me (or people like me) "bubbleheads".

Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.

In the piece today, Kudlow claimed: "I've always believed the 1990s were Ronald Reagan's third term."

Kudlow is rewriting his own history.  Near the beginning of Clinton's first term, Kudlow was arguing Clinton's policies would take the economy into a deep recession or even depression.  Kudlow was wrong then (I remember because I was on the other side of that debate), so he can't claim he "always believed" now.  Nonsense.

Further down, Kudlow dismisses gains in the stock market as unrelated to the economy:

"Over the last eight quarters ... the S&P 500 climbed 43 percent. But that's mostly from record profits and expanding multiples."

Weird, because in 2007, Kudlow wrote:

"I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president."

by Calculated Risk on 10/31/2014 05:31:00 PM

This is one of my favorite GDP graphs. The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Note: This can't be used blindly.  Residential investment is so low as a percent of the economy that the small decline earlier this year was not  a concern.

Click on graph for larger image.

Residential investment (RI) increased at a 1.8% annual rate in Q3 - and RI only contributed 0.06 percentage points to GDP growth.  For the rate of economic growth to increase, RI will probably have to make larger positive contributions to economic growth.

Equipment investment increased at a 7.2% annual rate, and investment in non-residential structures increased at a 3.9% annual rate.  Equipment and software added 0.41 percentage points to growth in Q3 and the three quarter average moved down slightly (green).

The contribution from nonresidential investment in structures was also positive in Q3.  Nonresidential investment in structures typically lags the recovery, however investment in energy and power provided a boost early in this recovery. 

I expect to see all areas of private investment increase over the next few quarters - and that is key for stronger GDP growth.

by Calculated Risk on 10/31/2014 02:30:00 PM

The BEA has released the underlying details for the Q3 advance GDP report today.

Investment in single family structures is now back to being the top category for residential investment (see first graph).  Home improvement was the top category for twenty one consecutive quarters following the housing bust ... but now investment in single family structures is the top category once again.

However - even though investment in single family structures has increased from the bottom - single family investment is still very low, and still below the bottom for previous recessions. I expect further increases over the next few years.

Click on graph for larger image.

The first graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Investment in single family structures was $190 billion (SAAR) (almost 1.1% of GDP).

Investment in home improvement was at a $180 billion Seasonally Adjusted Annual Rate (SAAR) in Q3 (just over 1.0% of GDP).   

The second graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased recently, but from a very low level.

Investment in offices is down about 47% from the recent peak (as a percent of GDP) and increasing slowly.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 59% from the peak.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment peaked at 0.31% of GDP in Q3 2008 and is down about 66%.   With the hotel occupancy rate at the highest level since 2000, it is likely that hotel investment will probably continue to increase.

These graphs show investment is generally increasing, but from a very low level.

by Calculated Risk on 10/31/2014 11:32:00 AM

The NAHB released their 2015 housing forecast today. Towards the end of each year I collect some housing forecasts for the following year, and it looks like most analysts are optimistic for 2015.

Here is a summary of forecasts for 2014. In 2014, new home sales will be around 440 thousand, and total housing starts will be close to 1 million.  No one was close on New Home sales (all way too optimistic), and Michelle Meyer (Merrill Lynch) and Fannie Mae were the closest on housing starts (about 10% too high).

In 2014, many analysts underestimated the impact of higher mortgage rates and higher new home prices on new home sales and starts.

Note: Here is a summary of forecasts for 2013. In 2013, new home sales were 429 thousand, and total housing starts were 925 thousand.  Barclays were the closest on New Home sales followed by David Crowe (NAHB).  Fannie Mae and the NAHB were the closest on housing starts.

The table below shows a few forecasts for 2015 (I'll update these in December).

From Fannie Mae: Housing Forecast: October 2014

From NAHB: Single-Family Production Poised to Take Off in 2015

I don't have Moody's Analytics' forecast, but Mark Zandi, chief economist at Moody's Analytics said today "that single-family starts could be closing in on 1 million units by the end of 2015 and multifamily production could go as high as 500,000 units."  That seems too high.

I haven't worked up a forecast yet for 2015.

Housing Forecasts for 2015
	New Home Sales (000s)	Single Family Starts (000s)	Total Starts (000s)	House Prices1
NAHB		802	1,158
Fannie Mae	523	783	1,170	4.9%2
Merrill Lynch	557		1,200	3.6%
Wells Fargo	535	760	1,110	3.2%
Zillow				3.0%3
1Case-Shiller unless indicated otherwise 2FHFA Purchase-Only Index 3Zillow Home Value Index, Sept 2014 to Sept 2015