by Calculated Risk on 11/27/2014 12:48:00 PM

From the WSJ: OPEC Leaves Production Target Unchanged

The Organization of the Petroleum Exporting Countries said its 12 members, who collectively pump around one-third of the world’s oil, would comply with its current production ceiling of 30 million barrels a day. That would involve a supply cut of around 300,000 barrels a day based on the cartel’s output in October, according to the group’s own data.
...
The oil producer group’s decision led to a further sharp selloff in major global oil benchmarks, with U.S. markets closed for the Thanksgiving holiday. Brent crude fell about 6% to below $73, a four-year low, while the West Texas Intermediate benchmark was down 3.2% to $71.36 a barrel.

Click on graph for larger image

This graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).

According to Bloomberg, WTI has fallen over 4% today to $69.40 per barrel, and Brent to $72.97.

Prices are off over 35% from the peak for the year, and if this price decline holds, there should be further declines in gasoline prices over the next couple of weeks.  Gasoline futures are down about 10 cents per gallon.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $2.80 per gallon (down about 45 cents from a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 11/27/2014 11:16:00 AM

Each year since 2003, Merriam-Webster has listed the Words of the Year mostly based on the frequency that each word was looked up that year.

Some years the "words of the year" have been relevant to Calculated Risk, as an example, in 2004 the word of the year was "blog" (CR was started in January 2005 partly because I was wondering what a "blog" was).  In 2008, the word of the year was "bailout", and in 2010 the word was "austerity".

For fun, here are a few suggestions for "word of the year" related to the blog since 2004 (I'm sure others will have better suggestions):

2004: Blog (Merriam-Webster)

2005: Bubble.  This was the peak year for the housing bubble (activity peaked in 2005, although prices peaked in early 2006).  Writing about the housing bubble was the main topic on the blog in 2005.

2006: Bust.  This was when the housing bust started.

2007: Subprime or Recession. It was 2007 that "subprime" started to be used by the general public. An alternative would be "recession" since the Great Recession started in December 2007, and a key topic on the blog all year was when the recession would start. Other words could be: delinquency, Alt-A, and NINJA (No income, jobs or asset loans).

2008: Bailout (Merriam-Webster).  Three alternatives could be "Financial Crisis", "TARP" and "foreclosure".

2009: Stimulus. An alternative could be "deflation".

2010: Austerity (Merriam-Webster).  Unfortunately austerity could be the "word of the year" for several years.

2011: Default.  This was the year Congress threatened to default on paying the bills.

2012: Short Sale.  This was probably the year that short sales peaked.  This was the year house prices bottomed (but I couldn't think of a "word")

2013: Shutdown.  In 2013, Congress shut down the government.

2014: Employment.  In May 2014, employment surpassed the pre-recession peak, and 2014 will be the best year for employment since the '90s.

2015: Wages (Just being hopeful - maybe 2015 will be the year that real wages start to increase)

Happy Thanksgiving to all!

by Calculated Risk on 11/26/2014 08:21:00 PM

Fannie Mae reported yesterday that the Single-Family Serious Delinquency rate declined in October to 1.92% from 1.96% in September. The serious delinquency rate is down from 2.48% in October 2013, and this is the lowest level since October 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier this week, Freddie Mac reported that the Single-Family serious delinquency rate declined in October to 1.91% from 1.96% in September. Freddie's rate is down from 2.48% in September 2013, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.56 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in 2016 - although the rate of decline has slowed recently.

Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be close to normal in late 2016.

by Calculated Risk on 11/26/2014 03:47:00 PM

The Case-Shiller house price indexes for September were released yesterday. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: Oct. 2014 Case-Shiller Prediction: Expect the Slowdown to Continue

The September S&P/Case-Shiller (SPCS) data out [yesterday] showed more slowing in the housing market, with annual growth in the 20-city index falling 0.7 percentage points from August’s pace to 4.9 percent in September. This is the first time annual appreciation for the 20-city index has been below 5 percent since October 2012. The national index was up 4.8 percent on an annual basis in September.

Our current forecast for October SPCS data indicates further slowing, with the annual increase in the 20-City Composite Home Price Index falling to 4.3 percent.

The non-seasonally adjusted (NSA) 20-City index was flat from August to September, and we expect it to decrease 0.4 percent in October. We also expect a monthly decline for the 10-City Composite Index, which is projected to fall 0.4 percent from September to October (NSA).

All forecasts are shown in the table below. These forecasts are based on the September SPCS data release and the October 2014 Zillow Home Value Index (ZHVI), released Nov. 20. Officially, the SPCS Composite Home Price Indices for October will not be released until Tuesday, Dec. 30.

So the Case-Shiller index will probably show a lower year-over-year gain in October than in September (4.9% year-over-year for the Composite 20 in September, 4.8% year-over-year for the National Index).

Zillow October 2014 Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	October 2013	180.29	178.20	165.90	164.01
Case-Shiller (last month)	September 2014	188.68	184.84	173.72	170.19
Zillow Forecast	YoY	4.2%	4.2%	4.3%	4.3%
	MoM	-0.4%	0.2%	-0.4%	0.2%
Zillow Forecasts1		187.9	185.4	173.0	170.8
Current Post Bubble Low		146.45	149.87	134.07	137.05
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		28.3%	23.7%	29.1%	24.6%
Bubble Peak		226.29	226.87	206.52	206.61
Date of Bubble Peak		Jun-06	Apr-06	Jul-06	Apr-06
Below Bubble Peak		17.0%	18.3%	16.2%	17.3%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 11/26/2014 12:24:00 PM

The new home sales report for October was below expectations at 458 thousand on a seasonally adjusted annual rate basis (SAAR).

Also, sales for the previous three months (July, August and September), were revised down.

Sales this year are significantly below expectations, however, based on the low level of sales, more lots coming available, and demographics, it seems likely sales will continue to increase over the next several years.

Earlier: New Home Sales at 458,000 Annual Rate in October

The Census Bureau reported that new home sales this year, through October, were 371,000, Not seasonally adjusted (NSA). That is up 1% from 367,000 during the same period of 2013 (NSA). Not much of a gain from last year.  Right now it looks like sales will barely be up this year.

Sales were up 1.8% year-over-year in October.

Click on graph for larger image.

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

The year-over-year gain will be small in Q4, but I expect sales to be up for the quarter and for the 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 September 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 mostly move sideways (distressed sales will continue to decline and be somewhat 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.