by Calculated Risk on 2/24/2011 10:00:00 AM

The Census Bureau reports New Home Sales in January were at a seasonally adjusted annual rate (SAAR) of 284 thousand. This is down from a revised 325 thousand in December.

Click on graph for larger image in new window.

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

Sales of new single-family houses in January 2011 were at a seasonally adjusted annual rate of 284,000 ... This is 12 6 12.6 percent (±11.2%) below the revised December rate of 325,000 and is 18.6 percent (±15.4%) below the January 2010 estimate of 349,000.

And a long term graph for New Home Months of Supply:

Months of supply increased to 7.9 in January from 7.0 months in December. The all time record was 12.1 months of supply in January 2009. This is still high (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of January was 188,000. This represents a supply of 7.9 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.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale fell to 78,000 units in January. And the combined total of completed and under construction is at the lowest level since this series started.

This is the "good" news - in most areas the 'completed' and 'under construction' inventory of new homes is fairly lean.

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

In January 2010 (red column), 19 thousand new homes were sold (NSA). This is a new record low for the month of January.

The previous record low for January was 24 thousand in 2009 and 2010.

This was below the consensus forecast of 310 thousand homes sold (SAAR).

New home sales have averaged 293 thousand per month (annual rate) over the last nine months - all below the previous record low. Another very weak report ...

by Calculated Risk on 2/24/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Feb. 19, the advance figure for seasonally adjusted initial claims was 391,000, a decrease of 22,000 from the previous week's revised figure of 413,000. The 4-week moving average was 402,000, a decrease of 16,500 from the previous week's revised average of 418,500.

Click on graph for larger image in graph gallery.

This graph shows the 4-week moving average of weekly claims for the last 40 years. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 16,500 to 402,000.

The sharp drop in the 4-week average since late last year suggests some improvement in the labor market. There is nothing magical about the 400,000 level, but breaking below that level would be a good sign.

by Calculated Risk on 2/23/2011 09:39:00 PM

From Nick Timiraos, Dan Fitzpatrick and Ruth Simon at the WSJ: Mortgage Deal Takes Shape

The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns ... some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers ...

This is just preliminary - and is just a broad outline of a possible settlement. This is the first I've heard of a possible number for fines and/or loan modifications.

by Calculated Risk on 2/23/2011 06:22:00 PM

From the American Trucking Association: ATA Truck Tonnage Index Surged 3.8 Percent in January

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 3.8 percent in January after rising a revised 2.5 percent in December 2010. The latest jump put the SA index at 117.1 (2000=100) in January, which was the highest level since January 2008. In December, the SA index equaled 112.7.
...
ATA Chief Economist Bob Costello said that he was very pleased with January’s robust gain, especially considering the winter storms during the month. “Many fleets told us that freight was solid in January, although operations were as challenge due to the winter storms that hit large parts of the country.” Costello also stated that the latest tonnage numbers indicate that the economy is growing at a good clip early in 2011 and he expects a solid first half of the year. “At this point, the biggest threat is the recent run-up in oil prices, which could dampen consumer spending.”

Click on map for graph gallery.

This graph from the ATA shows the Truck Tonnage Index since Jan 2007.

This is the highest level since January 2008 - and truck tonnage is increasing again after stalling out last spring and summer. I agree with Costello that the biggest short term threat to the economy is high oil prices.

Earlier posts on existing home sales and home prices:
• January Existing Home Sales: 5.36 million SAAR, 7.6 months of supply
• Existing Home Inventory increases 3.1% Year over Year
• Real House Prices fall to 2000 Levels, Update on NAR Overstating Sales
• Case-Shiller: National Home Prices Are Close to the 2009Q1 Trough
• House Prices: Price-to-rent, Price-to-median Household Income

by Calculated Risk on 2/23/2011 03:13:00 PM

Back in 2009, when the house price bottom callers were out in force, I pointed out that real house prices usually bottom after the unemployment rate peaks - and sometimes several years after the peak (like in the '90s).

Below is a comparison of real house prices and the unemployment rate using the Corelogic house price index (starts in 1976) and the Case-Shiller Composite 10 index (starts in 1987). Both indexes are adjusted by CPI less shelter.

Click on image for larger graph in graph gallery.

The two previous national declines in real house prices are evident on the graph (early '80s and early '90s). The dashed green lines are drawn at the peak of the unemployment rate following the peak in house prices.

In the early '80s, real house prices declined until the unemployment rate peaked, and then increased sluggishly for a few years. Following the late 1980s housing bubble, real house prices declined for several years after the unemployment rate peaked.

Although there are periods when there is no relationship between the unemployment rate and house prices - like during the bursting of the stock market bubble - this graph suggests that house prices do not bottom in real terms until the unemployment rate has peaked - and probably not until a few years later (the recent housing bubble dwarfed the previous housing bubbles, and the bust will probably take some time).

Clearly this analysis was correct since real house prices are now at post-bubble lows! I'd expect real prices (inflation adjusted) to fall for another 2 or 3 years, even if nominal prices bottom in 2011.

by Calculated Risk on 2/23/2011 02:02:00 PM

From Kansas City Fed President Thomas Hoenig: Financial Reform: Post Crisis?

Fifteen years ago, I gave a speech entitled “Rethinking Financial Regulation,” which summarized the major threats facing our financial system. My suggestion then was to take steps to reduce interdependencies among large institutions and to limit them to relatively safe activities if they chose to provide essential banking and payments services and be protected by the federal safety net. I also argued that safety net protection and public assistance should not be extended to large organizations extensively engaged in nontraditional and high-risk activities. A final point of those remarks was that central banks must pursue policies that preserve financial stability. I am going to repeat those suggestions today, and as often as the opportunity allows. History is on my side.

Today, I am convinced that the existence of too big to fail financial institutions poses the greatest risk to the U.S. economy. The incentives for risk-taking have not changed post-crisis and the regulatory factors that helped create the crisis remain in place. We must make the largest institutions more manageable, more competitive, and more accountable. We must break up the largest banks, and could do so by expanding the Volcker Rule and significantly narrowing the scope of institutions that are now more powerful and more of a threat to our capitalistic system than prior to the crisis.

I don't always agree with Hoenig, but I think he is correct about the large banks.

Earlier posts on existing home sales and home prices:
• January Existing Home Sales: 5.36 million SAAR, 7.6 months of supply
• Existing Home Inventory increases 3.1% Year over Year
• Real House Prices fall to 2000 Levels, Update on NAR Overstating Sales
• Case-Shiller: National Home Prices Are Close to the 2009Q1 Trough
• House Prices: Price-to-rent, Price-to-median Household Income