by Calculated Risk on 6/08/2011 02:00:00 PM

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts indicated that economic activity generally continued to expand since the last report, though a few Districts indicated some deceleration. Some slowing in the pace of growth was noted in the New York, Philadelphia, Atlanta, and Chicago Districts. In contrast, Dallas characterized that region's economy as accelerating. Other Districts indicated that growth continued at a steady pace.
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Consumer spending was mixed, with most Districts indicating steady to modestly increasing activity. Elevated food and energy prices, as well as unfavorable weather in some parts of the country, were said to be weighing on consumers' propensity to spend. ... Widespread supply disruptions--primarily related to the disaster in Japan--were reported to have substantially reduced the flow of new automobiles into dealers' inventories, which in turn held down sales in some Districts.
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Manufacturing activity was reported as continuing to increase since the last report in all but two districts, although many noted that the pace of growth had slowed.
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Labor market conditions continued to improve gradually across most of the nation, with a number of Districts noting a short supply of workers with specialized technical skills. Wage growth generally remained modest, though there were scattered reports of steeper increases for highly skilled workers in certain occupations.

And on real estate:

Residential real estate sales markets showed continued weakness in most Districts, while rental markets strengthened. Most Districts indicate that home prices have declined since the last report: Boston, Philadelphia, Richmond, Atlanta, Kansas City, and San Francisco all report some downward drift in selling prices, while reports from the New York and Cleveland Districts indicate that prices have been steady, on balance
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Commercial and industrial real estate markets have generally been steady since the last report, though there have been scattered signs of a pickup. Commercial leasing markets showed modest signs of improvement in the Richmond and San Francisco Districts. Boston and Dallas noted some firming in property sales markets, but Kansas City reported declines in prices for office buildings.

This was based on data gathered before May 27th.

by Calculated Risk on 6/08/2011 11:32:00 AM

Updating some graphs ...

Last week CoreLogic their house price index for April: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010. The CoreLogic HPI is a three month weighted average of February, March, and April (April weighted the most) and is not seasonally adjusted (NSA).

There was a change in how the data is released, so I didn't include a graph last week - here is the graph.

Note: Case-Shiller is the most followed house price index, but CoreLogic is used by the Federal Reserve and is followed by many analysts.

Click on graph for larger image in graph gallery.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.7% in April, and is down 7.5% over the last year, and off 33.8% from the peak.

This is the ninth straight month of year-over-year declines, and the index is now 4.0% below the March 2009 low.

Real House Prices

The second graph shows the quarterly Case-Shiller National Index SA (through Q1 2011), and the monthly Case-Shiller Composite 20 SA (through March) and CoreLogic House Price Indexes (through April) in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q4 1999 levels, the Composite 20 index is back to October 2000, and the CoreLogic index is back to January 2000.

House Prices and months-of-supply

Here is a look at house prices and existing home months-of-supply.

This graph shows existing home months-of-supply (left axis), and the annualized change in the Case-Shiller composite 20 house price index (right axis, inverted).

House prices are through March using the composite 20 index. Months-of-supply is through April. Based on this general relationship, I expect Case Shiller house prices to fall further - although there are some questions about the NAR inventory data.

It now appears that inventory is declining year-over-year (something to watch carefully), but of course sales have been declining too.

Note: there have been periods with high months-of-supply and rising house prices (see: Lawler: Again on Existing Home Months’ Supply: What’s “Normal?” ) so this is just a guide.

by Calculated Risk on 6/08/2011 09:00:00 AM

This is the new UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index^TM

Press Release: Pulse of Commerce Index Falls 0.9 percent in May

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), issued today by the UCLA Anderson School of Management and Ceridian Corporation fell 0.9 percent on a seasonally and workday adjusted basis in May, after falling 0.5 percent in April.

“The index has now declined in four of the first five months of 2011, and in eight of the past twelve months,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. ... “On a year over year basis, the PCI was flat in May. This was disappointing in that it ended a string of seventeen straight months of year over year improvement in the index,” Leamer continued. “One small glimmer of good news is that May of last year was the strongest month of 2010, and this month’s result nearly cleared that hurdle. Nevertheless, the PCI showed no growth, and this is another indication that the economy is stuck in neutral.”

Click on graph for larger image in graph gallery.

This graph shows the index since January 2000.

“Over time, the PCI has proven to be a leading and amplified indicator of both Industrial Production and GDP,” explained Craig Manson, senior vice president and Index expert for Ceridian. “The May result further reinforces our long-held cautious outlook for below consensus growth in GDP, and suggests that second quarter GDP growth will be less than 2 percent. Similarly, the PCI is anticipating Industrial Production to show modest growth of 0.05 percent for May when the number is released by the Government on June 15, 2011.”
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The Ceridian-UCLA Pulse of Commerce Index™ is based on real-time diesel fuel consumption data for over the road trucking ...

This index was useful in tracking the slowdown last summer.

Note: This index does appear to track Industrial Production over time (with plenty of noise).

by Calculated Risk on 6/08/2011 07:22:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The seasonally adjusted Purchase Index decreased 4.4 percent from one week earlier. ... The adjusted Refinance Index increased 1.3 percent from the previous week.
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The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.54 percent from 4.58 percent, with points decreasing to 0.95 from 1.00 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year contract rate since November 19, 2010.

Click on graph for larger image in graph gallery.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four week average of purchase activity is moving sideways at about 1997 levels. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through mid-year (not counting cash buyers). Note that mortgage rates have fallen to the lowest level since last November.

by Calculated Risk on 6/07/2011 08:12:00 PM

As I mentioned this morning, CoreLogic released the Q1 2011 negative equity report today.

CoreLogic ... today released negative equity data showing that 10.9 million, or 22.7 percent, of all residential properties with a mortgage were in negative equity at the end of the first quarter of 2011, down slightly from 11.1 million, or 23.1 percent, in the fourth quarter. An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the first quarter.

Here are a couple of graphs from the report:

Click on graph for larger image in graph gallery.

This graph shows the distribution of negative equity (and near negative equity). The more negative equity, the more at risk the homeowner is to losing their home.

Close to 10% of homeowners with mortgages have more than 25% negative equity. This is trending down slowly - the decline is apparently mostly due to homes lost in foreclosure.

The second graph from CoreLogic shows the default rate by percent negative equity.

The default rate increases the more 'underwater' the property, and the default rate really increases with Loan-to-values (LTV) of 125% or more.

Note that most homes with LTVs of 125% are still current. Many of these people will be stuck in their homes for years - or eventually default.

The third graph shows the break down of negative equity by state. Note: Data not available for Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming.

"Nevada had the highest negative equity percentage with 63 percent of all mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (36 percent) and California (31 percent). ... Las Vegas led the nation with a 66 percent negative equity share, followed by Stockton (56 percent), Phoenix (55 percent), Modesto (55 percent) and Reno (54 percent)."

by Calculated Risk on 6/07/2011 03:45:00 PM

From Fed Chairman Ben Bernanke: The U.S. Economic Outlook

U.S. economic growth so far this year looks to have been somewhat slower than expected. Aggregate output increased at only 1.8 percent at an annual rate in the first quarter, and supply chain disruptions associated with the earthquake and tsunami in Japan are hampering economic activity this quarter. A number of indicators also suggest some loss of momentum in the labor market in recent weeks. We are, of course, monitoring these developments. That said, with the effects of the Japanese disaster on manufacturing output likely to dissipate in coming months, and with some moderation in gasoline prices in prospect, growth seems likely to pick up somewhat in the second half of the year. Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers.
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Although the recent increase in inflation is a concern, the appropriate diagnosis and policy response depend on whether the rise in inflation is likely to persist. So far at least, there is not much evidence that inflation is becoming broad-based or ingrained in our economy; indeed, increases in the price of a single product--gasoline--account for the bulk of the recent increase in consumer price inflation.
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Although it is moving in the right direction, the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.