by Calculated Risk on 6/23/2011 10:00:00 AM

The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 319 thousand. This was down from a revised 326 thousand in April (revised from 323 thousand).

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

Sales of new one-family houses in May 2011 were at a seasonally adjusted annual rate of 319,000 ... This is 2.1 percent (±10.7%)* below the revised April rate of 326,000, but is 13.5 percent (±13.6%)* above the May 2010 estimate of 281,000.

Click on graph for larger image in graph gallery.

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

Months of supply decreased to 6.2 in May from 6.3 months in April. The all time record was 12.1 months of supply in January 2009. This is still higher than normal (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of May was 166,000. This represents a supply of 6.2 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 64,000 units in May. The combined total of completed and under construction is at the lowest level since this series started.

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

In May 2011 (red column), 30 thousand new homes were sold (NSA). The record low for May was 26 thousand in 2010 (following the expiration of the homebuyer tax credit) and now 2011. The high was 120 thousand in 2005.

Although above the consensus forecast of 305 thousand, this was just above the record low for May - and new home sales have averaged only 300 thousand SAAR since the expiration of the tax credit ... moving sideways at a very low level.

by Calculated Risk on 6/23/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending June 18, the advance figure for seasonally adjusted initial claims was 429,000, an increase of 9,000 from the previous week's revised figure of 420,000. The 4-week moving average was 426,250, unchanged from the previous week's revised average of 426,250.

The following graph shows the 4-week moving average of weekly claims for the last 40 years.

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged this week at 426,250.

This is the 11th straight week with initial claims above 400,000, and the 4-week average is at about the same the level as in January. This suggests the labor market weakness in May continued into June.

by Calculated Risk on 6/23/2011 12:06:00 AM

From the Telegraph: Greek cabinet approves austerity budget

The Greek cabinet has approved a 2012-2015 austerity budget plan as well as laws for its application, a key condition for further EU-IMF help to tame its massive public debt, government sources said.

The beatings will continue until morale improves.

And from the WSJ: Bailout Needs Banks' Help

In both Germany and France, finance-ministry officials met with representatives of their respective countries' leading banks and insurers on Wednesday to discuss how banks would shoulder some of the cost of a second bailout of Greece ... The trick will be for the private sector to take losses on Greek bonds, without Greece being declared in default.

I'm sure it will be voluntary ...

The Greek 2 year yield is down to 27.9%. The ten year yields is down to 16.8%.

by Calculated Risk on 6/22/2011 08:29:00 PM

Just thinking out loud ...

Fed Chairman Ben Bernanke argued that the recent slowdown was mostly due to temporary factors. From the FOMC statement: "The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan."

I also think we will see some pickup in the 2nd half of 2011, although I think the recovery will remain sluggish and choppy.

There has been some progress on the supply chain issues, and oil and gasoline prices have fallen sharply since late April.

So when will we see some better economic news?

Clearly we will see some ugly reports over the next few weeks. The regional manufacturing surveys will probably all show contraction in June, and that means the ISM manufacturing survey will be pretty bad, and maybe below 50 - indicating contraction nationally (to be released Friday, July 1st).

The May Personal Income and Outlays (Monday, June 27th) will be weak (May was a tough month), and there is little indication that the June employment report will be strong (Friday July 8th).

However, the Pending Home sales index (Weds, June 29th) will probably show a decent rebound from April. And several house price indexes have shown a bounce in house prices in April including the FHFA index released today.

U.S. house prices rose 0.8 percent on a seasonally adjusted basis from March to April, according to the Federal Housing Finance Agency’s monthly House Price Index.

Of course the FHFA index is based on GSE houses only, and almost everyone follows the Case-Shiller index now (Tuesday June 28th).

Even though Case-Shiller is a three month average - and the April report is for February, March and April - it is likely that Case-Shiller will be less negative in April than the previous months, and maybe even slightly positive. Seasonally April is usually one of the worst months of the year for the Case-Shiller index, so a less negative reading would be viewed as a positive.

And auto sales (Friday, July 1st) will probably show a rebound in June after the sharp falloff in May. From the Detroit News: GM will have 'good' sales month in June, exec says

"GM is going to have a good month — and I will leave it at that ... I feel good about June, and Ford does, too," [General Motors North American President Mark] Reuss said.

Ford Americas President Mark Fields told reporters earlier this week that June is "off to a good start."

But for manufacturing in general it might be some time before we see some more positive reports - the earliest would be mid-July, but it might not be until August or later.

And although gasoline prices are falling, prices are still much higher than earlier this year - and still above the levels in March. Consumption was somewhat weak in March, and that was when we saw the sharp decline in consumer sentiment. So falling gasoline prices will help, but consumption will probably still be fairly weak.

Last year at this time I was looking for weaker reports, and this year I'm looking for slightly better reports. Of course, as I mentioned above, some of the ugly reports are still coming (ISM manufacturing, Q2 GDP, etc) - but I think we will see a little better news here and there. I'm just starting to figure out when (and if) we will see a little pickup.

Unfortunately, even if the news is a little better, the recovery will still be sluggish ... (and remember, I have no crystal ball).

by Calculated Risk on 6/22/2011 03:32:00 PM

Moody's reported that the Moody’s/REAL All Property Type Aggregate Index declined 3.7% in April. Note: Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales and there are a large percentage of distressed sales - and that can impact prices and make the index very volatile.

The Moody’s/REAL Commercial Property Price Index dropped 3.7 percent from March and 13 percent from a year earlier. It’s now 49 percent below the peak of October 2007 and at its lowest point in data going back to December 2000 ...

“In a case of the strong getting stronger and the weak getting weaker, major asset/major market prices have recovered more than half of their post-peak losses, while prices for distressed transactions continue to bounce around the bottom,” Moody’s said in the report.

Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. Beware of the "Real" in the title - this index is not inflation adjusted.

Click on graph for larger image in graph gallery.

CRE prices only go back to December 2000. The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

According to Moody's, CRE prices are down 13% from a year ago and down about 49% from the peak in 2007. Prices are at new post-bubble lows - and at new lows for the index.

by Calculated Risk on 6/22/2011 01:57:00 PM

Below is a live video feed for Ben Bernanke's press conference.

UPDATE: The forecast updates are below the video.

The FOMC statement was released at 12:30 PM. The FOMC noted that the recovery was "continuing at a moderate pace" although slower "than the Committee had expected". They also noted "inflation has picked up in recent months".

The FOMC believes the slowdown is temporary and the pickup in inflation is transitory.

Here are the new FOMC projections.

GDP growth was revised down to around 2.8% this year.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2011	2012	2013
Jan 2011 Projections	3.4 to 3.9	3.5 to 4.4	3.7 to 4.6
April 2011 Projections	3.1 to 3.3	3.5 to 4.2	3.5 to 4.3
June 2011 Projections	2.7 to 2.9	3.3 to 3.7	3.5 to 4.2

¹ Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was revised up to 8.6% to 8.9% (this is Q4 unemployment rate). The FOMC thinks the unemployment rate will still be around 8% at the end of 2012!

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2011	2012	2013
Jan 2011 Projections	8.8 to 9.0	7.6 to 8.1	6.8 to 7.2
April 2011 Projections	8.4 to 8.7	7.6 to 7.9	6.8 to 7.2
June 2011 Projections	8.6 to 8.9	7.8 to 8.2	7.0 to 7.5

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

Inflation was revised up for 2011.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2011	2012	2013
Jan 2011 Projections	1.3 to 1.7	1.0 to 1.9	1.2 to 2.0
April 2011 Projections	2.1 to 2.8	1.2 to 2.0	1.4 to 2.0
June 2011 Projections	2.3 to 2.5	1.5 to 2.0	1.5 to 2.0

But core inflation is seen at levels still below the FOMC target.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2011	2012	2013
Jan 2011 Projections	1.0 to 1.3	1.0 to 1.5	1.2 to 2.0
April 2011 Projections	1.3 to 1.6	1.3 to 1.8	1.4 to 2.0
June 2011 Projections	1.5 to 1.8	1.4 to 2.0	1.4 to 2.0