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Thursday, May 26, 2011

Weekly Initial Unemployment Claims increase to 424,000

by Calculated Risk on 5/26/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending May 21, the advance figure for seasonally adjusted initial claims was 424,000, an increase of 10,000 from the previous week's revised figure of 414,000. The 4-week moving average was 438,500, a decrease of 1,750 from the previous week's revised average of 440,250.
The following graph shows the 4-week moving average of weekly claims for the last 40 years.
Weekly Unemployment Claims 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 decreased this week to 438,500.

The 4-week average is back to the level of last November when there were fewer payroll jobs being added each month - and that is very concerning.

Wednesday, May 25, 2011

Misc: State Revenues increases, Gas Prices fall, GDP and Weekly Claims tomorrow

by Calculated Risk on 5/25/2011 10:19:00 PM

• From the Rockefeller Institute of Government: States Report Strong Growth in Tax Revenues in the First Quarter of 2011

The Rockefeller Institute's compilation of data from 47 early reporting states shows collections from major tax sources increased by 9.1 percent in nominal terms in the first quarter of 2011 compared to the same quarter of 2010. That represented the third consecutive quarter of increasing strength in revenues. Tax collections now have been rising for five straight quarters, following five quarters of declines, but were still 3.1 percent lower in early 2011 than in the same period three years ago
...
In terms of dollars, California reported the largest increase in overall tax collections in the first quarter of 2011, where revenue collections rose by $1.4 billion or 5.6 percent. Illinois and New York also reported large increases in overall tax collections in terms of dollars.
The press release has a state by state breakdown. Revenue is still 3.1% lower than at the beginning of the recession.

• According to gasbuddy.com, gasoline prices are down about 15 cents per gallon nationally from the peak. Oil prices moved up today to almost $102 per barrel (WTI futures), but we should still further gasoline price declines after the Memorial Day weekend.

• At 8:30 AM tomorrow, the Department of Labor will release the initial weekly unemployment claims report. This is being watched closely now because of the sharp increase in initial claims at the end of April. The consensus is for a decrease to 404,000 from 409,000 last week.

Also at 8:30 AM, the BEA will release the second estimate of Q1 GDP. The consensus is for an upward revision to 2.1% annualized real GDP growth (from 1.8%). Goldman Sachs put out a note this afternoon:
[W]e now expect an upward revision to 2.1% (one tenth higher than before). [However the] soft April results ... imply about two tenths of additional downside risk to our Q2 GDP growth forecast, on top of our downward revision to 3.0% yesterday.
Best to all

DOT: Vehicle Miles Driven decreased 1.4% in March compared to March 2010

by Calculated Risk on 5/25/2011 05:52:00 PM

The Department of Transportation (DOT) reported that vehicle miles driven in March were down 1.4% compared to March 2010:

Travel on all roads and streets changed by -1.4% (-3.5 billion vehicle miles) for March 2011 as compared with March 2010. Travel for the month is estimated to be 250.4 billion vehicle miles.

Cumulative Travel for 2011 changed by -0.1% (-0.8 billion vehicle miles).
Vehicle Miles Click on graph for larger image in graph gallery.

This graph shows the rolling 12 month total vehicle miles driven.

Note: in the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months. Currently miles driven has been below the previous peak for 40 months - so this is a new record for longest period below the previous peak - and still counting!

Vehicle Miles Driven YoYThe second graph shows the year-over-year change from the same month in the previous year. So far the current decline is not as a severe as in 2008.

U.S. oil prices in March averaged $103 per barrel, and although prices have declined in May from the April highs, prices have only fallen to just below the prices in March. Also other sources have reported demand for gasoline is down in April and May, so I expect the data for April to show a sharp year-over-year decline in miles driven.

ATA Trucking index decreased 0.7% in April

by Calculated Risk on 5/25/2011 02:54:00 PM

From ATA Trucking: ATA Truck Tonnage Index Fell 0.7 Percent in April

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 0.7 percent in April after gaining a revised 1.9 percent in March 2011. March’s increase was slightly better than the 1.7 percent ATA reported on April 26, 2011. The latest drop put the SA index at 114.9 (2000=100) in April, down from the March level of 115.6.
Pulse of Commerce Index Click on graph for larger image in graph gallery.

Here is a long term graph that shows ATA's Fore-Hire Truck Tonnage index.

The dashed line is the current level of the index.
Compared with April 2010, SA tonnage climbed 4.8 percent. In March, the tonnage index was 6.5 percent above a year earlier.

“The drop in April is not a concern. Since freight volumes are so volatile truck tonnage is unlikely to grow every month, even on a seasonally adjusted basis,” ATA Chief Economist Bob Costello said. “I expect economic activity, and with it truck freight levels to grow at a moderate pace in the coming months and quarters.”

“The industry, and the economy at large, should benefit from the recent declines in oil and diesel prices,” Costello added.
...
Trucking serves as a barometer of the U.S. economy, representing 67.2 percent of tonnage carried by all modes of domestic freight transportation ... Motor carriers collected $563.4 billion, or 81.2 percent of total revenue earned by all transport modes.

Debt Ceiling Charade: Vote to Fail Next Week

by Calculated Risk on 5/25/2011 11:49:00 AM

Stan Collender writes: Not A Surprise: GOP Plans Vote On Debt Ceiling Bill Next Week

House Republicans announced yesterday that they would bring a "clean" debt ceiling to the House floor next week. ... by allowing members to vote against it now, the leadership will also be making it easier for some of them to vote for a debt ceiling increase later this summer.
The theater of the absurd. Otherwise known as politics.

And from the WSJ: Geithner Dismisses Debt-Ceiling Debate as Political Theater
U.S. Treasury Secretary Timothy Geithner Wednesday dismissed as political theater a House vote on the debt ceiling that is expected to fail, and said Congress would ultimately raise the limit this summer.

“Right now this is all theater. Beneath the theater you are starting to see people work together,” Geithner said
The key point is the vote next week is meaningless and the debt ceiling will be increased this summer.

More Negative Sentiment for Homeownership

by Calculated Risk on 5/25/2011 09:51:00 AM

During the housing busts that followed the California housing bubbles of the late '70s and late '80s, there came a period when sentiment for homeownership changed. The evidence was anecdotal, but it was not uncommon to hear people say owning a home was "dumb".

So one thing I've been looking for is a change in sentiment. Earlier posts on this with anecdotal evidence: Housing: Feeling the Hate, More "Hate" for Housing, and More "Hate" for Homeownership.

A shift in sentiment doesn't mean housing prices have bottomed - it just means the market is getting closer. In previous busts it seemed like negative sentiment lasted for a few years.

Last week Trulia and RealtyTrac released a survey of when Americans thought the housing market would recover. (ht Keith Jurow, Keith is far more bearish than I am bearish).

Here is the survey: Trulia and RealtyTrac Survey Reveals 54 Percent of American Adults Now Believe Housing Recovery Remains Unlikely Until 2014 or Later

As more cities across the nation experience double dips in home prices , more than half (54 percent) of U.S. adults believe recovery in the housing market will not happen until 2014 or later, according to the survey released today. In a previous survey conducted six months ago , 42 percent of American adults said they thought the market would turn around by 2012 or had already turned around. Now, only 23 percent continue to think this will happen.

When American Adults Believe Housing Market Will Recover
Apr-11Nov-10% Change
Already Recovered[1]5%5%0%
By the end of 20113%10%-70%
201215%27%-44%
201324%24%0%
2014 or Later54%34%59%

Clearly there has been a sharp shift in when people think the housing market will "recover". Expecting a recovery is somewhat different from asking when people will want to buy, but I think they are somewhat related - if non-owners think the market won't bottom for several years, they would probably also say they won't buy soon too. Just a little more evidence of a shift in sentiment ...

MBA: Mortgage Purchase application activity increases slightly

by Calculated Risk on 5/25/2011 07:35:00 AM

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

The Refinance Index increased 0.9 percent to its highest level since December 10, 2010. The seasonally adjusted Purchase Index increased 1.5 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.60 percent, with points decreasing to 0.69 from 0.93 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
MBA Purchase Index Click on graph for larger image in graph gallery.

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

Refinance activity increased to the highest level since December 2010.

The four week average of purchase activity is at about 1997 levels. Of course this doesn't includes cash buyers - and there is a very high percentage of cash buyers right now. This suggests weak existing home sales through mid-year (not counting cash buyers).

WSJ: State AGs Warn Banks of Suits if Foreclosure Settlement isn't Reached

by Calculated Risk on 5/25/2011 12:50:00 AM

From at the WSJ: Banks Face $17 Billion in Suits Over Foreclosures

State attorneys general told five of the nation's largest banks on Tuesday they face a potential liability of at least $17 billion in civil lawsuits if a settlement isn't reached to address improper foreclosure practices ... The figure doesn't cover additional billions of dollars in potential claims from federal agencies.
The initial number floated by the government was a $20 billion settlement. The banks suggested a $5 billion fund to provide transition assistance for those losing their homes in foreclosure. However the banks already provide transition assistance ("cash for keys") for borrowers who leave the keys and property in decent shape - so that wasn't much of a penalty. I guess this $17 billion is the new government number - so it appears the sides are still far apart.

Tuesday, May 24, 2011

Moody's: Commercial Real Estate Prices declined 4.2% in March, Hit new Post-Bubble Low

by Calculated Risk on 5/24/2011 06:35:00 PM

Moody's reported yesterday that the Moody’s/REAL All Property Type Aggregate Index declined 4.2% in March. 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 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement ...So-called trophy properties in New York, Washington, Boston, Chicago, Los Angeles and San Francisco are helping those markets avoid the drag caused by distressed asset sales nationwide, Moody’s reported.

The overall index shows “no sign of recovery,” Moody’s said.

Almost a third of all March transactions measured by Moody’s were considered distressed, meaning the properties’ owners faced foreclosure, had difficulty covering their mortgage payments or experienced other financial problems. It was the largest proportion of distressed property sales in the history of the index, Moody’s said.
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.

CRE and Residential Price indexes 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 8.5% from a year ago and down about 47% from the peak in 2007. Prices are at new post-bubble lows - and about at the levels of early 2002.

For more on CRE prices, here is the CoStar report for March prices.

Earlier:
New Home Sales in April at 323 Thousand SAAR, Ties Record low for April
Lawler: FDIC-insured institutions’ Real Estate Owned (REO) decrease in Q1
New Home Sales graphs

Lawler: FDIC-insured institutions’ Real Estate Owned (REO) decrease in Q1

by Calculated Risk on 5/24/2011 02:51:00 PM

From economist Tom Lawler:

The FDIC released its Quarterly Banking Profile for the first quarter of 2011. ... On the REO front [lender Real Estate Owned], the carrying value of 1-4 family residential real estate owned on FDIC-insured institutions’ balance sheet on 3/31/11 was $13.2795 billion, down from $14.0498 billion on 12/31/10 and $14.5527 billion last March. The steep drop suggests that banks probably increased the pace at which they sold SF REO properties last quarter.

FDIC insured Institutions REO Dollars Click on graph for larger image in new window.

As I have noted before, it is unfortunate that the FDIC does not collect data on the NUMBER of REO properties held, and there are actually significantly different estimates across analysts of the average carrying value of 1-4-family REO properties at FDIC-insured institutions. If one were to assume an average carrying value of about $150,000 – which is slightly over 50% above that for Fannie and Freddie – then FDIC-insured institutions would have owned about 88,530 residential REO properties last quarter. (Barclays Capital analysts believe the average carrying value is higher, and as a result the number of properties would be lower).

Using the $150,000 number, here is a chart of REO holdings of Fannie, Freddie, FHA, and FDIC-insured institutions.

Fannie Freddie FHA PLS FDIC insured REO InventoryNote that this is NOT an estimate of total residential REO, as it excludes non-FHA government REO (VA, USDA, etc.), credit unions, finance companies, non-FDIC-insured banks and thrifts, and a few other lender categories. At the end of last year Fannie, Freddie, FDIC-insured institutions, FHA, and private-label RMBS accounted for approximately 89% of the dollar balance of 1-4 family first-lien mortgage debt outstanding. If one “grossed up” the estimates shown in the chart by this factor – which probably produces a “too high” number – then one estimate of the total REO inventory for 1-4 family properties would be around 615,000.

Of course, such an estimate probably understates the effective number of REO properties. E.g., institutions could well have unloaded properties in bulk sales to private entities looking to fix up and then sell and/or rent the properties but who have not yet done so. However, at least based on available lender data, estimates of the number of REO properties from RealtyTrac look materially too high, and overall REO inventories have clearly declined over the last two quarters.

CR Note: this is probably a good estimate of REO inventory. The key is REO inventory is declining again even though some organizations have significantly increased their foreclosure activity and are working through the backlog of seriously delinquent mortgages.