by Calculated Risk on 9/26/2011 12:09:00 PM

On New Home sales: Since new home sales are reported when contracts are signed, and consumer sentiment fell off a cliff in August following the debt ceiling debate, I thought we might see an even large decline for August new home sales. This was still a weak report - the 16th month in a row with sales around 300 thousand SAAR - but I thought it might even be worse.

• Dallas Fed: Texas Manufacturing Activity Picks Up

Texas factory activity increased in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 1.1 to 5.9, suggesting growth picked up this month after stalling in August.

Most other measures of current manufacturing conditions also indicated growth in September. The new orders index edged down from 4.8 to 3.6 this month, suggesting order volumes continued to increase, but at a slightly decelerated pace. The shipments index rose from 6.7 to 9.4, reaching its highest level since March. The capacity utilization index remained in negative territory in September but rose from –2.8 to –1.3.

Perceptions of general business conditions worsened in September. The general business activity index remained negative for the fifth month in a row and fell from –11.4 to –14.4; ten percent of manufacturers perceived an increase in activity this month, while one quarter noted a decrease. The company outlook index fell from 7.2 in August to a near-zero reading in September. Still, the great majority of respondents said their outlooks were unchanged or improved from last month.

Labor market indicators reflected higher labor demand growth. The employment index came in at 13.4, up notably from 5.4 in August. One quarter of manufacturers reported hiring new workers, while 12 percent reported layoffs. The hours worked index moved back into positive territory in September, suggesting average workweeks lengthened.

Some improvement. There will be two more regional manufacturing surveys released this week and the ISM survey next week.

• Distressing Gap: The following graph shows existing home sales (left axis) and new home sales (right axis) through August. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Then along came the housing bubble and bust, and the "distressing gap" appeared due mostly to distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

Click on graph for larger image in graph gallery.

I expect this gap to close over the next few years once the number of distressed sales starts to decline.

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. Also the National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers and I expect significant downward revisions to sales estimates for the last few years - perhaps as much as 10% to 15% for 2009 and 2010. Even with these revisions, most of the "distressing gap" will remain.

On August Home Sales:
• New Home Sales decline slightly in August
• Last week: Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Graph Galleries: New Home Sales and Existing Home Sales

by Calculated Risk on 9/26/2011 10:00:00 AM

The Census Bureau reports New Home Sales in August were at a seasonally adjusted annual rate (SAAR) of 295 thousand. This was down from a revised 302 thousand in July (revised up from 298 thousand).

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 August 2011 were at a seasonally adjusted annual rate of 295,000 ... This is 2.3 percent (±13.9%) below the revised July rate of 302,000, but is 6.1 percent (±18.8%) above the August 2010 estimate of 278,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

Months of supply increased slightly to 6.6 in August. 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 August was 162,000. This represents a supply of 6.6 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 was at 60,000 units in August. 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 August 2011 (red column), 26 thousand new homes were sold (NSA). The record low for August was 23 thousand in 2010 (following the expiration of the homebuyer tax credit). The high for August was 110 thousand in 2005.

This was at the consensus forecast of 295 thousand, and was not far above the record low for the month of August set last year. New home sales have averaged only 300 thousand SAAR over the 16 months since the expiration of the tax credit ... moving sideways at a very low level.

by Calculated Risk on 9/26/2011 08:30:00 AM

This is a composite index from the Chicago Fed: Index shows economic activity weakened in August

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index decreased to –0.43 in August from +0.02 in July. Contributions from three of the four broad categories of indicators that make up the index declined from July, and three of the four were negative in August.
...
The index’s three-month moving average, CFNAI-MA3, ticked down to –0.28 in August from –0.27 in July. August’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image in graph gallery.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

This index suggests the economy was still growing in August, but below trend.

Weekend:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/25/2011 08:36:00 PM

The clock is ticking ...

From Bloomberg: ‘Barrier’ Around Greece Needed: Merkel

German Chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states ...

“We have to be in a position to react,” Merkel said. “We have to be able to put up a barrier.” Even so, “I don’t rule out at all that at some point we will have the question whether one can do an insolvency of states just like with banks.”

Merkel rejected Greece leaving the euro area, saying that “we can’t force it, but I don’t believe in that in any case” ... “Maybe Greece leaves, the next country leaves and then the next country after that,” she said. “They would speculate against all the countries.” ...

Merkel suggested that Greece may be able to get the next tranche of bailout aid, after a team of officials from the IMF, the ECB and the European Commission assess the Greek government’s progress ... Merkel is due to host Greek Prime Minister George Papandreou for talks in Berlin on Sept. 27, two days before German lawmakers vote on the enhanced rescue fund...

From the NY Times: Investors Ask if Anything Can Save Greece From Default

Under intense pressure from the United States, euro zone leaders spent the weekend in Washington working to craft a rescue plan to bolster sickly banks and buy the bonds of weak countries like Italy. But past efforts to bring an end to the debt crisis in Europe — including a second, €109 billion rescue plan for Greece forged by Europe and the International Monetary Fund in July — have failed to stand up. Investors remain skeptical that another plan will be any different.
...
With Greek government debt trading on the open market below 40 cents on the dollar, it is quickly approaching what debt experts call the recovery rate — the price investors would get for their bonds if the country officially defaulted.

In effect, that means investors have given up.

I'm not sure what the barrier will be, but just about everyone is now accepting that Greece will default (except a few Greek politicians). The question remains when - and what happens after they default.

by Calculated Risk on 9/25/2011 04:14:00 PM

From Reuters: U.S. gasoline prices slide; more to come-survey

The average price for a gallon of gasoline in the United States tumbled 12.23 cents in the past two weeks and appeared poised to drop even more as crude oil prices weaken, the nationwide Lundberg survey showed on Sunday.

The national average price was $3.5446 on Sept. 23, down from $3.67 two weeks ago ...

Gasoline prices jumped from about $3.10 per gallon in early February to over $3.50 per gallon in early March as Brent crude oil prices increased from about $100 per barrel to over $120 per barrel. (WTI increased from around $85 per barrel to over $110 per barrel early this year).

Since oil prices have declined back to the early February levels (Bloomberg: WTI is at $80 per barrel and Brent is at $104), gasoline prices will probably decline too.

Note: This graph show oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Yesterday:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/25/2011 02:01:00 PM

I haven't updated this graph for some time ...

There have been 395 bank failures in this cycle (starting in 2007):

FDIC Bank Failures by Year
2007	3
2008	25
2009	140
2010	157
20111	73
Total	395
1Through Sept 23, 2011.

This graph shows the cumulative bank failures by week in 2008, 2009, 2010 and 2011.

The FDIC has slowed down recently, and it appears the FDIC will close around 100 banks this year.

There are still quite a few problem banks, so there are probably quite a few banks failures to come.

by Calculated Risk on 9/25/2011 09:23:00 AM

A little Sunday morning speculation ...

From the Telegraph: Multi-trillion plan to save the eurozone being prepared

German and French authorities have begun work on a three-pronged strategy behind the scenes amid escalating fears that the eurozone’s sovereign debt crisis is spiralling out of control.
...
According to sources, progress has been made at the G20 meeting in Washington ... the world’s leading economies set themselves a six-week deadline to resolve the crisis – to unveil a solution by the G20 summit in Cannes on November 4.
...
First, Europe’s banks would have to be recapitalised with many tens of billions of euros to reassure markets that a Greek or Portuguese default would not precipitate a systemic financial crisis. ... Officials are confident that some banks could raise the funds privately, but if they are unable they would either be recapitalised by the state or by the European Financial Stability Facility (EFSF) ...

The second leg of the plan is to bolster the EFSF. Economists have estimated it would need about Eu2 trillion of firepower to meet Italy and Spain’s financing needs in the event that the two countries were shut out of the markets. Officials are working on a way to leverage the EFSF through the European Central Bank to reach the target.

The complex deal would see the EFSF provide a loss-bearing “equity” tranche of any bail-out fund and the ECB the rest in protected “debt”.
...
As quid pro quo for an enhanced bail-out, the Germans are understood to be demanding a managed default by Greece but for the country to remain within the eurozone.

Earlier:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/24/2011 10:45:00 PM

From the NY Times: Europe Seeks to Ratchet Up Effort on Debt

Under increasing pressure from global investors and world leaders, European government officials indicated Saturday that they were working to intensify their response to the continent’s growing debt problems.
...
French and German officials here continued to insist publicly that they were focused on the July plan, but in private meetings this weekend they made clear that they now understand the need for a new proposal ...

“The threat of cascading default, bank runs and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” Treasury Secretary Timothy F. Geithner said in a statement on Saturday. “Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets more severe.

If this follows previous leaks, German Finance Minister Wolfgang Schaeuble will probably deny this tomorrow.

by Calculated Risk on 9/24/2011 07:23:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Sept 23, 2011.

Changes and comments from surferdude808:

Finally, the OCC released some information on its recent enforcement action activity. Interestingly, the information only included actions against national banks as the OCC has yet to release any activity with thrifts since the merger with the OTS this summer. This week, there were five removals and seven additions and the changes leave the Unofficial Problem Bank List with 986 institutions and assets of $400.4 billion. Comparatively, there were 872 institutions with assets of $422.4 billion on the list a year ago.

The removals include an action termination against Border Capital Bank, National Association, McAllen, TX ($171 million); and two unassisted mergers -- GreenBank, Greenville, TN ($2.3 billion Ticker: GRNB) and The Merchants & Farmers Bank, Melville, LA ($8 million). Other removals include the two failures -- Bank of the Commonwealth, Norfolk, VA ($985 million Ticker: CWBS) and Citizens Bank of Northern California, Nevada City, CA ($289 million Ticker: CZNB).

Among the additions are Citizens National Bank of Texas, Waxahachie, TX ($526 million); Grayson National Bank, Independence, VA ($358 million Ticker: GSON); Fidelity National Bank, West Memphis, AR ($327 million); and Intercredit Bank, National Association, Miami, FL ($256 million). Long-time readers may remember that Intercredit Bank, N.A. was removed in July when the OCC terminated a Formal Agreement only to return this week under a Consent Order. The OCC is asymmetrical in the publication of its actions with terminations happening more real-time while new actions are issued with a lag. Perhaps the removal of Border Capital Bank, N.A. may prove premature if its Formal Agreement is actually replaced by a Consent Order like Intercredit Bank, N.A.

Next week, we expect the FDIC to release its actions through August 2011.

Earlier:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/24/2011 02:11:00 PM

Earlier:
• Summary for Week Ending Sept 23rd

There are two key housing reports to be released early in the week: New Home sales on Monday, and Case-Shiller house prices on Tuesday.

Other key releases include the third estimate of Q2 GDP on Thursday, and August Personal Income and Outlays on Friday. Several high frequency releases will be closely watched: weekly initial unemployment claims, consumer sentiment (final) and three more regional Fed manufacturing surveys and the Chicago Purchasing Managers Index.

----- Monday, Sept 26th -----
8:30 AM ET: Chicago Fed National Activity Index (August). This is a composite index of other data.

9:15 AM: Speech, Fed Governor Sarah Bloom Raskin, "Monetary Policy and Job Creation" At the University of Maryland Smith School of Business Distinguished Speaker Series, Washington, D.C.

10:00 AM: New Home Sales for August from the Census Bureau.

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

The consensus is for a slight decrease in sales to 295 thousand Seasonally Adjusted Annual Rate (SAAR) in August from 298 thousand in July. Given that new home sales are reported when contracts are signed - and August was an especially weak month due to the debt ceiling debate - sales might fall even further.

10:30 AM: Dallas Fed Manufacturing Survey for September. The Texas production index increased 1.1 in August.

----- Tuesday, Sept 27th -----
9:00 AM: S&P/Case-Shiller Home Price Index for July. Although this is the July report, it is really a 3 month average of May, June and July.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The consensus is for prices to increase 0.1% in July. The CoreLogic index showed a 0.8% increase in July (NSA). Based on other price indexes, the Case-Shiller index will probably increase a little more than the consensus.

10:00 AM: Conference Board's consumer confidence index for September. The consensus is for an increase to 46.2 from 44.5 last month.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for September. The consensus is for the index to be at -9, up slightly from -10 in August (below zero is contraction).

----- Wednesday, Sept 28th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak over the last month.

8:30 AM: Durable Goods Orders for August from the Census Bureau. The consensus is for a 0.4% decrease in durable goods orders after increasing 4.0% in July.

5:00 PM: Speech, Fed Chairman Ben Bernanke, "Lessons from Emerging Market Economies on the Sources of Sustained Growth", At the Cleveland Clinic Ideas for Tomorrow Speaker Series, Cleveland, Ohio

----- Thursday, Sept 29th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 420,000 from 423,000 last week.

8:30 AM: Q2 GDP (third estimate). This is the third estimate for Q2 GDP from the BEA.

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years.

The first estimate was for 1.3% real annualized growth in Q2. Growth was revised down to 1.0% in the 2nd estimate. The consensus is for an upward revision to 1.2% in Q2.

10:00 AM: Pending Home Sales Index for August. The consensus is for a 2% decrease in the index.

11:00 AM: Kansas City Fed regional Manufacturing Survey for September. The index was at 3 in August (slight expansion).

----- Friday, Sept 30th -----
8:30 AM: Personal Income and Outlays for July. The following graph shows real Personal Consumption Expenditures (PCE) through June (2005 dollars).

PCE increased 0.8 in July, and real PCE increased 0.5% as the price index for PCE increased 0.4 percent in July.

The consensus is for a 0.1% increase in personal income in August, and a 0.2% increase in personal spending, and for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for September. The consensus is for a decrease to 55.4, down from 56.5 in August.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for September). The consensus is for no change from the preliminary reading of 57.8.