by Calculated Risk on 10/26/2011 10:12:00 PM

via twitter: "Agreement on a comprehensive package reached at today's #Eurosummit."

Press conference soon.

Council of the European Union (official releases)

EU Press Releases (no statement yet)

Earlier:
• New Home Sales increase in September to 313,000

by Calculated Risk on 10/26/2011 08:14:00 PM

UPDATE: AP reports an official said there is "broad agreement" on cutting Greek debt. Apparently this is a 50% cut ... no details.

Telegraph: Debt crisis: live

00.30 Jean-Claude Juncker's (head of the euro group) spokesman has told Bloomberg that Merkel and Sarkozy have met with bank representatives and are now relaying the outcome to the rest of the eurozone leaders.

Bottom line, Germany wants banks to accept they will lose between 50pc and 60pc of their Greek sovereign debt investments. The banks don't want this. Question is, where do they meet in the middle?

WSJ: Live Blog: European Debt-Crisis Summit

Talks on leveraging the EFSF could drag into November, says a source.

From the NY Times: Europe Agrees on Plan to Inject Capital Into Banks

European leaders agreed Wednesday on a plan to force the continent’s banks to raise new capital to insulate them against potential sovereign debt defaults, but disagreements over new financial aid to Greece threatened to derail efforts to devise a comprehensive solution ...

“There has been no agreement on any Greek deal or a specific ‘haircut,’ said Charles Dallara, the lead negotiator for the Institute for International Finance. “We remain open to a dialogue in search of a voluntary agreement. There is no agreement on any element of a deal.”

Financial Times.

Council of the European Union (official releases)

EU Press Releases (nothing yet as of 8:15 PM ET)

by Calculated Risk on 10/26/2011 06:56:00 PM

While we wait for a European announcement ...

Bloomberg reports: Sarkozy, Merkel, Lagarde, Van Rompuy Meeting Bankers’ Dallara. They are still working on the size of the haircut.

The Social Security Cost-of-Living adjustment is official: 3.6%.

The Contribution and benefit base will increase to $110,100 in 2012 from $106,800.

As I mentioned earlier, I'm making changes to graphs. If you click on a graph in a post, a larger graph will be displayed. If there are more than one graph in the post, then thumbnails will be displayed for the other graphs. This is very fast!

The galleries of current graphs is moving to http://www.crgraphs.com/. So far I've moved:

New Home Sales
Existing Home Sales
House Prices
Employment Graphs

Click on any graph and a large graph will be displayed with thumbnails along the bottom. Click on the "X" on the upper right to close.

by Calculated Risk on 10/26/2011 02:16:00 PM

This is a great resource from the Financial Times: Eurozone crisis: live blog The meeting starts at 7:15 PM Brussels time and will probably continue late into the night.

A few stories ...

From the Financial Times: EU bids to slash Greek debt by third

From the WSJ: Europe Still Split On Crisis Package

The euro zone and banks are working on a plan that will cut the Greek debt held by private investors by 50% ... According to the plan, banks will be asked to exchange existing bonds for new 30-year bonds, carrying a 6% coupon plus 15% in cash, the official said. ... "This will cut the face value of the entire €205 billion ($285.10 billion) debt in private hands by half."

From CNBC: Stocks Jump on Signs of EU Debt Talk Progress

The euro zone is planning on leveraging its EFSF bailout fund "several fold" with the finance ministers deciding the details in November, according to the draft euro zone summit statement attained by Reuters.

by Calculated Risk on 10/26/2011 12:23:00 PM

I'm making a few changes. Now when you left click on a graph, you will see the large image of the graph and thumbnails of all graphs in the post below it. Click on the thumbnails to scroll through the graphs. This is very fast - and doesn't use the scripts in the previous graph gallery. Click on the "X" in the upper right to return to the blog.

In addition, I will keep the most recent graphs in a new graph gallery http://www.crgraphs.com/. Here is the New Home sales gallery. It will take me a few weeks to add all the galleries to this new format.

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The following graph shows existing home sales (left axis) and new home sales (right axis) through September. 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.

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, 2010 and 2011. Even with these revisions, most of the "distressing gap" will remain.

On September Home Sales:
• New Home Sales increase in September to 313,000
• Last week: Existing Home Sales in September: 4.91 million SAAR, 8.5 months of supply

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

The Census Bureau reports New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 313 thousand. This was up from a revised 296 thousand in August (revised up from 295 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 September 2011 were at a seasonally adjusted annual rate of 313,000 ... This is 5.7 percent (±18.4%)* above the revised August rate of 296,000, but is 0.9 percent (±16.3%)* below the September 2010 estimate of 316,000.

The second graph shows New Home Months of Supply.

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

The seasonally adjusted estimate of new houses for sale at the end of September was 163,000. 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 was at 61,000 units in September. 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 September 2011 (red column), 25 thousand new homes were sold (NSA). This ties the record low for September set in 2010. The high for September was 99 thousand in 2005.

This was above the consensus forecast of 300 thousand, and was tied the record low for the month of September set last year (NSA). New home sales have averaged only 300 thousand SAAR over the 17 months since the expiration of the tax credit ... mostly moving sideways at a very low level (with a little upward slope recently).

by Calculated Risk on 10/26/2011 07:29:00 AM

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

The Refinance Index increased 4.4 percent from the previous week. The seasonally adjusted Purchase Index increased 6.4 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 4.33 percent, with points decreasing to 0.47 from 0.48 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.68 percent from 4.64 percent, with points decreasing to 0.42 from 0.45 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.

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

Click on graph for larger image in graph gallery.

The purchase index is at about the same level as in 1996, and the 4-week average is at the lowest level this year. This does not include cash buyers, but this suggests weaker home sales in November and December.

by Calculated Risk on 10/25/2011 07:59:00 PM

Tomorrow is the announced deadline for a deal, but the meeting of European leaders doesn't start until 7 PM in Brussels (1 PM New York time), so any announcement will be late at night in Brussels.

The only thing that is certain is there won't be an announcement tomorrow morning!

From the Financial Times: Fears euro summit could miss final deal

A draft of the summit communiqué ... described to the FT does not include any wording on a completed deal on Greek bondholder haircuts ...

In addition, a separate “draft terms and conditions” paper on ... the eurozone’s €440bn rescue fund ... makes clear that leaders will be unable to attach a figure to how much firepower the leveraged fund will have. “A more precise number on the extent of leverage can only be determined after contacts with potential investors,” the draft states.
excerpt with permission

From the WSJ: Europe at Odds Over Crisis Package

Prospects for a long-awaited breakthrough deal to stem the worsening euro-zone debt crisis were up in the air on Tuesday, as governments and banks remained at loggerheads over how much pain to inflict on holders of government bonds issued by Greece ... Banks on Tuesday were rebuffing pressure from governments for "voluntary" write-downs of 50% to 60% on their Greek bonds

Earlier:
• Case Shiller: Home Prices increased Seasonally in August
• Real House Prices and House Price-to-Rent

by Calculated Risk on 10/25/2011 03:55:00 PM

From ATA: ATA Truck Tonnage Index Increased 1.6% in September

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.6% in September after falling a revised 0.5% in August 2011. August’s decrease was more than the 0.2% drop ATA reported on September 27, 2011. The latest gain put the SA index at 115.8 (2000=100) in September, up from the August level of 114.
...
Compared with September 2010, SA tonnage was up a solid 5.9%. In August, the tonnage index was 4.9% above a year earlier.

“I continue to believe the economy will skirt another recession because truck tonnage isn’t showing signs that we are in a recession,” ATA Chief Economist Bob Costello said. “Tonnage is suggesting that we are in a weak growth period for the economy, but not a recession.”

Click on graph for larger image in graph gallery.

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

The dashed line is the current level of the index. From ATA:

Trucking serves as a barometer of the U.S. economy, representing 67.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9 billion tons of freight in 2010. Motor carriers collected $563.4 billion, or 81.2% of total revenue earned by all transport modes.

Sluggish growth after stalling earlier this year ...

Earlier:
• Case Shiller: Home Prices increased Seasonally in August
• Real House Prices and House Price-to-Rent

by Calculated Risk on 10/25/2011 02:05:00 PM

An update: Case-Shiller, CoreLogic and others report nominal house prices. However it is also useful to look at house prices in real terms (adjusted for inflation), as a price-to-rent ratio, and also price-to-income (not shown here).

Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices are back to 1999/2000 levels, and the price-to-rent ratio is also back to 2000 levels.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q2 2011), and the monthly Case-Shiller Composite 20 SA (through August) and CoreLogic House Price Indexes (through August) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to June 2003 levels, and the CoreLogic index is back to July 2003.

Real House Prices

The second graph shows the same three indexes 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 Q3 1999 levels, the Composite 20 index is back to July 2000, and the CoreLogic index back to June 2000.

In real terms, all appreciation in the last decade is gone.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller Composite 20 and CoreLogic House Price Index.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Composite 20 index is back to August 2000 levels, and the CoreLogic index is back to July 2000.

In real terms - and as a price-to-rent ratio - prices are mostly back to 2000 levels (nationally) and will probably be back to 1999 levels in the next few months.

Earlier:
• Case Shiller: Home Prices increased Seasonally in August