by Calculated Risk on 5/29/2012 07:55:00 PM

Economist Tom Lawler wrote today:

I put “seasonally” in quotes, as there have substantial changes in the purported “seasonal” pattern of home prices since the housing market cratered. The reason, of course, is that there is a marked “seasonal” in the distressed-sales share of home sales, which peaks in the late winter months and hits a trough in the summer months. Not coincidentally, the “shift” in the “seasonal” pattern of home prices has been one where home prices are “seasonally” much weaker than they used to be in late winter, and “seasonally” much strong than they used to be in the summer.
...
Everyone “knows” why, and since the “cause” of the apparent wider “seasonal” swings is known (and someday will go away), it’s not rightly correct to call such swings “seasonal.”

The following graph shows the change in the seasonal factor over time using the Case-Shiller National Index.

Click on graph for larger image.

Most of the wild "seasonal" swings are related to foreclosures. As Lawler noted, foreclosure sales are fairly steady throughout the year, and conventional sales have a seasonal pattern. So in the winter foreclosures are a higher percentage of sales, and that pushes down the NSA prices.

The second graph shows the year-over-year change in the seasonal factor. Clearly something started to happen around 2005.

It seems that the seasonal factors started changing in 2005 - when prices were still going up.

Also, it appears that the change in the seasonal factors has slowed, and will probably start to reverse soon.

Lawler also commented that he thinks there is a "better than even shot" the National HPI will show a year-over-year gain next quarter. That would be a 6% increase in the NSA index in Q2 (or about a 2% increase in the "seasonally adjusted" index). My guess is the index will turn positive on a year-over-year basis later this year.

Earlier on house prices:
• Case Shiller: House Prices fall to new post-bubble lows in March NSA
• Real House Prices and Price-to-Rent Ratio at late '90s Levels

by Calculated Risk on 5/29/2012 03:53:00 PM

Less than four months ago, I wrote The Housing Bottom is Here and I pointed out that the house price data had a significant lag so we had to look at other data for clues. The post title refers to the many emails I received back in February: "bold call", "gutsy call", "you are insane" ... and many more.

I could still be wrong, but it sounds like Robert Shiller and Karl Case are coming around to a similar view. Here are couple of quotes from a CNBC interview this morning (video below):

Karl Case: “We lag of course – January, February and March moving average – and so we lag, and the indicators for the last three or four months on the quantity side have been real positive. We look like a bottom. You have to pick to find real negatives.”

CR: As I've noted before, this is just a possible bottom for nominal prices (not adjusted for inflation). We could see further real price declines, as Professor Shiller noted:

Robert Shiller on CNBC: "[The futures] go out to 2014. It is projecting something like 2% or 3% per year [increase], which by the way, is just the inflation rate. If you correct for the inflation rate, they [futures] are predicting no action."

Earlier on house prices:
• Case Shiller: House Prices fall to new post-bubble lows in March NSA
• Real House Prices and Price-to-Rent Ratio at late '90s Levels

by Calculated Risk on 5/29/2012 01:51:00 PM

From the Dallas Fed: Texas Manufacturing Expands but New Orders Remain Flat

Texas factory activity continued to increase in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, held steady at 5.5, suggesting growth continued at about the same pace as last month.
...
The general business activity index remained negative for the second consecutive month and edged down from -3.4 to -5.1.

Labor market indicators reflected slightly slower labor demand growth and shorter workweeks. Employment grew again in May, but the pace continued to slow; the index receded from 11.8 to 8.5. Eighteen percent of firms reported hiring new workers, while 10 percent reported layoffs. The hours worked index remained negative but edged up from -4.6 to -2.2.

This was below expectations of an increase in the general business activity index to +3.0.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (dashed green, through May), and five Fed surveys are averaged (blue, through May) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

The ISM index for May will be released Friday, June 1st, and these surveys suggest some decrease from the 54.8 reading in April.

by Calculated Risk on 5/29/2012 11:03:00 AM

Another Update: Case-Shiller, CoreLogic and others report nominal house prices. It is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio.

Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices, and the price-to-rent ratio, are back to late 1998 and early 2000 levels depending on the index.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q1 2012), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through March) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to February 2003 levels, and the CoreLogic index (NSA) is also back to February 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 Q4 1998 levels, the Composite 20 index is back to January 2000, and the CoreLogic index back to May 1999.

In real terms, all appreciation in the '00s 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 National, Composite 20 and CoreLogic House Price Indexes.

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

On a price-to-rent basis, the Case-Shiller National index is back to Q4 1998 levels, the Composite 20 index is back to March 2000 levels, and the CoreLogic index is back to August 1999.

In real terms - and as a price-to-rent ratio - prices are mostly back to late 1990s or early 2000 levels.

by Calculated Risk on 5/29/2012 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for March (a 3 month average of January, February and March).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the National index.

Note: Case-Shiller reports NSA, I use the SA data.

From S&P: Pace of Decline in Home Prices Moderates as the First Quarter of 2012 Ends, According to the S&P/Case-Shiller Home Price Indices

Data through March 2012, released today by S&P Indices for its S&P/CaseShiller Home Price Indices ... showed that all three headline composites ended the first quarter of 2012 at new post-crisis lows. The national composite fell by 2.0% in the first quarter of 2012 and was down 1.9% versus the first quarter of 2011. The 10- and 20-City Composites posted respective annual returns of -2.8% and -2.6% in March 2012. Month-over-month, their changes were minimal; average home prices in the 10-City Composite fell by 0.1% compared to February and the 20-City remained basically unchanged in March over February. However, with these latest data, all three composites still posted their lowest levels since the housing crisis began in mid-2006.
...
“While there has been improvement in some regions, housing prices have not turned,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This month’s report saw all three composites and five cities hit new lows. However, with last month’s report nine cities hit new lows. Further, about half as many cities, seven, experienced falling prices this month compared to 16 last time."

Click on graph for larger image.

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

The Composite 10 index is off 34.1% from the peak, and up 0.2% in March (SA). The Composite 10 is at a new post bubble low Not Seasonally Adjusted.

The Composite 20 index is off 33.8% from the peak, and up 0.2% (SA) from March. The Composite 20 is also at a new post-bubble low NSA.

The second graph shows the Year over year change in both indices.

The Composite 10 SA is down 2.8% compared to March 2011.

The Composite 20 SA is down 2.6% compared to March 2011. This was a smaller year-over-year decline for both indexes than in February.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 15 of the 20 Case-Shiller cities in March seasonally adjusted (12 cities increased NSA). Prices in Las Vegas are off 61.5% from the peak, and prices in Dallas only off 6.7% from the peak.

The NSA indexes are at new post-bubble lows. I'll have more on prices later

by Calculated Risk on 5/29/2012 08:40:00 AM

An important story that I haven't written about recently ... from Shaila Dewan at the NY Times: U.S. Winds Down Longer Benefits for the Unemployed

Hundreds of thousands of out-of-work Americans are receiving their final unemployment checks sooner than they expected, even though Congress renewed extended benefits until the end of the year. ... In February, when the program was set to expire, Congress renewed it, but also phased in a reduction of the number of weeks of extended aid and effectively made it more difficult for states to qualify for the maximum aid. Since then, the jobless in 23 states have lost up to five months’ worth of benefits.

Next month, an additional 70,000 people will lose benefits earlier than they presumed, bringing the number of people cut off prematurely this year to close to half a million, according to the National Employment Law Project. That estimate does not include people who simply exhausted the weeks of benefits they were entitled to.
...
Most states offer 26 weeks of unemployment benefits, plus the federal extensions that kicked in after the financial crash.

The number of extra weeks available by state is determined by several factors, including the state’s unemployment rate and whether it is higher than three years earlier. So states like California have had benefits cut even though the unemployment rate there is still almost 11 percent.

“Benefits have ended not because economic conditions have improved, but because they have not significantly deteriorated in the past three years,” Hannah Shaw, a researcher at the Center on Budget and Policy Priorities, wrote in a blog post. In May, an estimated 95,000 people lost benefits in California.
...
by the end of September, the extended benefits will end in the last three states providing 99 weeks of assistance — Nevada, New Jersey and Rhode Island.

by Calculated Risk on 5/28/2012 09:52:00 PM

• The S&P/Case-Shiller House Price Index for March is scheduled to be released at 9:00 AM ET. The consensus is for a 2.7% decrease year-over-year in the Composite 20 index (NSA) in March.

The Zillow forecast is for the Composite 20 index to decline 2.6% year-over-year, and for prices to increase slightly month-over-month seasonally adjusted. I expect these indexes to be at new post-bubble lows, Not Seasonally Adjusted (NSA).

• At 10:00 AM, the Conference Board's consumer confidence index for May will be released. The consensus is for an increase to 69.7 from 69.2 last month.

• At 10:30 AM, the Dallas Fed Manufacturing Survey for May. The consensus is for the general business activity index to increase to 3.0, up from -3.4 in April. This is the last of the regional Fed manufacturing surveys for May.

The Asian markets are mixed tonight. The Nikkei is down about 0.3%, and the Shanghai Composite is down slightly.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are up about 5, and Dow futures are up 40.

Oil: WTI futures are at $90.08 (this is down from $109.77 in February) and Brent is at $106.90 per barrel.

Saturday:
• Summary for Week Ending May 25th
• Schedule for Week of May 27th
For the monthly economic question contest (two more questions for May, and four questions for June):

by Calculated Risk on 5/28/2012 02:11:00 PM

The following graphs show the number of cities with increasing house prices on a year-over-year, six month, and month-over-month basis.

The first graph is based on the Case-Shiller Composite 20 cities using seasonally adjusted data starting in January 2007.

There were still a few cities with increasing prices in early 2007. The increases in 2009 and 2010 were related to the housing tax credit (all of those gains and more are gone).

Recently prices have started increasing in more and more cities again. Note: Case-Shiller data is through February, Zillow data is through April.

Click on graph for larger image in graph gallery.

The second graph shows the same year-over-year, six month, and month-over-month price increases for the 166 cities tracked by Zillow.

The pattern is similar to the Case-Shiller Composite 20 cities.

I expect that the number of cities with a year-over-year price increase will continue to climb all year, and later this year the Case-Shiller Composite 20 index (and Zillow national index) will turn positive on a year-over-year basis.

In February, the Case-Shiller Composite 20 index was down 3.4% year-over-year, down 2.5% over the last six months, and up slightly in February. The March data will be released this coming Tuesday.

The Zillow national index was down 1.4% year-over-year in April, only down 0.4% over the last six months, and up 0.7% month-over-month. This index will probably turn positive year-over-year in a few months.

by Calculated Risk on 5/28/2012 09:06:00 AM

From the Financial Times: Spain’s borrowing costs near crisis level

Yields on Spain’s 10-year government bonds on Monday moved above 6.50 per cent once again – moving closer to the 7 per cent level that prompted bailouts for Greece, Portugal and Ireland.
...
Spreads on Spanish 10-year bonds over German Bunds were also flirting with euro-era highs, climbing above 500 basis points.
excerpt with permission

From the WSJ: Bankia Bailout Hits Spanish Bonds

Spanish sovereign bonds came under heavy pressure Monday, pushing yield spreads against German bunds and debt insurance costs to record highs, after the government announced a €19 billion ($23.78 billion) bailout of Bankia SA late Friday.

The effective nationalization of Bankia raised concern the government may be on the hook for further funds to prop up its fragile banking sector.

From Reuters: Yields rise at Italy 2-yr debt sale

Italian two-year borrowing costs rose to their highest since December at a sale of zero-coupon paper on Monday as the prospect of a possible Greek euro exit and Spain's banking woes continued to weigh on the debt of weaker euro zone borrowers.

Here are some links to various European bond yields. The Spanish 10 year yield is at 6.44%, and the Italian 10 year yield is at 5.7%.

by Calculated Risk on 5/27/2012 05:52:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 25, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

As expected, this week the FDIC released the Official Problem Bank List through March 2012 and it enforcement actions through April 2012. For the week, there were nine removals and 12 additions, which leaves the Unofficial Problem Bank List with 931 institutions and assets of $358.1 billion. A year ago, the list held 997 institutions with assets of $415.4 billion. From last week, the count on the UPBL increased by three while assets dropped by $3.9 billion. However, the decline in assets was solely due to shrinkage as updated assets figures through q1 declined by $5.1 billion. Moreover, the count increased in back-to-back weeks, which has not happened since a three consecutive weekly increase from June 24, 2011 through July 8, 2011. For the month, the UPBL increased from 930 to 931, but assets declined by $3.7 billion with the shrinkage also due to the updated assets figures. The FDIC reported the Official Problem Bank List at 772 institutions with assets of $292 billion.

The nine removals all were action terminations -- The Stillwater National Bank and Trust Company, Stillwater, OK ($2.0 billion Ticker: OKSB); Guaranty Bank and Trust Company, Denver, CO ($1.7 billion Ticker: GBNK); Transportation Alliance Bank, Inc., Ogden, UT ($852 million); First State Bank, New London, WI ($284 million); Front Range Bank, Lakewood, CO ($152 million); Bank of Alpena, Alpena, MI ($70 million); Security State Bank of Kenyon, Kenyon, MN ($53 million); VisionBank, Saint Louis Park, MN ($31 million); and Quality Bank, Fingal, ND ($25 million).

The 12 additions this weekly are the most since 16 institutions were added for the UPBL published on October 28, 2011. The additions this week were SpiritBank, Tulsa, OK ($1.3 billion); Crown Bank, Elizabeth, NJ ($575 million); Community Bank of Broward, Dania Beach, FL ($464 million); The Foster Bank, Chicago, IL ($441 million); Anderson Brothers Bank, Mullins, SC ($438 million); The Bank of Delmarva, Seaford, DE ($437 million Ticker: DBCP); Affinity Bank, Atlanta, GA ($285 million); Highlands Independent Bank, Sebring, FL ($270 million); The First National Bank of Ottawa, Ottawa, IL ($270 million Ticker: FOTB); First Trust and Savings Bank, Oneida, TN ($149 million); Hometown Community Bank, Braselton, GA ($137 million); and Legacy State Bank, Loganville, GA ($74 million).

Other changes include the FDIC issuing a Prompt Corrective Action Order against The Farmers Bank of Lynchburg, Lynchburg, TN ($164 million). Strangely, the PCA order was issued on November 21, 2011, but the FDIC waited until May 2012 to disclose.

It is anticipated next week's activity will be largely removals so the consecutive weekly increase should end. Until then, wishing all our readers a safe and happy Memorial Day weekend and we send out many thanks for all the past and current and their families for their service and sacrifice securing our freedom.

Yesterday:
• Summary for Week Ending May 25th
• Schedule for Week of May 27th