by Calculated Risk on 7/25/2012 09:15:00 PM

First, a nice review of the FOMC options next week: An early FOMC preview: the menu of options

And another edition of "unexpected" declines ...

From the Financial Times: UK economy smaller than when Cameron took office

The UK’s double-dip recession has deepened sharply and unexpectedly, leaving the economy smaller than it was when the coalition government took office two years ago.

From the WSJ: U.K. Stumbles, Fueling Austerity Debate

The U.K.'s economy suffered a much larger contraction than expected in the second quarter ... The economy shrank 0.7% between April and June ... double-dip recession that is the worst in 50 years

Austerity and a depressed economy leading to a severe recession ... hoocoodanode? (sorry for sarcasm).

Here is one guy who has been consistently wrong, from Bloomberg: Schaeuble Declares Markets Wrong as Europe Heads to Vacation

Oh my. "The markets are wrong and I'm going on vacation."

On Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 380 thousand from 386 thousand.

• Also at 8:30 AM, the Durable Goods Orders for June will be released. The consensus is for a 0.6% increase in durable goods orders.

• At 10:00 AM, the NAR will release the Pending Home Sales Index for June. The consensus is for a 0.9% increase in the index.

• And at 11:00 AM, the Kansas City Fed regional Manufacturing Survey for July will be released. The consensus is for an increase to 4 from 3 in June (above zero is expansion). These regional manufacturing surveys have been disappointing in July.

Earlier on New Home Sales:
• New Home Sales declined in June to 350,000 Annual Rate
• Some comments on New Home Sales and Distressing Gap
• Lawler on New Home Sales and Revisions
• New Home Sales graphs

by Calculated Risk on 7/25/2012 04:46:00 PM

Note: "LPS has updated its extrapolation methodology. This improves estimates of market size (and includes wider coverage of both government and subprime products) and increases LPS' estimate of the total first lien residential mortgage market by three percent to 50.4 million." LPS has kindly provided me with some updated historical data for the table below.

LPS released their First Look report for June today. LPS reported that the percent of loans delinquent increased in June from May, and declined year-over-year. The percent of loans in the foreclosure process decreased in June, but remains at a very high level.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) increased to 7.14% from 6.91% in May. The percent of delinquent loans is still significantly above the normal rate of around 4.5% to 5%. The percent of delinquent loans peaked at 10.57%, so delinquencies have fallen over half way back to normal. The increase was mostly in the less than 90 days delinquent category.

The following table shows the LPS numbers for June 2012, and also for last month (May 2012) and one year ago (June 2011).

LPS: Percent Loans Delinquent and in Foreclosure Process
	12-Jun	12-May	11-Jun
Delinquent	7.14%	6.91%	7.71%
In Foreclosure	4.09%	4.17%	4.13%
Number of loans:
Loans Less Than 90 Days	2,012,000	1,923,000	2,229,000
Loans 90 Days or more	1,590,000	1,571,000	1,752,000
Loans In Foreclosure	2,061,000	2,110,000	2,133,000
Total	5,663,000	5,604,000	6,114,000

The number of delinquent loans, but not in foreclosure, is down about 10% year-over-year (379,000 fewer mortgages delinquent), and the number of loans in the foreclosure process is down 3% or 70,000 year-over-year.

The percent of loans less than 90 days delinquent is close to normal, but the percent (and number) of loans 90+ days delinquent and in the foreclosure process are still very high.

by Calculated Risk on 7/25/2012 03:54:00 PM

From ATA: ATA Truck Tonnage Jumped 1.2% in June

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.2% in June after falling 1.0% in May. (May’s loss was larger than the 0.7% drop ATA reported on June 19.) June’s increase was the largest month-to-month gain in 2012. However, the index contracted a total of 2.1% in April and May. The latest gain increased the SA index to 119.0 (2000=100), up from May’s level of 117.5. Compared with June 2011, the SA index was 3.2% higher, the smallest year-over-year increase since March 2012. Year-to-date, compared with the same period last year, tonnage was up 3.7%.
...
“June’s increase was a pleasant surprise, but the lower year-over-year gain fits with an economy that has slowed,” ATA Chief Economist Bob Costello said. “Manufacturing output was strong in June, which helped tonnage levels.” ... Costello lowered his tonnage outlook for 2012 to the 3% to 3.5% range due to recent economic weakness.

Click on graph for larger image.

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. The index is above the pre-recession level and still up 3.7% year-over-year - but has been moving mostly sideways in 2012.

From ATA:

Trucking serves as a barometer of the U.S. economy, representing 67% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.2 billion tons of freight in 2011. Motor carriers collected $603.9 billion, or 80.9% of total revenue earned by all transport modes.

Earlier on New Home Sales:
• New Home Sales declined in June to 350,000 Annual Rate
• Some comments on New Home Sales and Distressing Gap
• Lawler on New Home Sales and Revisions
• New Home Sales graphs

by Calculated Risk on 7/25/2012 02:23:00 PM

From economist Tom Lawler:

The US Census Bureau estimated that new SF home sales ran at a seasonally adjusted annual rate of 350,000 in June, down 8.4% from May’s upwardly-revised (to 382,000 from 350,000) pace. March and April sales were also revised upward. Current seasonally adjusted sales estimates are higher than the originally-reported estimates for each of the last eight months (October 2011 – May 2012). In the past, turning points in housing/home sales have often been accompanied by strings of either upward (when sales are rising) or downward (when sales are falling) revisions in Census’ new SF home sales estimates.

Long String of Upward Revisions in New SF Sales (SAAR, 000's)
	First Reported	Latest Estimate
Oct-11	307	314
Nov-11	315	327
Dec-11	307	339
Jan-12	311	339
Feb-12	313	366
Mar-12	328	352
Apr-12	343	358
May-12	369	382
Jun-12	350

According to today’s report, seasonally adjusted sales in the Northeast plunged by 60% in June, fell by 8.6% in the South, increased by 2.1% in the West, and jumped by 14.6% in the Midwest. Census does not report sales estimates for individual states, noting that its sample size is too small to produce reliable state estimates. Bad weather at the end of the month possibly impacted sales in the Northeast and mid-Atlantic part of the South.

Census also estimated that the number of new SF homes for sale at the end of June was 144,000 on a seasonally adjusted basis, up 0.7% from May’s downwardly-revised estimate but down 13.3% from a year ago.

Tomorrow three publicly-traded home builders -- Pulte Group (#2), Standard Pacific (#13), and M/I Homes report operating results for the quarter ending in June, while D.R. Horton (#1) reports on Friday.

Earlier:
• New Home Sales declined in June to 350,000 Annual Rate
• Some comments on New Home Sales and Distressing Gap
• New Home Sales graphs

by Calculated Risk on 7/25/2012 12:51:00 PM

Think about this ... if new home sales had been at expectations of 370,000 SAAR (seasonally adjusted annual rate), and there had been no revisions to the previous months sales, sales would have averaged 356,000 SAAR for the first six months of the year.

Instead sales came in below expectations for June, but all the revisions to previous months were up, and sales averaged 358,000 SAAR in the first half of 2012.

Of course the reporting focused on the most recent month, but that is misleading. With the upward revisions, sales are a little higher than expected over the first half of 2012. And it is important to note that sales are being revised up every month, and based on the recent trend, June will probably be revised up too. The report this morning was below expectations, it was still fairly solid.

Note: Long term readers will remember that every revision was down in 2006, and each "upside surprise" in the new home sales report was revised away. Now the opposite is happening.

Another thought: In 2011, there were 306,000 new home sales. At the first half 2012 sales rate of 358,000, sales will be up 17% in 2012. A recovery is NOT the level of sales, but the change from the previous period. Clearly new home sales have bottomed and are starting to recover.

Here is a very unfortunate headline from CNBC: Home Sales Disappoint Twice

Sales of newly built homes fell hard in June, despite newfound optimism in the housing recovery, especially among the home builders themselves.
...
This is the second miss for housing in the same month. Sales of existing homes fell as well, despite expectations for a gain.

Actually both reports were fairly solid.

As I've pointed out before, the key number in the existing home sales report is not sales, but inventory. It is visible inventory that impacts prices (although the "shadow" inventory will keep prices from rising). Since existing home inventory was down again in June, this was a positive report (the number of existing home sales is related to commissions, but otherwise existing home sales barely impact GDP).

For the new home sales report, the key number is sales. As I noted earlier, sales for June were below expectations, but sales for the first six months were slightly above expectations. So I wasn't disappointed in other report - and I think the CNBC headline was wrong - twice!

Here is an update to the distressing gap graph.

Click on graph for larger image in graph gallery.

This "distressing gap" graph that shows existing home sales (left axis) and new home sales (right axis) through June. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders haven't been able to compete with the low prices of all the foreclosed properties.

Flat or declining existing home sales is likely (as the number of distressed sales decline), while new home sales will sluggishly increase. That will eventually close this gap, but it will probably take a number of years.

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.

Earlier:
• New Home Sales declined in June to 350,000 Annual Rate
• New Home Sales graphs