by Calculated Risk on 10/29/2012 04:26:00 PM

Near the end of the year, I collect housing forecasts from a number of analysts. From Mark Vitner and Anika Khan at Wells Fargo:

We have raised our forecast for new home sales and housing starts in 2013 and 2014 due to recent reports from homebuilders, strong gains in building permits and starts, record low new home inventories, and the Fed’s stated intentions to purchase large quantities of mortgage-backed securities on an ongoing basis. ...

[G]iven the strong gain in permits, which are running slightly ahead of starts, the gain in the Wells Fargo/NAHB Homebuilders’ Index and robust orders data from several large homebuilders, we raised our expectations for 2013 and 2014 to 990,000 and 1.17 million homes, respectively.

Wells Fargo is now forecasting total starts of 990 thousand in 2013, and 1.17 million in 2014 (from around 770 thousand in 2012).

They are forecasting single family starts of 680 thousand in 2013, and 820 thousand in 2014 (around 530 thousand this year).

Their forecast for new home sales is 465 thousand in 2013, and 530 thousand in 2014 (from 370 thousand this year).

That is an increase of around 25%+ next year, and an additional 15% to 20% in 2014.

For 2012, Wells Fargo forecast 350 thousand new home sales, 457 single family starts, and 690 total starts. All too low.

by Calculated Risk on 10/29/2012 02:51:00 PM

From the WSJ: UPDATE: Labor Department ‘Working Hard’ to Ensure Jobs Report Released on Time

The U.S. Labor Department on Monday said it is “working hard to ensure the timely release” of the October jobs report, saying it intends to released the report on schedule Friday despite Hurricane Sandy.

“It is our intention that Friday will be business as usual,” said Carl Fillichio, a senior press advisor at Labor. Mr. Fillichio’s statement provided clarity to an earlier Labor statement that said the agency would assess how to handle data releases this week after the “weather emergency” is over.

From the NY Times: Still at Sea, Storm Drenches East Coast

Hurricane Sandy churned relentlessly through the Atlantic Ocean on Monday on the way to carving what forecasters agreed would be a devastating path on land that is expected to paralyze life for millions of people in more than a half-dozen states, with extensive evacuations, once-in-a-generation flooding, widespread power failures and mass transit disruptions.

The huge storm, which picked up speed over the water on Monday morning, was producing sustained winds of 90 miles per hour by 11 a.m., up from 75 m.p.h. on Sunday night. The center of Hurricane Sandy made its expected turn toward the New Jersey coast early on Monday. ...

According to forecasters, the storm is on a scale that weather historians say has little precedent along the East Coast. Landfall is predicted on Monday night somewhere between central New Jersey and southern Delaware. But most of the eastern United States will feel Hurricane Sandy’s effects, making the exact landfall spot less important than the overall trajectory.
emphasis added

Oh my. Please stay safe.

by Calculated Risk on 10/29/2012 12:20:00 PM

From the WSJ: Labor Department May Delay Jobs Report

The U.S. Labor Department on Monday said it hasn’t made a decision yet on whether to delay Friday’s October jobs report ... The U.S. Census Bureau also said it hasn’t made a decision on whether to delay economic reports it plans to release this week, including construction spending on Thursday and factory orders on Friday.

This is minor compared to other storm related issues, but I'll check up on this.  They will probably know any schedule changes by Wednesday. Stay safe.

Update: For anyone interested, the WSJ online is free today.

by Calculated Risk on 10/29/2012 10:30:00 AM

From the Dallas Fed: Texas Manufacturing Activity Expands but at a Slower Pace

Texas factory activity increased in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, dipped from 10 to 7.9, indicating slightly slower growth.

Most other measures of current manufacturing activity also suggested growth in October, although new orders declined. The capacity utilization index edged up from 9.3 to 11.4, with more than one-quarter of manufacturers noting an increase. The shipments index held steady at 4.7, suggesting shipments rose at about the same pace as in September. The new orders index fell from 5.3 to –4.5, reaching its lowest level this year and indicating a decrease in demand.

Perceptions of general business conditions improved slightly in October. The general business activity index rose to 1.8, registering its first positive reading since June. The company outlook index was positive for the sixth month in a row and remained unchanged at 2.4.

Labor market indicators reflected slow but steady labor demand growth and shrinking workweeks. The employment index was 5.2 in October, largely unchanged from last month but well below the higher levels seen earlier in the year. About 15 percent of firms reported hiring new workers, while 10 percent reported layoffs. The hours worked index fell back into negative territory with a reading of –5.9, down from 2.8 in September.

This was at expectations of a reading of 2 for the general business activity index. 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 October), and five Fed surveys are averaged (blue, through October) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through September (right axis).

The ISM index for October will be released Thursday, Nov 1st, and these surveys suggest another weak reading close to 50.

by Calculated Risk on 10/29/2012 08:30:00 AM

The BEA released the Personal Income and Outlays report for September:

Personal income increased $48.1 billion, or 0.4 percent ... in September, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $87.9 billion, or 0.8 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.4 percent in September, compared with an increase of 0.1 percent in August. ... The price index for PCE increased 0.4 percent in September, the same increase as in August. The PCE price index, excluding food and energy, increased 0.1 percent in September, the same increase as in August.
...
Personal saving -- DPI less personal outlays -- was $395.0 billion in September, compared with $445.1 billion in August. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 3.3 percent in September, compared with 3.7 percent in August.

The following graph shows real Personal Consumption Expenditures (PCE) through September (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE. The September pickup in PCE is clear.

A key point is the PCE price index has only increased 1.7% over the last year, and core PCE is up only 1.7%. In August, core PCE increased at a 1.4% annualized rate.

by Calculated Risk on 10/28/2012 09:50:00 PM

UPDATE: US Markets closed on Monday. From NBC abd Reuters: NYSE and Nasdaq to close on Monday due to Hurricane Sandy

U.S. stock trading will be closed on Monday and possibly Tuesday in response to Hurricane Sandy, NYSE Euronext said late on Sunday.

NYSE Euronext, which runs the New York Stock Exchange, had previously said that electronic trading would remain open and that only the exchange's trading floor would close.

In a statement, the company said that "the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority."

Nasdaq said it would also close all U.S. equity and derivatives exchanges, as well as the Nasdaq/FINRA TRF on Monday, CNBC reported late Sunday night. It is likley the markets will also be closed on Tuesday, according to the statement from the exchange.

To all in the path of Sandy: Stay safe and dry!

Monday:
• At 8:30 AM ET, the Personal Income and Outlays report for September is expected to be released. The consensus is for a 0.4% increase in personal income in September, and for 0.6% increase in personal spending. And for the Core PCE price index to increase 1.7% year-over-year.

• At 10:30 AM, the Dallas Fed Manufacturing Survey for October. The consensus is for a reading of 2, up from -0.9 last month. This is the last of the regional survey for October.

• At 2:00 PM, The Federal Reserve is expect to release the October 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices.

• Expected: the National Multi Housing Council (NMHC) Quarterly Apartment Survey. This is a key survey for apartment vacancy rates and rents.

The Asian markets are mixed tonight, with the Nikkei up 0.3%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 2 and DOW futures are down 10.

Oil prices are down recently with WTI futures at $86.28 per barrel and Brent down to $110.12 per barrel.

Weekend:
• Summary for Week Ending Oct 26th
• Schedule for Week of Oct 28th

Three more questions this week for the October economic prediction contest and four question for the November contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 10/28/2012 06:15:00 PM

Stay safe! Here is the National Hurricane Center website.

From the U.S. Office of Personnel Management: Monday, October 29, 2012, FEDERAL OFFICES in the Washington, DC, area are CLOSED TO THE PUBLIC.

From the NY Times: N.Y.S.E. Plans to Close Its Trading Floor

The New York Stock Exchange plans to close its trading floor on Monday as Hurricane Sandy approaches, in its first weather-related closure in 27 years. Trading operations will be conducted through its electronic market instead.
...
Clients should not notice any differences in the way their orders are executed, Duncan L. Niederauer, the chief executive of NYSE Euronext, said by telephone on Sunday.

I think the economic releases scheduled for Monday will still be released (Personal Income and Spending, Senior Loan Officer Survey), but there could be delays.

Yesterday:
• Summary for Week Ending Oct 26th
• Schedule for Week of Oct 28th

by Calculated Risk on 10/28/2012 01:45:00 PM

For fun on a Sunday: I've been asked frequently how investors will react to the election. First, every election is different. Sometimes it is obvious who is going to win, and the election results are completely expected (like Reagan in 2004 or Clinton in 1996). Other times the election is close (this election is close although I expect President Obama to be reelected).

Sometimes the economy is clearly headed into recession like in 2008. The 2000 election was during the ongoing decline following the stock bubble, and the election was especially unsettling because the Supreme Court made the final decision.

There are always some partisan analysts who predict doom if their candidate doesn't win (see Bruce Bartlett's Partisan Bias and Economic Forecasts). But any "doom" related to the election will be in the intermediate or long term, not in 2013.

The following graph shows the change in the S&P 500 from election day through the end of the year for all elections since 1952. Note: The number of trading days varied mostly because of the timing of the election.

Click on graph for larger image in graph gallery.

The two worst performing years - no surprise - were 2000 and 2008. The 2000 election followed the stock market bubble, and the economy was collapsing in 2008.

The other elections with a slight negative change were 1956, 1964, and 1984. These were all presidents being reelected and the results were obvious in advance: Eisenhower won reelection with 57.4% of the vote, Johnson won with 61.1%, and Reagan with 58.8%.

But most of the time the market has increased following the election, and the median increase from election day to the end of the year was 3.6%. Every election is different and this is NOT investment advice!

by Calculated Risk on 10/28/2012 09:44:00 AM

From Kathleen Pender at the San Francisco Chronicle: Principal relief for stressed homeowners

A limited number of underwater homeowners in California will soon be able to get principal reductions of up to $100,000 apiece on Fannie Mae and Freddie Mac loans through the federally funded Keep Your Home California program.
...
... in mid-September, Fannie and Freddie told servicers they could immediately begin accepting money for principal reductions from programs financed by the U.S. Treasury's Hardest Hit Fund, including Keep Your Home California.

Fannie's and Freddie's willingness to accept money from Hardest Hit Funds does not signal a change of heart on the part of their regulator, the Federal Housing Finance Agency. ... Fannie Mae spokesman Andrew Wilson says, "This in fact for us is not a principal reduction. It's a principal payment. It's as if your grandmother wanted to give you $50,000 to apply to your mortgage. In this case, the grandmother, as it were, was the Hardest Hit Fund."
...
The fund was set up in 2010 to provide $17 billion in homeowner assistance to 18 states hardest hit by the housing crisis. ... The California Housing Finance Agency set up four programs under the Keep Your Home name to distribute California's share - $1.9 billion. It allocated $772 million to principal reduction ...
...
To qualify for principal reduction in California, homeowners must live in the home, owe more than it is worth, be of low-to-moderate income, and be delinquent or have some hardship that puts them in imminent risk of default.
...
To date, 2,511 homeowners have received principal reductions totaling $185.6 million - or roughly $74,000 apiece.

This is a fairly small program, but this will provide some principal relief for a few borrowers.

Earlier:
• Summary for Week Ending Oct 26th
• Schedule for Week of Oct 28th

by Calculated Risk on 10/27/2012 03:55:00 PM

Earlier:
• Summary for Week Ending Oct 26th

The key report this week is the October employment report to be released on Friday. Other key reports include the August Case-Shiller house price index on Tuesday, October auto sales on Thursday, and the October ISM manufacturing index, also on Thursday.

There are two interesting surveys that will be released on Monday; the Fed's Senior Loan Officer Survey that might show some slight increase in loan demand or loosening of lending standards, and the NMHC apartment survey that tends to lead other indicators of changes in the apartment market.

----- Monday, Oct 29th ----- 8:30 AM ET: Personal Income and Outlays for September. The consensus is for a 0.4% increase in personal income in September, and for 0.6% increase in personal spending. And for the Core PCE price index to increase 1.7% year-over-year.

10:30 AM: Dallas Fed Manufacturing Survey for October. This is the last of the regional survey for October.

2:00 PM: The October 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.

Expected: National Multi Housing Council (NMHC) Quarterly Apartment Survey. This is a key survey for apartment vacancy rates and rents.

----- Tuesday, Oct 30th ----- 9:00 AM: S&P/Case-Shiller House Price Index for August. Although this is the August report, it is really a 3 month average of June, July and August.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through May 2012 (the Composite 20 was started in January 2000).

The consensus is for a 2.1% year-over-year increase in the Composite 20 prices (NSA) for August. The Zillow forecast is for the Composite 20 to increase 1.7% year-over-year, and for prices to increase 0.2% month-to-month seasonally adjusted. The CoreLogic index increased 0.2% in August (NSA).

10:00 AM: Conference Board's consumer confidence index for October. The consensus is for an increase to 72.0 from 70.3 last month.

10:00 AM: Q3 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. However, based on the initial evaluation, it appears the vacancy rates are too high. The Census Bureau is looking into the differences between the HVS, the ACS, and the decennial Census, and until the issues are resolved, this survey probably shouldn't be used to estimate the excess vacant housing supply.

----- Wednesday, Oct 31st ----- 7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

9:45 AM: Chicago Purchasing Managers Index for October. The consensus is for an increase to 51.7, up from 49.7 in September.

----- Thursday, Nov 1st ----- 8:15 AM: The ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for 135,000 payroll jobs added in October. This is the first report using the new methodology, and the consensus probably doesn't reflect the change. I expect something lower than the consensus.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 365 thousand from 369 thousand.

8:30 AM: Productivity and Costs for Q3. The consensus is for a 1.3% increase in unit labor costs.

10:00 AM ET: ISM Manufacturing Index for October.

Here is a long term graph of the ISM manufacturing index. The ISM index indicated expansion in September, after three consecutive months of contraction. The consensus is for a decrease to 51.0, up from 51.5 in September. (above 50 is expansion).

10:00 AM: Construction Spending for September. The consensus is for a 0.7% increase in construction spending.

All day: Light vehicle sales for October. The consensus is for light vehicle sales to increase to 15.0 million SAAR in October (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the September sales rate.

TrueCar is forecasting:

The October 2012 forecast translates into a Seasonally Adjusted Annualized Rate (“SAAR”) of 14.9 million new car sales, up from 13.3 million in October 2011 and down from 14.94 million in September 2012

Edmunds.com is forecasting:

Edmunds.com ... forecasts that 1,132,878 new cars will be sold in October for an estimated Seasonally Adjusted Annual Rate (SAAR) this month of 14.8 million light vehicles.

----- Friday, Nov 2nd ----- 8:30 AM: Employment Report for October. The consensus is for an increase of 120,000 non-farm payroll jobs in October; there were 114,000 jobs added in September.

The consensus is for the unemployment rate to increase to 7.9% in October, up from 7.8% in September.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through September.

The economy has added 5.2 million private sector jobs since employment bottomed in February 2010 including preliminary benchmark revision (4.6 million total jobs added including all the public sector layoffs).

There are still 3.7 million fewer private sector jobs now than when the recession started in 2007 (including benchmark revision).

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for September. The consensus is for a 4.0% decrease in orders.