by Calculated Risk on 12/05/2012 08:24:00 AM

From ADP:

Private sector employment increased by 118,000 jobs from October to November, according to the November ADP National Employment Report®, which is produced by Automatic Data Processing, Inc. (ADP®) ... in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The October 2012 report, which reported job gains of 158,000, was revised down by 1,000 to 157,000 jobs.

Mark Zandi, chief economist of Moody’s Analytics, said, “Superstorm Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls. The manufacturing, retailing, leisure and hospitality, and temporary help industries were hit particularly hard by the storm. Abstracting from the storm, the job market turned in a good performance during the month. This is especially impressive given the uncertainty created by the Presidential election and the fast-approaching fiscal cliff. Businesses appear to be holding firm on their hiring and firing decisions.”

This was below the consensus forecast for 125,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 80,000 payroll jobs in November, on a seasonally adjusted (SA) basis.

ADP hasn't been very useful in predicting the BLS report, but maybe the new method will work better. This is the 2nd month for the new method.

by Calculated Risk on 12/05/2012 07:01:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 0.1 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.52 percent, matching the lowest rate in the history of the survey, from 3.53 percent, with points increasing to 0.41 from 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

The purchase index had been mostly moving sideways over the last two years, however the purchase index has increased 9 of the last 11 weeks.  The 4-week average of the purchase index is at the highest level since 2010 (when the tax credit boosted application activity).

The 4-week average is up about 25% from the low in 2011.

by Calculated Risk on 12/04/2012 08:45:00 PM

Oh my. From Business Insider: 47% Of People Think The Deficit Would INCREASE If We Go Over The Fiscal Cliff

Were the United States to "go over the fiscal cliff," what do you expect would happen to the National Deficit?

At least according to the CBO and most economists, the correct answer is that "It will decrease." Going over the Fiscal Cliff would, according a Congressional Budget Office study, result in a reduction in the National Deficit of $607 billion between fiscal years 2012 and 2013.

However that was not the most popular answer. Per the survey, 47.4% of respondents said that the deficit would INCREASE if we went over the Fiscal Cliff. Only 12.6% think it will decrease.

The so-called "fiscal cliff" would cut spending and raise taxes, and the deficit would decrease very quickly. The key concern is that the CBO's analysis suggests a rapid decrease in the deficit will lead to a recession in 2013.   That is why a better name is "austerity slope" or something similar.

Wednesday economic releases:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for November will be released. This report is for private payrolls only (no government). The consensus is for 125,000 payroll jobs added in November. This is the second report using a new methodology, and the report last month (158,000) was fairly close to the BLS report for private employment (the BLS reported 184,000 private sector jobs added in November).

• At 10:00 AM, the ISM non-Manufacturing Index (Service) for November will be released. The consensus is for a decrease to 53.6 from 54.2 in October. Note: Above 50 indicates expansion, below 50 contraction.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is for a 0.1% decrease in orders.



Another question for the December economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 12/04/2012 05:55:00 PM

The ISM manufacturing index indicated contraction in November, with the PMI declining to 49.5% (below 50 is contraction). A couple of weeks ago, the Markit PMI increased to 52.4 from 51.0 in October - a five month high - suggesting "moderate" expansion.

Which was it? Contraction or expansion?

Chris Williamson, Markit chief economist wrote today (ht NW): Divergence in ISM and Markit survey headline indicators masks consistent picture of sluggish expansion in fourth quarter

Two barometers of US manufacturing business conditions moved in different directions in November, but if examined in more detail both tell a similar story of modest expansion of manufacturing output so far in the fourth quarter.
...
the PMIs are composite indicators derived from various survey questions, and although using the same indexes, the two surveys have different weights for each component. While the headline composite indexes from the two surveys did diverge, the discrepancies are smaller when you look at the subindices.
...
When the Output Indexes from the two surveys are compared against the three-month change in official production data (a widely used comparison for survey and official data), the Markit index has a correlation of 94% compared with 87% for the ISM data (this is based in both cases on the data from mid-2007 onwards, when Markit data were first available).

Of course this commentary was from Markit (the ISM index has a much longer history).  And, however we look at the data, manufacturing is clearly weak.

Tim Duy at EconomistsView has more: Apples and Oranges in the Manufacturing Data?

by Calculated Risk on 12/04/2012 03:00:00 PM

The following graph is from economist Tom Lawler and shows the total REO for Fannie, Freddie, FHA, Private Label (PLS) and FDIC insured institutions. This isn't all the REO, as Lawler noted before, it "excludes non-FHA government REO (VA, USDA, etc.), credit unions, finance companies, non-FDIC-insured banks and thrifts", but it is probably over 90%.

From Tom Lawler:

On the SF REO front, the [FDIC insured] industry’s “carrying value” of 1-4 family REO properties at the end of September was $8.7663 billion, down from 8.0% on the quarter and down 26.3% from a year ago. The FDIC neither reports on nor collects data on the number of 1-4 family REO properties held by FDIC-insured institutions, which is annoying. Assuming that the average carrying value of 1-4 family properties at such institutions is 50% higher than the average for Fannie and Freddie (which seems broadly consistently with other data sources on average UPB balances), then a chart showing SF REO inventories of Fannie, Freddie, FHA, private-label securities, and FDIC-insured institution would look as follows.

Click on graph for larger image.

SF REO inventories for these combined sectors in September were down 21.7% from last September.

CR Note: There are still quite a few properties with loans 90+ days delinquent or in the foreclosure process, but it appears these institutions are working down the number of foreclosed properties they are holding.

by Calculated Risk on 12/04/2012 12:45:00 PM

The FDIC released the Quarterly Banking Profile for Q3 today.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $37.6 billion in the third quarter of 2012, a $2.3 billion (6.6 percent) improvement from the $35.2 billion in profits the industry reported in the third quarter of 2011. This is the 13th consecutive quarter that earnings have registered a year-over-year increase. Increased noninterest income and lower provisions for loan losses accounted for most of the year-over-year improvement in earnings.

The FDIC reported the number of problem banks declined:

Also noteworthy was a decline in the number of banks on the FDIC's "Problem List" from 732 to 694. This marked the sixth consecutive quarter that the number of "problem" banks has fallen, and the first time in three years that there have been fewer than 700 banks on the list. Total assets of "problem" institutions declined from $282 billion to $262 billion

Click on graph for larger image.

The dollar value of Real Estate Owned (REOs, foreclosure houses) declined from $9.5 billion in Q2 to $8.8 billion in Q3. This is the lowest level of REOs since Q1 2008. Even in good times, the FDIC insured institutions have about $2.5 billion in residential REO.

This graph shows the dollar value of Residential REO for FDIC insured institutions. Note: The FDIC reports the dollar value and not the total number of REOs.

by Calculated Risk on 12/04/2012 10:08:00 AM

Press Release: Home Prices Rebound in Hard-Hit Atlanta, Sacramento, and the Inland Empire at the Price Recovery Accelerates in November

In November, asking home prices rose 0.8 percent month-over-month (M-o-M), seasonally adjusted–which implies an annualized growth rate of 10 percent. Year-over-year (Y-o-Y) prices increased 3.8 percent, which was also the largest yearly increase to date. Quarter-over-quarter (Q-o-Q) prices rose 2.2 percent, seasonally adjusted, another post-crisis high; in fact, prices rose 0.8 percent Q-o-Q without adjusting for seasonality (not shown in table), even though prices typically decline after the summer. Excluding foreclosures, asking prices rose 4.3 percent Y-o-Y and 1.6 percent Q-o-Q, seasonally adjusted.
...
For the first time since the housing crisis began, Atlanta and two inland California metros—Riverside-San Bernardino and Sacramento—all experienced significantly large Q-o-Q asking home price gains. Unlike other hard-hit metros such as Phoenix, Las Vegas, and Miami, prices in these metros have been slower to bounce back, declining in February and making smaller gains in August and May.
...
Nationally, rents rose 5.6 percent Y-o-Y, outpacing the national price gain of 3.8 percent. However, asking prices in 14 of the 25 largest rental markets actually rose faster than rents as the price recovery picks up.
...
“The key factors behind today’s price gains are job growth, falling vacancies, and–above all–rebounding from the huge price declines of the housing bust,” said Jed Kolko, Trulia’s Chief Economist. “The latest metros to join the price rebound are Atlanta, Sacramento, and Riverside-San Bernardino. Now, all of the metros that suffered most during the bust have had year-over-year price gains.”

These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a SA basis.

More from Jed Kolko, Trulia Chief Economist: Asking Price Gains Accelerate in November, but Local Differences Widen

by Calculated Risk on 12/04/2012 09:01:00 AM

Notes: This CoreLogic House Price Index report is for October. The recent Case-Shiller index release was for September. Case-Shiller is currently the most followed house price index, however CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® Home Price Index Marks Eighth Consecutive Month of Year-Over-Year Gains

Home prices nationwide, including distressed sales, increased on a year-over-year basis by 6.3 percent in October 2012 compared to October 2011. This change represents the biggest increase since June 2006 and the eighth consecutive increase in home prices nationally on a year-over-year basis. On a month-over-month basis, including distressed sales, home prices decreased by 0.2 percent in October 2012 compared to September 2012*. Decreases in month-over-month home prices are expected as the housing market enters the offseason.
...
Excluding distressed sales, home prices nationwide also increased on a year-over-year basis by 5.8 percent in October 2012 compared to October 2011. On a month-over-month basis excluding distressed sales, home prices increased 0.5 percent in October 2012 compared to September 2012, the eighth consecutive month-over-month increase. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that November 2012 home prices, including distressed sales, are expected to rise by 7.1 percent on a year-over-year basis from November 2011 and fall by 0.3 percent on a month-over-month basis from October 2012 as sales exhibit a seasonal slowdown going into the winter.
...
“The housing recovery that started earlier in 2012 continues to gain momentum," said Mark Fleming, chief economist for CoreLogic. “The recovery is geographically broad-based with almost all markets experiencing some appreciation. Sand and energy states continue to experience the most robust appreciation and some judicial foreclosure states are even recording increasing prices.”

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was down 0.2% in October, and is up 6.3% over the last year.

The index is off 27% from the peak - and is up 9.6% from the post-bubble low set in February (the index is NSA, so some of the increase is seasonal).

The second graph is from CoreLogic. The year-over-year comparison has been positive for eight consecutive months suggesting house prices bottomed earlier this year on a national basis (the bump in 2010 was related to the tax credit).

This is the largest year-over-year increase since 2006.

Since this index is not seasonally adjusted, it was expected to decline on a month-to-month basis in October, and will probably stay negative on a month-to-month basis until the March 2013 report is released. The key for the next several months will be to watch the year-over-year change.

by Calculated Risk on 12/03/2012 09:07:00 PM

Tuesday economic releases:
• At 10:00 AM ET, Trulia Price & Rent Monitors for November. This is the index from Trulia that uses asking prices adjusted both for the mix of homes listed for sale and for seasonal factors.

Here is another update using inventory numbers from HousingTracker / DeptofNumbers to track changes in listed inventory. Tom Lawler mentioned this last year.

According to the deptofnumbers.com for (54 metro areas), overall inventory is down 22% year-over-year and probably at the lowest level since the early '00s.

This graph shows the NAR estimate of existing home inventory through October (left axis) and the HousingTracker data for the 54 metro areas through early December.

Click on graph for larger image.

Since the NAR released their revisions for sales and inventory last year, the NAR and HousingTracker inventory numbers have tracked pretty well.

On a seasonal basis, housing inventory usually bottoms in December and January and then increases through the summer. So inventory will probably decline a little further over the next month or so, before increasing again next year.

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the early December listings, for the 54 metro areas, declined 21.7% from the same period last year.

The year-over-year declines will probably start to get smaller since inventory is already very low. It seems very unlikely we will see 20%+ year-over-year declines next summer, but it does appear that inventory will be very low in 2013.

by Calculated Risk on 12/03/2012 03:45:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 15.54 million SAAR in November. That is up 15% from November 2011, and up 9% from the sales rate last month. This is the highest level of sales since December 2007.

This was above the consensus forecast of 15.0 million SAAR (seasonally adjusted annual rate), however some of the increase was a bounce back from Hurricane Sandy that negatively impacted sales at the end of October.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for November (red, light vehicle sales of 15.54 million SAAR from Autodata Corp).

Click on graph for larger image.

Sales have averaged a 14.4 million annual sales rate this year through November, up from 12.7 million rate for the same period of 2011. Last year sales were depressed for several months (May through August) due to supply chain issues related to the tsunami in Japan.


The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This shows the huge collapse in sales in the 2007 recession.

Most (or all) of the month-to-month decline in October was related to Hurricane Sandy, and some of the sharp increase this month was a bounce back.