by Calculated Risk on 11/17/2013 05:06:00 PM

Here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

Two of the indicators are above pre-recession levels (GDP and Personal Income less Transfer Payments), and two indicators are still slightly below the pre-recession peaks (employment and industrial production).

Click on graph for larger image.

The first graph is for real GDP through Q3 2013.

Real GDP returned to the pre-recession peak in Q2 2011, and has hit new post-recession highs for ten consecutive quarters.

At the worst point - in Q2 2009 - real GDP was off 4.3% from the 2007 peak.

The second graph shows real personal income less transfer payments as a percent of the previous peak through the September report.

This indicator was off 8.2% at the worst point.

Real personal income less transfer payments surged in December 2012 due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013 (I've left December out going forward).   Real personal income less transfer payments declined sharply in January (as expected), and are now back above the pre-recession peak.

The third graph is for industrial production through October 2013.

Industrial production was off 16.9% at the trough in June 2009, and was initially one of the stronger performing sectors during the recovery.

However industrial production is still 0.8% below the pre-recession peak.  This indicator might return to the pre-recession peak in early 2014.

The final graph is for employment and is through October 2013.  This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

Payroll employment is still 1.1% below the pre-recession peak and will probably be back to pre-recession levels in mid-2014.

by Calculated Risk on 11/17/2013 11:19:00 AM

From Nick Timiraos at the WSJ: Why California Homeowners Could Avoid a Tax Hit (ht picosec)

The tax provision currently allows some homeowners—mostly those facing foreclosure—to avoid paying taxes on certain relief that they receive on their mortgages. The IRS considers debt forgiveness to be a form of taxable income. That means homeowners who sell their homes for less than the amount they owe in a short sale could face a tax bill.

In 2007, as the foreclosure crisis spread, Congress exempted some homeowners from counting certain kinds of forgiven mortgage debt as taxable income in order to encourage banks and borrowers to seek foreclosure alternatives. Congress retroactively extended the provision earlier this year, after it expired on Dec. 31, 2012. The provision is set to expire this coming Dec. 31 and there appears to be less urgency in Congress right now to pass an extension.

In the letter to Sen. Boxer, the IRS clarified that certain non-recourse debt forgiven by lenders wouldn’t typically be considered taxable income by the IRS. This means that for most California borrowers, the expiration of the tax provision may not have a meaningful effect.

The key section in the IRS letter is:

"[I]f a property owner cannot be held personally liable for the difference between the loan balance and the sales price, we would consider the obligation as a nonrecourse obligation. In this situation, the owner would not treat the cancelled debt as income."

Since California (and other states) passed anti-deficiency provisions, this means many loans will be considered nonrecourse by the IRS.

The number of short sales is already declining rapidly, and I was expecting short sales to fall off a cliff in January 2014. This letter suggests short sales will continue in certain states (the letter is only for California, but other states have similar statutes).

by Calculated Risk on 11/16/2013 04:38:00 PM

The key report this week will be October retail sales to be released on Wednesday. There are also two housing reports that will be released this week, the homebuilder confidence survey on Monday, and existing home sales on Wednesday (housing starts are delayed).

For manufacturing, the Philly and Kansas City Fed November surveys will be released this week.   For prices, CPI will be released on Wednesday.

----- Monday, November 18th -----
10:00 AM ET: The November NAHB homebuilder survey. The consensus is for a reading of 55, unchanged from October. Any number above 50 indicates that more builders view sales conditions as good than poor.

Note on delay in release of Housing Starts from the Census Bureau:

"New Residential Construction (NRC) data for September 2013 will be released with the October data release, which has been rescheduled to November 26, 2013.

Data collection for estimates of housing starts and completions occurs in the field with resources that are shared with other critical surveys. Full data collection will occur in November but will require extra time; hence, the scheduled releases are much later than originally scheduled in November. Normal data collection and data releases will resume with the release of the November data in December."

----- Tuesday, November 19th-----
7:00 PM ET: Speech, Fed Chairman Ben Bernanke, Communication and Monetary Policy, National Economists Club Annual Dinner: Herbert Stein Memorial Lecture

----- Wednesday, November 20th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA's Architecture Billings Index for October (a leading indicator for commercial real estate).

8:30 AM: Consumer Price Index for October. The consensus is for no change in CPI in October and for core CPI to increase 0.2%.

8:30 AM ET: Retail sales for October will be released.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales are up 28.5% from the bottom, and now 12.6% above the pre-recession peak (not inflation adjusted)

The consensus is for retail sales to be unchanged in October, and to increase 0.1% ex-autos.

10:00 AM: Existing Home Sales for October from the National Association of Realtors (NAR).

The consensus is for sales of 5.13 million on seasonally adjusted annual rate (SAAR) basis. Sales in September were at a 5.29 million SAAR.  Economist Tom Lawler estimates the NAR will report sales of 5.08 million.

A key will be inventory and months-of-supply.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for September.  The consensus is for a 0.3% increase in inventories.

2:00 PM: The Fed will release the FOMC Minutes for the Meeting of October 29-30, 2013.

----- Thursday, November 21st -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 335 thousand from 339 thousand last week.

8:30 AM: Producer Price Index for October. The consensus is for a 0.2% decrease in producer prices (0.1% increase in core).

10:00 AM: the Philly Fed manufacturing survey for November. The consensus is for a reading of 15.5, down from 19.8 last month (above zero indicates expansion).

----- Friday, November 22nd -----
10:00 AM: Job Openings and Labor Turnover Survey for September from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in August to 3.883 million from 3.808 million in July.  The number of job openings (yellow) is up 6.9% year-over-year compared to August 2012. 

Quits were up in August, and quits are up about 10.5% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

10:00 AM: Regional and State Employment and Unemployment (Monthly) for October 2013

11:00 AM: the Kansas City Fed manufacturing survey for November. The consensus is for a reading of 6, unchanged from last month (above zero indicates expansion).

by Calculated Risk on 11/16/2013 08:55:00 AM

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

Here is the unofficial problem bank list for November 15, 2013.

Changes and comments from surferdude808:

The OCC released its enforcement action activity through mid-September 2013. A few actions were modified and they terminated six orders. The changes reduce the Unofficial Problem Bank list to 655 institutions with assets of $223.2 billion. This week, assets figures were updated through third quarter. As a result, updated figures were responsible for $3.2 billion of the $5.7 billion decline in assets this week. A year ago, the list held 857 institutions with assets of $329.2 billion.

The OCC terminated actions against The Conway National Bank Conway, SC ($959 million Ticker: CNBW); Continental Bank, Plymouth Meeting, PA ($654 million); Middlesex Federal Savings, F.A., Somerville, MA ($337 million); National Bank of New York City, Flushing, NY ($188 million); Traders National Bank, Tullahoma, TN ($158 million); and Santa Clara Valley Bank, National Association, Santa Paula, CA ($134 million).

Next week, the FDIC may release industry results for the third quarter, which will include an update on the aggregate count of institutions on the Official Problem bank List. Prior to the third quarter of 2010, the Official List count was higher than the Unofficial List, with a peak of 157 at fourth quarter 2009. In subsequent quarters it has reversed to be lower than the Unofficial List count with the difference reaching a high of 185 at first quarter of 2012. The difference has trended down to 148. There is a chance the difference could narrow to around 120 when the third quarter figures are released.

There is some news on Capitol Bancorp, LTD. to pass along. The bad first. The New Mexico State Banking Department reissued a notice in order to close Sunrise Bank of Albuquerque, Albuquerque, NM ($42 million) because the bank's regulatory capital ratio has fallen below a required threshold. A previous closure notice issued in September 2012 was averted after a $1 million capital injection by Capitol Bancorp. Now the possible good news. According to a report by SNL Securities (Capitol Bancorp, FDIC to end dispute over failed-bank cross-guaranty liability), the company has reached an agreement whereby the FDIC would receive 85% of any proceeds from the pending sell of several units. The bankruptcy court has agreed to these terms as well, which could allow the sale of four units to Talmer Bancorp, Inc. to proceed. Perhaps the saga of Capitol Bancorp is nearing an end, which has been one of the longest resolutions in FDIC's history.

by Calculated Risk on 11/15/2013 08:56:00 PM

Economist Tom Lawler sent me an updated table below of short sales, foreclosures and cash buyers for several selected cities in October.

On short sales from CR: Look at the first two columns in the table for Short Sales Share.  Short sales are down sharply from a year ago, and will probably really decline in early 2014.  It appears that the Mortgage Debt Relief Act of 2007 will not be extended again next year. Usually cancelled debt is considered income, but a provision of the 2007 Debt Relief Act allowed borrowers "to exclude certain cancelled debt on [a] principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief." (excerpt from IRS).  This relief expires on Dec 31, 2013.  Complete all short sales by the end of this year!

Total "Distressed" Share. In all areas that have reported distressed sales so far, the share of distressed sales is down year-over-year.  Also there has been a significant decline in foreclosure sales in most of these cities.  

The All Cash Share (last two columns) is mostly declining year-over-year.  When investors pull back in markets like Phoenix (already declining), the share of all cash buyers will probably decline.

In general it appears the housing market is slowly moving back to normal.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Oct-13	Oct-12	Oct-13	Oct-12	Oct-13	Oct-12	Oct-13	Oct-12
Las Vegas	21.0%	44.7%	6.0%	11.6%	27.0%	56.3%	44.9%	54.1%
Reno	16.0%	40.0%	4.0%	12.0%	20.0%	52.0%
Phoenix	8.4%	26.2%	6.9%	12.9%	15.3%	39.1%	31.6%	43.9%
Sacramento	11.4%	35.7%	5.1%	12.0%	16.5%	47.7%	23.9%	36.9%
Minneapolis	5.1%	10.4%	16.4%	24.9%	21.5%	35.3%
Mid-Atlantic	7.9%	9.1%	8.2%	13.0%	16.1%	22.1%	19.9%	20.0%
Orlando	15.1%	29.8%	20.7%	23.2%	35.8%	53.0%		54.8%
California*	12.6%	26.7%	6.6%	17.1%	19.2%	43.8%
Bay Area CA*	10.3%	22.9%	3.6%	11.7%	13.9%	34.6%	22.8%	29.6%
So. California*	12.9%	27.2%	6.3%	16.3%	19.2%	43.5%	27.5%	32.8%
Hampton Roads					25.5%	28.3%
Northeast Florida					35.7%	44.2%
Toledo							37.0%	36.0%
Des Moines							20.2%	21.7%
Peoria							21.1%	23.7%
Tucson							32.9%	31.8%
Omaha							20.0%	20.4%
SE Michigan							34.5%	44.3%
Spokane			13.8%	8.4%
Memphis*			18.4%	22.9%
Memphis*			18.4%	22.9%
Birmingham AL			21.0%	30.8%
*share of existing home sales, based on property records

by Calculated Risk on 11/15/2013 05:03:00 PM

From housing economist Tom Lawler:

Based on local realtor/MLS reports across the country, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 5.08 million in October, down 4.0% from September’s seasonally adjusted pace. It’s difficult to gauge the extent to which last month’s government shutdown impacted closings last month, but weakness in contract signings prior to the shutdown suggest that last month’s decline in closings was mainly the result of higher mortgage rates and higher home prices. Weakness in closings was not uniform across the country – many Northeast markets, e.g., saw stronger YOY sales growth – but outside of the Northeast most markets saw a sales slowdown.

On the inventory front, most markets saw a “typical” seasonal decline in listings, but a number of markets actually saw an increase in listings – including many markets where the investor share of home sales has been higher than the norm over the last few years. Based on realtor/MLS reports AND on entities that track listings, I estimate that the inventory of existing homes for sale as measured by the NAR declined by 1.4% from the end of September to the end of October, which would imply that October listings would be up 3.3% from last October.

The government shutdown may have had a larger impact on contract signings, as several associations/MLS across the country reported YOY declines in new contract signings. Sadly, a large number of associations/MLS don’t report data on new contract signings to the public, and as a result it is difficult to construct “national” pending home sales measures consistent with the NAR’s pending home sales index (which I believe has some serious problems.)

CR Note: The NAR is scheduled to report October existing home sales on Wednesday, November 20th.

by Calculated Risk on 11/15/2013 11:59:00 AM

From HotelNewsNow.com: STR: US results for week ending 9 November

The U.S. hotel industry posted positive results in the three key performance measurements during the week of 3-9 November, according to data from STR.

In year-over-year measurements, the industry’s occupancy increased 2.5 percent to 64.1 percent. Average daily rate rose 3.1 percent to finish the week at US$111.35. Revenue per available room for the week was up 5.7 percent to finish at US$71.34.
emphasis added

The 4-week average of the occupancy rate is close to normal levels.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average for the year 2000 through 2013.

Click on graph for larger image.

The red line is for 2013 and black is for 2009 - the worst year since the Great Depression for hotels.

Note: Although 2009 was the worst year since the Depression, there was a brief period in 2001 when the occupancy rate was even lower than in 2009 due to the attacks on 9/11.   In 2005, the occupancy rate was very high at the end of the year due to Hurricanes Katrina and Rita.

Through November 9th, the 4-week average of the occupancy rate is slightly higher than the same period last year and is tracking at pre-recession levels.   

This has been a solid year for the hotel industry (although the government shutdown hurt for a few weeks in October).

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 11/15/2013 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production edged down 0.1 percent in October after having increased 0.7 percent in September. Manufacturing production rose 0.3 percent in October for its third consecutive monthly gain. The index for mining fell 1.6 percent after having risen for six consecutive months, and the output of utilities dropped 1.1 percent after having jumped 4.5 percent in September. The level of the index for total industrial production in October was equal to its 2007 average and was 3.2 percent above its year-earlier level. Capacity utilization for the industrial sector declined 0.2 percentage point in October to 78.1 percent, a rate 1.1 percentage points above its level of a year earlier and 2.1 percentage points below its long-run (1972-2012) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.1 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.1% is still 2.1 percentage points below its average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased 0.1% in October to 99.98. This is 19.4% above the recession low, but still slightly, 0.8%, below the pre-recession peak.

The monthly change for both Industrial Production and Capacity Utilization were below expectations. The consensus was for a 0.1% increase in Industrial Production in October, and for Capacity Utilization to be at 78.3%.

by Calculated Risk on 11/15/2013 08:30:00 AM

From the NY Fed: Empire State Manufacturing Survey

The November 2013 Empire State Manufacturing Survey indicates that manufacturing conditions weakened somewhat for New York manufacturers. The general business conditions index fell four points to -2.2, its first negative reading since May. The new orders index also entered negative territory, falling thirteen points to -5.5 ...

The prices received index fell to -4.0; the negative reading was a sign that selling prices had declined—their first retreat in two years. Labor market conditions were also weak, with the index for number of employees falling four points to 0.0, while the average workweek index dropped to -5.3. Despite the negative readings registered by many of the indexes for current activity, indexes for the six-month outlook continued to convey a strong degree of optimism about future business conditions. emphasis added

This is the first of the regional surveys for November.  The general business conditions index was below the consensus forecast of a reading of 5.5, and shows contraction for the first time since May.

by Calculated Risk on 11/14/2013 09:39:00 PM

November 15th is my former co-blogger's birthday. Hard to believe it has been five years since she left us ... Happy Birthday Tanta!

Oh, Fed Chair nominee Janet Yellen was outstanding today (as expected). From the WSJ: Yellen Stands by Fed Strategy

The committee plans to vote on Ms. Yellen's nomination as soon as next week. She is expected to then win confirmation from the full Senate ...

I expect an easy confirmation.

Friday:
• At 8:30 AM ET, the NY Fed Empire State Manufacturing Survey for November. The consensus is for a reading of 5.5, up from 1.5 in October (above zero is expansion).

• At 9:15 AM, the Fed is scheduled to release Industrial Production and Capacity Utilization for October. The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to be unchanged at 78.3%.

• At 10:00 AM, the Monthly Wholesale Trade: Sales and Inventories for September. The consensus is for a 0.4% increase in inventories.