by Calculated Risk on 11/20/2013 12:46:00 AM

Wednesday:
• At 7:00 AM ET, 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).

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

• Also at 8:30 AM, Retail sales for October will be released. The consensus is for retail sales to be unchanged in October, and to increase 0.1% ex-autos..

• At 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.

• Also at 10:00 AM, the 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.

by Calculated Risk on 11/19/2013 07:05:00 PM

From Fed Chairman Ben Bernanke: Communication and Monetary Policy. An excellent speech worth reading. Excerpts on current situation:

In coming meetings, in evaluating the outlook for the labor market, we will continue to consider both the cumulative progress since September 2012 and the prospect for continued gains. We have seen meaningful improvement in the labor market since the latest asset purchase program was announced in September 2012. At the time, the latest reading on the unemployment rate was 8.1 percent, and both we and most private-sector economists were projecting only slow reductions in unemployment in the coming quarters. Recent reports on payroll employment had also been somewhat disappointing. However, since the program was announced, the unemployment rate has fallen 0.8 percentage point, and about 2.6 million payroll jobs have been added. Looking forward, we will of course continue to monitor the incoming data. As reflected in the latest Summary of Economic Projections and the October FOMC statement, the FOMC still expects that labor market conditions will continue to improve and that inflation will move toward the 2 percent objective over the medium term. If these views are supported by incoming information, the FOMC will likely begin to moderate the pace of purchases. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook. As before, the Committee will also continue to take into account its assessment of the likely efficacy and costs of the program.

When, ultimately, asset purchases do slow, it will likely be because the economy has progressed sufficiently for the Committee to rely more heavily on its rate policies, the associated forward guidance, and its substantial continued holdings of securities to maintain progress toward maximum employment and to achieve price stability. In particular, the target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the unemployment threshold is crossed and at least until the preponderance of the data supports the beginning of the removal of policy accommodation.

Conclusion
I began my time as Chairman with the goal of increasing the transparency of the Federal Reserve, and of monetary policy in particular. In response to a financial crisis and a deep recession, the Fed's monetary policy communications have proved far more important and have evolved in different ways than I would have envisioned eight years ago.

The economy has made significant progress since the depths of the recession. However, we are still far from where we would like to be, and, consequently, it may be some time before monetary policy returns to more normal settings. I agree with the sentiment, expressed by my colleague Janet Yellen at her testimony last week, that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery.  The FOMC remains committed to maintaining highly accommodative policies for as long as they are needed. Communication about policy is likely to remain a central element of the Federal Reserve's efforts to achieve its policy goals.
emphasis added

by Calculated Risk on 11/19/2013 04:06:00 PM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the long term graph of the number of real estate licensees in California through August 2013.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 32.4% from the peak, and is down 3.3% year-over-year.  However, in August, licensees increased slightly month-to-month for the first time since early 2007.

Brokers' licenses are only off 8.4% from the peak, but are still slowly declining (down 1.1% year-over-year, and down slightly month-to-month).

Click on graph for larger image.

This might be the bottom (or near the bottom) for real estate licensees in California, but so far there is no sign of a new bubble in real estate agents!

by Calculated Risk on 11/19/2013 12:37:00 PM

Here is a minor indicator that I follow, from ATA: ATA Truck Tonnage Index Decreased 2.8% in October

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index fell 2.8% in October, the first decrease since July. ... In October, the index equaled 124 (2000=100) versus 127.5 in September. October’s level was the lowest since April. Compared with October 2012, the SA index surged 8%, which is the largest year-over-year gain since December 2011.
...
“From May through September, the index surged 3.5%, including only one monthly decrease over that period,” said ATA Chief Economist Bob Costello. “It isn’t surprising for volumes to fall back some after such a good run.”

“Despite October’s month-to-month decrease, we saw a very robust year-over-year increase and I’m seeing some good signs out of the trucking industry that suggests the economy may be a little stronger than we think,” he said. “Specifically, the heavy freight sectors, like tank truck, have been helping tonnage this year. But in the third quarter, generic dry van truckload freight saw the best quarterly gains since 2010. I view this positively for the economy. I view it positively for trucking. Now, we have to see if it continues.”
emphasis added

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 up solidly year-over-year. This monthly decline might have been related to the government shutdown.

by Calculated Risk on 11/19/2013 10:14:00 AM

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for October since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was unchanged in October compared to the rolling 12 months ending in September.   Outbound traffic decreased slightly compared to September.

In general, inbound traffic has been increasing  and outbound traffic had been declining slightly.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

This suggests an increase in the trade deficit with Asia for October - and possibly a fairly strong retailer buying for the holiday season. 

by Calculated Risk on 11/18/2013 06:41:00 PM

From the Senate Banking Committee: EXECUTIVE SESSION to Vote on the Nomination of The Honorable Janet L. Yellen to be Chairman of the Board of Governors of the Federal Reserve System

Thursday, November 21, 2013
10:00 AM - 12:00 PM
538 Dirksen Senate Office Building
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS will meet in EXECUTIVE SESSION to consider the nomination of The Honorable Janet L. Yellen, of California, to be Chairman of the Board of Governors of the Federal Reserve System.

In an ideal world, the vote for Yellen would be unanimous.   A few senators might vote against her, but she should be confirmed easily.  Meanwhile Bernanke is still Fed Chairman and the focus will be on his speech tomorrow.

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

Note: Housing Starts would have been released on Tuesday, but due to the government shutdown, starts for September and October will be delayed until next week. 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."

by Calculated Risk on 11/18/2013 02:33:00 PM

Here is another weekly update on housing inventory ... for the fifth consecutive week, housing inventory is up year-over-year.  This suggests inventory bottomed early this year.

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for September, October data will be released this Wednesday).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years.

Click on graph for larger image.

This graph shows the Housing Tracker reported weekly inventory for the 54 metro areas for 2010, 2011, 2012 and 2013.

In 2011 and 2012, inventory only increased slightly early in the year and then declined significantly through the end of each year.

Inventory in 2013 is now above the same week in 2012 (red is 2013, blue is 2012).

We can be pretty confident that inventory bottomed early this year, and I expect the seasonal decline to be less than usual at the end of the year - so the year-over-year change will continue to increase.

Inventory is still very low, but this increase in inventory should slow house price increases.

by Calculated Risk on 11/18/2013 12:31:00 PM

Here is a price index for commercial real estate that I follow. 

From CoStar: CRE Prices Gain Traction Across All Property Types During Third Quarter 2013 Despite Uncertainty Over Economic Policy

CRE PRICES POST MODEST QUARTERLY GAINS DESPITE SEPTEMBER LULL: After posting modest gains throughout the third quarter of 2013, price growth for commercial property was mixed in September, reflecting the uncertainty that existed over economic policy and an uptick in interest rates. The two broadest measures of aggregate pricing for commercial properties within the CCRSI—the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index—saw little movement for the month. The value-weighted index, which is influenced by larger transactions, expanded by 0.3% in September while the equal-weighted index, which reflects more numerous smaller transactions, dipped by 0.6% in September. However, both indices posted modest gains in the third quarter of 2013, and advanced 8.4% on an annual basis.
...
PRICE GROWTH ACCELERATING IN SECONDARY REGIONS AND PROPERTY TYPES: With pricing for multifamily assets in the Northeast and West regions approaching peak or near-peak levels, investors have continued to expand their search for yield beyond core gateway markets, leading to stronger price gains in the office, retail and industrial sectors in other regions, including the Midwest region. After bottoming more than a year later than in the other regions, the Midwest Composite Index has advanced by 15.7% from its trough in mid-2012, buoyed by impressive pricing growth in the multifamily and retail sectors.

DISTRESS SALES CONTINUE TO WANE: The percentage of commercial property selling at distressed prices dropped to 11.6% in September 2013 from more than 24% one year earlier, enabling banks and other lenders to focus on growth opportunities. The multifamily sector recorded the lowest level of distress in the third quarter of 2013 at 9.5%, which is a cumulative 77% decline from peak levels reached in 2010. The share of distress deals in the other property types ranges from 12.1% in the industrial sector to 15.8% in the office sector. On a regional basis, distress levels have largely worked through the system in the Northeast, with just 7.1% of deals selling at distressed prices, while the Midwest has the furthest to recover with over 23% of property still selling at distressed levels.
emphasis added

Click on graph for larger image.

This graph from CoStar shows the Value-Weighted and Equal-Weighted indexes.  CoStar reported that the Value-Weighted index is up 48.8% from the bottom (showing the earlier and stronger demand for higher end properties) and up 8.4% year-over-year. However the Equal-Weighted index is only up 15.5% from the bottom, and also up 8.4% year-over-year.

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

by Calculated Risk on 11/18/2013 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 54 in November, the same as in October (revised down from 55). Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Holds Steady in November

Builder confidence in the market for newly built, single-family homes was unchanged in November from a downwardly revised level of 54 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. This means that for the sixth consecutive month, more builders have viewed market conditions as good than poor.
...
The HMI index gauging current sales conditions in November held steady at 58. The component measuring expectations for future sales fell one point to 60 and the component gauging traffic of prospective buyers dropped one point to 42.

The HMI three-month moving average was mixed in the four regions. No movement was recorded in the South or West, which held unchanged at 56 and 60, respectively. The Northeast recorded a one-point gain to 39 and the Midwest fell three points to 60.
emphasis added

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the November release for the HMI and the August data for starts (September and October housing starts will be released in early December). This was below the consensus estimate of a reading of 55.

This chart shows that confidence and single family starts generally move in the same direction, but it doesn't tell us anything about the expected level of single family starts.

Probably a better comparison is to look at the year-over-year change in each series (Builder confidence and single family housing starts).

Once again the year-over-year change tends to move in the same direction, but builder confidence has larger swings (especially lately).

I expect single family starts to continue to increase over the next few years, but I don't think we should use builder confidence to estimate the eventual level. 

by Calculated Risk on 11/17/2013 09:19:00 PM

From Professor Hamilton at Econbrowser: Lower gasoline prices

Americans are indeed facing the lowest gasoline prices in almost three years, but not by much. The price of gasoline last December was almost as low as it is now, as it also had been in December 2011. The fact is, U.S. gasoline prices are usually lower in the fall and winter than they are in the spring and summer due to seasonal variation in gasoline demand and fuel formulations.
...
So why hasn't the surge in U.S. production of crude oil brought any real decrease in the price of oil and gasoline? The answer is pretty simple. If you leave out the growth in shale oil production from the U.S. and oil sands production from Canada, total field production of crude oil from the rest of the world combined actually decreased between 2005 and 2012. Given the increase from the U.S. and Canada, global production managed to increase by 2 million barrels a day over the period, but that's less than the growth in consumption from the emerging economies and oil-producing countries over those same years. That's why the world price of oil went up, not down, despite the growth in production from the U.S. and Canada.

Monday:
• 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.

Weekend:
• Schedule for Week of November 17th

The Nikkei is up about 0.3%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 3 and DOW futures are down 15 (fair value).

Oil prices are mixed with WTI futures at $93.60 per barrel and Brent at $108.32 per barrel.