by Calculated Risk on 11/01/2014 06:46:00 PM

Fannie Mae reported yesterday that the Single-Family Serious Delinquency rate declined in September to 1.96% from 1.99% in August. The serious delinquency rate is down from 2.55% in September 2013, and this is the lowest level since October 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier this week, Freddie Mac reported that the Single-Family serious delinquency rate declined in September to 1.96% from 1.98% in August. Freddie's rate is down from 2.58% in September 2013, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.59 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in 2016 - although the rate of decline has slowed recently.

Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be close to normal in late 2016.

by Calculated Risk on 11/01/2014 01:01:00 PM

The key report this week is the October employment report on Friday.

Other key reports include the October ISM manufacturing index and October vehicle sales, both on Monday, the September Trade Deficit on Tuesday, and September ISM non-manufacturing index on Wednesday.

----- Monday, November 3rd -----
Early: Black Knight Mortgage Monitor report for September.

All day: Light vehicle sales for October. The consensus is for light vehicle sales to increase to 16.6 million SAAR in October from 16.3 million in September (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.

10:00 AM: ISM Manufacturing Index for October. The consensus is for a decrease to 56.0 from 56.6 in September

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in September at 56.6%. The employment index was at 54.6%, and the new orders index was at 60.0%.

10:00 AM: Construction Spending for September. The consensus is for a 0.6% increase in construction spending.

----- Tuesday, November 4th -----
8:30 AM: Trade Balance report for September from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through August. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $40.7 billion in September from $40.1 billion in August.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for September. The consensus is for a 0.7 decrease in September orders.

----- Wednesday, November 5th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for 212,000 payroll jobs added in October, down from 213,000 in September.

10:00 AM: ISM non-Manufacturing Index for October. The consensus is for a reading of 58.0, down from 58.6 in September. Note: Above 50 indicates expansion.

----- Thursday, November 6th -----
Early: Trulia Price Rent Monitors for October. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 283 thousand from 287 thousand.

----- Friday, November 7th -----
8:30 AM: Employment Report for October. The consensus is for an increase of 240,000 non-farm payroll jobs added in October, down from the 248,000 non-farm payroll jobs added in September.

The consensus is for the unemployment rate to be unchanged at 5.9% in October.

This graph shows the year-over-year change in total non-farm employment since 1968.

In September, the year-over-year change was 2.635 million jobs, and it appears the pace of hiring is increasing.  Right now it looks like 2014 will be the best year since 1999 for both total nonfarm and private sector employment growth.

As always, a key will be the change in real wages - and as the unemployment rate falls, wage growth should eventually start to pickup.

3:00 PM: Consumer Credit for September from the Federal Reserve.  The consensus is for credit to increase $16.0 billion.

by Calculated Risk on 11/01/2014 08:11:00 AM

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

Here is the unofficial problem bank list for Oct 31, 2014.

Changes and comments from surferdude808:

As expected, the FDIC provided an update on its enforcement action activities. Their disclosure has to be the shortest list of new actions and terminations since the on-set of the Great Recession. In all, there were three removals and two additions to the Unofficial Problem Bank List this week. After the changes, the list holds 422 institutions with assets of $133.5 billion. For the month of October, the list declined by a net 10 institutions after eight action terminations, three mergers, two failures, and three additions.

The FDIC terminated actions against Decatur State Bank, Decatur, AR ($144 million); Lone Star Bank, Houston, TX ($106 million); and The Bank of Kaukauna, Kaukauna, WI ($84 million).

New to the list is Polonia Bank, Huntingdon Valley, PA ($300 million Ticker PBCP) and Proficio Bank, Cottonwood Heights, UT ($199 million).

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 422.

by Calculated Risk on 10/31/2014 09:08:00 PM

Larry Kudlow wrote an absurd piece at CNBC today.

Of course Kudlow is usually wrong and frequently absurd ... as an example, in June 2005 Kudlow wrote "The Housing Bears are Wrong Again" and called me (or people like me) "bubbleheads".

Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.

In the piece today, Kudlow claimed: "I've always believed the 1990s were Ronald Reagan's third term."

Kudlow is rewriting his own history.  Near the beginning of Clinton's first term, Kudlow was arguing Clinton's policies would take the economy into a deep recession or even depression.  Kudlow was wrong then (I remember because I was on the other side of that debate), so he can't claim he "always believed" now.  Nonsense.

Further down, Kudlow dismisses gains in the stock market as unrelated to the economy:

"Over the last eight quarters ... the S&P 500 climbed 43 percent. But that's mostly from record profits and expanding multiples."

Weird, because in 2007, Kudlow wrote:

"I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president."

by Calculated Risk on 10/31/2014 05:31:00 PM

This is one of my favorite GDP graphs. The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Note: This can't be used blindly.  Residential investment is so low as a percent of the economy that the small decline earlier this year was not  a concern.

Click on graph for larger image.

Residential investment (RI) increased at a 1.8% annual rate in Q3 - and RI only contributed 0.06 percentage points to GDP growth.  For the rate of economic growth to increase, RI will probably have to make larger positive contributions to economic growth.

Equipment investment increased at a 7.2% annual rate, and investment in non-residential structures increased at a 3.9% annual rate.  Equipment and software added 0.41 percentage points to growth in Q3 and the three quarter average moved down slightly (green).

The contribution from nonresidential investment in structures was also positive in Q3.  Nonresidential investment in structures typically lags the recovery, however investment in energy and power provided a boost early in this recovery. 

I expect to see all areas of private investment increase over the next few quarters - and that is key for stronger GDP growth.