In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Saturday, January 24, 2015

Unofficial Problem Bank list declines to 390 Institutions

by Calculated Risk on 1/24/2015 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 Jan 23, 2015.

Changes and comments from surferdude808:

For the second straight week, there is a bank failure that contributed to changes to the Unofficial Problem Bank List. In all, there were two removals that lowered the list count to 390 institutions with assets of $122.5 billion. A year ago, the list held 600 institutions with $197.9 billion in assets.

Valley National Bank, Espanola, NM ($174 million), which has been on the list since its first publication in 2009, found a merger partner in order to escape the list. Highland Community Bank, Chicago, IL ($58 million) was closed today by the FDIC. It was the 62nd bank headquartered in Illinois to fail since the on-set of the Great Recession in 2008.

Next week, we anticipate for the FDIC to release an update on its latest enforcement action activities.
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 back down to 390 - only one more than when we started.

Friday, January 23, 2015

Bank Failure #2 in 2015: Highland Community Bank, Chicago, Illinois

by Calculated Risk on 1/23/2015 08:34:00 PM

Another failure in Illinois, from the FDIC: United Fidelity Bank, fsb, Evansville, Indiana, Assumes All of the Deposits of Highland Community Bank, Chicago, Illinois

As of December 31, 2014, Highland Community Bank had approximately $54.7 million in total assets and $53.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.8 million. ... Highland Community Bank is the second FDIC-insured institution to fail in the nation this year, and the first in Illinois. The last FDIC-insured institution closed in the state was The National Republic Bank of Chicago, Chicago, on October 24, 2014.
It feels like a Friday. Best to all!

Q4 GDP Forecasts: 3%+

by Calculated Risk on 1/23/2015 04:30:00 PM

The advance estimate for Q4 GDP will be released next Thursday. The consensus is for GDP to 3.0% annualized in Q4. Here are couple of forecasts:

From the Atlanta Fed GDPNow:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2014 was 3.5 percent on January 21, up from 3.4 percent on January 14. The uptick was due to a slight increase in the nowcast for fourth-quarter inventory investment after last Thursday's industrial production release from the Federal Reserve Board.
From Merrill Lynch:
We are forecasting a 3.2% increase in real GDP in 4Q. We expect particularly strong consumer spending of 3.7% even with the disappointing December retail sales report.

A Few Comments on December Existing Home Sales

by Calculated Risk on 1/23/2015 11:56:00 AM

The most important number in the NAR report each month is inventory. This morning the NAR reported that inventory was down 0.5% year-over-year in December.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data - and December is usually the lowest month of the year for inventory.

Clearly - in many areas - inventory is still too low.

The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Existing Home Inventory Seasonally AdjustedClick on graph for larger image.

This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 5.5% from the bottom. On a seasonally adjusted basis, inventory was down 2.2% in December compared to November (most of the decline reported by the NAR was seasonal).

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

And another key point: The NAR reported total sales were up 3.5% from December 2013, however normal equity sales were up even more, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):

Distressed sales – foreclosures and short sales – were up slightly in December (11 percent) from November (9 percent) but are down from 14 percent a year ago. Eight percent of December sales were foreclosures and 3 percent were short sales.
Last year in December the NAR reported that 14% of sales were distressed sales.

A rough estimate: Sales in December 2013 were reported at 4.87 million SAAR with 14% distressed.  That gives 682 thousand distressed (annual rate), and 4.19 million equity / non-distressed.  In December 2014, sales were 5.04 million SAAR, with 11% distressed.  That gives 554 thousand distressed - a decline of about 19% from December 2013 - and 4.49 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 7%.. 

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in December (red column) were the highest since for December since 2006.

Earlier:
Existing Home Sales in December: 5.04 million SAAR, Inventory down slightly Year-over-year

Existing Home Sales in December: 5.04 million SAAR, Inventory down slightly Year-over-year

by Calculated Risk on 1/23/2015 10:00:00 AM

The NAR reports: Existing-Home Sales Rebound in December, 2014 Total Sales Finish 3 Percent Below 2013

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.04 million in December from a downwardly-revised 4.92 million in November. From a year ago, December sales were higher by 3.5 percent and are now above year-over-year levels for the third straight month. ...

Total housing inventory at the end of December dropped 11.1 percent to 1.85 million existing homes available for sale, which represents a 4.4-month supply at the current sales pace – down from 5.1 months in November. Unsold inventory is now 0.5 percent lower than a year ago (1.86 million).
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in December (4.93 million SAAR) were 2.4% higher than last month, and were 3.5% above the December 2013 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory decreased to 1.85 million in December from 2.08 million in November.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory decreased 0.5% year-over-year in December compared to December 2013.  

Months of supply was at 4.4 months in December.

This was at expectations of sales of 5.05 million.  For existing home sales, the key number is inventory - and inventory is still low.    I'll have more later ...

Black Knight: Mortgage Delinquencies Declined in December

by Calculated Risk on 1/23/2015 07:01:00 AM

According to Black Knight's First Look report for December, the percent of loans delinquent decreased 7% in December compared to November, and declined 13% year-over-year.

The percent of loans in the foreclosure process declined further in December and were down about 35% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 5.64% in December, down from 6.08% in November.  The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined to 1.61% in December from 1.63% in November.

The number of delinquent properties, but not in foreclosure, is down 375,000 properties year-over-year, and the number of properties in the foreclosure process is down 424,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for December in early February.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  Dec
2014
Nov
2014
Dec
2013
Dec
2012
Delinquent5.64%6.08%6.47%7.17%
In Foreclosure1.61%1.63%2.48%3.44%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:1,736,0001,925,0001,964,0002,031,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:1,132,0001,163,0001,280,0001,545,000
Number of properties in foreclosure pre-sale inventory:820,000829,0001,244,0001,716,000
Total Properties3,688,0003,917,0004,488,0005,292,000

Thursday, January 22, 2015

Friday: Existing Home Sales

by Calculated Risk on 1/22/2015 06:10:00 PM

More on the ECB from Neil Irwin at the NY Times: Mario Draghi’s Bombshell Is Europe’s Last, Best Hope to Return to Growth

At first glance, Mr. Draghi’s plan emulates the Federal Reserve’s QE3 program: the third round of quantitative easing, or bond buying, announced in the United States in September 2012 and which most likely helped the acceleration in the American economy over the last two years. ...
...
There are two big differences.

First, it is late. When the Fed pulled the trigger on its open-ended bond buying, in 2012, annual inflation was running at 1.6 percent in the United States, not far below its 2 percent target. The economy was growing at a steady if unexceptional rate. The Fed was looking to get ahead of its problem of sluggish growth.

The European Central Bank, by contrast, has spent the last two and a half years seemingly looking for any excuse not to take the action announced Thursday ...

The second big difference with the American program is that the E.C.B. is only dabbling with risk-sharing across Europe.
The ECB is "late", but the real problem is the fiscal authorities (especially in Germany).

Friday:
• At 10:00 AM ET, Existing Home Sales for December from the National Association of Realtors (NAR). The consensus is for sales of 5.05 million on seasonally adjusted annual rate (SAAR) basis. Sales in November were at a 4.93 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.15 million SAAR.

Draghi: "There must be a statute of limitations for those who say there will be inflation"

by Calculated Risk on 1/22/2015 12:58:00 PM

I think this is the quote of the day via The Daily Telegraph: ECB unveils €1.1 trillion QE program

Mr Draghi rejected any criticism that the vast expansion of the ECB's easy-money policies would stoke inflation down the road, noting that inflation has stayed very low even after several interest rate cuts and abundant ECB loans to banks.

"There must be a statute of limitations for those who say there will be inflation," Mr Draghi said.
Some policymakers have been wrong for years, both on monetary and fiscal policy ("austerity über alles").

And on the ECB's QE, from the WSJ: ECB Unveils Stimulus to Boost Economy
ECB President Mario Draghi said the ECB will buy a total of €60 billion a month in assets including government bonds, debt securities issued by European institutions and private-sector bonds. The purchases of government bonds and those issued by European institutions will start in March and are intended to run through to September 2016, Mr. Draghi said. The risks associated with the bonds of EU institutions will be shared among eurozone central banks, but purchases of other government bonds won’t be subject to loss sharing, he said.

Mr. Draghi said bond purchases might continue beyond September 2016, and until there are clear signs that the annual rate of inflation is rising toward the central bank’s target of just below 2%.
And from the Financial Times: European Central Bank unleashes quantitative easing
Mr Draghi said the bond-buying scheme will commence in March and last until the end of September 2016, or “until we see a sustained adjustment in the path of inflation”. The €60bn monthly asset purchases include government debt, asset-backed securities and covered bonds but not corporate bonds.
This buys more time for policymakers in Germany to change their approach (I doubt they will, there is no "statute of limitations" for bad ideas).

Kansas City Fed: Regional Manufacturing "Activity Expanded at a Slower Pace" in January, Weaker Energy Sector

by Calculated Risk on 1/22/2015 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Expanded at a Slower Pace

Tenth District manufacturing activity expanded at a slower pace in January, but producers’ expectations for future activity remained at solid levels. Most price indexes were lower than last month, especially for finished goods prices.

The month-over-month composite index was 3 in January, down from 8 in December and 6 in November. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The overall slower growth was mostly attributable to declines in some types of durable goods production, particularly electronics, machinery, and metal products, some of which is likely due to lower energy activity. Looking across District states, the weakest activity was in energy-dependent Oklahoma. ... the employment index posted a five-month low.
...
We saw weaker activity in some energy sector-related manufacturing in January, and that pulled the overall index down somewhat”, said [Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City]. “But firms still reported modest overall growth in regional factory activity".

Future factory indexes continued to remain stable at mostly solid levels. The future composite index was unchanged at 19 ...
emphasis added
Two more regional Fed manufacturing surveys for January will be released this month (the Dallas and Richmond Fed surveys). It appears we are starting to see some impact from lower oil prices.

The over all impact from the decline in oil prices will be positive for the US economy, but as Tim Duy noted a couple of weeks ago about oil prices:
the negative impacts will be fairly concentrated and easy for the media to sensationalize, while the positive impacts will be fairly dispersed. We all know what is going to happen to rig counts, high-yield energy debt, and the economies of North Dakota and at least parts of Texas. "Kablooey," I think, is the technical term. Easy media fodder. Much more difficult to see the positive impact spread across the real incomes of millions of households, with particularly solid gains at the lower ends of the income distribution. This will be most likely revealed in the aggregate data and be much less newsworthy.
emphasis added

Weekly Initial Unemployment Claims decreased to 307,000

by Calculated Risk on 1/22/2015 08:30:00 AM

The DOL reported:

In the week ending January 17, the advance figure for seasonally adjusted initial claims was 307,000, a decrease of 10,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 316,000 to 317,000. The 4-week moving average was 306,500, an increase of 6,500 from the previous week's revised average. The previous week's average was revised up by 2,000 from 298,000 to 300,000.

There were no special factors impacting this week's initial claims.
The previous week was revised up to 317,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 306,500.

This was higher than the consensus forecast of 300,000, and the 4-week average has moved up lately, but the low level still suggests few layoffs.  Note: We might start seeing an increase in unemployment claims due to layoffs in oil producing states.