by Calculated Risk on 1/25/2015 09:09:00 PM

From the WSJ: Leftists Sweep to Power in Greece

Greek voters were set to hand power to a radical leftist party in national elections on Sunday, a popular rebellion against the bitter economic medicine Greece has swallowed for five years and a rebuke of the fellow European countries that prescribed it.

With nearly all votes counted, opposition party Syriza was on track to win about half the seats in Parliament. In the wee hours of the morning, it clinched a coalition deal with a small right-wing party also opposed to Europe’s economic policy to give the two a clear majority.

We discussed this several years ago - in a democracy, austerity will eventually fail at the ballot box. The people will not tolerate 25% unemployment forever - with no hope in sight.

Monday:
• At 10:30 AM ET: the Dallas Fed Manufacturing Survey for January.

Weekend:
• Schedule for Week of January 25, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are down 12 and DOW futures are down 120 (fair value).

Oil prices were down over the last week with WTI futures at $44.99 per barrel and Brent at $48.45 per barrel.  A year ago, WTI was at $96, and Brent was at $109 - so prices are down 54% and 56% year-over-year respectively.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $2.02 per gallon (down about $1.25 per gallon from a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 1/25/2015 11:40:00 AM

The advance estimate for Q4 GDP will be released this week. The consensus forecast is that real GDP increased 3.2% annualized in Q4.

The FOMC GDP projections are for Q4-over-Q4.  The most recent FOMC projection was for real GDP to increase 2.3% to 2.5% Q4 2014 over Q4 2013.

However many analysts forecast annual GDP, so here is a discussion of the difference between annual and Q4-over-Q4:

• The Bureau of Economic Analysis (BEA) reports real GDP growth on a seasonally adjusted annual rate (SAAR) basis. So this is adjusted for inflation (real), seasonally adjusted, and annualized.  Other countries report GDP differently - as an example China reports GDP growth on a year-over-year basis, and the UK reports GDP growth for each quarter, but not annualized.  A 3.2% annualized real growth rate in the US would be reported at 0.79% quarterly in the UK (not annualized).

Note: the easiest way to calculate the real change in GDP is to use the chained 2009 dollars series. Nominal GDP in 2014 was around $17.5 trillion.

•  Calculating the Q4 GDP forecast: Using the consensus forecast of 3.2% real GDP growth in Q4, real GDP (2009 dollars) would be $16,333.7 billion (SAAR) in Q4.  To calculate this, use Table 1.1.6. Real Gross Domestic Product, Chained Dollars at the BEA.  The BEA reported Q3 GDP was $16,205.6 billion (SAAR).  Multiply this by (1.032 ^ .25) to calculate Q4 real GDP (2009 dollars, SAAR).

• Calculating Q4-over-Q4 GDP growth: The BEA reported real GDP in Q4 2013 was $15,916.2 billion (SAAR, 2009 dollars). So the Q4-over-Q4 growth rate would be $16,333.7 (Q4 2014 forecast) divided by $15,916.2 (Q4 2013). That would be 2.6% (slightly above the December FOMC projections).

• Calculating 2014 GDP growth: To calculated GDP growth for 2013, first we calculate the annual real GDP for 2014 (this is an average of GDP for the four quarters).  Using the forecast GDP for Q4, the 2014 annual GDP would be $16,095.4 billion.   The annual real GDP (2009 dollars) for 2013 was $15,710.3 billion.  So the 2014 annual growth rate would be $16,095.4 (four quarter average using Q4 forecast) divided by $15,710.3 (2013 real GDP). This would be 2.5%.

Not much difference between the annual rate and Q4-over-Q4, but it might be a little confusing when GDP is reported this week.  Some articles might report the Q4-over-Q4 growth rate that the FOMC is looking at - other articles might report 2014 over 2013.

Of course most of the focus will be on the quarterly GDP rate (and also inflation).

by Calculated Risk on 1/24/2015 01:04:00 PM

The key reports this week are the advance estimate of Q4 GDP, December New Home sales, and November Case-Shiller house prices.

For manufacturing, the January Dallas and Richmond Fed surveys will be released this week.

----- Monday, January 26th -----
10:30 AM: Dallas Fed Manufacturing Survey for January.

----- Tuesday, January 27th -----
8:30 AM: Durable Goods Orders for December from the Census Bureau. The consensus is for a 0.7% increase in durable goods orders.

9:00 AM: S&P/Case-Shiller House Price Index for November. Although this is the November report, it is really a 3 month average of September, October and November prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the October 2014 report (the Composite 20 was started in January 2000).

The consensus is for a 4.6% year-over-year increase in the National Index for November, down from 4.7% in October. The Zillow forecast is for the National Index to increase 4.5% year-over-year in November, and for prices to increase 0.6% month-to-month seasonally adjusted.

10:00 AM: New Home Sales for December from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the November sales rate.

The consensus is for an increase in sales to 450 thousand Seasonally Adjusted Annual Rate (SAAR) in December from 438 thousand in November.

10:00 AM: Regional and State Employment and Unemployment (Monthly) for December 2014

10:00 AM: Richmond Fed Survey of Manufacturing Activity for January.

10:00 AM: Conference Board's consumer confidence index for January. The consensus is for the index to increase to 95.0 from 92.6.

----- Wednesday, January 28th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: FOMC Meeting Statement. The FOMC is expected to retain the word "patient" in the FOMC statement.

----- Thursday, January 29th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 300 thousand from 307 thousand.

10:00 AM ET: Pending Home Sales Index for December. The consensus is for a 0.5% increase in the index.

10:00 AM: Q4 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to report on the homeownership rate, and the homeowner and rental vacancy rates. However, this report doesn't track with other measures (like the decennial Census and the ACS).

----- Friday, January 30th -----
8:30 AM: Gross Domestic Product, 4th quarter 2014 (advance estimate). The consensus is that real GDP increased 3.2% annualized in Q4.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 57.7, down from 58.8 in December.

9:55 AM: University of Michigan's Consumer sentiment index (final for January). The consensus is for a reading of 98.2, unchanged from the preliminary reading of 98.2, and up from the December reading of 93.6.

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.

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!

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.

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.

Click 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).

Click 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

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).

Click 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.

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.

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 ...

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
Delinquent	5.64%	6.08%	6.47%	7.17%
In Foreclosure	1.61%	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:	1,736,000	1,925,000	1,964,000	2,031,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,132,000	1,163,000	1,280,000	1,545,000
Number of properties in foreclosure pre-sale inventory:	820,000	829,000	1,244,000	1,716,000
Total Properties	3,688,000	3,917,000	4,488,000	5,292,000

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.