by Calculated Risk on 7/04/2012 12:52:00 PM

Happy 4th!

Here is another update using inventory numbers from HousingTracker / DeptofNumbers to track changes in listed inventory. Tom Lawler mentioned this last year.

According to the deptofnumbers.com for (54 metro areas), inventory is off 24.2% compared to the same week last year. Unfortunately the deptofnumbers only started tracking inventory in April 2006.

This graph shows the NAR estimate of existing home inventory through May (left axis) and the HousingTracker data for the 54 metro areas through early July.

Click on graph for larger image.

Since the NAR released their revisions for sales and inventory last year, the NAR and HousingTracker inventory numbers have tracked pretty well.

On a seasonal basis, housing inventory usually bottoms in December and January and then starts to increase again through the summer. So inventory might still increase a little over the next month or two, but the forecasts for a "surge" in inventory this summer were incorrect. In fact inventory might have already peaked for the year!

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.

HousingTracker reported that the early July listings, for the 54 metro areas, declined 24.2% from the same period last year. So far in 2012, the NAR has reported only a small seasonal increase in inventory - and the housing tracker numbers are lower in early July than for January!

This decline in active inventory remains a huge story, and the lower level of inventory is helping stabilize house prices.

All current Existing Home Sales graphs

by Calculated Risk on 7/04/2012 09:55:00 AM

Martin Wolf has been a consistent critic of eurozone policymakers ...

From Martin Wolf at the Financial Times: A Step At Last in the Right Direction and here at CNBC.

The 19th crisis summit was better than many of its disappointing predecessors. But the game has not yet changed. Helpful steps were taken.

Wolf provides an overview of the steps taken, and concludes:

Let us not be too grudging: the decision to allow the ESM to recapitalize banks directly is possibly very important, both in itself and for what it portends.

... Nevertheless, the biggest danger is that the economics of the euro zone are deteriorating fast. Joblessness reached 11.1 percent in May, the highest on record for the zone.

Worse ... the ECB is hopelessly late in taking necessary monetary action. ...

It is conceivable that the euro zone will struggle through this economic trench warfare over the next several years. However, the costs – not just economic but also political – are likely to be enormous.

This is the least pessimistic I've seen Wolf, and his view is still very grim. Note: The ECB is expected to cut rates tomorrow.

by Calculated Risk on 7/03/2012 08:50:00 PM

Goldman Sachs put out a research note today: House Prices Finding a Bottom. This isn't a strong call, and is only a slight upward revision to their previous forecast. As they note, there are many factors adding to the "noise" in the house price indexes (distressed sales, foreclosure moratorium, recent warm weather), and a 0.2% increase in prices over the next year isn't much.

A few brief excerpts:

[O]ur model projects a nominal house price gain of 0.2% from 2012Q1 to 2013Q1 and another 1.4% from 2012Q1 to 2013Q1. Taken literally, this would imply that the bottom in nominal house prices is now behind us.

While the recent house price news is encouraging, we would not yet sound the "all clear" for the housing market or the broader economy. First, the instability in the seasonal factors over the past few years is a potential source of noise in the recent house price indicators, and also in our model. ... In addition, the seasonal factors can be also distorted by one-off items ... All of these complications ... adds to the uncertainty as to whether the better recent numbers indicate a true turnaround in the US housing market.

Second, even if the market is gradually turning, as our model implies, the difference between a slightly declining and a slightly increasing national average for home prices is minor, especially given the wide variation between stronger and weaker markets. Our broad view remains that national home prices will remain close to flat over the next 1-2 years, or at a minimum that the recovery will remain very "U-shaped."

by Calculated Risk on 7/03/2012 03:52:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 14.08 million SAAR in June. That is up 22% from June 2011, and up 2.6% from the sales rate last month (13.73 million SAAR in May 2012).

This was above the consensus forecast of 13.9 million SAAR (seasonally adjusted annual rate).

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for June (red, light vehicle sales of 14.08 million SAAR from Autodata Corp).

Click on graph for larger image.

June was the weakest month this year, and the year-over-year increase was large because of the impact of the tsunami and related supply chain issues in May 2011.

Sales have averaged a 14.28 million annual sales rate through the first half of 2012, up sharply from the same period of 2011.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This shows the huge collapse in sales in the 2007 recession.

Sales will probably increase some more, but most of the recovery from the depth of the recession has already happened.

by Calculated Risk on 7/03/2012 01:28:00 PM

Note on Auto Sales: I should have an estimate for the June Seasonally Adjusted Annual Rate (SAAR) around 4 PM ET.

A note on manufacturing vs. housing: The ISM manufacturing index dropped below 50 for the first time since July 2009 (below 50 indicates contraction). And the JPMorgan Global Manufacturing PMI also fell below 50.

Meanwhile, in the US, housing is picking up. Housing starts have been increasing, residential construction spending is up 17% from the recent low, and new home sales have averaged 353 thousand on an annual rate basis over the first 5 months of 2012, after averaging under 300 thousand for the previous 18 months.

If someone looked at just manufacturing, they might think the US is near a recession. And if they just looked at housing, they'd think the economy is recovering. Which is it?

First, the decline in the ISM index was partially driven by exports (no surprise given the problems in Europe and slowdown in China). The ISM export index declined to 47.5 in June from 53.5 in May, the lowest level since early 2009. However some of this export weakness will probably be offset by lower oil and gasoline prices.

Second, the current ISM reading of 49.7 isn't all that weak. Goldman Sachs analysts noted yesterday: "A reading such as this has historically been associated with just under 2% real GDP growth--very near our current second-quarter tracking estimate of 1.6%."

Third, housing is usually a better leading indicator for the US economy than manufacturing. Historically housing leads the economy both into and out of recessions (not out of the recession this time because of the excess supply in 2009). Manufacturing is more coincident. So the ISM index suggests some weakness now - mostly abroad - whereas housing suggests an ongoing sluggish recovery.

Who ya gonna call? Housing.

by Calculated Risk on 7/03/2012 11:54:00 AM

From the FHFA: FHFA Announces Next Steps in REO Pilot Program

The Federal Housing Finance Agency (FHFA) today announced that the winning bidders in a real estate owned (REO) pilot initiative have been chosen and transactions are expected to close early in the third quarter. Market response has been robust with strong qualified bidder interest.

“FHFA undertook this initiative to help stabilize communities and home values in areas hard-hit by the foreclosure crisis,” said Edward J. DeMarco, Acting Director of FHFA. “As conservator of Fannie Mae and Freddie Mac, we believe this pilot program will assist us in achieving our objectives and help to maximize the benefit to taxpayers. We are pleased with the response from the market and look forward to closing transactions in the near future.”

FHFA launched the pilot program in late February, and in the second quarter bids were solicited from qualified investors to purchase approximately 2,500 single-family Fannie Mae foreclosed properties. Fannie Mae offered for sale pools of properties in geographically concentrated locations across the United States.

This transaction will close soon, but will this program be expanded? I'm trying to find out ...

by Calculated Risk on 7/03/2012 10:15:00 AM

Press Release: Rent increases outpace home prices rises, reports Trulia

Trulia today released the latest findings from the Trulia Price Monitor and the Trulia Rent Monitor ... Based on the for-sale homes and rentals listed on Trulia, these monitors take into account changes in the mix of listed homes and reflect trends in prices and rents for similar homes in similar neighborhoods through June 30, 2012.

Asking prices on for-sale homes–which lead sales prices by approximately two or more months – increased 0.3 percent in June month over month (M-o-M), seasonally adjusted. With the exception of nearly flat prices in May, prices rose in four of the past five months. Asking prices in June rose nationally 0.8 percent quarter over quarter (Q-o-Q), seasonally adjusted. Year-over-year (Y-o-Y) asking prices rose by 0.3 percent; excluding foreclosures, asking prices rose Y-o-Y by 1.7 percent. Nationally, 44 out of the 100 largest metros had Y-o-Y price increases, and 84 out of the 100 largest metros had Q-o-Q price increases, seasonally adjusted.

However, seven of the 10 metros with the largest increase in asking prices also have a high share of homes in foreclosure, including Phoenix, the Florida metros, and Detroit and its suburbs. These coming foreclosures threaten to reduce or reverse recent price gains in those markets. In contrast, Denver, San Jose, Pittsburgh, Little Rock, Austin and Colorado Springs all had price gains of more than 4 percent with a moderate or low share of homes in foreclosure.

More from Jed Kolko, Trulia Chief Economist: Rising Home Prices Can’t Keep Up with Rent Increases

According to Trulia, rents are increasing even faster than house prices.

On rents from Bloomberg: Manhattan First-Time Apartment Buyers Grab Deals in Slow Market (ht Mike In Long Island)

“Rents are just so high right now that for a lot of people it doesn’t make sense” to continue leasing, said Sofia Song, vice president of research at StreetEasy. “A lot of people are saying, ‘You know what? For this amount of money I can probably buy something.’”

Of course Manhattan is its own world, but it does appear rents are increasing in many communities.

Click on graph for larger image.

This graph shows the change in asking house prices in June, adjusted for the mix and seasonal factors. Although these are just asking prices, this suggests prices have continued to increase through June, and that seasonally adjusted closing prices will continue to increase through July and August on the repeat sales indexes.

by Calculated Risk on 7/03/2012 08:42:00 AM

Reis reports that the office vacancy rate was unchanged in Q2 at 17.2%. Comments from Reis Senior Economist Ryan Severino:

The office sector absorbed 4.138 million SF during the second quarter, the sixth consecutive quarterly gain in occupied stock since the beginning of 2011. However, national vacancies ceased falling. This is reflective of the ongoing weakness in the labor market recovery.
...
National asking and effective rent both grew by 0.3% during the second quarter, but this represents a slowdown from the 0.5% and 0.6% growth rates that asking and effective rents respectively achieved during the first quarter. Annual gains of 1.6 and 2.0 percent, respectively, are virtually unchanged from last quarter, and remain feeble.
...
Supply growth in the office sector remains muted. During the second quarter of 2012 only 1.606 million square feet of office space were completed, the equivalent of one large office building. This represents the lowest quarterly level on record since Reis began tracking quarterly market data in 1999. Nonetheless, demand for space during the quarter was so weak that even with such little supply being delivered, the level of absorption that we observed during the quarter was insufficient to generate a vacancy rate decline.

Click on graph for larger image.

This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).

Reis is reporting the vacancy rate was unchanged at 17.2% in Q2, and down from 17.5% in Q2 2011. The vacancy rate peaked in this cycle at 17.6% in Q3 and Q4 2010.

As Reis noted, there are very few new office buildings being built in the US, and new construction will probably stay low for several years.

by Calculated Risk on 7/02/2012 08:38:00 PM

Special Note: Stephen Campbell, frequent commenter under the name Nova, and author of "American Apocalypse" has passed away. Very sad news. Nova wrote parts of American Apocalypse several years ago in the comments of CR, and many of us followed along. He will be greatly missed.

The key report on Tuesday will be auto sales. Remember sales were depressed last year because of the tsunami in Japan, and the automakers report a comparison to the same month in the previous year. Some automakers were hit harder than others, so what will matter is the Seasonally Adjusted Annual Rate (SAAR).

• All day: Light vehicle sales for June. Light vehicle sales are expected to increase to 13.9 million SAAR from 13.8 million in May.

• At 10:00 AM ET, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for May will be released. The consensus is for a 0.1% increase in orders.

• Also at 10:00 AM, the Trulia Price & Rent Monitors for June will be released. This is the new index from Trulia that uses asking prices adjusted both for the mix of homes listed for sale and for seasonal factors.

• Early: Reis is expected to released their Q2 Office Vacancy report.

The Asian markets are mostly green tonight. The Nikkei is up 0.4%, and the Shanghai Composite is up slightly.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 and Dow futures are down slightly.


Oil: WTI futures are down to $83.43 (this is down from $109.77 in February, but up last week) and Brent is at $97.21 per barrel. According to a formula from Professor Hamilton, the price of Brent would suggest gasoline at $3.27 per gallon (the current national average price is $3.35, so even with the increase in Brent, gasoline prices will probably fall further).

Note: SIFMA recommends US markets close at 2:00 PM ET in advance of the Independence Day Holiday on July 4th.

by Calculated Risk on 7/02/2012 03:08:00 PM

Notes: This CoreLogic House Price Index report is for May. The Case-Shiller index released last week was for April. Case-Shiller is currently the most followed house price index, however CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® May Home Price Index Shows Third Consecutive Monthly Increase

Home prices nationwide, including distressed sales, increased on a year-over-year basis by 2.0 percent in May 2012 compared to May 2011. On a month-over-month basis, home prices, including distressed sales, also increased by 1.8 percent in May 2012 compared to April 2012. The May 2012 figures mark the third consecutive increase in home prices nationwide on both a year-over-year and month-over-month basis.

Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 2.7 percent in May 2012 compared to May 2011. On a month-over-month basis excluding distressed sales, the CoreLogic HPI indicates home prices increased 2.3 percent in May 2012 compared to April 2012, the fourth month-over-month increase in a row. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that house prices, including distressed sales, will rise by at least another 1.4 percent from May 2012 to June 2012. Excluding distressed sales, house prices are also poised to rise by 2.0 percent during that same time period.

“The recent upward trend in U.S. home prices is an encouraging signal that we may be seeing a bottoming of the housing down cycle,” said Anand Nallathambi, president and chief executive officer of CoreLogic. “Tighter inventory is contributing to broad, but modest, price gains nationwide and more significant gains in the harder-hit markets, like Phoenix.”

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.8% in May, and is up 2.0% over the last year.

The index is off 30% from the peak - and is up 5% from the post-bubble low set in February (the index is NSA, so some of the increase is seasonal).

The second graph is from CoreLogic. The year-over-year comparison has turned positive.

This is the third consecutive month with a year-over-year increase, and excluding the tax credit bump, these are the first year-over-year increases since 2006.