by Calculated Risk on 11/28/2012 10:00:00 AM

The Census Bureau reports New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 368 thousand. This was down from a revised 369 thousand SAAR in August (revised down from 389 thousand).

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in October 2012 were at a seasonally adjusted annual rate of 368,000 ... This is 0.3 percent below the revised September rate of 369,000, but is 17.2 percent above the October 2011 estimate of 314,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

The months of supply increased in October to 4.8 months. September was revised up to 4.7 months (from 4.5 months).

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of October was 147,000. This represents a supply of 4.8 months at the current sales rate.

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was just above the record low in October. The combined total of completed and under construction is also just above the record low since "under construction" is starting to increase.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In October 2012 (red column), 29 thousand new homes were sold (NSA). Last year only 25 thousand homes were sold in October. This was the third weakest October since this data has been tracked (above 2011 and 2010). The high for October was 105 thousand in 2005.

New home sales have averaged 361 thousand SAAR over the first 10 months of 2012, up sharply from the 307 thousand sales in 2011. Also sales are finally at the lows for previous recessions too.

This was below expectations of 387,000. I'll have more soon ...
New Home Sales graphs

by Calculated Risk on 11/28/2012 07:03:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

This week’s results include an adjustment for the Thanksgiving holiday. ...

The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.53 percent from 3.54 percent, with points remaining constant at 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

The purchase index has been mostly moving sideways over the last two years, however the purchase index has increased 8 of the last 10 weeks and is now near the high for the year.

by Calculated Risk on 11/27/2012 09:01:00 PM

Earlier, a little good manufacturing news from the Richmond Fed: Manufacturing Activity Advanced in November; Optimism Increased

Manufacturing activity in the central Atlantic region advanced moderately in November following a slight pullback in October, according to the Richmond Fed's latest survey. ...

In November, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — gained sixteen points to 9 from October's reading of −7. Among the index's components, shipments rose twenty points to 11, new orders moved up seventeen points to finish at 11, and the jobs index increased eight points to 3.

And on consumer confidence from the Financial Times: US growth hopes lifted by housing data

The figures suggest that consumers and companies are holding their nerve despite anxiety about the fiscal cliff ... The Conference Board, an industry group, said its index of consumer attitudes towards the economy rose to 73.7 in November, its highest since February 2008.
excerpt with permission

Wednesday:
• At 7:00 AM, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 10:00 AM, New Home Sales for October from the Census Bureau will be released. The consensus is for a decrease in sales to 387 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 389 thousand in September.).

• At 2:00 PM, the Federal Reserve Beige Book will be released.  This is an informal review by the Federal Reserve Banks of current economic conditions in their Districts. This might show some slight improvement. Some analysts will be looking for concerns about Europe or the "fiscal cliff".

Earlier on House Prices:
• Case-Shiller: Comp 20 House Prices increased 3.0% year-over-year in September
• Case-Shiller House Price Comments and Graphs
• Real House Prices, Price-to-Rent Ratio
• All Current House Price Graphs


Another question for the November economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 11/27/2012 05:36:00 PM

A few weeks ago, I mentioned a recession probability chart from the St Louis Fed that was making the rounds. (see below). This graph shouldn't be interpreted as indicating a new recession. Jeff Miller at a Dash of Insight discussed why: Debunking the 100% Recession Chart.

Now the author, University of Oregon Professor Jeremy Piger, posted some FAQs and data for the chart online. Professor Piger writes:

2. How should I interpret these probabilities as a recession signal?

Historically, three consecutive months of smoothed probabilities above 80% has been a reliable signal of the start of a new recession, while three consecutive months of smoothed probabilities below 20% has been a reliable signal of the start of a new expansion. For an analysis of the performance of the model for identifying new turning points in real time, see:

Chauvet, M. and J. Piger, “A Comparison of the Real-Time Performance of Business Cycle Dating Methods,” Journal of Business and Economic Statistics, 2008.

Click on graph for larger image in new window.

Here is the chart from FRED at the St Louis Fed.

Obviously we haven't seen three consecutive months above 80%. Also I expect the recent data point to be revised down.

This is kind of a Woody Allen and Marshall McLuhan moment! Those arguing this chart indicated a 100% probability of a new recession knew nothing of Piger's work.

Earlier on House Prices:
• Case-Shiller: Comp 20 House Prices increased 3.0% year-over-year in September
• Case-Shiller House Price Comments and Graphs
• Real House Prices, Price-to-Rent Ratio
• All Current House Price Graphs

by Calculated Risk on 11/27/2012 03:00:00 PM

From the NY Fed: Decrease in Overall Debt Balance Continues Despite Rise in Non-Real Estate Debt

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York announced that in the third quarter, non-real estate household debt jumped 2.3% to $2.7 trillion. The increase was due to a boost in student loans ($42 billion), auto loans ($18 billion) and credit card balances ($2 billion).

During the third quarter of 2012, total consumer indebtedness shrunk $74 billion to $11.31 trillion, a 0.7% decrease from the previous quarter. The reduction in overall debt is attributed to a decrease in mortgage debt ($120 billion) and home equity lines of credit ($16 billion), despite mortgage originations increasing for a fourth consecutive quarter.

“The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position,” said Donghoon Lee, senior economist at the New York Fed. “As consumers feel more comfortable, they may start to make purchases that were previously delayed.”
emphasis added

Here is the Q3 report: Quarterly Report on Household Debt and Credit

Mortgages, the largest component of household debt, continue to drive the decline in overall indebtedness. Mortgage balances shown on consumer credit reports continued to drop, and now stand at $8.03 trillion, a 1.5% decrease from the level in 2012Q2. Home equity lines of credit (HELOC) balances dropped by $16 billion (2.7%). Non-mortgage household debt balances instead jumped by 2.3% in the third quarter to $2.7 trillion, boosted by increases of $18 billion in auto loans, $42 billion in student loans, and $2 billion in credit card balances.
...
About 242,000 individuals had a new foreclosure notation added to their credit reports between June 30 and September 30, a slowdown of 5.5%, continuing the downward trend as foreclosure starts slowly move toward their pre-crisis levels.

Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased in Q3. This was mostly due to a decline in mortgage debt.

However student debt is still increasing. From the NY Fed:

Outstanding student loan balances increased to $956 billion as of September 30, 2012, an increase of $42 billion from the previous quarter. However, of the $42 billion, $23 billion is new debt while the remaining $19 billion is attributed to previously defaulted student loans that have been newly updated on credit reports this quarter.

The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red).

From the NY Fed:

Overall, delinquency rates improved slightly in 2012Q3. As of September 30, 8.9% of outstanding debt was in some stage of delinquency, compared with 9.0% in 2012Q2. About $1.01 trillion of debt is delinquent, with $740 billion seriously delinquent (at least 90 days late or “severely derogatory”).

There are a number of credit graphs at the NY Fed site.

by Calculated Risk on 11/27/2012 12:11:00 PM

Case-Shiller, CoreLogic and others report nominal house prices, and it is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio.

As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation.

For the Case-Shiller National index, real prices declined slightly in Q3, and are up 1.7% year-over-year. The nominal Case-Shiller National index is up 3.6% year-over-year.

Real prices, and the price-to-rent ratio, are back to late 1999 to 2000 levels depending on the index.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q3 2012), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through September) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q1 2003 levels (and also back up to Q3 2010), and the Case-Shiller Composite 20 Index (SA) is back to August 2003 levels, and the CoreLogic index (NSA) is back to December 2003.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to mid-1999 levels, the Composite 20 index is back to June 2000, and the CoreLogic index back to February 2001.

In real terms, most of the appreciation in the last decade is gone.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to Q3 1999 levels, the Composite 20 index is back to July 2000 levels, and the CoreLogic index is back to February 2001.

In real terms - and as a price-to-rent ratio - prices are mostly back to 1999 or early 2000 levels.

I think nominal house prices have bottomed, but I expect real prices to mostly move sideways for the next year or two.

All Current House Price Graphs

by Calculated Risk on 11/27/2012 09:59:00 AM

Case-Shiller reported the fourth consecutive year-over-year (YoY) gain in their house price indexes since 2010 - and the increase back in 2010 was related to the housing tax credit. Excluding the tax credit, the previous YoY increase was back in 2006. The YoY increase in September suggests that house prices probably bottomed earlier this year (the YoY change lags the turning point for prices).

The following table shows the year-over-year increase for each month this year.

Case-Shiller Composite 20 Index
Month	YoY Change
Jan-12	-3.9%
Feb-12	-3.5%
Mar-12	-2.5%
Apr-12	-1.7%
May-12	-0.5%
Jun-12	0.6%
Jul-12	1.1%
Aug-12	1.9%
Sep-12	3.0%
Oct-12
Nov-12
Dec-12
Jan-13

On a not seasonally adjusted basis (NSA), Case-Shiller house prices will probably start to decline month-to-month in October. But I think prices will remain above the post-bubble lows set earlier this year.

Note: S&P reports the NSA, the following graphs use the Seasonally Adjusted (SA) data.

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 31.4% from the peak, and up 0.3% in September (SA). The Composite 10 is up 4.2% from the post bubble low set in January 2012 (SA).

The Composite 20 index is off 30.7% from the peak, and up 0.4% (SA) in September. The Composite 20 is up 4.7% from the post-bubble low set in January 2012 (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 2.1% compared to September 2011.

The Composite 20 SA is up 3.0% compared to September 2011. This was the fourth consecutive month with a year-over-year gain since 2010 (when the tax credit boosted prices temporarily).

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 19 of the 20 Case-Shiller cities in September seasonally adjusted (15 of 20 cities increased NSA). Prices in Las Vegas are off 59.1% from the peak, and prices in Dallas only off 4.8% from the peak. Note that the red column (cumulative decline through September 2012) is above previous declines for all cities.

I'll have more on house prices later.

by Calculated Risk on 11/27/2012 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for September (a 3 month average of July, August and September).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities), and the quarterly National Index.

From S&P: Home Prices Rise for the Sixth Straight Month According to the S&P/Case-Shiller Home Price Indices

Data through September 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices ... showed that home prices continued to rise in the third quarter of 2012. The national composite was up 3.6% in the third quarter of 2012 versus the third quarter of 2011, and was up 2.2% versus the second quarter of 2012. In September 2012, the 10- and 20-City Composites showed annual returns of +2.1% and +3.0%. Average home prices in the 10- and 20-City Composites were each up by 0.3% in September versus August 2012. Seventeen of the 20 MSAs and both Composites posted better annual returns in September versus August 2012; Detroit and Washington D.C. recorded a slight deceleration in their annual rates, and New York saw no change.

“Home prices rose in the third quarter, marking the sixth consecutive month of increasing prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In September’s report all three headline composites and 17 of the 20 cities gained over their levels of a year ago. Month-over-month, 13 cities and both Composites posted positive monthly gains.

“The National Composite increased by 3.6% from the same quarter in 2011 and by 2.2% from the second quarter of 2012. The 10- and 20-City Composites have posted positive annual returns for four consecutive months with a +2.1% and +3.0% annual change in September, respectively. Month-over-month, both Composites have recorded increases for six consecutive months, with the most recent monthly gain being +0.3% for each Composite.

“We are entering the seasonally weak part of the year. The headline figures, which are not seasonally adjusted, showed five cities with lower prices in September versus only one in August; in the seasonally adjusted data the pattern was reversed: one city fell in September versus two in August. Despite the seasons, housing continues to improve.

This was about at the consensus forecast and the recent change to a year-over-year increase is a significant story. I'll have graphs and more on prices later (S&P's website is having a problem).

by Calculated Risk on 11/26/2012 09:01:00 PM

First, on Greece, here is the Eurogroup statement on Greece.  Excerpt:

The Eurogroup was informed that Greece is considering certain debt reduction measures in the near future, which may involve public debt tender purchases of the various categories of sovereign obligations. If this is the route chosen, any tender or exchange prices are expected to be no higher than those at the close on Friday, 23 November 2012.

This buy-back lacks details such as the source of money for the buy-backs and how much debt will be bought. The IMF will wait to disburse funds until the results of the buy-backs are known (that was my understanding from the press conference).

From the WSJ: Greece's Creditors Reach Deal on New Aid

From the NY Times: European Finance Ministers Agree on Greek Bailout Terms

Tuesday:
• At 8:30 AM ET, Durable Goods Orders for October from the Census Bureau. The consensus is for a 0.8% decrease in durable goods orders.

• At 9:00 AM, the S&P/Case-Shiller House Price Index for September will be released. Although this is the September report, it is really a 3 month average of July, August and September. The consensus is for a 2.9% year-over-year increase in the Composite 20 index (NSA) for September. This release also includes the Q3 Case-Shiller National index.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for November will be released. The consensus is for a decrease to -8 for this survey from -7 in October (below zero is contraction).

• Also at 10:00 AM, the FHFA House Price Index for September 2012 will be released. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic). The consensus is for a 0.5% increase in house prices.

• Also at 10:00 AM, Conference Board's consumer confidence index for November. The consensus is for an increase to 72.8 from 72.2 last month.

• At 3:00 PM: the New York Fed will release the Q3 Report on Household Debt and Credit.



Another question for the November economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 11/26/2012 07:38:00 PM

Press conference here.

From Reuters: Euro zone, IMF reach deal on long-term Greek debt

Euro zone finance ministers and the International Monetary Fund clinched agreement on a new debt target for Greece on Monday in a breakthrough towards releasing an urgently needed tranche of loans to the near-bankrupt economy, officials said.

After nearly 10 hours of talks at their third meeting on the issue in as many weeks, Greece's international lenders agreed to reduce Greek debt by 40 billion euros, cutting it to 124 percent of gross domestic product by 2020, via a package of steps.

From AlphaVille: A mere three weeks later, a Greek debt deal (?)

UPDATE: Press release here: Eurogroup statement on Greece.