by Calculated Risk on 6/13/2012 07:49:00 PM

From DataQuick: More Gains for Southern California Home Sales and Median Prices

Last month’s total Southland sales rose nearly 21 percent compared with a year ago, and activity increased across the home-price spectrum. But the gains were strongest above $300,000. The volume of transactions in lower-cost markets has been restrained by, among other things, the dwindling inventories of homes for sale, especially foreclosures.
...
In May, a total of 22,192 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was up 15.1 percent from 19,284 in April, and up 20.6 percent from 18,394 in May 2011.
...
On a year-over-year basis, Southland home sales have increased for five consecutive months, with last month’s 20.6 percent annual gain the largest in the series. Sales have also increased year-over-year in nine out of the last ten months. Still, last month’s sales were 14.5 percent lower than the average sales tally for all the months of May since 1988.

The month-to-month and year-over-year increases in sales last month would not have been as great if this May hadn’t had one extra business day on which sales could close. While last month had 22 business days, this April and May 2011 had 21 business days.
...
Distressed sales – the combination of foreclosure resales and short sales – made up 44.8 percent of last month’s resale market. That was the lowest level since the figure was 44.4 percent in March 2008.

The percent of distressed sales is still very high, but this is the lowest level since March 2008.

The median price is being impacted by the mix and isn't useful for measuring house price changes (with fewer low end distressed sales, the median has increased).

The NAR is scheduled to report May existing home sales and inventory next week on Thursday, June 21st.

by Calculated Risk on 6/13/2012 04:28:00 PM

From Professor Tim Duy: Is Anyone Answering the Phones at the ECB?. Excerpt:

It is never a good sign when the monetary authority - the lender of last resort - is no longer willing to buy your bonds. If the ECB sees only risk at these rates, why should private investors jump into the pool?

Honestly, I find it incomprehensible to believe that the ECB will not soon come to the aid of Spain and Italy with additional bond purchases. Only the most irresponsible policy body would take such a risk. To not do so almost guarantees the destruction of the Eurozone and a deepening recession if not depression throughout Europe. They cannot possibly believe that fiscal and structural reforms will bear sufficient fruit in any reasonable time frame. Nor can they possibly believe that Spain and Italy can implement a IMF-type structural reform program in the absence of the competitive boost provided by currency devaluation.

Or can they? If they do believe these things - that they can do no more, the job is entirely on the shoulders of fiscal policymakers - then we all need to be afraid, very afraid. Because when the ECB fully abdicates its role as a provider of financial stability for the Eurozone, all Hell is going to break loose.

by Calculated Risk on 6/13/2012 01:40:00 PM

From Realtor.com: May 2012 Real Estate Data

On the national level, inventory of for-sale single family homes, condominiums, townhouses and co-ops declined by -20.07% in May 2012 compared to a year ago, and declined in all but two of the 146 markets covered by REALTOR.com.

The median age of the inventory fell -9.78% on a year-over-year basis last month, and the median national list price increased 3.17% last month compared to May 2011.

Signs of recovery are evident in a growing number of markets that were once the epicenter of the housing crisis, and older industrialized areas in the Northeast and the Midwest are showing emerging signs of weaknesses. For example, the recovery process that began in Florida approximately one year ago has since spread to Phoenix and most recently California. At the same time, markets such as Reading, PA, Allentown, PA and Milwaukee, WI continue to lag behind the rest of the market.

Realtor.com also reports that inventory was up 2.0% from the April level.

The NAR is scheduled to report May existing home sales and inventory next week on Thursday, June 21st.

by Calculated Risk on 6/13/2012 11:51:00 AM

Another house price index, this one is based on price per sq ft ...

From Redfin: May Real Estate Prices Increase 2.2% as Inventory Continues to Fall

Redfin today released a new 19-market analysis of May home prices, sales volume and inventory levels. The Redfin Real-Time Price Tracker ... showed an annual price gain of 2.2% and a monthly gain of 2.7%. Inventory levels were down 23.5% compared to last year, and down 1.7% compared to last month. Sales volume was up 7.4% over this time last year, and pending sales were up even more, by 10.7%.

“We expected real estate to soften in May along with the larger economy, but we actually saw home prices continue to increase,” said Redfin CEO Glenn Kelman. “This trend seems likely to hold at least through mid-summer. Redfin’s business saw a stronger-than-expected rebound from Memorial Day weekend: with rates low and rents high more new home-buyers were touring homes last weekend, and more are now writing offers. The limit on sales volume is inventory. Not enough sellers have stepped in to provide the liquidity that once came from banks with foreclosures to sell.”

“The 2011 decline in inventory was seasonal and largely expected,” said Tim Ellis, Redfin’s real estate analyst. “But once the trend continued into the outset of 2012′s home-buying cycle, inventory shocks resulted in the first sharp price increases for many areas in five years.”

There is limited historical data for this index. In 2011, sales were fairly weak in the May through July period, and a 7.4% increase in year-over-year sales would be less than the 10% year-over-year increase in April.

The reported 23.5% decrease in inventory is similar to other sources and is a key driver for the small year-over-year price increase.

by Calculated Risk on 6/13/2012 08:46:00 AM

On a monthly basis, retail sales were down 0.2% from April to May (seasonally adjusted), and sales were up 5.3% from May 2011. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $404.6 billion, a decrease of 0.2 percent from the previous month, but 5.3 percent above May 2011.

Ex-autos, retail sales declined 0.4% in May.

Click on graph for larger image.

Sales for April was revised down to a 0.2% decrease from a 0.1% increase.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 22.1% from the bottom, and now 6.8% above the pre-recession peak (not inflation adjusted)

The second graph shows the same data since 2006 (to show the recent changes). Excluding gasoline, retail sales are up 18.9% from the bottom, and now 6.8% above the pre-recession peak (not inflation adjusted).

The third graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 5.9% on a YoY basis (5.3% for all retail sales). Retail sales ex-gasoline decreased 0.1% in May.

This was at the consensus forecast for retail sales of a 0.2% decrease in May, and below the consensus for a 0.1% decrease ex-auto.



All current retail sales graphs

by Calculated Risk on 6/13/2012 07:00:00 AM

From the MBA: Mortgage Applications Reach Highest Level Since 2009 in Latest MBA Weekly Survey

The Refinance Index increased over 19 percent from the previous week to the highest index level since April 2009. The seasonally adjusted Purchase Index increased around 13 percent from one week earlier.

“Mortgage application volume increased sharply last week. The increase was accentuated due to the comparison to the week including Memorial Day, but the level of refinance and total market activity is the highest since the spring of 2009,” said Michael Fratantoni, MBA's Vice President of Research and Economics. “Refinance volume increased as borrowers were able to lock in at mortgage rates below 4 percent, and purchase application volume was its highest level in over six months. HARP volume has been steady in recent weeks at about 28 percent of refinance applications.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.88 percent from 3.87 percent, with points decreasing to 0.43 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

The purchase index is still very weak, but appears to be moving up recently.

Refinance activity continues to increase as mortgage rates are near the record low set the previous week.

It usually takes around a 50 bps decline from the previous mortgage rate low to get a huge refinance boom - and rates have fallen about that far - and refinance activity is now at the highest level since 2009.

According to the MBA, HARP volume was still at 28% of all refinance activity, so HARP activity is increasing at the same rate as overall refinance activity.

by Calculated Risk on 6/12/2012 09:45:00 PM

Over in Europe, eurozone industrial production will be released. The consensus is for a 1% decline.

As a reminder, the Greek election is this coming Sunday, and currently polls show no clear winner.

From Bloomberg: Greek Bank Deposit Outflows Said to Have Risen Before Elections

Daily withdrawals have increased to the upper end of a 100 million-euro ($125 million) to 500 million-euro range this month, one banker said, asking not to be identified because the figures aren't public. A second banker said the drawdown may have exceeded 700 million euros yesterday.

• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. Expect record or near record low mortgage rates and a sharp increase in refinance activity.


• At 8:30 AM, Retail sales for May will be released. The consensus is for retail sales to decrease 0.2% in May, and for retail sales ex-autos to decrease 0.1%.

• Also at 8:30 AM, the Producer Price Index for May. The consensus is for a 0.6% decrease in producer prices due to the decline in oil prices (0.2% increase in core).

• At 10:00 AM, the Manufacturing and Trade: Inventories and Sales for April will be released (Business inventories). The consensus is for 0.3% increase in inventories.

by Calculated Risk on 6/12/2012 08:08:00 PM

From the Financial Times: JPMorgan plan for ‘catastrophic’ event

[T]he presentation given at a Harvard Law School event is also an unusually frank acknowledgement that there are limits to the capital buffers of even healthy banks.

In the doomsday scenario set out by [Gregory Baer, deputy general counsel], a $50bn loss would trigger “a run on the bank” - with $375bn of funding, including bank deposits, draining away.

The government would then step in and mark down the bank’s assets, leading to an additional $150bn loss. Shareholders would be wiped out but senior creditors would be transferred to a new bridge company that allows “critical activities [to] continue to operate smoothly”.
excerpt with permission

Here is the presentation: Orderly Liquidation of a Failed SIFI (systemically important financial institutions).

This provides a "Hypothetical, illustrative example of the orderly liquidation of JPMorgan Chase". This is a pretty catastrophic event: "For illustrative purposes, we describe the impact of a catastrophic, idiosyncratic event causing a $200B loss and $550B of liquidity outflows – leading to Orderly Liquidation Authority being invoked to resolve JPMC"

by Calculated Risk on 6/12/2012 04:08:00 PM

Some interesting articles ...

From Brad DeLong and Barry Eichengreen: New preface to Charles Kindleberger, The World in Depression 1929-1939. A brief excerpt:

The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.

Both the existence of these parallels and their tragic nature would not have escaped Charles Kindleberger, whose World in Depression, 1929-1939 was published exactly 40 years ago, in 1973. Where Kindleberger’s canvas was the world, his focus was Europe. While much of the earlier literature, often authored by Americans, focused on the Great Depression in the US, Kindleberger emphasised that the Depression had a prominent international and, in particular, European dimension. It was in Europe where many of the Depression’s worst effects, political as well as economic, played out. And it was in Europe where the absence of a public policy authority at the level of the continent and the inability of any individual national government or central bank to exercise adequate leadership had the most calamitous economic and financial effects.

From Mark Blyth and Matthias Matthijs at Foreign Affairs: The World Waits For Germany. An excerpt:

So Germany has shifted, but not enough to make any real difference to the outcome. Germany is both devoutly anti-reflationary and leadership averse, which is the worst possible combination at the worst possible moment. It would be nice, to use an American expression, for Germany to step up to the plate and put its full economic weight behind a fiscal and a banking union, including euro-denominated sovereign debt. But for reasons of history and ideology, as well as political and economic context, Europe may well be about to re-run Kindleberger's 1930s ...

And from Sebastian Mallaby at Foreign Affairs: The Fate of the Monetary Union Lies in Germany’s Hands

And from the WSJ: ECB Says Euro Zone Needs Banking Union

The European Central Bank repeated its call for a common banking union to shore up the euro zone's financial system, even as Germany's central bank warned such proposals are "premature" and risky.

The ECB's No. 2 official, Vitor Constancio of Portugal, also said the central bank should have the power to supervise large European banks, saying it has the institutional resources and knowledge to perform such a task.
...
"There is a need to…conceive a banking union as an integral counterpart of monetary union," the ECB said in its semiannual financial stability review. Such a union would include euro-zone-wide bank supervision, deposit guarantees and a funding mechanism from banks.

by Calculated Risk on 6/12/2012 02:28:00 PM

CR Note: Yesterday I posted some distressed sales data for Sacramento. I'm following the Sacramento market to see the change in mix over time (short sales, foreclosure, conventional). Economist Tom Lawler has been digging up similar data, and he sent me the table below for several more distressed areas. For all of these areas, except Las Vegas, the share of distressed sales is down from May 2011 - and for the areas that break out short sales, the share of short sales has increased (except Minneapolis) and the share of foreclosure sales are down - and down significantly in some areas.

From Lawler:

Note that the distressed sales shares in the below table are based on MLS data, and often based on certain “fields” or comments in the MLS files, and some have questioned the accuracy of the data. Some MLS/associations only report on overall “distressed” sales, while others (e.g., Birmingham) only report on the foreclosure share of sales.

I’m not quite sure why the short-sales share (based on MLS reports) in the Minneapolis area is so low relative to other MLS-based reports for areas with “high” distressed-sales shares.

The most striking shift from a year ago, of course, is the sharp drop in the foreclosure share of home sales – with the drop in Phoenix being nothing short of amazing. Most, but not all, areas also saw a significant increase from a year ago in the short-sales share of resales. And finally, most areas have seen a YOY drop in the overall “distressed” sales share, and saw a significant YOY increase in non-distressed sales.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-May	11-May	12-May	11-May	12-May	11-May
Las Vegas	32.6%	23.0%	34.7%	43.8%	67.3%	66.8%
Reno	39.0%	29.0%	22.0%	40.0%	61.0%	69.0%
Phoenix	26.6%	21.4%	16.9%	43.8%	43.5%	65.2%
Sacramento	30.1%	23.2%	28.1%	42.4%	58.2%	65.6%
Minneapolis	10.5%	11.2%	28.9%	40.1%	39.4%	51.3%
Mid-Atlantic (MRIS)	11.8%	11.3%	10.2%	18.6%	22.1%	29.8%
Hampton Roads VA					26.3%	31.0%
Birmingham AL			27.3%	29.8%

by Calculated Risk on 6/12/2012 11:43:00 AM

From Kathleen Pender at the San Francisco Chronicle: Harp 2 starts to help the severely underwater

On June 1, the Federal Housing Finance Agency reported that total Harp refinances had jumped to 180,185 in the first quarter of this year - almost double the number done in the previous quarter.
...
The vast majority of Harp refis in the first quarter were loans with LTV ratios in the 80 to 105 percent range. Guy Cecala, publisher of Inside Mortgage Finance, calls these loans the "low-hanging fruit lenders have been willing" to refinance.

Only 20 percent had LTVs between 105 and 125 percent and only 2 percent had LTVs greater than 125 percent.
...
Starting last week, loans with LTVs greater than 125 percent can be bundled into securities sold to investors, although they still must be segregated from other loans, Cecala says. That should give Harp 2 a big boost.

One obstacle for borrowers is that most big banks, including Bank of America and Chase, won't refinance a loan under Harp 2 unless they already service it.

HARP 2 doesn't always lead to lower payments - one of the goals of the program was to get borrowers to pay down principal faster with a shorter amortization period. This will help borrowers get out of a negative equity situation sooner. Here is an example from the article:

Oliver and his wife owed $372,000 on their home, now worth about $230,000. With a loan-to-value ratio of 161 percent, Oliver had little hope of refinancing his 5.875-percent mortgage ...

The Olivers had only 21 years remaining on their original mortgage, so rather than refinance into a new 30-year loan, they took out a 15-year loan at 3.5 percent with no closing costs.

"We will be paying roughly $300 more per month, but we are saving $171,000 over the course of the loan," says Oliver, who closed a few weeks ago.

A quick calculation: if the house value stays at $230,000, the borrowers would be out of negative equity around June 2023 with the current loan. With the new loan they will be out of negative equity at the end of 2018 (still a long time, but they have quite a bit of negative equity).

by Calculated Risk on 6/12/2012 08:19:00 AM

From the National Federation of Independent Business (NFIB): Small-Business Optimism Index Stagnates: No Progress Made for Small-Business Sector in May

Dropping just a tenth-of-a-point in the month of May, the Nation Federation of Independent Business (NFIB) Index of Small Business Optimism came in at 94.4. A reading of 94.4 is historically low and consistent with the sub-par performance of GDP and employment growth. The individual indicators were mixed, with expected sales in a three month decline. However, some employment components improved and profit trends remained relatively stable after its sharp gain in April.
...
It appears that sales are improving modestly in the small-business sector. The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past three months dropped 2 points, falling to two percent, the second highest reading in 60 months (the highest was April’s reading of 4 percent).
...
Twenty (20) percent reported that “poor sales” are their top business problem, up 1 point from April.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image.

This graph shows the small business optimism index since 1986. The index decreased slightly to 94.4 in May from 94.5 in April.

For the second consecutive month, the "single most important problem" was not "poor sales". In the best of times, small business owners complain about taxes and regulations, and that is starting to happen again.

The second graphs shows an index of hiring plans over the next six months.

Seasonally adjusted, the net percent of owners planning to create new jobs rose 1 point to six percent, confirming the 5 point jump recorded in April.

Hiring plans increased slightly in May, and has been trending up slowly.

This optimism index remains low, but as housing continues to recover, I expect this index to increase (there is a high concentration of real estate related companies in this index).

by Calculated Risk on 6/11/2012 10:22:00 PM

First on Spain:

From Joseph Cotterill at FT Alphaville:

A day of confusion over the terms of the Spanish bank bailout ended with a market sell-off. Spanish bond yields closed higher on Monday than on Friday, with the ten-year yield at 6.54 per cent (Wall Street Journal). Spain said it would continue with auctions of its debt as normal, but investors pointed to the possibly seniority of ESM loans over private bondholders as a risk to buying more bonds (Financial Times). In addition to fears over Spain, it emerged that eurozone planners discussed border and capital controls as a contingency if Greece leaves the euro (Reuters).

And a summary from Ben Walsh at Reuters: Parsing the Spanish bailout

• At 7:30 AM ET, the NFIB Small Business Optimism Index for May will be released. The index increased to 94.5 in April from 92.5 in March. This tied February 2011 as the highest level since December 2007. The consensus is for a slight decrease to 94.2 in May.

• At 8:30 AM, U.S. Import and Export Price Indexes for May will be released. The consensus is a for a 1.1% decrease in import prices due primarily to the decline in oil prices.

by Calculated Risk on 6/11/2012 05:33:00 PM

I've been following the Sacramento market to look for changes in the mix of house sales in a distressed area over time (conventional, REOs, and short sales). The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

So far there has been a shift from REO to short sales, and the percentage of distressed sales has been declining year-over-year. This data would suggest improvement, however we do not know the impact of the mortgage settlement yet (the court signed off on the agreement in early April).

In May 2012, 58.3% of all resales (single family homes and condos) were distressed sales. This was down from 60.7% last month, and down from 65.6% in May 2011. This is lowest level since the Sacramento Realtors started tracking distressed sales, but 58% distressed is still extremely high!

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales. There is a seasonal pattern for conventional sales (stronger in the spring and summer), and distressed sales happen all year - so the percentage of distressed sales decreases every summer and the increases in the fall and winter.

There has been a sharp increase in conventional sales, and there were more short sales than REO sales in May for the second consecutive month.

Total sales were up 9.0% compared to May 2011, and conventional sales were up 32% year-over-year. Active Listing Inventory for single family homes declined 65.6% from last May, and total inventory, including "short sale contingent", was off 36% year-over-year.

Cash buyers accounted for 31.5% of all sales (frequently investors), and median prices were down 1.8% from last May.

This appears to be a little progress, although the market is still in distress - and the impact of the mortgage settlement is still unknown.

We are seeing similar patterns in other distressed areas.

by Calculated Risk on 6/11/2012 02:36:00 PM

From the Federal Reserve: Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances (ht MS)

The Federal Reserve Board’s Survey of Consumer Finances (SCF) for 2010 provides insights into changes in family income and net worth since the 2007 survey. The survey shows that, over the 2007–10 period, the median value of real (inflation-adjusted) family income before taxes fell 7.7 percent; median income had also fallen slightly in the preceding three-year period. The decline in median income was widespread across demographic groups, with only a few groups experiencing stable or rising incomes. Most noticeably, median incomes moved higher for retirees and other nonworking families. The decline in median income was most pronounced among more highly educated families, families headed by persons aged less than 55, and families living in the South and West regions.
...
The decreases in family income over the 2007−10 period were substantially smaller than the declines in both median and mean net worth; overall, median net worth fell 38.8 percent, and the mean fell 14.7 percent (figure 2).Median net worth fell for most groups between 2007 and 2010, and the decline in the median was almost always larger than the decline in the mean. The exceptions to this pattern in the medians and means are seen in the highest 10 percent of the distributions of income and net worth, where changes in the median were relatively muted. Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices.

Click on table for larger image.

This is a portion of table 4 from the Fed Bulletin, and shows the median and mean net worth by income and head of household age for four periods (2001, 2004, 2007 and 2010).

The only group (by income) with an increase in the median net worth was the top 10%. There is much more in the survey.

by Calculated Risk on 6/11/2012 12:23:00 PM

There is plenty of confusion regarding the Spanish bank aid. See the Financial Times Alphaville: Just buying time? , An ESM subordination ... save? and on rumors of capital controls.

From Bloomberg: U.S. Gasoline Fell to $3.6243 a Gallon, Lundberg Survey

The average price of regular gasoline at U.S. filling stations declined 15.9 cents in the past three weeks to $3.6243 a gallon, according to Lundberg Survey Inc.

... The price is down 11.62 cents from a year earlier. The highest average this year was $3.9671 during the two weeks ended April 6.

“Europeans’ misfortunes are American fuel consumers gain,” Trilby Lundberg, president of Lundberg Survey, said today in a telephone interview. “Our dollar looks strong against the weaker euro, which has reduced the price of crude.”

The euro has declined further today with the confusion around the Spanish bank aid.

Oil prices are down again today. Brent is down to $98.56 per barrel, and WTI is down to $83.36. The lower oil prices will not only lead to lower gasoline prices, but also a lower trade deficit and lower headline inflation (CPI).

The following graph shows the decline in gasoline prices. Gasoline prices are down significantly from the peak in early April. Gasoline prices in the west had been impacted by refinery issues, but prices are now falling there too.

Note: The graph shows oil prices for WTI; 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 6/11/2012 08:59:00 AM

CoreLogic released their June MarketPulse Report today.

Here is a brief excerpt from a piece by Sam Khater, CoreLogic senior economist, on the impact of negative equity on housing supply:

While the rapid decline in months’ supply is typically good news because it indicates a better balance between demand and supply, this decline is occurring less because of an increase in sales and more because of a drop in unsold inventory as a result of negative equity. Negative equity is typically a demand-side obstacle to sales and refinances, but currently is also restricting the supply of homes for sale. Analysis of the 50 largest markets reveals the metropolitan areas with the lowest levels of months’ supply also have the higher shares of negative equity. Markets with negative equity share of 50 percent or more have an average months’ supply of 4.7 months, compared to 8.3 months’ supply for markets with less than a 10 percent negative equity share. The presence of negative equity not only drives foreclosures, reduces the availability of purchase down payments and impedes refinances, but also restricts the ability of owners to list their homes for sale as the demand side of the market improves.

Paradoxically, as the flow of REOs has slowed over the last 18 months, negative equity has become a positive force in real estate markets by restricting supply in the face of increasing demand.

Although negative equity is probably contributing to the decline in inventory - especially in certain markets with high levels of negative equity - I think price expectations are a bigger factor in the recent decline in inventory.

by Calculated Risk on 6/10/2012 09:24:00 PM

There are no US economic releases scheduled for Monday. The big story will be the aid for Spanish Banks. The next key event in Europe is the Greek election on Sunday June 17th.

The Asian markets are up tonight. The Nikkei is up about 2.3%, and the Hang Seng is up 2.6%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are up about 16, and Dow futures are up 150.

Oil: WTI futures are up to $86.48 (this is down from $109.77 in February) and Brent is back over $100 at $102.14 per barrel.

Saturday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

For the monthly economic question contest (three more questions for June later this week):

by Calculated Risk on 6/10/2012 01:15:00 PM

Another story on the sharp decline in home inventory ...

From Alejandro Lazo at the LA Times: Shortage of homes for sale creates fierce competition

Housing inventory has sunk to levels not seen since the bubble years. ... In Southern California, inventories have plunged over the last year. The number of homes listed for sale in April fell 35% in Los Angeles County and was down 42% in Orange, 39% in San Bernardino, 42% in Riverside, 53% in Ventura and 43% in San Diego counties, according to online brokerage Redfin.

Many people who bought at the top of the cycle are so deeply underwater, they can't get the price they need to sell and are therefore not bothering to put their homes on the market.

"We know negative equity holds back home sales, but it also holds back the listing of sales," said Sam Khater, an economist with CoreLogic ...

Glenn Kelman, chief executive of Redfin, said the recovery remains tentative but the market has grown competitive because sellers feel they have time on their side, while buyers feel a sense of urgency given low interest rates and relatively cheap prices compared with the bubble years.

"It is a precarious situation, but the real issue is that nobody wants to sell a house right now," Kelman said. "So now we have classes for our real estate agents on how to win a bidding war."

Negative equity is keeping some people from selling, however most homeowners have positive equity (there are about 75 million owner occupied homes, and about 11 million have negative equity). I think a more important driver of the decline in inventory is price expectations. I agree with Redfin's Kelman who pointed out that "sellers feel they have time on their side".

Earlier I argued:

When the expectation is that prices will fall further, marginal sellers will try to sell their homes immediately. And marginal buyers will decide to wait for a lower price. This leads to more inventory on the market.

But when the expectation is that prices are stabilizing (the current situation), sellers will wait until it is convenient to sell. And buyers will start feeling a little more confident.

This leads to less inventory on the market.

Yesterday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

by Calculated Risk on 6/10/2012 09:16:00 AM

From the WSJ: China Data Signal Some Strength

A raft of data released over the weekend by the Chinese government present a mixed picture, but overall suggest an economy stronger than many market players feared at the end of last week.

Some of the data from the WSJ article:

Industrial production was up 9.6% year-over-year (YoY) in May, a stronger pace than in April (9.3%) - however that isn't saying much since April saw the slowest YoY growth since 2009.

CPI increased 3.0% YoY in May, the slowest since June 2010.

Both exports and imports were up in May. Exports were up 15.3% YoY, and import up 12.7%.

Auto sales were up 22.6% YoY, increasing at a faster pace than in April (12.5%).

However overall retail sales increased at a slower pace in May; 13.8% year-over-year compared to 14.1% in April.

Overall this was slightly better than expected.

Yesterday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th