by Calculated Risk on 7/20/2012 05:18:00 PM

From the FDIC: First National Bank of the Gulf Coast, Naples, Florida, Assumes All of the Deposits of the Royal Palm Bank of Florida, Naples, Florida

As of March 31, 2012, The Royal Palm Bank of Florida had approximately $87.0 million in total assets and $85.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $13.5 million. ... The Royal Palm Bank of Florida is the 34th FDIC-insured institution to fail in the nation this year, and the fifth in Florida.

From the FDIC: Community & Southern Bank, Atlanta, Georgia, Assumes All of the Deposits of Georgia Trust Bank, Buford, Georgia

As of March 31, 2012, Georgia Trust Bank had approximately $119.8 million in total assets and $117.4 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $20.9 million. ... Georgia Trust Bank is the 35th FDIC-insured institution to fail in the nation this year, and the seventh in Georgia.

From the FDIC: Community & Southern Bank, Atlanta, Georgia, Assumes All of the Deposits of First Cherokee State Bank, Woodstock, Georgia

As of March 31, 2012, First Cherokee State Bank had approximately $222.7 million in total assets and $193.3 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $36.9 million. ... First Cherokee State Bank is the 36th FDIC-insured institution to fail in the nation this year, and the eighth in Georgia.

Two more in Georgia ... not a surprise.

by Calculated Risk on 7/20/2012 02:53:00 PM

Low rates and HARP are driving activity ...

From Jon Prior at HousingWire: Big-four mortgage originations climb 37%

Mortgage originations at the big-four banks increased 37% in the second quarter from last year because of the expanded Home Affordable Refinance Program.
...
Wells continued to dominate. The San Francisco bank wrote $131.9 billion in new loans during the quarter, more than double originations from the same period last year. Wells said 16% of those new loans came through the Home Affordable Refinancing Program.
...
Chase wrote $43.9 billion in new mortgages during the quarter, up 29% from last year and 14.3% from the previous quarter.
...
Bank of America continues to feel the drop off from exiting its correspondent lending channel last year. Originations fell 55% from one year ago to roughly $18 billion, the only yearly decline of the big-four lenders.
...
Citi originations totaled $12.9 billion, up 17% from last year but still down 10% from the previous quarter.

If the Fed does expand their balance sheet ("QE3") on Aug 1st, or at the September meeting, the purchases will probably be focused on agency mortgage backed securities. The people able to refinance might even get even lower rates, but many prospective borrowers will still be unable to refinance.

by Calculated Risk on 7/20/2012 11:13:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were little changed in June. Twenty-seven states recorded unemployment rate increases, 11 states and the District of Columbia posted rate decreases, and 12 states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada continued to record the highest unemployment rate among the states, 11.6 percent in June. Rhode Island and California posted the next highest rates, 10.9 and 10.7 percent, respectively. North Dakota again registered the lowest jobless rate, 2.9 percent, followed by Nebraska, 3.8 percent.

Click on graph for larger image in graph gallery.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). New York is at the maximum unemployment rate for the recession - every other state has some blue indicating some improvement. New Jersey is close to the recession maximum.

The states are ranked by the highest current unemployment rate. Only three states still have double digit unemployment rates: Nevada, Rhode Island, and California. This is the fewest since January 2009. In early 2010, 18 states and D.C. had double digit unemployment rates.

It appears some of the "sand states", with the largest housing bubbles, are starting to see faster declines in the unemployment rate (Arizona, Florida, California and Nevada).
All current employment graphs

by Calculated Risk on 7/20/2012 08:47:00 AM

From the WSJ: Euro Zone Approves Terms of Spain Bank Bailout

Luxembourg Finance Minister Luc Frieden told reporters there had been a "formal" adoption of the country's memorandum of understanding—the official document outlining the details of the financial assistance package.
...
The bailout will pump up to €100 billion euros ($123 billion) into ailing Spanish banks and will aim to restore the country's financial sector.
...
Also Friday, Spain's government said it expects the economy to remain in recession next year as it steps up austerity measures.

The yield on the Spanish 10 year bond is now above 7.2% - near the high.

More austerity. More recession. The beatings continue ...

by Calculated Risk on 7/19/2012 06:57:00 PM

Here is a sector that is growing ... expecting more imports from Asia:

From Ronald White at the LA Times: Ports of Los Angeles and Long Beach building at furious pace

At the edge of San Pedro Bay, home of North America's largest cargo complex, they're building new piers, wharves and rail yards at a furious pace ... So much construction is underway that the new facilities by themselves would move more freight than the entire port of Savannah, Ga., which ranks No. 4 among the continent's ports.
...
The most expensive and extensive upgrades in the history of both ports will cost nearly $6 billion.
...
About 640,000 people work in trade-related jobs in [SoCal] ... That's up from a low of fewer than 600,000 during the recession, but still far short of the 709,000 trade jobs in pre-recession 2007.

Earlier on Existing Home Sales:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 04:04:00 PM

In addition to Case-Shiller, CoreLogic, and LPS, I'm also watching the FNC, Zillow and other house price indexes.

FNC released their May index data today. FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.6% in May (Composite 100 index). The other RPIs (10-MSA, 20-MSA, 30-MSA) increased between 0.5% and 0.8% in May. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

The year-over-year trends continued to show improvement in May, with all four composite indexes down 1.8% to 2.1% compared to May 2011. For all the indexes, this is the smallest year-over-year decline in the FNC index since year-over-year prices started falling in 2007 (five years ago).

Click on graph for larger image.

This graph is based on the FNC index (four composites) through May 2012. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Some of the month-to-month gain is seasonal since this index is NSA. The key is the indexes are showing less of a year-over-year decline in May. If house prices have bottomed, the year-over-year decline should turn positive later this year or early in 2013.

The May Case-Shiller index will be released Tuesday, July 31st.

Earlier on Existing Home Sales:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 01:42:00 PM

Earlier ...

• From the Philly Fed: July 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of −16.6 in June to −12.9. This marks the third consecutive negative reading for the index ...
...
Labor market conditions at the reporting firms deteriorated this month. The current employment index decreased 10 points, to −8.4, its second negative reading in three months. ... Firms also indicated fewer hours worked this month: The average workweek index increased 2 points but posted its fourth consecutive negative reading.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through July. The ISM and total Fed surveys are through June.

The average of the Empire State and Philly Fed surveys increased in July, but the average is still negative (contraction).

• The Conference Board leading indicators declined 0.3% in June:

The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.3 percent in June to 95.6 (2004 = 100), following a 0.4 percent increase in May, and a 0.1 percent decline in April.

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI declined in two of the last six months, and its six-month growth rate has eased in the last three months. The strengths among the leading indicators have become less widespread as consumer expectations and manufacturing new orders offset gains in the financial, labor, and construction-related components. Meanwhile, the coincident economic index, a measure of current economic conditions, has risen slowly but steadily in the last three months.”

Says Ken Goldstein, economist at The Conference Board: “The U.S. economy is growing very slowly. The CEI basically reflects this steady but soft pace of overall economic activity. The LEI is pointing to no strengthening over the next few months, as the economy continues to sail through strong headwinds domestically and internationally.”

by Calculated Risk on 7/19/2012 11:47:00 AM

I can't emphasize enough - what matters the most in the NAR's existing home sales report is inventory; what matters the most in the new home sales report next week is sales. It is active inventory that impacts prices (although the "shadow" inventory will keep prices from rising). Those looking at the number of existing home sales for a recovery in housing are looking at the wrong number. For existing home sales, look at inventory first.

Although there are always questions about the NAR data, the report this morning was another positive housing report.

The NAR reported inventory decreased to 2.39 million units in June, down 3.2% from the downwardly revised 2.47 million in May (revised down from 2.49 million). This is down 24.4% from June 2011, and down 10.8% from the inventory level in June 2005 (mid-2005 was when inventory started increasing sharply). This is the lowest level for a June since 2002.

Clearly inventory will be below the comparable month in 2005 for the rest of the year and will probably track close to the level in 2004. It is also possible that inventory has peaked for 2012 (or is at least very close to the peak).

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "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.

The following graph shows inventory by month since 2004. In 2005 (dark blue columns), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red for 2012) inventory is at the lowest level for the month of June since 2002, and inventory is below the level in June 2005 (not counting contingent sales). However inventory is still elevated using months-of-supply, but I expect months-of-supply to be below 6 later this year.

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

Sales NSA (red column) are above the sales for the 2009 and 2011 (2010 was higher because of the tax credit). Sales are well below the bubble years of 2005 and 2006.

On distressed sales from the NAR:

Distressed homes - foreclosures and short sales sold at deep discounts - accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011.

However other data suggest distressed sales were down in June, and that is a positive sign for the housing market.

Earlier:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 10:00:00 AM

The NAR reports: June Existing-Home Prices Rise Again, Sales Down with Constrained Supply

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 5.4 percent to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, but are 4.5 percent higher than the 4.18 million-unit level in June 2011.
...
Total housing inventory at the end June fell another 3.2 percent to 2.39 million existing homes available for sale, which represents a 6.6-month supply at the current sales pace, up from a 6.4-month supply in May. Listed inventory is 24.4 percent below a year ago when there was a 9.1-month supply.

Click on graph for larger image.

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

Sales in June 2012 (4.37 million SAAR) were 5.4% lower than last month, and were 4.5% above the June 2011 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory declined to 2.39 million in June from the downwardly revised 2.47 million in May (revised down from 2.49 million). Inventory is not seasonally adjusted, and usually inventory increases from the seasonal lows in December and January to the seasonal high in mid-summer.

The last 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 24.4% year-over-year in June from June 2011. This is the sixteenth consecutive month with a YoY decrease in inventory, and the largest year-over-year decline reported.

Months of supply increased to 6.6 months in June.

This was below expectations of sales of 4.65 million. However, as I've noted before, those focusing on sales of existing homes, looking for a recovery for housing, are looking at the wrong number. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing. I'll have more later ...


All current Existing Home Sales graphs

by Calculated Risk on 7/19/2012 08:37:00 AM

The DOL reports:

In the week ending July 14, the advance figure for seasonally adjusted initial claims was 386,000, an increase of 34,000 from the previous week's revised figure of 352,000. The 4-week moving average was 375,500, a decrease of 1,500 from the previous week's revised average of 377,000.

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 declined to 375,500.

The sharp decline last week due to onetime factors, and some increase was expected.

And here is a long term graph of weekly claims:

This was well above the consensus forecast of 365,000 and suggests ongoing weakness in the labor market.


All current Employment Graphs

by Calculated Risk on 7/18/2012 09:31:00 PM

Existing home sales for June is the key release on Thursday. Most of the focus will be on sales, but the key numbers are inventory and months-of-supply.

• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand.

• At 10:00 AM, Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for sales of 4.65 million on seasonally adjusted annual rate (SAAR) basis, up from 4.55 million in May.


• Also at 10:00 AM, Philly Fed Survey for July will be released. This survey really surprised to the downside in June, and the consensus is for a reading of -8.0, up from -16.6 last month (below zero indicates contraction).

• Also at 10:00 AM, the Conference Board Leading Indicators for June will be released. The consensus is for a 0.1% decrease in this index.

Earlier:
• Housing Starts increased to 760 thousand in June, Highest since October 2008
• Starts and Completions: Multi-family and Single Family
• August 1st QE3 Departure Date?

by Calculated Risk on 7/18/2012 05:12:00 PM

Halfway through 2012, single family starts are on pace for over 500 thousand this year, and total starts are on pace for about 730 thousand. That is above the forecasts for most analysts (however Lawler and the NAHB were close).

Here is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Click on graph for larger image.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) has been increasing steadily, and completions (red line) is lagging behind - but completions will follow starts up over the course of the year (completions lag starts by about 12 months).

This means there will be an increase in multi-family deliveries next year.

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

For the fifth consecutive month, the rolling 12 month total for starts has been above completions - that usually only happens after housing has bottomed.

Earlier on housing starts:
• Housing Starts increased to 760 thousand in June, Highest since October 2008

by Calculated Risk on 7/18/2012 02:00:00 PM

Fed's Beige Book:

Reports from most of the twelve Federal Reserve Districts indicated that overall economic activity continued to expand at a modest to moderate pace in June and early July.

This is a downgrade from the previous beige book that reported "moderate" growth.

And on real estate:

Reports on residential housing markets remained largely positive. Sales were characterized as improving in Philadelphia, New York, Richmond, Chicago, St. Louis, and Minneapolis, while home sales increased in Boston, Cleveland, Atlanta, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
...
Most Districts reported declines in home inventories. Homes prices have begun to stabilize in some markets and price increases were noted in select markets. Boston and Atlanta noted that appraisals were coming in below market prices.
...
Rental markets continued to strengthen by most accounts.
...
Recent activity in commercial real estate markets has been mixed. Modest improvements were noted in Boston, Atlanta, and St. Louis and demand strengthened in the San Francisco District. Softer conditions were reported in the New York and Richmond Districts, while demand held steady in the Philadelphia and Dallas Districts. Nonresidential construction activity varied as well.

"Prepared at the Federal Reserve Bank of Atlanta and based on information collected before July 9, 2012."

More sluggish growth, but still "modest to moderate". And a few positive comments on residential real estate ...

by Calculated Risk on 7/18/2012 11:47:00 AM

There is quite a bit of discussion on when (not if) the Fed will embark on QE3. As an example, from Goldman Sachs yesterday:

While we think that a modest easing step is a strong possibility at the August or September meeting, we suspect that a large move is more likely to come after the election or in early 2013, barring rapid further deterioration in the already-cautious near term Fed economic outlook.

And from Merrill Lynch this morning:

We expect that, as the data continue to soften, the Fed will undershoot its own forecasts and thus respond with further easing. We expect the Fed to push out its forward guidance until at least mid-2015, perhaps at the August 1 FOMC meeting, and to launch a $500bn QE3 asset purchase plan by the September 13 meeting.

Although the date is uncertain, I think there is a strong possibility that the Fed will launch QE3 on August 1st.

First, I think Bernanke paved the way for QE3 at the press conference on June 20th. Before embarking on previous rounds of QE, Bernanke always outlined the reasons - and I thought he made it clear that if the economy didn't improve, more accommodation was coming. And, if anything, the data has been worse since the last meeting. However there has only been a limited amount of data (Q2 GDP will be released next week), and some participants might argue they need additional data before supporting QE3.

Second, two of the key undecided voting members of the FOMC are clearly moving closer to supporting QE3. Last week Atlanta Fed President Dennis Lockhart came close to advocating QE3. Although Lockhart weighed both sides of each issue in his speech, he concluded: 1) the risks of QE3 are "manageable", 2) QE3 will be modestly effective, and 3) his earlier forecast is becoming "untenable" and that means he will support more accommodation if the recent weak data continues.

And yesterday, Cleveland Fed President Sandra Pianalto said more easing could be warranted.

My outlook calls for the pace of growth to pick up over the course of this year and into 2013 as the headwinds holding back the recovery gradually abate. I also expect inflation to remain close to 2 percent. If the expansion were to continue to lose momentum, and inflation threatened to run persistently below 2 percent, additional policy action could be warranted.

I expect Pianalto will revise down her outlook over the next couple of weeks.

Third, it appears some key members of the FOMC (Yellen, Dudley, Williams) are all pushing harder for QE now. San Francisco Fed President John Williams is definitely being more aggressive, from July 9th:

We are falling short on both our employment and price stability mandates, and I expect that we will make only very limited progress toward these goals over the next year. ... If further action is called for, the most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities. ... At the Fed, we take our dual mandate with the utmost seriousness. ... We stand ready to do what is necessary to attain our goals of maximum employment and price stability.

By my count, if Bernanke decides that QE3 is appropriate, he will have 10 or 11 votes on August 1st. Maybe the FOMC will wait for more data, but I think QE3 is likely very soon.

by Calculated Risk on 7/18/2012 10:41:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Weak Market Conditions Persist According to Architecture Billings Index

The Architecture Billings Index (ABI) saw more poor conditions last month, indicating a drop in design activity at U.S. architecture firms, and suggesting upcoming weakness in spending on nonresidential construction projects. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the June ABI score was 45.9, nearly identical to the mark of 45.8 in May. This score reflects a decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 54.4, up slightly from mark of 54.0 the previous month.

“The downturn in design activity that began in April and accelerated in May has continued into June, likely extending the weak market conditions we’ve seen in nonresidential building activity ,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “While not all firms are experiencing negative conditions, a large share is still coping with a sluggish and erratic marketplace.”

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 45.9 in June, up slightly from May. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This suggests further weakness in CRE investment later this year and into next year (it will be some time before investment in offices and malls increases).
All current Commercial Real Estate graphs

by Calculated Risk on 7/18/2012 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 760,000. This is 6.9 percent above the revised May estimate of 711,000 and is 23.6 percent above the June 2011 rate of 615,000.

Single-family housing starts in June were at a rate of 539,000; this is 4.7 percent above the revised May figure of 515,000. The June rate for units in buildings with five units or more was 213,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 755,000. This is 3.7 percent below the revised May rate of 784,000, but is 19.3 percent above the June 2011 estimate of 633,000.

Single-family authorizations in June were at a rate of 493,000; this is 0.6 percent above the revised May figure of 490,000. Authorizations of units in buildings with five units or more were at a rate of 241,000 in June.

Click on graph for larger image.

Total housing starts were at 760 thousand (SAAR) in June, up 6.9% from the revised May rate of 711 thousand (SAAR). Note that May was revised up from 708 thousand. April was revised up slightly too.

Single-family starts increased 4.7% to 539 thousand in June.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that total housing starts have been increasing lately after moving sideways for about two years and a half years.

Total starts are up 59% from the bottom start rate, and single family starts are up 53% from the low.

This was above expectations of 745 thousand starts in June. This is another fairly strong housing report.

All Housing Investment and Construction Graphs

by Calculated Risk on 7/18/2012 07:04:00 AM

From the MBA: Record Low Mortgage Rates Lead to Jump in Refinance Activity

The Refinance Index increased 22 percent from the previous week and is at the highest level since mid-June. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier.

“Refinance application volume increased last week to near peak levels for the year as mortgage rates dropped to a new low, driven down by growing concerns about the health of the US economy,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Applications for HARP refinance loans accounted for 24 percent of refinance activity last week, in line with the HARP share for the past few weeks.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.74 percent, the lowest rate in the history of the survey, from 3.79 percent, with points increasing to 0.45 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

The first graph shows the purchase index, and the purchase index is mostly moving sideways over the last two years - but has been moving a little recently.

The second graph shows the refinance index.

This index is back to the high for the year.

Some of the increase in the refinance index is related to HARP (HARP activity has picked up this year), but most of this activity is related to the record low mortgage rates.

by Calculated Risk on 7/17/2012 10:01:00 PM

Wednesday will be another busy day for economic data, but first from Binyamin Appelbaum at the NY Times: Cautious on Growth, Bernanke Offers No Hint of New Action

The Federal Reserve chairman, Ben S. Bernanke, said Tuesday that the Fed was seeking greater clarity about the health of the recovery, suggesting that officials were not ready to approve another round of stimulus.
...
Rather than committing to new steps, Mr. Bernanke told the Senate Banking Committee that the decision would turn on the judgment of Fed officials about the pace of job growth in the coming months.

The major issue, he said, is “whether or not there is in fact a sustained recovery going on in the labor market, or are we stuck in the mud?” Mr. Bernanke added a wrinkle, saying the central bank “would certainly want to react against any increase in deflation risk.”

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

• 8:30 AM: Housing Starts for June will be released. The consensus is for total housing starts to increase to 745,000 (SAAR) in June from 708,000 in May.

• At 10:00 AM, Fed Chairman Ben Bernanke will testify before the Committee on Financial Services, U.S. House of Representatives. (same report again).


• At 2:00 PM, the Federal Reserve Beige Book will be released.

Also during the day, the AIA's Architecture Billings Index for June will be released (a leading indicator for commercial real estate).

For the July contest:

by Calculated Risk on 7/17/2012 06:29:00 PM

From economist Tom Lawler:

Based on an admittedly limited sample of realtor/MLS reports across the country, I estimate that existing home sale ran at a seasonally adjusted annual rate of 4.56 million in June, little changed from May’s SA pace and up 9.1% from last June’s SA pace. Unadjusted data clearly show a smaller YOY gain in June sales relative to May sales, which was expected, as this May had one more business day than last May, while this June had one fewer business day than last May.

It is worth noting that in several “distressed” markets, sales this June were down from a year ago, even though in many of these markets non-distressed (and especially non-foreclosure) sales, were up -- in some cases by a lot.

On the inventory front, various entities that track listings showed modestly different trends, though all show big YOY declines. Realtor.com, e.g., reported that the AVERAGE number of listings in the month of June was up 0.5% from May, but down 19.4% from last June, while HousingTracker.Net reported that average listings (actually, the average number of listings on Mondays) in June in the 54 metro markets it tracks were down 1.3% from May and down 22.0% from last June. Looking at these data, combined with realtor reports, my “best guess” is that the NAR’s estimate for the number of existing homes for sale at the end of June will be about 2.5 million, up 0.4% from May but down 20.9% from last June.

On the median sales price front, it’s pretty clear that the national median existing SF sales price this June will show another YOY gain – the fourth in a row – though local realtor/MLS data suggest that June’s YOY increase will be a bit less than May’s. My best guess is that the NAR’s estimate of the median existing SF home sales price in June will be up about 6.4% from last June.

CR Note: This would put the months-of-supply at about 6.6 months, unchanged from May. For the month of June, this would be the lowest level of inventory since 2004, and the lowest months-of-supply since 2005. The NAR is scheduled to report June sales on Thursday.

Tom also sent me the following updated table on distressed sales. From Lawler: "Note that all of these shares are based on MLS data or realtor reports save for those for Southern California, which come from Dataquick and are based on property records."

CR Note: Notice the decline in distressed sales. Foreclosure are down in all these areas, and short sales are up in most.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-June	11-June	12-June	11-June	12-June	11-June
Las Vegas	34.2%	21.6%	27.8%	47.2%	62.0%	68.8%
Reno	37.0%	25.0%	21.0%	41.0%	58.0%	66.0%
Phoenix	32.8%	27.0%	14.1%	40.8%	46.8%	67.8%
Sacramento	31.0%	22.2%	23.2%	43.0%	54.2%	65.2%
Mid-Atlantic (MRIS)	10.2%	10.0%	8.7%	14.9%	18.9%	24.9%
Minneapolis	9.6%	10.5%	25.1%	33.9%	34.6%	44.3%
Southern California	17.7%	17.9%	24.5%	32.9%	42.2%	50.8%
Northeast Florida					36.3%	43.2%
Hampton Roads					28.8%	29.7%
Chicago					33.5%	36.0%
Charlotte					14.2%	30.6%

And from DataQuick on SoCal:

The number of homes sold in Southern California rose above a year earlier for the sixth month in a row in June, the result of robust investor demand and significant sales gains for mid- to high-end homes.

Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 24.5 percent of the Southland resale market last month, down from a revised 26.9 percent the month before and 32.9 percent a year earlier. Last month’s figure was the lowest since foreclosure resales were 24.3 percent of the resale market in December 2007. In the current cycle, the figure hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.7 percent of Southland resales last month. That was down slightly from an estimated 18.0 percent the month before and 17.9 percent a year earlier.

by Calculated Risk on 7/17/2012 03:21:00 PM

The BLS reported this morning: "The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.6 percent over the last 12 months to an index level of 226.036 (1982-84=100). For the month, the index decreased 0.2 percent prior to seasonal adjustment."

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is an explanation ...

The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W¹ for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and not seasonally adjusted.

Since the highest Q3 average was in 2011, at 223.233, we only have to compare to last year. Note: The last few years we needed to compare to Q3 2008 since that was the previous highest Q3 average.

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Currently CPI-W is above the Q3 2011 average. If the current level holds, COLA would be around 1.3% for next year (the current 226.036 divided by the Q3 2011 level of 223.233).

This is very early, but it appears COLA will be slightly positive next year.

Contribution and Benefit Base

The law prohibits an increase in the contribution and benefit base if COLA is not greater than zero. However if the there is even a small increase in COLA, the contribution base will be adjusted using the National Average Wage Index.

From Social Security: Cost-of-Living Adjustment Must Be Greater Than Zero

... ... any amount that is directly dependent for its value on the COLA would not increase. For example, the maximum Supplemental Security Income (SSI) payment amounts would not increase if there were no COLA.

... if there were no COLA, section 230(a) of the Social Security Act prohibits an increase in the contribution and benefit base (Social Security's maximum taxable earnings), which normally increases with increases in the national average wage index. Similarly, the retirement test exempt amounts would not increase ...

This is based on a one year lag. The National Average Wage Index is not available for 2011 yet, but wages probably didn't increase much from 2010. If wages increased the same as last year, and COLA is positive (seems likely right now), then the contribution base next year will be increased to around $112,500 from the current $110,100.

Remember - this is an early look. What matters is CPI-W during Q3 (July, August and September).

⁽¹⁾ CPI-W usually tracks CPI-U (headline number) pretty well. From the BLS:

The Bureau of Labor Statistics publishes CPIs for two population groups: (1)the CPI for Urban Wage Earners and Clerical Workers (CPI-W), which covers households of wage earners and clerical workers that comprise approximately 32 percent of the total population and (2) the CPI for All Urban Consumers (CPI-U) ... which cover approximately 87 percent of the total population and include in addition to wage earners and clerical worker households, groups such as professional, managerial, and technical workers, the self- employed, short-term workers, the unemployed, and retirees and others not in the labor force.