by Calculated Risk on 8/20/2012 08:30:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic activity increased in July

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to –0.13 in July from –0.34 in June. ...

The index’s three-month moving average, CFNAI-MA3, decreased slightly from –0.18 in June to –0.21 in July—its fifth consecutive reading below zero. July’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests growth was below trend in July.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 8/19/2012 09:30:00 PM

My baseline scenario is for economic growth to remain sluggish but to start to increase as housing improves and the impact of state and local austerity subsides. I think QE3 remains likely, although the timing is still uncertain. My baseline also assumes that some sort of reasonable resolution to the "fiscal cliff" is found, that the European crisis doesn't take down the world economy and that President Obama is reelected.

The Asian markets are mostly green tonight, with the Nikkei up 0.5% and the Shanghai Composite up slightly.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P future are down slightly, and the DOW futures down about 4 points.

Oil prices are moving up again with WTI futures are at $96.21 and Brent is at $114.10 per barrel. Using the calculator at Econbrowser suggests national gasoline prices at about $3.69 per gallon.

Yesterday:
• Summary for Week Ending Aug 17th
• Schedule for Week of Aug 19th

Two more questions for the August economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 8/19/2012 06:56:00 PM

Just filled up my car, and I paid $4.11 per gallon. Using the calculator from Professor Hamilton, and the current price of Brent crude oil, the national average should be around $3.68 per gallon. That is about the current level according to Gasbuddy.com (see graph below). In California, where I live, gasoline prices are always higher than the national average. Update: Some of the recent increase in California was due to the refinery fire in Richmond

The following graph shows the recent increase in gasoline prices. Gasoline prices are down from the peak in early April, but up about 30 cents over the last seven weeks. Note: This will push up the headline CPI numbers.

Note: If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Weekend:
• Summary for Week Ending Aug 17th
• Schedule for Week of Aug 19th

by Calculated Risk on 8/19/2012 12:15:00 PM

The European crisis will be back in the headlines soon ...

From Bloomberg: ECB May Set Yield Limits on Euro Sovereign Bonds, Spiegel Says

The European Central Bank is considering setting limits on yields of euro area sovereign debt by pledging unlimited bond purchases, Germany’s Spiegel magazine reported ...

On Thursday German Chancellor Merkel and French President Hollande will meet in Berlin, and on Friday, the Spanish Government is expected to announce the details of the bank bailout. Also on Friday, Greek Prime Minister Samaras and German Chancellor Merkel will meet in Berlin with a press conference to follow.

The following week, the Jackson Hole Economic Symposium starts on Thursday, with Fed Chairman Ben Bernanke speaking on Friday, August 31st at 10 AM ET, and ECB President Mario Draghi speaking on Saturday, September 1st at 10 AM.

by Calculated Risk on 8/19/2012 08:01:00 AM

From Eric Wolff at the North County Times: Fears recede of second crash from 'shadow inventory'

For years, some real estate analysts feared that banks would suddenly release a wave of foreclosed houses, swamping the local housing market and sending house prices into a second collapse.

That second tsunami isn't happening, according to an analysis by the North County Times.

A house-price crash precipitated a series of foreclosure spikes in 2007 and 2008, leaving banks holding thousands of houses and struggling to hire staff to process them.

After 2009, real estate agents and some analysts became convinced that lenders were holding off on foreclosures, and sitting on foreclosed properties in order to prop up prices, creating a "shadow inventory."

They feared lenders would have to process and release all those houses ---- sending house prices, which have been bouncing along a price bottom for two years, into another downward spiral.

Instead, the number of homes in default has been steadily declining in the region, thanks to a host of programs from government and private banks and a turn toward short sales, in which borrowers sell their properties for less than they owe.

And once lenders have foreclosed on properties, they have moved quickly to sell them, so the stock of properties held by banks is declining, according to an analysis of foreclosure data by the North County Times.

Wolff has plenty of data for North County San Diego in his article. There isn't as much "shadow inventory" as feared.

by Calculated Risk on 8/18/2012 06:27:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Aug 17, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

While the latest monthly release of enforcement action activity by the OCC contributed to many changes to the Unofficial Problem Bank List, it finished the week largely unchanged at 899 institutions with assets of $347.5 billion, compared to 900 institutions and assets of $348.6 billion last week. A year ago, the list held 984 institutions with assets of $412.5 billion.

The OCC terminated actions against Seaside National Bank & Trust, Orlando, FL ($762 million); The First National Bank of Santa Fe, Santa Fe, NM ($751 million); Executive National Bank, Miami, FL ($285 million); First Community Bank, National Association, San Benito, TX ($216 million); Security Federal Savings Bank, Logansport, IN ($201 million); and Home Loan Investment Bank, F.S.B., Warwick, RI ($190 million).

Additions this week were The Bank of Maine, Portland, ME ($793 million); A J Smith Federal Savings Bank, Midlothian, IL ($228 million); CenTrust Bank, National Association, Northbrook, IL ($95 million); The Citizens National Bank of Meyersdale, Meyersdale, PA ($90 million); and Commonwealth National Bank, Mobile, AL ($68 million).

Next week, there is an outside chance for the FDIC to release its actions through July 2012.

Earlier:
• Summary for Week Ending Aug 17th
• Schedule for Week of Aug 19th

by Calculated Risk on 8/18/2012 01:29:00 PM

Update: Dates fixed!

Earlier:
• Summary for Week Ending Aug 17th

There are two key housing reports to be released this week: July existing home sales on Wednesday, and July new home sales on Thursday.

On Friday Durable Goods orders for July will be released.

There are a few key European meetings and announcements on Thursday and Friday (included below).

Note: The FDIC might release the Q2 Quarterly Banking Profile late this week.

----- Monday, Aug 20th ----- 8:30 AM: Chicago Fed National Activity Index (July). This is a composite index of other data.

----- Tuesday, Aug 21st ----- No releases scheduled.

----- Wednesday, Aug 22nd ----- 7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

10:00 AM: Existing Home Sales for July from the National Association of Realtors (NAR).

The consensus is for sales of 4.50 million on seasonally adjusted annual rate (SAAR) basis. Sales in June 2012 were 4.37 million SAAR.

Housing economist Tom Lawler is forecasting the NAR will report sales of 4.47 million in July.

A key will be inventory and months-of-supply.

2:00 PM: FOMC Minutes for Meeting of July 31-August 1, 2012. Once again the minutes will be closely scrutinized for hints about QE3.

During the day: The AIA's Architecture Billings Index for July (a leading indicator for commercial real estate).

----- Thursday, Aug 23rd ----- 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 365 thousand from 366 thousand.

9:00 AM: The Markit US PMI Manufacturing Index Flash. This is a new release and might provide hints about the ISM PMI for August. The consensus is for a reading of 51.0, down from 51.8 in July.

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

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

The consensus is for an increase in sales to 362 thousand Seasonally Adjusted Annual Rate (SAAR) in July from 350 thousand in June. Watch for upgrades to the sales rate for previous months.

10:00 AM: FHFA House Price Index for June 2012. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic). The consensus is for a 0.6% increase in house prices.

Europe Note: German Chancellor Merkel and French President Hollande will meet in Berlin

----- Friday, Aug 24th ----- 8:30 AM: Durable Goods Orders for July from the Census Bureau. The consensus is for a 1.9% increase in durable goods orders.

10:00 AM: Worker Displacement from the BLS for January 2012. This report will probably receive some attention because of weak labor market.

Europe Note: On Friday, the Spanish Government is expected to announce the details of the bank bailout. Also on Friday, Greek Prime Minister Samaras and German Chancellor Merkel will meet in Berlin with a press conference to follow.

by Calculated Risk on 8/18/2012 08:57:00 AM

The economic data was a little more upbeat this week. Retail sales were up sharply in July (reversing the decline in June), housing starts were solid (running about 20% ahead of last year), industrial production increased, the 4-week for initial unemployment claims was near the post-recession low, homebuilder confidence improved, and even consumer sentiment ticked up a little.

Recently the most positive data has been housing related and I wrote this week: Even though housing starts are increasing, it is from a very low level, and 2012 will still be one of the worst years for housing starts (only 2009, 2010, and 2011 will be worse). Still, even with these weak sales, this is good news for the economy: housing starts are on pace to be up 20% from last year (how many sectors are growing 20% this year?), and housing starts could double again over the next several years.

This reminds me of the recovery for auto sales. Auto sales bottomed in February 2009 at close to a 9 million annual sales rate. Now auto sales are running at a 14 million pace; over a 50% increase. That strong increase in auto sales really contributed to GDP growth over the last few years, see from Cardiff Garcia at FT Alphaville: Car-driven GDP growth.

Now we are starting to see a rebound for housing. And housing will have an even larger impact on GDP and employment growth than autos; and housing will probably double from here (more than the 50% increase for autos). Barring policy mistakes in the US and Europe (a big IF), this improvement for housing suggests the economy will continue to grow. However the recovery in housing will probably be gradual.

Here is the take from Merrill Lynch on the economic impact of the housing recovery:

The housing market has become a bright spot for the US economy, offering glimmers of hope for a stronger recovery. The good news is that housing should provide a boost to the economy this year. The bad news is that it will likely be insufficient to save the rest of the economy. While we believe that the housing market has decidedly turned a corner and the recovery has begun, we think it will be a gradual recovery.

Note: Merrill think GDP growth will slow over the next few quarters and remain sluggish through next year.

Here is a summary of last week in graphs:

• Housing Starts declined to 746 thousand in July

Click on graph for larger image.

Total housing starts were at 746 thousand (SAAR) in July, down 1.1% from the revised June rate of 754 thousand (SAAR). Note that June was revised from 760 thousand.

Single-family starts decreased 6.5% to 502 thousand in July.

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 56% from the bottom start rate, and single family starts are up 42% from the low.

This was slightly below expectations of 750 thousand starts in July, but the key is starts are up solidly from last year. Right now starts are on pace to be up about 20% from 2011. Also note that total permits were at the highest level since 2008.

All Housing Investment and Construction Graphs
• Retail Sales increased 0.8% in July

On a monthly basis, retail sales were up 0.8% from June to July (seasonally adjusted), and sales were up 4.1% from July 2011. Ex-autos, retail sales increased 0.8% in July.

Sales for June were revised down to a 0.7% decrease (from 0.5% decrease).

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

This was above the consensus forecast for retail sales of a 0.3% increase in July, and above the consensus for a 0.4% increase ex-auto.

This mostly just reversed the sharp decline in June.
All current retail sales graphs
• Industrial Production increased 0.6% in July, Capacity Utilization increased

From the Fed: Industrial production and Capacity Utilization "Industrial production increased 0.6 percent in July after having risen 0.1 percent in both May and June. ... Capacity utilization for total industry moved up 0.4 percentage point to 79.3 percent, a rate 1.0 percentage point below its long-run (1972--2011) average."

This graph shows Capacity Utilization. This series is up 12.5 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 79.3% is still 1.0 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 80.6% in December 2007.

The second graph shows industrial production since 1967.

Industrial production increased in July to 98.0. This is 17.4% above the recession low, but still 2.7% below the pre-recession peak.

The consensus was for Industrial Production to increase 0.5% in July, and for Capacity Utilization to increase to 79.2%. The increase in IP and Capacity Utilization was above expectations.

All current manufacturing graphs
• Key Measures show slowing inflation in July

On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.0%, and core CPI rose 2.1%. Core PCE is for June and increased 1.8% year-over-year.

These measures suggest inflation is now at the Fed's target of 2% on a year-over-year basis and it appears the inflation rate is slowing. On a monthly basis (annualized), two of these measure were well below the Fed's target; trimmed-mean CPI was at 1.3%, Core CPI at 1.1% - although median CPI was at 2.5% and and Core PCE for June was at 2.5%. Based on initial data - and comparing to the increase in August 2011 - it is very likely that the August report will show a further decline in the year-over-year inflation rate.

• Weekly Initial Unemployment Claims increase to 366,000

The DOL reports:" In the week ending August 11, the advance figure for seasonally adjusted initial claims was 366,000, an increase of 2,000 from the previous week's revised figure of 364,000. The 4-week moving average was 363,750, a decrease of 5,500 from the previous week's revised average of 369,250."

This graph shows the 4-week moving average of weekly claims since January 2000. The dashed line on the graph is the current 4-week average.

This was at the consensus forecast of 365,000.

The 4-week average post-bubble low is 363,000; this week the average was just above that level at 363,750.

All current Employment Graphs
• Consumer Sentiment increases in August to 73.6

The preliminary Reuters / University of Michigan consumer sentiment index for August increased to 73.6, up from the July reading of 72.3.

This was above the consensus forecast of 72.0 but still fairly low. Sentiment remains weak due to the high unemployment rate and sluggish economy - and rising gasoline prices probably aren't helping.


• Other Economic Stories ...
• July Update: Early Look at 2013 Cost-Of-Living Adjustments indicates 1% increase
• NAHB Builder Confidence increases in August, Highest since February 2007
• House Prices and a Foreclosure Supply Shock
• Comment on Housing, and Starts and Completions
• State Unemployment Rates increased in 44 States in July
• Quarterly Housing Starts by Intent compared to New Home Sales
• Jackson Hole Economic Symposium 2012 Dates

by Calculated Risk on 8/17/2012 06:33:00 PM

Below is a graph I usually post after the release of the NY Fed and Philly Fed manufacturing surveys. Most of the economic data this week was a little more upbeat, but both of these surveys were disappointing ...

This week the Philly Fed survey indicated contraction:

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased 6 points, to a reading of ‐7.1. This marks the fourth consecutive negative reading for the index but also its highest reading since May

And the NY Fed (Empire State) survey was also weak:

The August Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated over the month. The general business conditions index slipped below zero for the first time since October 2011, falling thirteen points to -5.9.

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 August. The ISM and total Fed surveys are through July.

The average of the Empire State and Philly Fed surveys declined in August, and has remained negative for three consecutive months. This suggests another weak reading for the ISM manufacturing index.

by Calculated Risk on 8/17/2012 03:35:00 PM

From economist Tom Lawler:

Based on reports from various state and local realtor associations, boards, and/or MLS, I estimate that US existing home sales as estimated by the NAR ran at a seasonally adjusted annual rate of 4.47 million in July, up 2.3% from June’s preliminary estimated pace. On the NAR’s preliminary June sales estimate, which was way below consensus and lower than my below-consensus forecast, state and local realtor/MLS reports released following the NAR’s EHS release were for the most part lower than I had assumed, and seemed to confirm the below-consensus pace of existing home sales in June. By the same token, however, the local realtor data released across the country seemed to suggest that existing home sales were a bit stronger than the NAR’s preliminary estimate (as was the case in May, when sales were revised upward from a SAAR of 4.55 million to 4.62 million). My “best guess” is that June’s existing home sales will be revised upward by a similar amount – from 4.37 million to around 4.44 million. Net, then, I expect that July’s seasonally adjusted existing home sales pace will be little changed from June’s upwardly revised pace.

While June and July existing home sale at first glance seem a bit disappointing relative to previous expectations, a major reason for the weaken-than-consensus sales is a much larger-than-consensus decline in the “distressed” – and especially the foreclosure – share of resales. E.g., in the markets shown in the “distressed home sales share” table [below], the distressed home sales share for those combined markets this July was down about ten percentage points from last July! (The drop for the whole country, of course, was probably smaller). “Non-distressed” sales have actually been running very strong relative to a year ago – for the markets on page one the YOY gain in “non-distressed” sales was over 30% -- and that strength, combined with significant declines in the inventory of homes for sale, has contributed to the upturn in home prices this year.

On the inventory front, the combination of various “trackers” of select metro markets and realtor reports suggests to me that the inventory of existing homes for sale at the end of July was probably down by about 22% or so from a year ago. How that will translate into a NAR estimate, however, is not clear. E.g., firms that track listings and/or folks who track realtor reports were very surprised that the NAR’s existing home inventory fell by 3.2% from June to July, and that July’s inventory number was down 24.4% from last July. I’m guessing that the June inventory number will be revised upward by around 1.7% (reflecting the upward sales revision), and that the NAR’s inventory estimate for July will be down by about 22.2% from last July, which would imply a monthly increase (from an assumed upward revision in June) of 0.8%.

On the median sales price side, for two months in a row the NAR’s preliminary median sales price estimates have been revised downward significantly, with the biggest revisions coming in the Northeast. I wouldn’t be surprised to see a downward revision in the June MSP as well. For July, using a sales-weighted average methodology, I estimate that the July median existing SF home sales price as estimated by the NAR will show YOY gain of about 7.8%.

CR Note: The NAR is scheduled to release the existing home sales report on Wednesday, August 22nd at 10 AM ET. The preliminary consensus is for sales of 4.50 million SAAR in July (close to Lawler's estimate). Based on Lawler's sales and inventory estimates, months-of-supply would be unchanged at 6.6 months.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-July	11-July	12-July	11-July	12-July	11-July
Las Vegas	40.0%	20.2%	20.7%	50.2%	60.7%	70.4%
Reno	38.0%	28.0%	15.0%	37.0%	53.0%	65.0%
Phoenix	29.5%	23.6%	14.6%	43.1%	44.1%	66.7%
Sacramento	32.0%	22.3%	22.4%	39.0%	54.4%	61.3%
Minneapolis	9.3%	11.0%	24.8%	34.4%	34.1%	45.4%
Mid-Atlantic (MRIS)	11.3%	10.2%	8.7%	15.1%	20.0%	25.2%
Orlando	28.2%	29.4%	23.7%	28.2%	51.9%	57.6%
Southern California	18.7%	17.4%	21.0%	32.6%	39.7%	50.0%
California (DQ)	19.0%	17.3%	22.0%	34.5%	41.0%	51.8%
Lee County, FL	17.3%	18.8%	15.9%	30.6%	33.2%	49.4%
Hampton Roads VA					29.1%	30.3%
Northeast Florida					39.0%	44.1%
Sarasota					32.4%	38.0%*
Chicago					36.1%	36.7%
Rhode Island					24.8%	20.3%

by Calculated Risk on 8/17/2012 01:48:00 PM

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for July. LA area ports handle about 40% of the nation's container port traffic.

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, both inbound and outbound traffic are down slightly compared to the 12 months ending in June.

In general, inbound and outbound traffic has been moving sideways recently.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

For the month of July, loaded outbound traffic was down slightly compared to July 2011, and loaded inbound traffic was down 2% compared to July 2011.

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday - so imports might increase over the next couple of months, but probably not by much.

This suggests import traffic might be down a little in July.

by Calculated Risk on 8/17/2012 10:50:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed or slightly higher in July. Forty-four states recorded unemployment rate increases, two states and the District of Columbia posted rate decreases, and four states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada continued to record the highest unemployment rate among the states, 12.0 percent in July. Rhode Island and California posted the next highest rates, 10.8 and 10.7 percent, respectively. North Dakota again registered the lowest jobless rate, 3.0 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). Two states - New Jersey and New York - are at the maximum unemployment rate for the recession and set new cycle highs in July.

The New York unemployment rate increased to 9.1%, the previous cycle high was 8.9%. The New Jersey unemployment rate increased to 9.8%, the previous cycle high was 9.7%. Every other state has some blue indicating some improvement.

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, although New Jersey is close. In early 2010, 18 states and D.C. had double digit unemployment rates.

All current employment graphs

by Calculated Risk on 8/17/2012 09:55:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for August increased to 73.6, up from the July reading of 72.3.

This was above the consensus forecast of 72.0 but still fairly low. Sentiment remains weak due to the high unemployment rate and sluggish economy - and rising gasoline prices probably aren't helping.

by Calculated Risk on 8/16/2012 09:15:00 PM

First from Bloomberg: U.S. to sell off some mortgages

A $1.7 billion portfolio of nonperforming, federally insured home loans will be offered for sale at auction next month [on Sept 12th].

The loans will be auctioned in pools consisting of homes in Chicago; Phoenix; Newark, N.J.; and Tampa, Fla. ... the portfolio ... consists of 9,442 loans with an average balance of $182,000, for the Department of Housing and Urban Development.

• At 9:55 AM ET, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for August) will be released. The consensus is for sentiment to decrease slightly to 72.0 from 72.3 in July.

• At 10:00 AM, the Conference Board Leading Indicators for August will be released. The consensus is for a 0.2% increase in this index..

• Also at 10:00 AM, the Regional and State Employment and Unemployment (Monthly) for July 2012 is scheduled to be released.

Earlier on housing starts:
• Housing Starts declined to 746 thousand in July
• Quarterly Housing Starts by Intent compared to New Home Sales
• Comment on Housing, and Starts and Completions
• On Yahoo Daily Ticker: Housing Starts Jump 20% in One Year: Recovery Ahead, Says Bill McBride

by Calculated Risk on 8/16/2012 02:57:00 PM

This is a very important year for housing and for the economy. The budding recovery for housing starts and new home sales is positive for GDP and employment. Even though housing starts are increasing, it is from a very low level, and 2012 will still be one of the worst years for housing starts (only 2009, 2010, and 2011 will be worse). But that is good news for the economy: housing starts are on pace to be up 20% from last year (how many sectors are growing 20% this year?), and housing starts could double again over the next several years.

This reminds me of the recovery for auto sales. Auto sales bottomed in February 2009 at close to a 9 million annual sales rate. Now auto sales are running at a 14 million pace; over a 50% increase. That strong increase in auto sales really contributed to GDP growth over the last few years, see from Cardiff Garcia at FT Alphaville: Car-driven GDP growth.

Now we are starting to see a rebound for housing. And housing will have an even larger impact on GDP and employment growth than autos; and housing will probably double from here (more than the 50% increase for autos). Even with the downside risks from Europe and the fiscal cliff, this suggests more growth in the medium term (policy mistakes in the US and Europe are probably the biggest economic risk).

Through July, single family starts are on pace for over 500 thousand in 2012, and total starts are on pace for about 730 thousand. That is up from 431 thousand single family starts in 2011, and 609 thousand total starts. Starts are running above the forecasts for most analysts (however Lawler and the NAHB were close).

But even with the increase in starts, completions will be near record lows again in 2012. 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. Completions have barely turned up, but will increase over the next several months.

For the sixth 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 declined to 746 thousand in July
• Quarterly Housing Starts by Intent compared to New Home Sales
• On Yahoo Daily Ticker: Housing Starts Jump 20% in One Year: Recovery Ahead, Says Bill McBride (Note: Doing the interview was a little more difficult than I expected. The room was mostly dark except the lights in my face. There was a green screen behind me, and I couldn't see Aaron.

by Calculated Risk on 8/16/2012 01:42:00 PM

In addition to housing starts for July, the Census Bureau released Housing Starts by Intent for Q2. This is a very useful report.

First, we can't directly compare single family housing starts to new home sales. For starts of single family structures, the Census Bureau includes owner built units and units built for rent that are not included in the new home sales report. For an explanation, see from the Census Bureau: Comparing New Home Sales and New Residential Construction

We are often asked why the numbers of new single-family housing units started and completed each month are larger than the number of new homes sold. This is because all new single-family houses are measured as part of the New Residential Construction series (starts and completions), but only those that are built for sale are included in the New Residential Sales series.

However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis.

The quarterly report released this morning showed there were 106,000 single family starts, built for sale, in Q2 2012, and that was just above the 103,000 new homes sold for the same quarter (Using Not Seasonally Adjusted data for both starts and sales).

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

Click on graph for larger image.

Single family starts built for sale were up about 28% compared to Q2 2011. This is the highest level since 2008.

Owner built starts were up slightly year-over-year from Q2 2011. And condos built for sale are still near the record low.

The 'units built for rent' has increased significantly and is up about 48% year-over-year.

The second graph shows quarterly single family starts, built for sale and new home sales (NSA).

In 2005, and most of 2006, starts were higher than sales, and inventories of new homes increased. The difference on this graph is pretty small, but the builders were starting about 30,000 more homes per quarter than they were selling (speculative building), and the inventory of new homes soared to record levels. Inventory of under construction and completed new home sales peaked at 477,000 in Q3 2006.

In 2008 and 2009, the home builders started far fewer homes than they sold as they worked off the excess inventory that they had built up in 2005 and 2006.

For the last 3 years, the builders have sold a few more homes than they started, and inventory levels are now at record lows (117,000 under construction and completed as of June 2012).

Note: new home sales are reported when contracts are signed, so it is appropriate to compare sales to starts (as opposed to completions). This is not perfect because of the handling of cancellations, but it does suggest the builders are keeping inventories under control, and also suggests that the year-over-year increase in housing starts is directly related to an increase in demand and not renewed speculative building.

by Calculated Risk on 8/16/2012 11:22:00 AM

From Nick Timiraos at the WSJ: Shadow Inventory: How Low New Construction Helps the Outlook

There’s been a lot of attention over the last few years on the “shadow inventory” of potential foreclosures — a pent-up supply of homes that could smother an incipient housing recovery.

But there’s been comparatively less attention on the lack of new housing construction, which has helped to offset the potential damage from elevated levels of foreclosed properties. New home building has been at its lowest levels since World War II in 2009, 2010, and 2011.

The record low level of completions over the last four years - and record low level of housing units added to the housing stock - is an important reason for the budding recovery in housing. See: Housing: Record Low Total Completions in 2011. The last four years have seen record low completions, and 2012 will also be very low. This low level of completions means that a significant portion of the excess vacant housing supply has been absorbed. And completions in 2012 will still be very low even with the 20%+ increase in housing starts.

From Timiraos:

“Not too many people talk about the lack of new construction over the last several years, which has set the foundation for a snapback in pricing,” says Michael Sklarz, president of real-estate research firm Collateral Analytics.

Frank Nothaft, the chief economist at Freddie Mac, elaborated on this point in a research note published last week ... “the relatively small amount of new construction, coupled with increased household formation, has allowed much of the excess vacant inventory to be absorbed over the past few years,” he wrote.

Nothaft is using the Housing Vacancies and Homeownership (HVS) and that survey is not consistent with other measures (like the decennial Census and the ACS). The Census Bureau is looking into the differences between the surveys, but I'm not confident in using the HVS to estimate the excess vacant supply.

However I do agree with Nothaft that "much of the excess vacant" has been absorbed.

by Calculated Risk on 8/16/2012 08:57:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in July were at a seasonally adjusted annual rate of 746,000. This is 1.1 percent below the revised June estimate of 754,000, but is 21.5 percent above the July 2011 rate of 614,000.

Single-family housing starts in July were at a rate of 502,000; this is 6.5 percent below the revised June figure of 537,000. The July rate for units in buildings with five units or more was 229,000.

Building Permits:
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 812,000. This is 6.8 percent above the revised June rate of 760,000 and is 29.5 percent above the July 2011 estimate of 627,000.

Single-family authorizations in July were at a rate of 513,000; this is 4.5 percent above the revised June figure of 491,000. Authorizations of units in buildings with five units or more were at a rate of 274,000 in July.

Click on graph for larger image.

Total housing starts were at 746 thousand (SAAR) in July, down 1.1% from the revised June rate of 754 thousand (SAAR). Note that June was revised from 760 thousand.

Single-family starts decreased 6.5% to 502 thousand in July.

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 56% from the bottom start rate, and single family starts are up 42% from the low.

This was slightly below expectations of 750 thousand starts in July, but the key is starts are up solidly from last year. Right now starts are on pace to be up about 20% from 2011. Also note that total permits were at the highest level since 2008.

All Housing Investment and Construction Graphs

by Calculated Risk on 8/16/2012 08:30:00 AM

The DOL reports:

In the week ending August 11, the advance figure for seasonally adjusted initial claims was 366,000, an increase of 2,000 from the previous week's revised figure of 364,000. The 4-week moving average was 363,750, a decrease of 5,500 from the previous week's revised average of 369,250.

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 decreased to 363,750.

This was at the consensus forecast of 365,000.


And here is a long term graph of weekly claims:

The 4-week average post-bubble low is 363,000; this week the average was just above that level at 363,750.

All current Employment Graphs

by Calculated Risk on 8/15/2012 09:54:00 PM

First, informative reading from Bond Girl at Nemo's site: The well-known story of municipal bond defaults

And from Jim Hamilton at Econbrowser: Recent developments in oil markets

And from Tim Duy at Economist'sView: Data Dump

• At 8:30 AM ET, Housing Starts for July will be released. The consensus is for total housing starts to decrease to 750,000 (SAAR) in July, down from 760,000 in June.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand from 361 thousand last week. Initial weekly unemployment claims have been declining recently, and the 4-week average last week was just above the post-bubble low of 363,000.

• At 10:00 AM, the Philly Fed Survey for August will be released. This has been negative the last three months with readings of -5.8, -16.6 and -12.9. The consensus is for another negative reading of -5.0 in August (above zero indicates expansion).


Another question for the monthly economic prediction contest: