by Calculated Risk on 3/26/2012 10:00:00 AM

From the NAR: Pending Home Sales Ease in February but Solidly Higher Than a Year Ago

The Pending Home Sales Index, a forward-looking indicator based on contract signings, eased 0.5 percent to 96.5 in February from 97.0 in January but is 9.2 percent above February 2011 when it was 88.4. The data reflects contracts but not closings.
...
The PHSI in the Northeast slipped 0.6 percent to 77.7 in February but is 18.4 percent above a year ago. In the Midwest the index jumped 6.5 percent to 93.8 and is 19.0 percent higher than February 2011. Pending home sales in the South fell 3.0 percent to an index of 105.8 in February but are 7.8 percent above a year ago. In the West the index declined 2.6 percent in February to 99.3 and is 1.8 percent below February 2011.

This was below the consensus of a 1.0% increase for this index.

Contract signings usually lead sales by about 45 to 60 days, so this is for sales in March and April.

by Calculated Risk on 3/26/2012 08:57:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth near average in February

Led by weaker production-related indicators, the Chicago Fed National Activity Index decreased to –0.09 in February from +0.33 in January. ...

The index’s three-month moving average, CFNAI-MA3, increased from +0.22 in January to +0.30 in February—its highest level since May 2010. February’s CFNAI-MA3 suggests that growth in national economic activity was above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited 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 near trend in February - still not strong growth.

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 3/26/2012 08:11:00 AM

From Fed Chairman Ben Bernanke: Recent Developments in the Labor Market

We have seen some positive signs on the jobs front recently, including a pickup in monthly payroll gains and a notable decline in the unemployment rate. That is good news. At the same time, some key questions are unresolved. For example, the better jobs numbers seem somewhat out of sync with the overall pace of economic expansion. What explains this apparent discrepancy and what implications does it have for the future course of the labor market and the economy?
...
A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed. Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force. Moreover, we cannot yet be sure that the recent pace of improvement in the labor market will be sustained. Notably, an examination of recent deviations from Okun's law suggests that the recent decline in the unemployment rate may reflect, at least in part, a reversal of the unusually large layoffs that occurred during late 2008 and over 2009. To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.

I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well. We must watch long-term unemployment especially carefully, however. Even if the primary cause of high long-term unemployment is insufficient aggregate demand, if progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further, possibly converting a cyclical problem into a structural one.

If this hypothesis is wrong and structural factors are in fact explaining much of the increase in long-term unemployment, then the scope for countercyclical policies to address this problem will be more limited. Even if that proves to be the case, however, we should not conclude that nothing can be done. If structural factors are the predominant explanation for the increase in long-term unemployment, it will become even more important to take the steps needed to ensure that workers are able to obtain the skills needed to meet the demands of our rapidly changing economy.

by Calculated Risk on 3/25/2012 07:16:00 PM

From the Financial Times: Merkel set to allow firewall to rise

Senior European officials ... would allow the €440bn [EFSF] ... to keep running when a new permanent €500bn fund, called the European Stability Mechanism, starts up in the middle of this year.

[With] about €200bn committed to Greek, Irish and Portuguese bailouts, the total available would be €740bn. ... the system to fall back to €500bn once the EFSF expires in mid-2013.
excerpt with permission

This is probably still not enough to bailout Spain or Italy.

And from Bloomberg:

German Chancellor Angela Merkel and her finance minister, Wolfgang Schaeuble, have abandoned their opposition to combining the two funds, Der Spiegel reported yesterday, citing unnamed government officials. The two leaders have agreed that the EFSF and ESM may be “in operation” for a transitional period, the magazine reported.

The focus by policy makers and investors has shifted over recent weeks from Greece to Spain, where Prime Minister Mariano Rajoy is struggling to reduce the country’s budget deficit in the face of a looming recession.

Rajoy faces his first general strike on March 29 as unions protest against changes to employment laws making it cheaper to fire workers and cut wages. Three months after coming to power, he is due to present the 2012 budget on March 30, which is designed to cut the deficit.

Yesterday:
• Summary for Week ending March 23rd
• Schedule for Week of March 25th

by Calculated Risk on 3/25/2012 01:20:00 PM

Kathleen Pender has some details at the SF Chronicle: Harp 2 mortgage-refinance program

Harp 2 got into full swing last week after Fannie Mae and Freddie Mac updated their automated underwriting systems ... Fannie and Freddie updated their systems March 17 and 15, respectively. That means lenders can now refinance any loans, and do it more efficiently. ...

Banks are free to add their own requirements, and some have. Wells Fargo spokesman Jim Hines says, "We also employ minimum credit standards to ensure customers have capacity to repay the mortgage." Some banks, including Chase and Bank of America, are not refinancing loans under Harp 2 that they do not already service. ... originators - who often continue to service loans they sell to Fannie or Freddie - don't want all the headaches associated with servicing defaulted loans. That's why some lenders are still imposing loan-to-value limits and other requirements.

This means high LTV borrowers will probably have to stick with their current servicer to refinance - and the servicer can charge high fees for the refinance. Still - with the automated version - we should see an increase in HARP refinance activity.

Yesterday:
• Summary for Week ending March 23rd
• Schedule for Week of March 25th