by Calculated Risk on 1/03/2013 02:00:00 PM

It appears several members expect QE3 to end in 2013. Also, all but one member was in favor of economic thresholds for raising the Fed Funds rate.

From the Fed: Minutes of the Federal Open Market Committee, Meeting of December 11-12, 2012. Excerpt:

In their discussion of monetary policy for the period ahead, all members but one judged that continued provision of monetary accommodation was warranted in order to support further progress toward the Committee's goals of maximum employment and price stability. The Committee judged that such accommodation should be provided in part by continuing to purchase MBS at a pace of $40 billion per month and by purchasing longer-term Treasury securities, initially at a pace of $45 billion per month, following the completion of the maturity extension program at the end of the year. The Committee also maintained its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS into agency MBS and decided that, starting in January, it will resume rolling over maturing Treasury securities at auction. While almost all members thought that the asset purchase program begun in September had been effective and supportive of growth, they also generally saw that the benefits of ongoing purchases were uncertain and that the potential costs could rise as the size of the balance sheet increased. Various members stressed the importance of a continuing assessment of labor market developments and reviews of the program's efficacy and costs at upcoming FOMC meetings. In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.

With regard to its forward guidance about the federal funds rate, the Committee decided to indicate in the statement language that it expects the highly accommodative stance of monetary policy to remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In addition, all but one member agreed to replace the date-based guidance with economic thresholds indicating that the exceptionally low range for the federal funds rate would remain appropriate at least as long as the unemployment rate remains above 6½ percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee thought it would be helpful to indicate in the statement that it viewed the economic thresholds as consistent with its earlier, date-based guidance. The new language noted that the Committee would also consider other information when determining how long to maintain the highly accommodative stance of monetary policy, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. One member dissented from the policy decision, opposing the new economic threshold language in the forward guidance, as well as the additional asset purchases and continued intervention in the MBS market.
emphasis added

by Calculated Risk on 1/03/2013 12:07:00 PM

From Freddie Mac today: Mortgage Rates Start the New Year Near All-Time Record Lows

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates continuing to hover near their all-time record lows ...

30-year fixed-rate mortgage (FRM) averaged 3.34 percent with an average 0.7 point for the week ending January 3, 2013, down from last week when it averaged 3.35 percent. Last year at this time, the 30-year FRM averaged 3.91 percent.

15-year FRM this week averaged 2.64 percent with an average 0.7 point, down from last week when it averaged 2.65 percent. A year ago at this time, the 15-year FRM averaged 3.23 percent.

The Freddie Mac survey started in 1971 and mortgage rates are currently near the record low for the last 40 years.

Click on graph for larger image.

This graph shows the 15 and 30 year fixed rates from the Freddie Mac survey since the Primary Mortgage Market Survey® started in 1971 (15 year in 1991).

Note: Mortgage rates were at or below 5% back in the 1950s.

by Calculated Risk on 1/03/2013 10:05:00 AM

Press Release: Asking Prices Up 5.1 Percent Nationally Year-Over-Year, While Rents Rose 5.2 Percent

In December 2012, asking prices increased 5.1 percent nationally year-over-year (Y-o-Y), marking a huge turnaround from being down 4.3 percent in December 2011. Moreover, not only are prices rising, these gains have accelerated in the last year. Quarter-over-quarter price changes were 0.8% in Q1 (March 2012), 0.4% in Q2 (June 2012), 1.4% in Q3 (September 2012), and 2.3% in Q4 (December 2012), seasonally adjusted.

Asking home prices increased the most in Phoenix, which rose 26.0 percent Y-o-Y in December 2012; however, Las Vegas and Seattle experienced the year’s most dramatic price turnarounds. Both had price gains of more than 10 percent in 2012 after declines of more than 10 percent in 2011. Overall, 2012 marked a huge turnaround year for most local housing markets. In fact, prices rose in 82 of the 100 largest metros at the end of December, compared with just 12 out of 100 in 2011.

Nationally, rents rose 5.2 percent Y-o-Y. Throughout 2012, rent increases Y-o-Y remained around 5 percent, even though asking price increases accelerated and have almost caught up with rent gains at year’s end. Locally, rents rose most in Houston, Oakland and Miami. Rent increases surpassed price increases by a wide margin in Houston, Chicago, Philadelphia, and Baltimore. In contrast, prices grew much faster than rents in Phoenix, Las Vegas, Riverside-San Bernardino, and Sacramento. Overall, prices rose faster than rents in 17 of the 25 largest rental markets in 2012.

“The housing market enters 2013 with a running start,” said Jed Kolko, Trulia’s Chief Economist. “Price gains picked up steam in 2012, starting with modest increases early in the year and accelerating in the third and fourth quarter. In 2013, rising prices will encourage more new construction and will encourage some homeowners to sell, which will help alleviate the current inventory shortage.”

More from Jed Kolko, Trulia Chief Economist: Asking Home Prices Up 5.1% in 2012, Huge Turnaround After Falling 4.3% in 2011

These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a SA basis.

by Calculated Risk on 1/03/2013 08:30:00 AM

The DOL reports:

In the week ending December 29, the advance figure for seasonally adjusted initial claims was 372,000, an increase of 10,000 from the previous week's revised figure of 362,000. The 4-week moving average was 360,000, an increase of 250 from the previous week's revised average of 359,750.

The previous week was revised up from 350,000.

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 increased to 360,000.


Weekly claims are very volatile during the holiday season, but the 4-week average finished 2012 near the low for the year.


Weekly claims were above the 363,000 consensus forecast.


And here is a long term graph of weekly claims:

Note: There are large seasonal factors in December and January, and that can make for fairly large swings for weekly claims.


All current Employment Graphs

by Calculated Risk on 1/03/2013 08:19:00 AM

From ADP:

Private sector employment increased by 215,000 jobs from November to December, according to the December ADP National Employment Report®, which is produced by Automatic Data Processing, Inc. (ADP®) ... in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The November 2012 report, which reported job gains of 118,000, was revised upward by 30,000 to 148,000 jobs.

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market held firm in December despite the intensifying fiscal cliff negotiations in Washington. Businesses even became somewhat more aggressive in their hiring at year end. Most encouraging is the revival in construction jobs, although the December gain was likely lifted by rebuilding after Superstorm Sandy. The job market ended 2012 on a more solid footing.”

This was above the consensus forecast for 150,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 157,000 payroll jobs in December, on a seasonally adjusted (SA) basis.

ADP hasn't been very useful in predicting the BLS report, but maybe the new method will work better. This is the 3rd month for the new method.