by Calculated Risk on 12/13/2013 10:53:00 AM

Update: FHA ISSUES ANNUAL FINANCIAL STATUS REPORT TO CONGRESS

Nick Timiraos at the WSJ has some details: Audit Shows FHA Faces $1.3 Billion Deficit

The Federal Housing Administration ran a projected shortfall of $1.3 billion at the end of September, down from a much larger projected deficit of $16.3 billion one year earlier, according to the agency's independent financial review, released Friday.
...
In September, the FHA received a $1.7 billion infusion from the U.S. Treasury, its first such injection in its 79-year history. The agency is required to maintain enough cash to pay for projected losses on the more than $1 trillion in loans that it guarantees. A separate report next year from White House budget officials will determine whether the FHA needs additional taxpayer money.
...
Most of the agency's losses stem from loans made between 2007 and 2009, when the housing bust deepened. Loans made since 2010 are profitable, the report found.

by Calculated Risk on 12/13/2013 08:55:00 AM

From the BLS:

The Producer Price Index for finished goods edged down 0.1 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods decreased 0.2 percent in October and 0.1 percent in September.
...
In November, the decrease in the finished goods index can be traced to a 0.4-percent decline in prices for finished energy goods. By contrast, prices for finished goods less foods and energy advanced 0.1 percent.

This slight decline was expected, and was mostly due to a decline in energy products. However this is another indicator showing little inflation.

A key question for the Fed next week is if the below target "rate of inflation experienced so far this year has become ingrained in the economy" (using some of Bernanke's words from 2011 when he argued a small increase in inflation was transitory - and Bernanke was correct then).

To start to reduce asset purchases next week, the FOMC would probably have to argue that the current low inflation is transitory.

by Calculated Risk on 12/12/2013 08:33:00 PM

As expected, the House passed the budget deal. From the WSJ: House Easily Passes Budget Agreement in 332-94 Vote

The bill passed by a wide bipartisan margin, 332-94. The bill drew a strong bipartisan majority: 169 Republicans and 163 Democrats voted for the measure. Voting in opposition were 62 Republicans and 32 Democrats.
...
There is no guarantee that this bipartisan budget deal signals the end of brinkmanship or that this episode of bipartisanship will reach into other areas.

This isn't the end of "brinkmanship" or dumb political stunts, but those usually happen in odds years, as opposed to election years - so voters will forget.

Friday:
• 8:30 AM ET, the Producer Price Index for November. The consensus is for a 0.1% decrease in producer prices (and 0.1% increase in core PPI).

by Calculated Risk on 12/12/2013 06:46:00 PM

From housing economist Tom Lawler:

Hovnanian Enterprises reported that net orders (including jvs) in the quarter ended October 31, 2013 totaled 1,315, down 8.9% from the comparable quarter of 2012. The dip in orders came despite a YOY community-count increase of 6.9%. The company’s sales cancellation rate, expressed as a % of gross orders, was 23% last quarter, unchanged from a year ago. Home deliveries last quarter totaled 1,816, up 3.8% from the comparable quarter of 2012, at an average sales price of $371,401, up 13.8% from a year go. The company’s order backlog at the end of October was 2,392, up 11.5% from last October, at an average order price of $354,672, up 2.5% from a year ago.

Hovnanian said in its sales release that its “sales slowed from July through September due to the adverse impacts of higher mortgage rates, the sequester and the government shutdown,” but another factor was Hovnanian’s aggressive price increases (highlighted in last quarter’s presentation) in several markets, especially California. Hovnanian’s net orders in California last quarter were down 48.4% from a year ago, at an average contract price of $571,800, up 41.5% from a year ago.

Click on graph for larger image.

In its quarter presentation Hovnanian provided monthly net orders figures, including an estimate for November. Combined net orders for October and November were virtually unchanged from the same two months of 2012 (847 vs. 849) While in its press release Hovnanian said that November net orders exceed last November’s levels, its quarterly presentation showed a small YOY decline (382 vs. 385).

Hovnanian joined the vast bulk of publicly-traded large home builders reporting a significant drop in net home orders last quarter – consistent with Census’s estimate of a substantial decline in new home sales during that period.

by Calculated Risk on 12/12/2013 03:06:00 PM

Two years ago I posted a graph with projections of when payroll employment would return to pre-recession levels (see: Sluggish Growth and Payroll Employment from November 2011).

In 2011, I argued we'd continue to see sluggish growth (back in 2011 many analysts were forecasting another US recession - those forecasts were wrong).

  On the graph I posted two lines - one with payroll growth of 125,000 payroll jobs added per month (the pace in 2011), and another line with 200,000 payroll jobs per month.  The following graph is an update with reported payroll growth through November 2013.

The dashed red line is 125,000 payroll jobs added per month. The dashed blue line is 200,000 payroll jobs per month.  Both projections are from November 2011.

Click on graph for larger image.

So far the economy has tracked just below the blue line (200,000 payroll jobs per month).

Right now it appears payrolls will exceed the pre-recession peak in mid-2014.

Currently there are about 1.3 million fewer payroll jobs than before the recession started, and at the recent pace of job growth it will take about 7 months to reach the previous peak.  

Of course this doesn't include population growth and new entrants into the workforce (the workforce has continued to grow).

Note: There are 760 thousand fewer private sector payroll jobs than before the recession started. At the recent pace of private sector job growth, the private sector could be back at the pre-recession peak in March 2014.