by Calculated Risk on 12/23/2013 07:01:00 AM

According to the First Look report for November to be released today by Lender Processing Services (LPS), the percent of loans delinquent increased in November compared to October, and declined about 9.4% year-over-year. Also the percent of loans in the foreclosure process declined further in November and were down 29% over the last year.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) increased to 6.45% from 6.28% in October. The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined to 2.50% in November from 2.54% in October.   The is the lowest level since late 2008.

The number of delinquent properties, but not in foreclosure, is down 342,000 properties year-over-year, and the number of properties in the foreclosure process is down 511,000 properties year-over-year.

LPS will release the complete mortgage monitor for November in early January.

LPS: Percent Loans Delinquent and in Foreclosure Process
	November 2013	October 2013	November 2012
Delinquent	6.45%	6.28%	7.03%
In Foreclosure	2.50%	2.54%	3.61%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,958,000	1,869,000	1,999,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,283,000	1,283,000	1,584,000
Number of properties in foreclosure pre-sale inventory:	1,256,000	1,276,000	1,767,000
Total Properties	4,497,000	4,428,000	5,350,000

by Calculated Risk on 12/22/2013 08:17:00 PM

Monday:
• At 8:30 AM ET, the Personal Income and Outlays report for November. The consensus is for a 0.5% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• Also at 8:30 AM, the Chicago Fed National Activity Index for November. This is a composite index of other data.

• At 9:00 AM, the Chemical Activity Barometer (CAB) for December from the American Chemistry Council. This appears to be a leading economic indicator.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for December). The consensus is for a reading of 83.5, up from the preliminary reading of 82.5, and up from the November reading of 75.1.

Weekend:
• Schedule for Week of December 22nd

• Review: Ten Economic Questions for 2013

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 10 and DOW futures are up 82 (fair value).

Oil prices have been moving up with WTI futures at $99.25 per barrel and Brent at $111.81 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.24 per gallon.  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

by Calculated Risk on 12/22/2013 12:38:00 PM

Next week I'll post some economic questions for 2014, but first here is a review of my Ten Economic Questions for 2013.

After posting the list, I followed up with a discussion of each question. The goal was to provide an overview of what I was expecting in 2013 (I don't have a crystal ball, but I think it helps to outline what I think will happen - and understand when I was wrong).

I've linked to my posts from the beginning of the year, with a brief excerpt and a few comments:

10) Question #10 for 2013: Europe and the Euro

Even though I've been pessimistic on Europe (In 2011, I correctly argued that the eurozone was heading into recession), I was less pessimistic than many others. Each of the last two years, I argued the eurozone would stay together ... My guess is the eurozone makes it through another year without losing any countries or a serious collapse. Obviously several countries are near the edge, and the key will be to return to expansion soon.

Note: unless the eurozone "implodes", I don't think Europe poses a large downside risk to the US.

Correct: The Eurozone survived another year.  The good news is it is now obvious to almost everyone that "austerity" alone failed.  The bad news is that many policymakers remain blind to the obvious. 

Even with bad policies, eventually the European economies will start to grow again.   And it appears that is starting to happen now.  Of course many problems remain.

9) Question #9 for 2013: How much will Residential Investment increase?

New home sales will still be competing with distressed sales (short sales and foreclosures) in many areas in 2013 - and probably even more foreclosures in some judicial states. Also I've heard some builders might be land constrained in 2013 (not enough finished lots in the pipeline). Both of these factors could slow the growth of residential investment, but I expect another solid year of growth.

... I expect growth for new home sales and housing starts in the 20% to 25% range in 2013 compared to 2012.

Forecast was a little high: We have start data through November, and starts this year are up 19% over the same period in 2012.  New home sales are up 15% through the first ten months of 2013 compared to the same period in 2012.  This is a little below my forecast, but another solid year for housing.

8) Question #8 for 2013: Will Housing inventory bottom in 2013?

If prices increase enough then some of the potential sellers will come off the fence, and some of these underwater homeowners will be able to sell. It might be enough for inventory to bottom in 2013.

Right now my guess is active inventory will bottom in 2013, probably in January. At the least, the rate of year-over-year inventory decline will slow sharply.

Correct: It appears inventory bottomed early in 2013, and inventory was up 5% year-over-year in November according to the NAR.  Inventory is still low, but this increase in inventory should slow the rate of house price increases.

7) Question #7 for 2013: What will happen with house prices in 2013?

Calling the bottom for house prices in 2012 now appears correct.

[E]ven though I expect inventories to be low this year, I think we will see more inventory come on the market in 2013 than 2012, as sellers who were waiting for a better market list their homes, and as some "underwater" homeowner (those who owe more than their homes are worth) finally can sell without taking a loss.

Also I expect more foreclosure in some judicial states, and I think the price momentum in Phoenix and other "bounce back" areas will slow.

All of these factors suggest further prices increases in 2013, but at a slower rate than in 2012.

Forecast was too low: The Case-Shiller Comp 20 and National indexes both increased about 7% in 2012.  The seasonally adjusted Case-Shiller Comp 20 index was up 13.3% year-over-year in September, and the National Index is up 11% through Q3 . Other indexes show less appreciation - and I expect price increases to slow - but my initial prediction for house prices this year was too low.

6) Question #6 for 2013: What will happen with Monetary Policy and QE3?

I expect the FOMC will review their purchases at each meeting just like they used to review the Fed Funds rate. We might see some adjustments during the year, but currently I expect the Fed to purchase securities at about the same level all year.

Correct: The Fed kept their purchases steady all year, and will start to reduce QE asset purchases in January (announced at the meeting last week).

5) Question #5 for 2013: Will the inflation rate rise or fall in 2013?

I still expect inflation to be near the Fed's target. With high unemployment and low resource utilization, I don't see inflation as a threat in 2013.

Forecast was a little too high: Inflation has been below the Fed's target all year. This is a significant issue for the Fed, and it appears my inflation forecast was a little high.

4) Question #4 for 2013: What will the unemployment rate be in December 2013?

My guess is the participation rate will remain around 63.6% in 2013, and with sluggish employment growth, the unemployment rate will be in the mid-to-high 7% range in December 2013 (little changed from the current rate).

Forecast was too high: The unemployment rate was at 7.0% in November.  I was too pessimistic on the unemployment rate because the participation rate has continued to decline.

3) Question #3 for 2013: How many payroll jobs will be added in 2013?

Both state and local government and construction hiring should improve in 2013. Unfortunately there are other employment categories that will be hit by the austerity (especially the increase in payroll taxes). I expect that will offset any gain from construction and local governments. So my forecast is close to the previous two years, a gain of about 150,000 to 200,000 payroll jobs per month in 2013.

Correct: Through November 2013, the economy has added an average of 173 thousand jobs per month - about as expected.

2) Question #2 for 2013: Will the U.S. economy grow in 2013?

[R]ight now it appears the drag from austerity will probably offset the pickup in the private sector - and we can expect another year of sluggish growth in 2013 probably in the 2% range again.

Correct: It now looks like GDP will increase in the 2.2% to 2.4% range for 2013.

1) Question #1 for 2013: US Fiscal Policy

[T]the House will fold their [early 2013] losing hand [on the debt ceiling] soon. ...

Although the negotiations on the "sequester" will be tough, I suspect something will be worked out (remember the goal is to limit the amount of austerity in 2013). The issue that might blow up is the “continuing resolution", and that might mean a partial shut down of the government. This wouldn't be catastrophic (like the "debt ceiling"), but it would still cause problems for the economy and is a key downside risk.

And a final prediction: If we just stay on the current path ... I think the deficit will decline faster than most people expect over the next few years. Eventually the deficit will start to increase again due to rising health care costs (this needs further attention), but that isn't a short term emergency.

Mostly Correct: The House did fold early this year, but I was wrong about the sequester (bad policy).  Unfortunately I was also correct about the government shutdown.

And I was definitely correct about the deficit decreasing faster than most people expected.  This has really surprised some policymakers (who unfortunately are still not paying attention).

Luckily 2014 is an election year, and with the recent budget agreement, I don't expect the House to be a huge downside risk next year (assuming Congress "pays the bills").

Overall 2013 unfolded about as expected.  I'm expecting Stronger Economic Growth in 2014, and longer term, the future's so bright ...

by Calculated Risk on 12/21/2013 04:44:00 PM

Here is a minor indicator that I follow, from ATA: ATA Truck Tonnage Index Jumped 2.7% in November

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 2.7% in November, after falling 1.9% in October. ... In November, the index equaled 128.5 (2000=100) versus 125.1 in October. November’s level is a record high. Compared with November 2012, the SA index surged 8.1% ...
...
“Tonnage snapped back in November, which fits with several other economic indicators,” said ATA Chief Economist Bob Costello. “Assuming that December isn’t weak, tonnage growth this year will be more than twice the gain in 2012.”

Tonnage increased 2.3% in 2012. Costello noted tonnage accelerated in the second half of the year, indicating that the economy is likely stronger some might believe.
emphasis added

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is up solidly year-over-year. The monthly decline in October was probably related to the government shutdown, but the index bounced back in November to a record high.

by Calculated Risk on 12/21/2013 12:47:00 PM

The key reports this week are Personal Income and Outlays for November on Monday, and November New Home Sales on Tuesday.

For manufacturing, the Richmond Fed December survey will be released on Tuesday.

Merry Christmas and Happy Holidays to All!

----- Monday, December 23rd -----
8:30 AM ET: Personal Income and Outlays for November. The consensus is for a 0.5% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.1%.

8:30 AM ET: Chicago Fed National Activity Index for November. This is a composite index of other data.

9:00 AM: Chemical Activity Barometer (CAB) for December from the American Chemistry Council. This appears to be a leading economic indicator.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for December). The consensus is for a reading of 83.5, up from the preliminary reading of 82.5, and up from the November reading of 75.1.

----- Tuesday, December 24th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Durable Goods Orders for November from the Census Bureau. The consensus is for a 1.5% increase in durable goods orders.

9:00 AM: FHFA House Price Index for October 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% increase.

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

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

The consensus is for an increase in sales to 450 thousand Seasonally Adjusted Annual Rate (SAAR) in November from 444 thousand in October. 

10:00 AM: Richmond Fed Survey of Manufacturing Activity for December. The consensus is a reading of 10, down from 13 in November (above zero is expansion).

All US markets will close early.

----- Wednesday, December 25th -----
All US markets will be closed in observance of the Christmas Holiday.

----- Thursday, December 26th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 340 thousand from 379 thousand last week.

----- Friday, December 27th -----
No economic releases scheduled.