by Calculated Risk on 2/21/2014 08:43:00 PM

From some weekend reading, here are the 2008 FOMC transcripts.

Here is a gem from August 2008 from St Louis Fed President James Bullard:

My sense is that the level of systemic risk associated with financial turmoil has fallen dramatically. For this reason, I think the FOMC should begin to de-emphasize systemic risk worries. My reasoning is as follows. Systemic risk means that the sudden failure of a particular financial firm would so shock other ostensibly healthy firms in the industry that it would put them out of business at the same time. The simultaneous departure of many firms would badly damage the financial services industry, causing a substantial decline in economic activity for the entire economy. This story depends critically on the idea that the initial failure is sudden and unexpected by the healthy firms in the industry. But why should this be, once the crisis has been ongoing for some time? Are the firms asleep? Did they not realize that they may be doing business with a firm that may be about to default on its obligations? Are they not demanding risk premiums to compensate them for exactly this possibility? My sense is that, because the turmoil has been ongoing for some time, all of the major players have made adjustments as best they can to contain the fallout from the failure of another firm in the industry. They have done this not out of benevolence but out of their own instincts for self-preservation. As one of my contacts at a large bank described it, the discovery process is clearly over. I say that the level of systemic risk has dropped dramatically and possibly to zero.
emphasis added

And then the economy collapsed. I guess the "discovery process" wasn't over!

From Annie Lowrey at the NY Times Economix: How the Fed Saw a Recession, Then Didn’t, Then Did. From January 2008:

JANET L. YELLEN: The severe and prolonged housing downturn and financial shock have put the economy at, if not beyond, the brink of recession.

RICHARD FISHER: While there are tales of woe, none of the 30 C.E.O.’s to whom I talked, outside of housing, see the economy trending into negative territory. They see slower growth. Some of them see much slower growth. None of them at this juncture – the cover of Newsweek notwithstanding, a great contra-indicator, which by the way shows “the road to recession” on the issue that is about to come out – see us going into recession.

CHARLES EVANS: Our cumulative actions following this meeting should provide noticeable stimulus to the economy by midyear.… In the absence of further negative developments, growth should improve in the second half of this year.

ERIC ROSENGREN: We could soon be or may already be in a recession.

As I've noted over the years, Dr. Yellen is usually correct and Mr. Fisher is frequently funny - and usually wrong. 

From Cardiff Garcia at the FT Alphaville: FOMC transcripts: Bernanke on Japanese vs American monetary policy (or QE vs credit easing)

More excerpts from the NY Times: Inside the Fed’s 2008 Proceedings

And more from Annie Lowrey at the NY Times Economix: In a Dark Year, a Lighter Side at the Fed

MR. MISHKIN: I am very skeptical of [household surveys] because they tend to react very much to current conditions. Also, if you ask people what TV shows they are watching, they will tell you that they are watching PBS and something classy, but you know they are watching “Desperate Housewives.”

MR. BERNANKE. What is wrong with “Desperate Housewives”?

by Calculated Risk on 2/21/2014 02:45:00 PM

Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in January.

Lawler writes:

The short-sales share of home sales is down in virtually all markets, and in most markets by a lot from a year ago. Note that the foreclosure sales share in Florida is up from a year ago.

From CR: Total "distressed" share is down significantly in most of these markets, mostly because of a decline in short sales.

And foreclosures are down in all areas except Florida.

The All Cash Share (last two columns) is mostly declining year-over-year.  As investors pull back in markets the share of all cash buyers will probably decline.

In general it appears the housing market is slowly moving back to normal.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Jan-14	Jan-13	Jan-14	Jan-13	Jan-14	Jan-13	Jan-14	Jan-13
Las Vegas	17.0%	36.2%	11.0%	12.5%	28.0%	48.7%	46.3%	56.1%
Reno**	16.0%	41.0%	9.0%	10.0%	25.0%	51.0%
Phoenix	6.8%	17.6%	9.6%	16.2%	16.5%	33.8%	36.3%	44.1%
Sacramento	11.8%	30.3%	8.4%	14.2%	20.2%	44.5%	26.6%	37.4%
Minneapolis	5.4%	10.3%	24.0%	31.9%	29.4%	42.2%
Mid-Atlantic	8.5%	13.1%	12.2%	12.7%	20.7%	25.8%	22.9%	22.0%
Orlando	11.7%	23.9%	25.7%	26.7%	37.4%	50.6%	49.2%	55.3%
California *	11.5%	23.9%	7.7%	19.0%	19.2%	42.9%
Bay Area CA*	10.5%	22.6%	5.4%	14.1%	15.9%	36.7%	24.8%	28.4%
So. California*	12.2%	24.2%	6.6%	17.2%	18.8%	41.4%	29.1%	33.7%
Florida SF	9.5%	19.4%	24.2%	19.9%	33.7%	39.3%	49.1%	50.5%
Florida C/TH	7.6%	14.8%	19.6%	17.2%	27.2%	32.0%	72.3%	74.4%
Miami MSA SF	13.9%	21.9%	18.2%	14.9%	32.1%	36.8%	49.2%	48.9%
Miami MSA C/TH	10.3%	16.4%	20.1%	16.4%	30.4%	32.8%	75.2%	77.8%
Northeast Florida					45.0%	46.3%
Chicago	11.0%	NA	31.0%	NA	42.0%	49.0%
Hampton Roads					29.5%	34.9%
Toledo							43.9%	44.4%
Des Moines							22.2%	26.8%
Peoria							35.9%	20.8%
Tucson							38.2%	36.7%
Omaha							26.4%	21.3%
Georgia***							35.7%	NA
Houston			9.2%	19.6%
Memphis*			19.1%	25.9%
Birmingham AL			26.0%	30.2%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 2/21/2014 12:46:00 PM

From Fannie Mae: Fannie Mae Reports Comprehensive Income of $84.8 Billion for 2013 and $6.6 Billion for Fourth Quarter 2013

Fannie Mae reported annual net income for 2013 of $84.0 billion, which includes the release of the company’s valuation allowance against its deferred tax assets, and annual pre-tax income for 2013 of $38.6 billion.

Fannie Mae will pay Treasury $7.2 billion in dividends in March 2014. With the March dividend payment, Fannie Mae will have paid a total of $121.1 billion in dividends to Treasury in comparison to $116.1 billion in draw requests since 2008. Dividend payments do not offset prior Treasury draws.
...
While Fannie Mae expects to be profitable for the foreseeable future, the company does not expect to repeat its 2013 financial results, as those results were positively affected by the release of the company’s valuation allowance against its deferred tax assets, a significant increase in home prices during the year, and the large number of resolutions the company reached relating to representation and warranty matters and servicing matters.
emphasis added

Here are some summary stats on Fannie’s single family REO activity.

Fannie SF REO Activity
	Acquisitions	Dispositions	Inventory
Q3/09	40,959	31,299	72,275
Q4/09	47,189	33,309	86,155
Q1/10	61,929	38,095	109,989
Q2/10	68,838	49,517	129,310
Q3/10	85,349	47,872	166,787
Q4/10	45,962	50,260	162,489
Q1/11	53,549	62,814	153,224
Q2/11	53,697	71,202	135,719
Q3/11	45,194	58,297	122,616
Q4/11	47,256	51,344	118,528
Q1/12	47,700	52,071	114,157
Q2/12	43,783	48,674	109,266
Q3/12	41,884	43,925	107,225
Q4/12	41,112	42,671	105,666
Q1/13	38,717	42,934	101,449
Q2/13	36,106	40,635	96,920
Q3/13	37,353	33,332	100,941
Q4/13	32,208	29,920	103,229

Click on graph for larger image.

Here is a graph of Fannie REO. This was the second consecutive quarterly increase in REO.

Fannie’s SF REO inventory increased in Q4 mostly because of a decline in REO dispositions.  Fannie reported the decline in acquisitions was related to long time lines in certain states (judicial foreclosure process).  It is unclear why there was a sharp decline in dispositions over the last two quarters.

by Calculated Risk on 2/21/2014 10:00:00 AM

The NAR reports: Existing-Home Sales Drop in January While Prices Continue to Grow

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 5.1 percent to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December, and are also 5.1 percent below the 4.87 million-unit pace in January 2013. Last month’s level of activity was the slowest since July 2012, when it stood at 4.59 million.
...
Total housing inventory at the end of January rose 2.2 percent to 1.90 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, up from 4.6 months in December. Unsold inventory is 7.3 percent above a year ago, when there was a 4.4-month supply.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in January (4.62 million SAAR) were 5.1% lower than last month, and were 5.1% below the January 2013 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.90 million in January from 1.86 million in December.   Inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory increased 7.3% year-over-year in January compared to January 2013.   This year-over-year increase in inventory suggests inventory bottomed earlier last year.

Months of supply was at 4.9 months in January.

This was slightly below expectations of sales of 4.70 million.  For existing home sales, the key number is inventory - and the key story is inventory is still low, but up year-over-year.    I'll have more later ...

by Calculated Risk on 2/20/2014 07:53:00 PM

First, here is a minor indicator that I follow, from ATA: Winter Weather Pushed ATA Truck Tonnage Index Down 4.3% in January

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 4.3% in January, after edging 0.8% lower in December. In January, the index equaled 124.4 (2000=100) versus 130.0 in December. The all-time high was in November 2013 (131.0). Compared with January 2013, the SA index increased 1.2%.
...
“Like most economic indicators, truck tonnage was negatively impacted by bad winter weather in January,” said ATA Chief Economist Bob Costello. “The thing about truck freight is that it’s difficult to catch up. Drivers are governed by hours-of-service regulations and trucks are limited to trailer lengths and total weights, thus it is nearly impossible to recoup the days lost due to bad storms.”

As a result, Costello said January will be a tough month to gauge.

“January wasn’t just one storm, it was several across a large part of the country. Therefore, I wouldn’t panic from the largest monthly drop in two years," Costello said. "I’ve heard from many fleets that freight was good, in-between storms. The fundamentals for truck freight still look good.”
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 1.2% year-over-year.

Friday:
• At 10:00 AM ET, Existing Home Sales for January from the National Association of Realtors (NAR). The consensus is for sales of 4.70 million on seasonally adjusted annual rate (SAAR) basis. Sales in December were at a 4.87 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.67 million SAAR.