by Calculated Risk on 12/30/2010 04:05:00 PM

LPS Applied Analytics released their November Mortgage Performance data. According to LPS:

• The average number of days delinquent for loans in foreclosure is a record 499 days
• Over 4.3 million loans are 90 days or more delinquent or in foreclosure
• Delinquency rates are down across all products as more loans entered foreclosure and new delinquencies declined.
• Foreclosure inventory increases are being driven both by elevated levels of foreclosure starts as well as a very limited amount of foreclosure sale activity.

Click on graph for larger image in new window.

This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages.

The percent in the foreclosure process is trending up because of the foreclosure moratoriums.

According to LPS, 9.02% of mortgages are delinquent (down from 9.29% in October), and another 4.08% are in the foreclosure process (up from 3.92% in October) for a total of 13.10%. It breaks down as:

• 2.61 million loans less than 90 days delinquent.
• 2.16 million loans 90+ days delinquent.
• 2.16 million loans in foreclosure process.

For a total of 6.92 million loans delinquent or in foreclosure.

Note: I've seen some people include these 7 million delinquent loans as "shadow inventory". This is not correct because 1) some of these loans will cure, and 2) some of these homes are already listed for sale (so they are included in the visible inventory).

Two key numbers to watch in 2011 are:
• New delinquencies. With falling house prices, delinquencies could start to increase again.
• Foreclosures. With the end of the foreclosure moratoriums, foreclosure sales should increase - and the number of homes in the foreclosure process should decline.  However REOs (Real Estate Owned) will increase unless the homes are sold.

by Calculated Risk on 12/30/2010 02:19:00 PM

A week ago I posted some questions for next year: Ten Economic Questions for 2011. I'm working through the questions and trying to add some predictions, or at least some thoughts for each question before the end of year.

4) Economic growth: After I took the "over" for 2011 back in November, a number of analysts have upgraded their forecasts. As an example, Goldman Sachs noted Friday, Dec 17th:

The US economic outlook for 2011 has improved further with enactment of the fiscal compromise, as well as a stronger trend in recent data. As we forewarned, we are revising up our forecasts to incorporate this news and now expect real GDP to rise 3.4% in 2011 and 3.8% in 2012 (up from 2.7% and 3.6%) ...

It does appear GDP growth will increase in 2011, although GDP growth will probably still be sluggish relative to the slack in the system. How much will the economy grow in 2011?

For 2010 there were a number of forecasts for a "V-shaped" recovery (4% to 6% real GDP growth range) - and also a number of forecasts for a double dip recession. Both wrong.

I took the boring middle ground: sluggish and choppy growth, but no double dip. The key reasons were 1) recoveries from financial crisis tend to be sluggish, and 2) the drag from residential investment (RI) would be less in 2010 (so a double dip seemed less likely).

There are still plenty of scars from the financial crisis (excessive debt, high unemployment, excess capacity, excess supply of housing, a large number of homeowners with negative equity, and high foreclosure activity), but the economy is slowly healing. And even though residential investment will be weak in 2011, I think RI will make a positive contribution to GDP growth for the first time since 2005. And another sector, non-residential investment in structures, will probably bottom in 2011 based on the Architecture Billings index.

There are still plenty of downside risks: financial contagion from Europe, budget problems at state and local governments, and falling house prices all could lead to slower U.S. growth.

However my guess is growth will be sluggish relative to the slack in the system, but above the 2010 growth rate. Usually I don't forecast a specific number, but for personal reasons I will this year (probably jinxing myself). For 2011 I'll take 3.7% real GDP growth. That is consistent with my employment / unemployment rate forecasts, and that would also be the highest growth rate since Clinton was President (not saying much because the '00s were so bad).

As a reminder - this will not feel like a recovery for the millions of unemployed workers, and for the millions more who are working part time or for lower wages. This will not feel like an economic recovery until the unemployment rate drops sharply and real income for the middle class starts to increase.

Ten Questions:
• Question #1 for 2011: House Prices
• Question #2 for 2011: Residential Investment
• Question #3 for 2011: Delinquencies and Distressed house sales
• Question #4 for 2011: U.S. Economic Growth
• Question #5 for 2011: Employment
• Question #6 for 2011: Unemployment Rate
• Question #7 for 2011: State and Local Governments
• Question #8 for 2011: Europe and the Euro
• Question #9 for 2011: Inflation
• Question #10 for 2011: Monetary Policy

by Calculated Risk on 12/30/2010 11:00:00 AM

From the Kansas City Fed: Survey of Tenth District Manufacturing

Tenth District manufacturing activity continued at a solid pace in December, and producers were increasingly optimistic about future activity. Price indexes in the survey rose further, with a marked increase in raw materials prices.

The net percentage of firms reporting month-over-month increases in production in December was 21, unchanged from 21 in November and up from 10 in October. ... The employment index increased to its highest level in three years, while the new orders for exports index edged down from 11 to 7.

This is the last of the regional Fed surveys for December. The regional surveys provide a hint about the ISM manufacturing index, as the following graph shows.

Click on graph for larger image in graph gallery.

The New York and Philly Fed surveys are averaged together (dashed green, through December), and averaged five Fed surveys (blue, through December) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

The regional surveys suggest an increase in manufacturing activity in December.

The ISM manufacturing index will released on Monday, Jan 3, 2011.

by Calculated Risk on 12/30/2010 10:00:00 AM

From the NAR: Pending Home Sales Continue Recovery

The Pending Home Sales Index,* a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October [revised down from 89.3]. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

This suggests existing home sales in December and January will be somewhat higher than in November.

Also ...

• The Chicago PMI for December (released this morning) was stronger than expected. The headline index was 68.6, well above the 62.5 expected.

The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER achieved its highest level since July 1988, expanding for the fifteenth consecutive month.

Production (at 74.0) "reached its highest levels since October 2004", and new orders (73.6) "improved to 2005 levels". The employment index increased to 60.2 from 56.3 in November. This continues the trend of stronger reports recently.

by Calculated Risk on 12/30/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Dec. 25, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 34,000 from the previous week's revised figure of 422,000. The 4-week moving average was 414,000, a decrease of 12,500 from the previous week's revised average of 426,500.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 12,500 to 414,000.

Even though weekly claims are seasonally adjusted, sometimes data for holiday weeks can be a little off.

In general the four-week moving average has been declining and that is good news. If weekly unemployment claims remain below 400,000 that would suggest a better labor market.

by Calculated Risk on 12/29/2010 08:41:00 PM

In the S&P/Case-Shiller report for October, S&P noted:

[S]ix markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007

S&P reports the data Not Seasonally Adjusted (NSA) because of concerns about foreclosures impacting the seasonal factor.

Using the Seasonally Adjusted (SA) series, eleven cities were at post bubble lows; the six cities listed above plus Phoenix, Chicago, Detroit, New York and Las Vegas.

The following graph shows the percent above the post bubble lows for the 20 Case-Shiller cities and the two composite indexes using both SA and NSA data.

Click on graph for larger image in graph gallery.

Las Vegas was slightly above the post bubble low NSA (it isn't apparent on the graph).

We can probably guess the cities that will set new post bubble lows in November. Using the NSA data, Las Vegas, New York and Detroit will all probably join the list above setting new lows.

Using the SA data, Dallas, Cleveland, Denver, and maybe the Composite 20 index will be at new lows.

Note: Earlier I posted A few for Graphs for 2010. Enjoy!