Paper Economy - A US Real Estate Bubble Blog

Friday, April 29, 2011

Fannie Mae Delinquencies: March 2011

The latest release of the Fannie Mae Monthly Summary indicated that for data through February, total serious single family delinquency continued to declined though at a notably slower pace than in recent months.

In January, 3.39% of non-credit enhanced loans went seriously delinquent while the level was 10.53% of credit enhanced loans resulting in an overall total single family delinquency of 4.44%.

The following charts (click for larger ultra-dynamic and surf-able chart) show what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.


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University of Michigan Survey of Consumers April 2011 (Final)

Today's final release of the Reuters/University of Michigan Survey of Consumers for April indicated a slight improvement in consumer sentiment with a reading of 69.8 but still remaining 3.32% below the level seen last year while one year inflation expectations remained at 4.6%.

The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) rose to 61.6, and the Current Economic Conditions Index remained at 82.5.

It's important to recognize that while consumer sentiment is higher than the panic laden trough level seen in late 2008, the current sentiment level is still far lower than any level seen during the 2001 tech recession and roughly equivalent to the worst seen during the early 1990s and second dip 1982 recessions.


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Thursday, April 28, 2011

Kansas City Fed Manufacturing Survey: April 2011

The Federal Reserve Bank of Kansas City, like other district FRBs (New York, Philadelphia, Richmond and Dallas), tracks its region’s manufacturing activity by surveying a number of important indicators such as general activity, production, shipments, orders, employment and prices for raw materials and finished products.

The latest results are indicating that the manufacturing expansion slowed slightly falling to 20 from a level of 23 a month earlier while the employee index increased to 21 and the prices paid for raw materials declined to 73 from March’s decade high of 81.

The following chart plots the seasonally adjusted Composite index since 2001 with the solid red line indicating the threshold between expansion and contraction.

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Pending Home Sales: March 2011

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for March showing home sales increasing with the seasonally adjusted national index climbing 5.1% since February while remaining 11.4% below the level seen in March 2010.

Meanwhile, the NARs chief economist Lawrence Yun continues to talk of market recovery while again griping about tight lending standards.

"Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own, ... The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards."

Looking at the confluence of truly hideous trends currently playing out for housing it's no wonder the NAR is grasping for any positive number but the writing is on the wall... housing is now within a notable post-government manipulated second dip.

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).


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The Chicago Fed National Activity Index: March 2011

Today’s release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that national economic activity increased in March with the index climbing to 0.26 while the three month moving declined slightly to 0.20.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.

A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.

It’s important to note that at 0.20, the current three month average index value is indicating weak trend growth.

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Bull Trip!: GDP Report Q1 2011 (First Rough Estimate)

Today, the Bureau of Economic Analysis (BEA) released their first "estimate" of the Q1 2011 GDP report showing that the economy continued to expand with real GDP increasing at an annualized rate of 1.8% from Q4 2010.

On a year-over-year basis real GDP increased 2.28% while the quarter-to-quarter non-annualized percent change was 0.43%.

The latest report reveals an notable decline in non-residential fixed investment with non-residential structures declining at a rate of 21.7% from the fourth quarter 2010 while residential fixed investment also declined falling at a rate of 4.1% over the same period.

Note that the administration (and the BEA) have yet to take down their estimates for Q2 residential fixed investment which still sits at the lofty level of a supposed 25.7% quarter-to-quarter change... not likely.... look for that figure to be revised down in coming releases impacting the anemic "final" Q2 2010 results.

Government expenditures declined notably with the national defense component declining at a rate of 11.7% from the fourth quarter 2010 and shaving 1.09% from overall GDP.


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Extended Unemployment: Initial, Continued and Extended Unemployment Claims April 28 2011

Today’s jobless claims report showed a notable decline to initial unemployment claims and an increase to continued unemployment claims as a rising trend continued to materialize for initial claims.

Seasonally adjusted “initial” unemployment increased by 25,000 to 429,000 claims from last week’s revised 404,000 claims while seasonally adjusted “continued” claims declined by 68,000 resulting in an “insured” unemployment rate of 2.9%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 4.16 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.89 million people that are currently counted as receiving traditional continued unemployment benefits, there are 8.05 million people on state and federal unemployment rolls.


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Wednesday, April 27, 2011

Hey Big Spender: Discretionary Durable Goods Orders March 2011

Today’s Durable Goods Manufacturers’ Shipments, Inventories and Orders report indicated that total new orders increased 2.5% from February to $208,372 billion while excluding transportation, new orders increased 1.3% to $153,680 billion.

Stripping durable goods orders of defense orders AND non-defense aircraft orders yields an effective measure of orders coming as a direct result of typical discretionary consumer durable goods spending on items such as motor vehicles, furniture, consumer electronic devices and home appliances.

Looking at the latest data for February (less timely data), "discretionary" durable goods orders increased 0.93% since January climbing 11.39% above the level seen in February 2010.

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Reading Rates: MBA Application Survey – April 27 2011

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 3 basis points to 4.80% since last week while the purchase application volume plunged 13.6% and the refinance application volume declined 0.6% over the same period.

While rates have generally trending up for the last five months, it will take some time to determine if this trend will continue or if rates will begin to slide back down to the historically low levels seen in mid-2010.

Keep in mind that the Feds QE2 announcement marked the start of the latest uptrend in rates so that as we near the completion of the Feds latest action (scheduled to end in June) it will be interesting to see if there is a correlated impact on rates.

Further, there has been some chatter of either a premature end to QE2 as the Fed gears up to deal with untethered inflationary forces as well as some speculation to the contrary indicating that the Fed may need to engage in QE3 later this year should the recovery stall similarly to 2010.

Both outcomes could notably impact mortgage rates and in turn, seriously impact the trends in the nation's housing markets.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to slow.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).




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Tuesday, April 26, 2011

S&P/Case-Shiller: February 2011

Note... be sure to bookmark the overall S&P/Case-Shiller Dashboard or the Scary Housing Dashboard of the weakest markets for a real-time view of all the markets tracked by S&P.

Today’s release of the S&P/Case-Shiller (CSI) home price indices for February reported that the non-seasonally adjusted Composite-10 price index declined a notable 1.11% since January indicating that housing is continuing slump into a double-dip.

The latest CSI data clearly indicates that the price trends are continuing to slump and, as I recently pointed out, the more timely and less distorted Radar Logic RPX data is continuing to capture notable price weakness nationwide.

Further, both composite indices are now showing notable year-over-year declines, a weak sign indeed.

The 10-city composite index declined 2.65% as compared to February 2010 while the 20-city composite declined 3.33% over the same period.

Topping the list of regional peak decliners was Las Vegas at -58.14%, Phoenix at -55.67%, Miami at -50.71%, Detroit at -46.50% and Tampa at -46.08%.

Additionally, both of the broad composite indices show significant peak declines slumping -32.52% for the 10-city national index and -32.56% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com to view the full release.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a month-to-month basis.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual and normalized charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data side-by-side (click for larger version).


The “peak” chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.


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Monday, April 25, 2011

New Home Sales: March 2011

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for March showing a notable monthly jump with sales increasing 11.11% since February but still declining 21.88% below the level seen a year earlier to 300K SAAR units.

These results, while strengthening a bit off of last months horrendous results still clearly indicate that the nation's housing markets are now firmly entrenched in a double-dip and come fully in-line with the other pitiful housing data-points I have outlined in past weeks.

The monthly supply declined to 7.3 months while the median selling price declined a notable 4.89% and the average selling price declined a notable 6.12%.

The following chart show the extent of sales decline to date (click for full-larger version).

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More Pain, Less Gain: S&P/Case-Shiller Preview for February 2011

As I demonstrated in prior posts, given their strong correlation, the home price indices provided daily by Radar Logic, averaged monthly, can effectively be used as a preview of the monthly S&P/Case-Shiller home price indices.

The current Radar Logic 25 MSA Composite data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as February 21 and averaged for the month indicates that in the wake of the expiration of the government's final housing tax gimmick prices have continued to decline nationally dropping 4.36% below the level seen in February 2010.

This trend is likely telling us that, as transactions collapse down to the weak "organic" level post-housing tax scam, prices have followed.

Look for tomorrow's S&P/Case-Shiller home price report to reflect an equivalent declining trend for prices as the source data moves further through months affected by the tax credit activity and into reality.

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Friday, April 22, 2011

The New “Household” Misery Index: February 2011

Today's release of the Household Misery Index showed that the level of misery declined in February dropping 0.04% but still remained near the peak for this cycle and nearly the highest level seen in 30 years while on a year-over-year basis, misery declined for the third consecutive month dropping 0.14% since February 2010.

Back in the 1970s and 80s the “Misery Index” was popularized as a measure that accurately captured the misery and malaise of the time.

The original Misery Index was a bit too simplistic as it only captured the severity of the two main vexing issues of the time, unemployment and inflation.

Today, inflation, as measured by the annual rate of change of the CPI-U, is not a significant source of financial misery.

Of course, households on fixed income may dispute that fact and many have argued that CPI itself does not accurately capture “real” inflation as it has never accounted for the ridiculous increasing costs of housing and other essentials so for the sake of formulating a new misery index, inflation will factored out.

Another key to formulating a new misery index is to specifically target “household” misery as opposed to including data that might target the miserable state of affairs of the federal government or corporate misery.

The Household Misery Index captures the following trends and weights them equally:

1. The U-3 unemployment rate
2. YOY percent change of the 10-Year moving average of total nonfarm payrolls
3. YOY percent change of the 10-Year moving average of “real” personal income
4. YOY percent change of the 10-year moving average of “real” S&P 500

The unemployment rate captures the misery associated to the threat and severity of a potential bout of unemployment while the annual change of the 10 year moving average of non-farm payrolls captures a more fundamental sense of the overall job market.

The annual change to the 10 year moving average of “real” (adjusted with CPI-U) personal income captures a household’s long term sense of income prospects.

The annual change to the 10 year moving average of “real” (adjusted with CPI-U) S&P 500 captures a household’s long term sense of typical investment prospects.

Unfortunately, all home price series are simply not long enough to include in the formulation but there may be alternative measures that can be included in the future.

This is a notable improvement for misery and if the past is to be taken to be even just a crude guide, the level of household misery should continue to steadily improve in the coming months.

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Thursday, April 21, 2011

FHFA Monthly Home Prices: February 2011

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that, nationally, home prices declined a notably 1.63% since January dropping 5.74% below the level seen in February 2010.

The FHFA monthly HPI are formulated from home purchase information collected from mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.

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Philadelphia Feeling: Federal Reserve Bank of Philadelphia Business Outlook Survey April 2011

The latest release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) for April indicated a pullback in the regions manufacturing activity with the current activity index declining notably to a level of 18.50 while the future activity index also declined to a level of 33.6.

Both indices are still indicating expansion though the size of the latest pullback clearly demands that closer attention be paid to these series in future releases.

The following chart shows the current and future activity indexes both with their corresponding 3-month moving averages. The red line marks the threshold between contraction and expansion for these diffusion indexes.

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Extended Unemployment: Initial, Continued and Extended Unemployment Claims April 21 2011

Today’s jobless claims report showed a decline to both initial unemployment claims and continued unemployment claims as a significant declining trend continued to materialize for both initial and traditional continued claims.

Seasonally adjusted “initial” unemployment declined by 13,000 to 403,000 claims from last week’s revised 416,000 claims while seasonally adjusted “continued” claims declined by 7,000 resulting in an “insured” unemployment rate of 2.9%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 4.24 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.94 million people that are currently counted as receiving traditional continued unemployment benefits, there are 8.18 million people on state and federal unemployment rolls.


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Wednesday, April 20, 2011

Existing Home Sales Report: March 2011

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for March showing a slight increase in sales while prices continue to be weak and inventory continues to remain elevated.

Single family home sales increased 3.97% since February but fell 6.51% below the level seen last year while prices declined a notable 5.31% below the level seen in March 2010.

Further, inventory of single family homes remains high climbing 0.7% from February but declining 1.3% below the level seen in March 2010 which, combined with the relatively slow pace of sales, resulted in a monthly supply of 8.1.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.



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Double-Digit Double-Jeopardy: Double Digit State Unemployment March 2011

The latest Regional and State Employment and Unemployment report showed that in March, 9 states were experiencing double digit unemployment with a median unemployment rate of 10.3% while the median unemployment rate for all 50 states and the District of Columbia stood at 8.4%.

Nevada showed the highest unemployment rate at 13.2% followed by California at 12% and Florida at 11.1%.

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