Paper Economy - A US Real Estate Bubble Blog

Thursday, January 31, 2013

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 31 2013

Today’s jobless claims report showed a notable jump to both initial and continued jobless claims as initial claims trended well below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims increased by 38,000 to 368,000 claims from 330,000 claims for the prior week while seasonally adjusted “continued” claims increased by 22,000 claims to 3.197 million resulting in an “insured” unemployment rate of 2.5%.

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 2.11 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.71 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.82 million people on state and federal unemployment rolls.


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Wednesday, January 30, 2013

Bull Trip!: GDP Report Q4 2012 (First Estimate)

Today, the Bureau of Economic Analysis (BEA) released their first "estimate" of the Q4 2012 GDP report showing that the economy unexpectedly slumped with real GDP declining at an annualized rate of 0.1% from Q3 2012.

On a year-over-year basis, real GDP increased 1.54% while the quarter-to-quarter non-annualized percent change was a decline of 0.04%.

The latest quarterly results indicate that the most notable source of weakness in the economy came from declines to fixed non-residential investment with the structures component declining 1.1% from Q3, and notable declines in govenment spending particularly national defense with a 22.2% in federal national defense spending from Q3.

Residential investment, on the other hand, worked to buoy the overall fixed investment component growing at an annualized rate of 15.3% from Q3.

Keep in mind that these results are likely very poorly estimated and are sure to be revised notably in following quarters and even years to come.

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ADP National Employment Report: January 2013

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved in January as private employers added 192,000 jobs in the month bringing the total employment level 1.54% above the level seen in January 2012.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

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Reading Rates: MBA Application Survey – January 30 2013

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 (from FHA and conforming GSE data) increased 7 basis point to 3.57% since last week while the purchase application volume declined 2% and the refinance application volume declined 10% over the same period.

Clearly, the Federal Reserve's QE3 announcement and implementation has had a notable effect on mortgage rates in recent weeks continuing to lift refinance application activity and possibly helping to establish a base of sorts to purchase applications.

The question is though, if the Fed is stimulating this activity by forcing artificially low rates, what would these trends look like if prevailing rates were based on a more fundamental market function?

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, January 29, 2013

S&P/Case-Shiller: November 2012

Today's release of the S&P/Case-Shiller (CSI) home price indices for November reported that the non-seasonally adjusted Composite-10 price index declined a slight 0.17% since October while the Composite-20 index declined 0.09% over the same period.

The latest CSI data clearly demonstrates that the typical seasonal pattern is continuing to play with price weakness coming as a result of lower transactions.  If this trend continues, prices should continue to decline into the February-March release in advance of the typical uplift from the more active spring transactions.

It's important to recognize though that on a year-over-year basis, nominal prices remain in positive territory possibly indicating that this seasons seasonal weakness may minor compared to recent years.

The 10-city composite index increased 4.54% as compared to November 2011 while the 20-city composite increased 5.52% over the same period.

Both of the broad composite indices show significant peak declines slumping -30.05% for the 10-city national index and -29.39% 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.

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Monday, January 28, 2013

Pending Home Sales: December 2012

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that pending home sales declined notably with the seasonally adjusted national index falling 4.3% from November but increasing 6.9% above the level seen in December 2011.

Meanwhile, the NARs chief economist Lawrence Yun suggests that while supply limitations may be negativity influencing contract activity, buyer foot traffic is strong:

"The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis ... Buyer interest remains solid, as evidenced by a separate Realtor survey which shows that buyer foot traffic is easily outpacing seller traffic."

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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Friday, January 25, 2013

New Home Sales: December 2012

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for December showing a notable monthly decline with sales falling 7.3% since November but rising 8.8% above the level seen in December 2011 and remaining at an historically low level of 369K SAAR units.

It's important to recognize that the inventory of new homes appears to now be bouncing around a very low 151K units, near the lowest level seen in in at least 47 years while the median number of months for sale has improved to 4.6.

The monthly supply increased to 4.9 months while the median selling price increased 13.86% and the average selling price increased 15.63% from the year ago level.

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

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Thursday, January 24, 2013

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 24 2013

Today’s jobless claims report showed a decline to both initial and continued jobless claims as initial claims trended well below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims declined by 5,000 to 330,000 claims from a revised 335,000 claims for the prior week while seasonally adjusted “continued” claims declined by 71,000 claims to 3.157 million resulting in an “insured” unemployment rate of 2.5%.

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 1.69 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.86 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.56 million people on state and federal unemployment rolls.


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Wednesday, January 23, 2013

FHFA Monthly Home Prices: November 2012

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that in November, nationally, home prices increased 0.56% from October and rose 5.67% above the level seen in November 2011.

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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Reading Rates: MBA Application Survey – January 23 2013

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 (from FHA and conforming GSE data) increased 1 basis point to 3.51% since last week while the purchase application volume increased 3% and the refinance application volume increased 8% over the same period.

Clearly, the Federal Reserve's QE3 announcement and implementation has had a notable effect on mortgage rates in recent weeks continuing to lift refinance application activity and possibly helping to establish a base of sorts to purchase applications.

The question is though, if the Fed is stimulating this activity by forcing artificially low rates, what would these trends look like if prevailing rates were based on a more fundamental market function?

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, January 22, 2013

Existing Home Sales Report: December 2012

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for December showing a decrease in sales with total home sales dropping 1.0% since November but climbing 12.8% above the level seen in December 2011.

Single family home sales also declined falling 1.4% from November but still rising 11.5% above the level seen in December 2011 while the median selling price increased a notable 10.9% above the level seen a year earlier.

Inventory of single family homes declined notably from November to 1.60 million units dropping 21.2% below the level seen in December 2011 which, along with the sales pace, resulted in a monthly supply of 4.4 months.

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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The Chicago Fed National Activity Index: December 2012

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated a weakening for the national economy with the index falling to a very low growth level of 0.02 from a notably weak level of -.27 in November while the three month moving average improved slightly to a weak level of -0.11.

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.

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Friday, January 18, 2013

University of Michigan Survey of Consumers January 2013 (Early)

Today's early release of the Reuters/University of Michigan Survey of Consumers for January indicated an decline in consumer sentiment from the prior month with a reading of 71.3, the lowest level seen since December 2011 and a decline of 4.93% on an annual basis while one year inflation expectations rose to 3.4%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) also declined falling to 62.7 while the Current Economic Conditions Index slumped to 84.4.

It's important to recognize that consumer sentiment has seriously eroded over the past few months with the current results remaining near levels not seen since 1980, a major indication that consumers are in the process of tightening even further on spending.


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Thursday, January 17, 2013

The Philly Fed Business Outlook Survey: January 2013

The January release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) indicated an worsening of the regions manufacturing activity with the current activity index declining to a contraction level of -5.8 while assessments the future activity index increased to a level of 29.2.

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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New Residential Construction Report: December 2012

Today’s New Residential Construction Report showed very positive results for December with an increase for single family permits and a notable improvement for both total and single family starts.

Single family housing permits, the most leading of indicators, rose 1.8% from November to 578K single family units (SAAR), and increased 27.3% above the level seen in December 2011 but still remained an astonishing 67.85% below the peak in September 2005.

Single family housing starts increased a whopping 8.1% from November  to 616K units (SAAR), and rose 18.5% above the level seen in December 2011 but still remained 66.21% below the peak set in early 2006.


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Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 17 2013

Today’s jobless claims report showed a notable decline for initial jobless claims and an increase to continued jobless claims as initial claims trended well below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims declined by 37,000 to 335,000 claims from a revised 372,000 claims for the prior week while seasonally adjusted “continued” claims rose by 87,000 claims to 3.214 million resulting in an “insured” unemployment rate of 2.5%.

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 2.06 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.28 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.34 million people on state and federal unemployment rolls.


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Wednesday, January 16, 2013

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings January 2013

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that assesments of housing activity went flat in January with the composite HMI index remaining at 47 while the "buyer traffic" index improved slightly to 37, a level not seen since early 2006.

It's important to note that January has continued to show a slight pullback to future expectations, a development that is worth noting as the new home market moves through it's most active months at the start of the year (see Bob Tolls explination for January - early spring being the new home markets most active period annually).

While all indicators have made truly spectacular improvements this year, it's important to note that conditions still remain fairly distressed by historic standards.

Although, looking at the data, it is fairly clear that the last few months of results indicate a major change in builder sentiment likely coming as a result of improvements in confidence given the notable rise in buyer traffic, reduced inventory and a more balanced monthly supply.




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Production Pullback: Industrial Production December 2012

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing an increase in December with total industrial production rising 0.26% since November and rising 2.25% above the level seen in December 2011.

Capacity utilization also rose 0.12% from November and climbing 0.61% above the level seen in November of 2011 to stand at 78.78%

It's important to recognize that though the "recovery" is well over two years old, both industrial production and capacity utilization are notably below the peaks set in late 2007.


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Reading Rates: MBA Application Survey – January 16 2013

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 (from FHA and conforming GSE data) increased 2 basis point to 3.5% since last week while the purchase application volume jumped 13% and the refinance application volume increased 15% over the same period.

Clearly, the Federal Reserve's QE3 announcement and implementation has had a notable effect on mortgage rates in recent weeks continuing to lift refinance application activity and possibly helping to establish a base of sorts to purchase applications.

The question is though, if the Fed is stimulating this activity by forcing artificially low rates, what would these trends look like if prevailing rates were based on a more fundamental market function?

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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