Paper Economy - A US Real Estate Bubble Blog

University of Michigan Survey of Consumers January 2012 (Final)

2012-01-27T16:09:00.001-05:00

Today's final release of the Reuters/University of Michigan Survey of Consumers for January indicated improvement in consumer sentiment with a reading of 75.0 and climbing just 1.08% above the level seen last year while one year inflation expectations rose slightly to 3.3%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 69.1, and the Current Economic Conditions Index climbed to 84.2.

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.

New Home Sales: December 2011

2012-01-26T12:11:00.003-05:00

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for December showing a notable monthly decline with sales dropping 2.2% since November and 7.3% below the level seen in December 2010 and remaining at an epically low level of 307K SAAR units.

It's important to recognize that the inventory of new homes has now fallen to a new series low at 157K units, lowest level seen in in at least 47 years while the median number of months for sale declined to 6.7.

The monthly supply remained declined to 6.1 months while the median selling price declined 12.81% and the average selling price declined 8.81% from the year ago level.

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

The Chicago Fed National Activity Index: December 2011

2012-01-26T12:02:00.001-05:00

Today’s release of the Chicago Federal Reserve National Activity Index (CFNAI) improved though continued to indicate weakness in national economic trends with the index climbing to a tepid 0.17 while the three month moving average improved to -0.08.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 26 2012

2012-01-26T11:55:00.003-05:00

Today’s jobless claims report showed notable increases to both initial and continued unemployment claims as seasonally adjusted remained below the closely watched 400K level.

Seasonally adjusted “initial” unemployment increased 21,000 to 377,000 claims from last week’s revised 356,000 claims while seasonally adjusted “continued” claims increased by 88,000 resulting in an “insured” unemployment rate of 2.8%.

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 3.41 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 4.11 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.53 million people on state and federal unemployment rolls.

FHFA Monthly Home Prices: November 2011

2012-01-25T10:17:00.001-05:00

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that, nationally, home prices increased 0.98% since October and declined 2.48% below the level seen in November 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.

Pending Home Sales: December 2011

2012-01-25T10:08:00.001-05:00

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that home sales slowed with the seasonally adjusted national index dropping 3.5% since November while increasing 5.57% above the level seen in December 2010.

Meanwhile, the NARs chief economist Lawrence Yun suggests that the rice in contract activity still remains high compared with the past few years and that homebuyers are persistent even in light of notable contract failures.

"Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period, ... Contract failures remain an issue, reported by one-third of Realtors® over the past few months, but home buyers are not giving up."

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).

Reading Rates: MBA Application Survey – January 25 2012

2012-01-25T09:51:00.000-05:00

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 6 basis points to 4.04% since last week while the purchase application volume declined 5.4% and the refinance application declined 5.2% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

The Richmond Fed Survey of Manufacturing Activity: January 2012

2012-01-24T12:02:00.001-05:00

Today, the Federal Reserve Bank of Richmond released their Survey of Manufacturing Activity for January showing that the composite index, the broadest measure of manufacturing activity, improved 9 points to a level of 12.

The most notable component measures also showed similar results with the new orders improving to 14

The following chart plots the composite index with the red line marking a level of 0, or the threshold between increasing and declining activity.

Radar Watching: November 2011

2012-01-23T10:58:00.000-05:00

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines and has now dropped well below all recent lows reaching a level not seen since early 2003.

The latest data shows that as of late November, prices have declined 7.11% below the level seen in
November 2010 while continuing to turn down from a seasonal peak reached in mid-June.

With the spring/summer selling season now complete and declining prices now registering with regularity, there is nowhere for prices to go but down. Look for a declining trend to continue to materialize and likely run into March or April of 2012.

Existing Home Sales Report: December 2011

2012-01-20T10:21:00.003-05:00

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for December showing an increase in sales with total home sales climbing 5.0% since November and 3.6% above the level seen in December 2010.

Single family home sales increased 4.6% from November and rose 4.3% above the level seen in December 2010 while the median selling price declined 2.5% below the level seen in December 2010.

Inventory of single family homes declined 10.7% from November dropping 19.7% below the level seen in December 2010 which resulted in a monthly supply of 6.1 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.

New Residential Construction Report: December 2011

2012-01-19T12:27:00.001-05:00

Today’s New Residential Construction Report showed that in December, both single family permits and starts increased from November with permits continuing to show tepid results when compared on a year-over-year basis while starts improved notably over the same period.

Single family housing permits, the most leading of indicators, increased 1.8% from last month to 444K single family units (SAAR), but declined 0.22% below the level seen in December 2010 and remaining an astonishing 75.31% below the peak in September 2005.

Single family housing starts increased 4.44% to 470K units (SAAR), and climbed 11.64% above the level seen in December 2010 but remaining a stunning 74.22% below the peak set in early 2006.

With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 19 2011

2012-01-19T12:14:00.001-05:00

Today’s jobless claims report showed notable declines to both initial and continued unemployment claims as seasonally adjusted initial fell back below the closely watched 400K level.

Seasonally adjusted “initial” unemployment declined 50,000 to 352,000 claims from last week’s revised 402,000 claims while seasonally adjusted “continued” claims declined by 215,000 resulting in an “insured” unemployment rate of 2.7%.

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 3.56 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 4.16 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.77 million people on state and federal unemployment rolls.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings January 2012

2012-01-18T11:26:00.003-05:00

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that all measures increased in January with the composite HMI index climbing to 25, the highest level seen since mid-2007, while the "buyer traffic" index climbed to 21.

While all indicators made notable increases in January, it's important to note that conditions still remain distressed by historic standards.

The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared.

Reading Rates: MBA Application Survey – January 18 2012

2012-01-18T11:18:00.006-05:00

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) declined 5 basis points to 3.98% since last week while the purchase application volume surged 10.3% and the refinance application jumped a whopping 26.40% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

The Empire State Manufacturing Survey: January 2012

2012-01-17T11:46:00.002-05:00

The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.

Today’s report showed a notable improvement for both current and future assessments of manufacturing activity with the current activity index climbing to 13.48 while future activity jumped to 54.87.

Current prices paid increased to 26.37 while current new orders improved 13.7 and assessments of future new orders weakened slightly to 53.85.

University of Michigan Survey of Consumers January 2012 (Early)

2012-01-13T10:23:00.003-05:00

Today's early release of the Reuters/University of Michigan Survey of Consumers for January indicated improvement in consumer sentiment with a reading of 74.0 and falling just 0.27% below the level seen last year while one year inflation expectations rose slightly to 3.2%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 68.4, and the Current Economic Conditions Index climbed to 82.6.

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.

Conspicuous Correlation: Retail Sales December 2011

2012-01-12T12:28:00.002-05:00

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.1% increase from November and an increase of 6.5% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.23% from November and increased 2.90% above the level seen in December 2010 while, adjusting for inflation, “real” discretionary retail sales declined 0.07% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 12 2011

2012-01-12T12:13:00.001-05:00

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as seasonally adjusted initial claims jumped back near the so closely watched 400K level.

Seasonally adjusted “initial” unemployment increased 24,000 to 399,000 claims from last week’s revised 375,000 claims while seasonally adjusted “continued” claims increased by 19,000 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 3.45 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.77 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.23 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – January 11 2012

2012-01-11T11:16:00.001-05:00

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 points to 4.03% since last week while the purchase application volume increased 8.10% and the refinance application increased 3.30% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

Economic Jolt: Job Openings and Labor Turnover November 2011

2012-01-10T11:51:00.003-05:00

Today, the Bureau of Labor Statistics released their latest monthly read of job availability and labor turnover (JOLT) showing that private non-farm job “openings” declined 1.57% since October climbing 6.82% above the level seen in November 2010 while private non-farm job “hires” increased 2.11% from October and rose 5.37% above the level seen in November 2010

Job “layoffs and discharges” increased 5.68% from October falling 1.19% below the level seen last year while quitting activity increased 1.83% from October remaining 11.37% above the level seen in November 2010.

It’s important to understand that job “quits” are included as a component of the “separations” data series as “quitting” is a valid means of workers “separating” from employers but their inclusion tends to create an overall procyclical trend in what would otherwise be logically thought of as a countercyclical process (i.e. downturn leads to increase in separations not decrease).

On The Stamp: Food Stamp Participation October 2011

2012-01-09T11:40:00.001-05:00

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in October, 45,528 recipients were removed from the food stamps program with the current total still increasing 7.0% on a year-over-year basis while household participation increased 8.85%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 6.22% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 7.87% on a year-over-year basis to $6.23 billion for the month.

Radar Watching: October 2011

2012-01-09T11:26:00.000-05:00

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines and has now dropped well below all recent lows reaching a level not seen since early 2003.

The latest data shows that as of late October, prices have declined 7.31% below the level seen in
October 2010 while continuing to turn down from a seasonal peak reached in mid-June.

With the spring/summer selling season now complete and declining prices now registering with regularity, there is nowhere for prices to go but down. Look for a declining trend to continue to materialize and likely run into March or April of 2012.

Envisioning Employment: Employment Situation December 2011

2012-01-06T10:49:00.000-05:00

Today’s Employment Situation Report indicated that in December, net nonfarm payrolls increased with private nonfarm payrolls adding 212,000 jobs and the unemployment rate declining to 8.5% over the same period.

Net private sector jobs increased 0.19% since last month climbing 1.78% above the level seen a year ago but but remained a whopping 4.91% below the peak level of employment seen in December 2007.

Full Time Workers Fully Under Pressure: December 2011

2012-01-06T10:44:00.000-05:00

Today’s employment situation report showed that in December the full time unemployment rate declined to 9.0% of the civilian workforce but remains near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for roughly 88.5% of all unemployed workers.

Recovery-less Recovery: Unemployment Duration December 2011

2012-01-06T10:41:00.000-05:00

Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.

Today's employment situation report showed that conditions for the long term unemployed improved slightly in December while remaining epically distressed by historic standards.

Workers unemployed 27 weeks or more declined to 5.588 million or 42.5% of all unemployed workers while the median number of weeks unemployed declined to 21.0 weeks and the average stay on unemployment declined to 40.8 weeks.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

On The Margin: Total Unemployment December 2011

2012-01-06T10:35:00.000-05:00

Today’s Employment Situation report showed that in December “total unemployment” including all marginally attached workers declined to 15.2% from the prior month's level of 15.6% while the traditionally reported unemployment rate also declined to 8.5%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

ISM Non-Manufacturing Report on Business: December 2011

2012-01-05T11:49:00.001-05:00

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity improved slightly throughout December with the business activity component going flat on the month while the overall non-manufacturing index increased to 52.6 from 52.0 in November.

At 56.2 the business activity index went unchanged since October and remained 10.65% below the level seen a year earlier.

Like releases of prior months, non-manufacturing sector respondents are seeing some signs of improvement but the overall outlook is still fairly mixed:

"Year-end uptick in activity." (Finance & Insurance)

"Business is stabilizing — some good signs in the private sector for commercial construction." (Construction)

"Some additional proposal requests, but clients continue to delay decisions on capital spending. Expect first quarter 2012 activity to be sluggish." (Professional, Scientific & Technical Services)

"Automotive industry growth seems to be outpacing the rest of the economy." (Information)

"Demand increasing gradually." (Wholesale Trade)

"Business is holding steady. Outlook for December and first quarter 2012 is good." (Retail Trade)

ADP National Employment Report: December 2011

2012-01-05T11:39:00.001-05:00

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 notably in December as private employers added 325,000 jobs in the month bringing the total employment level 1.81% above the level seen in December 2010.

Looking at the chart (click for full-screen dynamic version) showing ADP’s total private nonfarm payrolls since 2001 as well as the year-over-year and month-to-month percent change, you can see that while the job recovery had been anemic throughout most of 2010, more recently the trend had been picking up momentum.

Although the level of jobs is still far below the peak seen in late 2007 and still near the lows seen during the worst period of the "dot-com" recession, the bottom looks to be clearly defined and the trend is looking comparable to past recoveries.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 05 2011

2012-01-05T11:32:00.003-05:00

Today’s jobless claims report showed a decline to both initial and continued unemployment claims as seasonally adjusted initial claims continued to trend lower below the so closely watched 400K level.

Seasonally adjusted “initial” unemployment declined 15,000 to 372,000 claims from last week’s revised 387,000 claims while seasonally adjusted “continued” claims declined by 22,000 resulting in an “insured” unemployment rate of 2.8%.

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 3.50 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.61 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.11 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – January 04 2012

2012-01-04T10:52:00.001-05:00

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 4.01% since last week while the purchase application volume declined 9.7% and the refinance application declined 1.9% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

Constuction Spending: November 2011

2012-01-03T11:05:00.001-05:00

Today, the U.S. Census Bureau released their latest read of construction spending showing near-cycle low levels of spending in November for residential construction while indicating a slight improvement for total non-residential spending.

On a month-to-month basis, total residential spending increased 2.01% from October and rose 2.70% above the level seen in November 2010 while remaining a whopping 63.97% below the peak level seen in 2006.

Single family construction spending increased 1.52% since October and rose 2.42% since November 2010 but remained a whopping 76.82% below it's peak in 2006.

Non-residential construction spending increased 0.4% since October climbing 4.46% above the level seen in November 2010 but remained a whopping 34.66% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.

ISM Manufacturing Report on Business: December 2011

2012-01-03T10:56:00.001-05:00

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that manufacturing activity improved in December with assessments of most measures increasing.

At 53.9 the purchasing manager’s composite index (PMI) increased 2.28% since November but remained 7.86% below the level seen a year earlier.

Respondents indicated mixed assessments with some suggesting strong demand while others see activity slowing:

"Slow Q4 — lots of destocking and inventory reduction going on." (Chemical Products)

"Business seems strong, but likely due to tax advantages of purchasing capital expense items." (Machinery)

"Our business is stable with a very good outlook for 2012." (Miscellaneous Manufacturing)

"Food prices seem to have peaked as demand is starting to wane." (Food, Beverage & Tobacco Products)

"All auto demand remains strong." (Fabricated Metal Products)

"Continued conservative hiring, with tight discretionary spending controls due to slower growth expectations for 2012, driven by Euro zone sovereign debt concerns and lack of viable U.S. legislative process through the 2012 election." (Computer & Electronic Products)

"Business beginning to slow down (seasonal), but will finish with a very strong year." (Plastics & Rubber Products)

"Business is steady today around the world." (Transportation Equipment)

"Market has definitely slowed in the last month, and is expected to remain so this month." (Wood Products)

Fannie Mae Delinquencies: November 2011

2011-12-30T10:02:00.000-05:00

The latest release of the Fannie Mae Monthly Summary indicated that total serious single family delinquency went flat in November while remaining at distressed levels.

In November, 3.13% of non-credit enhanced loans went seriously delinquent while the level was 9.32% of credit enhanced loans resulting in an overall total single family delinquency of 4%.

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.

Kansas City Fed Manufacturing Survey: December 2011

2011-12-30T09:50:00.002-05:00

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 activity fell to a contraction level of -4 in December with virtually every component measure turning negative while prices paid for raw materials increased notably to 28.

It's important to note that although this data-set has a history that only runs as far back as mid-2001, the composite index never fell below 10 during the "recovery" that followed the tech-wreck of the early aughts.

Today, we see the composite index not only remaining depressed but actually turning notably negative, clearly indicating the internal weakness of our current economic expansion and possibly presenting a strong signal of recession to come.

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

Pending Home Sales: November 2011

2011-12-30T09:32:00.004-05:00

Yesterday, the National Association of Realtors (NAR) released their Pending Home Sales Report for November showing that home sales increased with the seasonally adjusted national index jumping a notable 7.3% since October and increasing 5.93% above the level seen in November 2010.

Meanwhile, the NARs chief economist Lawrence Yun suggests that the rice in contract activity should portend an equivalent rise to existing home sales though purchase failures have been running unusually high.

"Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high... November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,..."

Also, it's important to note that the NAR reports that the pending home sales numbers were apparently not affected by the recent and dramatic existing home sales benchmark revisions.

"Pending home sales are not affected by the recently published rebenchmarking of existing-home sales because the index uses a different methodology based directly on contract signings, and is adjusted for seasonality."

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).

Extended Unemployment: Initial, Continued and Extended Unemployment Claims December 29 2011

2011-12-30T09:22:00.000-05:00

Yesterday’s jobless claims report showed increases to both initial and continued unemployment claims as seasonally adjusted initial claims remained below the 400K level for the fourth consecutive week.

Seasonally adjusted “initial” unemployment increased 15,000 to 381,000 claims from last week’s revised 366,000 claims while seasonally adjusted “continued” claims increased by 34,000 resulting in an “insured” unemployment rate of 2.8%.

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 3.49 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.62 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.12 million people on state and federal unemployment rolls.

The Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey: December 2011

2011-12-28T12:37:00.000-05:00

Yesterday, the Federal Reserve Bank of Dallas released their latest read on manufacturing in their region indicating that manufacturing activity worsened slightly with the current general business activity index declining to a contraction level of -3 while the future general business activity index increased to 10.3.

These results are coming, more or less, inline with the other regional manufacturing survey all indicating that business activity has slowed sharply in 2011 and may possibly indicate recession is upon us.

The Richmond Fed Survey of Manufacturing Activity: December 2011

2011-12-28T12:21:00.001-05:00

Yesterday, the Federal Reserve Bank of Richmond released their Survey of Manufacturing Activity for December showing that the composite index, the broadest measure of manufacturing activity, improved 3 points to a weak level of 3.

The most notable component measures also showed similar results with the new orders improving to 7, shipments increasing to 3 and backlog of orders climbing to a weak 1.

The following chart plots the composite index with the red line marking a level of 0, or the threshold between increasing and declining activity.

S&P/Case-Shiller: October 2011

2011-12-28T11:53:00.000-05:00

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.

The latest release of the S&P/Case-Shiller (CSI) home price indices for October reported that the non-seasonally adjusted Composite-10 price index declined 1.09% since September while the Composite-20 index declined 1.23% over the same period with both measures continuing to decline notably since last year.

The latest CSI data clearly indicates that the price trends are experiencing a declining trend into the typically less active summer and fall season and as I recently pointed out, the more timely and less distorted Radar Logic RPX data is starting to capture notable falling prices driven primarily by seasonality.

The 10-city composite index declined 3.02% as compared to October 2010 while the 20-city composite declined 3.40% over the same period.

Topping the list of regional peak decliners was Las Vegas at -60.66%, Phoenix at -55.79%, Miami at -50.80%, Tampa at -46.78% and Detroit at -44.12%.

Additionally, both of the broad composite indices show significant peak declines slumping -31.90% for the 10-city national index and -32.06% 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 charts (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 as well as annual and monthly changes.

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.

How The Bear Popped The Bubble!

2011-12-28T11:05:00.001-05:00

Gather 'round all ye bubble-sitting families and partake in a reading of this warm old holiday classic by Dr. SoldAtTheTop! (Originally posted Christmas 2006!)

***

Every Bull
Down in Bull-ville
Liked the Housing Bubble a lot...

But the Bear,
Who lived just South of Bull-ville
Did NOT!

The Bear hated the Bubble!
He blamed the Fed, rates and lending!
But the Bulls didn't care, they just kept right on spending.
It could be that Bulls were just very trendy.
It could be, perhaps, they were whipped into a speculative frenzy.
But I think the most likely reason of all
May have been that their noggins were two sizes too small.

But,
Whatever the reason,
Their heads or the craze,
They continued to spend, for days upon days.
And the Bear, staring up from his cave down below
Sensed the limit had been reached, things were going to BLOW!
For he knew every Bull up in Bull-ville that night
Had stretched every dollar, squeezed their finances tight.

"And they're going back for more!" he could see to his dismay
"This just cannot last, not for one more day!"
Then he ran to his closet to fetch a loud-speaker
"I MUST warn them all, before they get in any deeper!"
For, the Bear knew...

...All the Bull girls and boys
Who had been flipping, and borrowing and buying up toys
Were all skirting the edge, sitting perfectly poised
For collapse that once realized... oh, the noise! Noise! Noise! Noise!

Then the Bulls, young and old, will be in a terrible fix.
And they'd have to hunker down and stop all their mad tricks!
And the economy... oh what a mighty deep-six!
It will sink faster than boat load of bricks!

And THEN
Something would happen that he liked least of all!
Every Bull up in Bull-ville, the tall and the small,
Would all start to panic, when home prices stop swelling.
They'd reverse the craze… they'll all begin selling!

They'd sell! And they'd sell!
AND they'd SELL! SELL! SELL! SELL!
And the more the Bear thought of the Bull-Panicky-Sell
The more the Bear thought "This is NOT going to end well!"
"Why for almost a decade I've watched the bubble inflate!
I MUST warn them now!
Before it's TOO LATE!"

THEN
He mounted the loud-speaker
To the top of his car
And a siren with flood lights
That were blazing like stars

Then the Bear said, "I’m off!"
And he drove forty blocks
Toward the homes that the Bulls
Had been trading like stocks.

All their windows were bright. Flat panel glow filled the air.
All the Bulls were all carrying-on without even a care
When he came to a stop in the Bull-ville town square.
"This is the best place," the Bear thought as he reached
For the microphone that he would use when he preached.

THEN
Click! On went the siren, the lights and the speaker!
Then the Bear started yelling! "Things are looking bleaker and bleaker!
You all must come out, listen to what I have to say
Give me a chance to appeal to your senses today!"

Then one Bull emerged through his front door.
Then another came out, and some more... then still more.
Soon the square was abuzz with a large crowd of Bulls
All grumbling and muttering about association rules.

But the Bear went on "You are all in grave trouble!
I have come here to warn you of the Great Housing Bubble!
You see it's been inflating, stretching thinner and thinner..
If you don't stop now, there will be almost no winners!"

"This is the greatest Ponzi-scheme ever devised
Where all of you have been convinced to not question your eyes.
Just go right on speculating... pushing prices up higher
And assume there will always be a greater fool buyer!"

"But Things are now not looking so hot...
Home sales are plunging, The builders are shot!
Inventory is rising, there is no place to hide.
Soon you will be in for a vicious price slide!"

Then he clicked off the speaker and he heard not a sound.
The Bulls all looked puzzled, just standing around.
Then one Bull, an Economist named David Lereah (Pronounced Le-ray)
Stood up and he shouted, "I have something to say!"

"You are a very foolish Bear!" He said with a sigh
"This is a GREAT time to SELL or to BUY!
Yes prices are moderating, that much is sure true.
But that is a HEALTHY sign that the market will pull right on through.
I've seen all the numbers, I release them you know...
And what I've seen is STABILIZATION as we level off at the low"

"So pack up your things and head off down the hill!
We don't need your type of hype in Bull-ville!"

So the Bear did as he was told, all downhearted and grim.
He silently opened his car door and stepped in.
And he backed down the hill and then crawled into his cave.
And he thought about the Bull-ville that he failed to save.

But just then the Bear heard a horrible sound!
A massive explosion that sent shock waves through the ground!
As he looked from his window, he could not believe either eye...
The whole of Bull-ville had been blown to the sky!

And what happened then...?
Well, in Bear-ville they say
That although he was sad...
His pride grew three sizes that day!
And the minute his heart stopped feeling so blue
He published a book titled "What To Do and Not To Do If a Bubble Finds You!"

New Home Sales: November 2011

2011-12-23T10:22:00.003-05:00

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for November showing a monthly increase with sales climbing 1.6% since October and 9.8% above the level seen in November of 2010 but remaining at an epically low level of 315K SAAR units.

It's important to recognize that the inventory of new homes has now fallen to a new series low at 158K units, lowest level seen in in at least 47 years while the median number of months for sale going flat at 7.4.

The monthly supply remained declined to 6.0 months while the median selling price declined 2.5% and the average selling price declined 13.77% from the year ago level.

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

FHFA Monthly Home Prices: October 2011

2011-12-22T13:01:00.001-05:00

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that, nationally, home prices declined 0.21% since September and declined 3.16% below the level seen in October 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.

University of Michigan Survey of Consumers December 2011 (Final)

2011-12-22T12:54:00.001-05:00

Today's final release of the Reuters/University of Michigan Survey of Consumers for December indicated improvement in consumer sentiment with a reading of 69.9 but falling 6.17% below the level seen last year while one year inflation expectations declined slightly at 3.1%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 63.6, and the Current Economic Conditions Index climbed to 79.6.

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.

The Chicago Fed National Activity Index: November 2011

2011-12-22T12:48:00.003-05:00

Today’s release of the Chicago Federal Reserve National Activity Index (CFNAI) continued to indicate weakness in national economic trends with the index remaining in contraction territory for a fourth consecutive month at -0.37 while the three month moving average went flat at -0.24.

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.

Bull Trip!: GDP Report Q3 2011 (Third Rough Estimate)

2011-12-22T12:42:00.001-05:00

Today, the Bureau of Economic Analysis (BEA) released their second "estimate" of the Q3 2011 GDP report showing that the economy continued to expand but at a notably slower pace than originally estimated with real GDP increasing at an annualized rate of just 1.8% from Q2 2011.

On a year-over-year basis real GDP increased 1.46% while the quarter-to-quarter non-annualized percent change was 0.45%.

The latest quarterly results indicate that the most notable source of weakness in the economy came from the change in private inventories component resulting in an overall contribution of -1.35% to GDP while government expenditures with non-defense spending declined 3.8% and state and local spending declined by 1.6%.

Fixed investment purportedly made notable contributions to Q3 GDP with non-residential fixed investment increasing 15.7% from Q2 2011 while residential fixed investment increased 1.3% over the same period.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims December 22 2011

2011-12-22T12:27:00.000-05:00

Today’s jobless claims report showed declines to initial unemployment claims and continued unemployment claims as initial claims fell to the lowest level seen since mid-2008.

Seasonally adjusted “initial” unemployment declined 4,000 to 364,000 claims from last week’s revised 368,000 claims while seasonally adjusted “continued” claims declined by 79,000 resulting in an “insured” unemployment rate of 2.8%.

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 3.50 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.53 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.04 million people on state and federal unemployment rolls.

NAR Revises the Great Housing Decline

2011-12-21T12:12:00.001-05:00

Today, the National Association of Realtors (NAR) released a major benchmark revision to their existing home sales data resulting in notable downward revisions to all monthly results from 2007 and beyond.

While the Realtors were quick to point out that the “month to month characterizations of market conditions did not change”, the data certainly did with the trends post-bust now looking much more severe and a fair amount more consistent with what was reported for the new home market.

Of course the NAR suggests that there are a number of factors that contributed to the previously inflated results including growth in MLS coverage, FSBO related distortions and geographic population shifts.

Looking at the chart above (click for full-screen version) that compares the data pre and post-benchmark revisions, you can see that what the NAR is purporting to be the trend now looks substantially weaker and shows that the housing decline was notably more severe than previously reported with seasonally adjusted annualize home sales falling from a peak level of 7.25 million units in 2005 to just over 3.45 million in 2010, a level first seen in the early 1990s.

Existing Home Sales Report: November 2011

2011-12-21T11:45:00.002-05:00

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for November showing an increase in sales with total home sales climbing 4% since October and 12.2% above the level seen in November 2010.

Single family home sales increased 4.5% from October and rose 12.9% above the level seen in November 2010 while the median selling price declined 4.0% below the level seen in November 2010.

Inventory of single family homes declined 3.8% from October dropping 16.1% below the level seen in November 2010 which, combined with the relatively slow pace of sales, resulted in an still elevated monthly supply of 7.0 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.

Reading Rates: MBA Application Survey – December 21 2011

2011-12-21T09:49:00.000-05:00

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) declined yet again, dropping 3 basis points to 4.00% since last week while the purchase application volume declined 4.9% and the refinance application declined 1.6% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

New Residential Construction Report: November 2011

2011-12-20T10:40:00.001-05:00

Today’s New Residential Construction Report showed that in November, both single family permits and starts increased from October with both measures continuing to show tepid results when compared on a year-over-year basis.

While the traditional business media jumped on this report as an indicator that housing is on the mend, closer inspection shows that the majority of the "strength" was in multi-unit structures, particularly structures with five or more units while single family activity remains historically subdued.

Single family housing permits, the most leading of indicators, increased 1.64% from last month to 435K single family units (SAAR), increasing 3.57% above the level seen in November 2010 but remaining an astonishing 75.81% below the peak in September 2005.

Single family housing starts increased 2.29% to 447K units (SAAR), but dropped 1.54% below the level seen in November 2010 and a stunning 75.48% below the peak set in early 2006.

With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings December 2011

2011-12-19T11:39:00.000-05:00

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that all measures increased in December with the composite HMI index climbing to 21 while the "buyer traffic" index climbed from record lows to 19, the highest level seen since May 2008, as home builders continue to plod through the weakest activity seen in generations.

While all indicators made notable increases in November, it's important to note that conditions still remain epically distressed by historic standards.

The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared.

Index of Stress: December 2011

2011-12-16T09:47:00.001-05:00

The Federal Reserve Bank of St. Louis recently began publishing a new weekly index that seeks to track the general level of financial stress.

As periods of financial stress come and go a whole host of fundamental economic indicators immediately adjust to meet the near and long term expectations of market participants

Interest rates, yields spreads, popular market volatility indices all move in real time giving observers unequivocal evidence of changes general sentiment.

The St. Louis Fed has devised a method of crunching eighteen of these sensitive indices down into one convenient index it calls the St. Louis Fed Financial Stress Index (STLFSI).

The latest results of the STLFSI indicate that the level of financial stress remains elevated with December's results near the highest level seen in since 2009 at .83.

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

2011-12-15T12:51:00.000-05:00

The latest release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) for December indicated a notable improvement in the regions manufacturing activity with the current activity index climbing to a level of 10.3 while the future activity index improved to a level of 44.1.

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.

Production Pullback: Industrial Production November 2011

2011-12-15T12:46:00.000-05:00

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing a pullback with total industrial production declining 0.22% from October and rising 3.74% above the level seen in November 2010.

Capacity utilization declined 0.30% from October climbing just 2.63% above the level seen in November of 2010 to stand at 77.79%

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.

The Empire State Manufacturing Survey: December 2011

2011-12-15T12:34:00.000-05:00

The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.

Today’s report showed a notable improvement for both current and future assessments of manufacturing activity with the current activity index climbing to 9.53 while future activity jumped to just 52.33.

Current prices paid increased to 24.42 while current new orders improved 5.1 and assessments of future new orders improved to 54.65.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims December 15 2011

2011-12-15T12:23:00.001-05:00

Today’s jobless claims report showed a notable decline to initial unemployment claims and a slight increase to continued unemployment claims as a slight rising trend was firmly called into question for initial claims.

Seasonally adjusted “initial” unemployment declined 19,000 to 366,000 claims from last week’s revised 385,000 claims while seasonally adjusted “continued” claims increased by 4,000 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 3.64 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.69 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.33 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – December 14 30 2011

2011-12-14T09:35:00.002-05:00

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) declined yet again, dropping 5 basis points to 4.03% since last week while the purchase application volume declined 8.2% and the refinance application climbed 9.3% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

Economic Jolt: Job Openings and Labor Turnover October 2011

2011-12-13T10:43:00.000-05:00

Today, the Bureau of Labor Statistics released their latest monthly read of job availability and labor turnover (JOLT) showing that private non-farm job “openings” declined 3.20% since September climbing 13.55% above the level seen in October 2010 while private non-farm job “hires” declined 2.65% from September and rose 5.64% above the level seen in October 2010

Job “layoffs and discharges” declined 6.92% from September falling 2.61% below the level seen last year while quitting activity declined 3.56% from September remaining 9.85% above the level seen in October 2010.

It’s important to understand that job “quits” are included as a component of the “separations” data series as “quitting” is a valid means of workers “separating” from employers but their inclusion tends to create an overall procyclical trend in what would otherwise be logically thought of as a countercyclical process (i.e. downturn leads to increase in separations not decrease).

On The Pulse: Ceridian-UCLA Pulse of Commerce Index November 2011

2011-12-13T10:32:00.000-05:00

The latest release of the Ceridian-UCLA Pulse of Commerce Index™ (PCI) suggests that economic activity improved slightly in November with the seasonally adjusted index climbing 0.13% from October and climbing 0.92% above the level seen in November 2010.

Currently, the PCI appears to be slowing overall joining a host of other sensitive indicators that currently appear to be signaling notable economic weakness and possible looming recession.

The three month moving average of the PCI increased slightly from October indicating that the November (released this week) Industrial Production data will likely show a similar trend.

Conspicuous Correlation: Retail Sales November 2011

2011-12-13T10:24:00.000-05:00

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.2% increase from October and an increase of 6.7% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.34% from October and increased 3.68% above the level seen in November 2010 while, adjusting for inflation, “real” discretionary retail sales declined 0.08% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Hong Kong Bubble?: Hong Kong Residential Property Prices October 2011

2011-12-12T12:02:00.001-05:00

Today, the University of Hong Kong released their Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in October, the price of residential properties declined 0.26% since September but still climbed 13.43% above the level seen in October 2010.

It appears that after a stunning run of monthly increases that saw prices increase dramatically, prices are beginning to show a notable pullback with all measures declining on the month.

The HKU-REIS is a set of property price indices constructed monthly using a “modified” repeat-sale methodology similar to that of the S&P/Case-Shiller indices yet suited to the Hong Kong property market.

Radar Watching: October 2011

2011-12-12T11:56:00.001-05:00

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines and, after having broken well below the low set in March of 2009 (double-dipping) earlier this year and then rising throughout the spring/summer selling season, is now clearly in decline as the data moves into the period of the year with the least number of transactions.

The latest data shows that as of October, prices have declined 4.33% below the level seen in October 2010 while continuing to turn down from a seasonal peak reached in mid-June.

With the spring/summer selling season now complete and declining prices now registering with regularity, there is nowhere for prices to go but down. Look for a declining trend to continue to materialize and likely run into March or April of 2012.

University of Michigan Survey of Consumers December 2011 (Early)

2011-12-09T15:05:00.001-05:00

Today's early release of the Reuters/University of Michigan Survey of Consumers for December indicated improvement in consumer sentiment with a reading of 67.7 but falling 9.13% below the level seen last year while one year inflation expectations declined slightly at 3.1%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 61.1, and the Current Economic Conditions Index climbed to 77.9.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims December 08 2011

2011-12-08T09:46:00.001-05:00

Today’s jobless claims report showed notable declines to both initial and continued unemployment claims as a slight rising trend was firmly called into question for initial claims.

Seasonally adjusted “initial” unemployment declined 23,000 to 381,000 claims from last week’s revised 404,000 claims while seasonally adjusted “continued” claims declined by 174,000 resulting in an “insured” unemployment rate of 2.8%.

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 3.30 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.16 million people that are currently counted as receiving traditional continued unemployment benefits, there are 6.47 million people on state and federal unemployment rolls.

Index of Stress: November 2011

2011-12-07T14:15:00.000-05:00

The Federal Reserve Bank of St. Louis recently began publishing a new weekly index that seeks to track the general level of financial stress.

As periods of financial stress come and go a whole host of fundamental economic indicators immediately adjust to meet the near and long term expectations of market participants

Interest rates, yields spreads, popular market volatility indices all move in real time giving observers unequivocal evidence of changes general sentiment.

The St. Louis Fed has devised a method of crunching eighteen of these sensitive indices down into one convenient index it calls the St. Louis Fed Financial Stress Index (STLFSI).

The latest results of the STLFSI indicate that the level of financial stress appears to be trending up with November's results remaining near the highest level seen in since 2009 at 1.0.

On The Stamp: Food Stamp Participation September 2011

2011-12-07T09:52:00.001-05:00

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in September, an additional 430,434 recipients were added to the food stamps program increasing 7.82% on a year-over-year basis while household participation increased 9.81%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 7.04% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 9.08% on a year-over-year basis to $6.26 billion for the month.

Reading Rates: MBA Application Survey – December 07 30 2011

2011-12-07T09:37:00.001-05:00

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) declined 3 basis points to 4.08% since last week while the purchase application volume increased 8.3% and the refinance application jumped 15.3% over the same period.

With rates at or near generational lows (including the 10-year T-Bill), the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how low rates on the long end can decline.

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).

For Your Viewing Enjoyment...

2011-12-06T09:30:00.000-05:00

Outstanding Contraction!: Commercial Paper Outstanding November 2011

2011-12-06T09:23:00.000-05:00

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a generally cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they had not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and for November commercial paper generally trended up breaking its recent decent while still contracting at a rate of 2.00% on a year-over-year basis to $1002.10 billion, a level that is still notably lower than even the worst periods of the last two recessions.

Fannie Mae Delinquencies: October 2011

2011-12-05T10:45:00.001-05:00

The latest release of the Fannie Mae Monthly Summary indicated that total serious single family delinquency went flat in October while remaining at distressed levels.

In October, 3.11% of non-credit enhanced loans went seriously delinquent while the level was 9.41% of credit enhanced loans resulting in an overall total single family delinquency of 4%.

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.

ISM Non-Manufacturing Report on Business: November 2011

2011-12-05T10:18:00.001-05:00

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity improved slightly throughout November with the business activity component increasing on the month while the overall non-manufacturing index declined falling to 52.0 from 52.9 in October.

At 56.2 the business activity index increased 4.46% since October but remained 5.39% below the level seen a year earlier.

Like releases of prior months, non-manufacturing sector respondents are seeing some signs of improvement but the overall outlook is still fairly mixed:

"Business activity continues to swing back and forth. Customer traffic remains lower than expected, but discretionary spending is fluctuating, making it difficult to find the pulse of the consumer." (Arts, Entertainment & Recreation)

"Lending is getting a little better. Competition for good deals is fierce because there remains a very limited number of high-quality borrowers." (Finance & Insurance)

"Raw materials prices appear to be stabilizing, and in some cases are dropping. Diesel fuels remain elevated and have not dropped." (Mining)

"We currently see no signs of a turnaround. Customers are nervous about the future of their jobs and incomes. Due to this fact, our sales are down and our need to hire more employees is, too." (Accommodation & Food Services)

"Business is slowly improving. Outlook for the next few months is good." (Retail Trade)

"In the face of an extremely tight business climate, prices continue to be sticky. We are not seeing significant price moderation." (Management of Companies & Support Services)

Envisioning Employment: Employment Situation November 2011

2011-12-02T10:00:00.001-05:00

Today’s Employment Situation Report indicated that in November, net nonfarm payrolls increased with private nonfarm payrolls adding 140,000 jobs and the unemployment rate declining to 8.6% over the same period.

Net private sector jobs increased 0.13% since last month climbing 1.74% above the level seen a year ago but but remained a whopping 5.09% below the peak level of employment seen in December 2007.

Full Time Workers Fully Under Pressure: November 2011

2011-12-02T09:56:00.001-05:00

Today’s employment situation report showed that in November the full time unemployment rate declined to 9.2% of the civilian workforce but remains near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for roughly 88.5% of all unemployed workers.

Recovery-less Recovery: Unemployment Duration November 2011

2011-12-02T09:50:00.001-05:00

Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.

Today's employment situation report showed that conditions for the long term unemployed were mixed in November and remained epically distressed by historic standards.

Workers unemployed 27 weeks or more declined to 5.691 million or 43% of all unemployed workers while the median number of weeks unemployed increased to 21.6 weeks and the average stay on unemployment increased to 40.9 weeks, the highest level ever recorded.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

On The Margin: Total Unemployment November 2011

2011-12-02T08:51:00.001-05:00

Today’s Employment Situation report showed that in November “total unemployment” including all marginally attached workers declined to 15.6% from the prior month's level of 16.2% while the traditionally reported unemployment rate also declined to 8.6%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Constuction Spending: October 2011

2011-12-01T10:40:00.001-05:00

Today, the U.S. Census Bureau released their latest read of construction spending showing near-cycle low levels of spending in October for residential construction while indicating a improvement for total non-residential spending.

On a month-to-month basis, total residential spending increased 3.36% from September and rose 1.95% above the level seen in October 2010 while remaining a whopping 64.67% below the peak level seen in 2006.

Single family construction spending increased 0.57% since September and rose 1.03% since October 2010 but remained a whopping 77.14% below it's peak in 2006.

Non-residential construction spending increased 1.34% since September climbing 7.55% above the level seen in October 2010 but remained a whopping 34.41% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.

ISM Manufacturing Report on Business: November 2011

2011-12-01T10:23:00.001-05:00

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that manufacturing activity improved in November with assessments of many measures increasing.

At 52.7 the purchasing manager’s composite index (PMI) increased 3.74% since October but remained 9.45% below the level seen a year earlier.

Some respondents indicated that business in improving but orders remain weak:

"Business still holding its own. Some growth in margin now that some of the raw materials prices have abated. Oil is pushing $100 so that has not been favorable." (Chemical Products)

"Orders for the remaining two months have increased after an extended 'summer dip' in sales overall. We expect to finish the year approximately 10 percent above 2010." (Electrical Equipment, Appliances & Components)

"Seeing a slight slowdown in orders; could be related to the holidays." (Primary Metals)

"Oil exploration seems to be really picking up. Government is permitting again, so business is the busiest we've ever seen." (Computer & Electronic Products)

"The EPS ruling about higher fees for coal-generated electricity can have a huge, negative impact on our business if implemented in January 2012. We are at the peak of our seasonal demand push." (Plastics & Rubber Products)

Extended Unemployment: Initial, Continued and Extended Unemployment Claims December 01 2011

2011-12-01T09:10:00.001-05:00

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as a slight rising trend was firmly called into question for initial claims.

Seasonally adjusted “initial” unemployment increased 6,000 to 402,000 claims from last week’s revised 396,000 claims while seasonally adjusted “continued” claims increased by 35,000 resulting in an “insured” unemployment rate of 3.0%.

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 3.52 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.37 million people that are currently counted as receiving traditional continued unemployment benefits, there are 6.89 million people on state and federal unemployment rolls.

Following the Economy (on Your Android Mobile Device)

2011-11-30T11:00:00.001-05:00

As most longtime PaperEconomy readers know, I rely heavily on Blytic.com to provide the majority of the interactive data visualizations embedded in my posts.

While Blytic’s platform for conveniently publishing data visualizations is very cool, particularly for bloggers or any other finance related content publishers, today Blytic.com has announced an interesting new Android app that allows users to “keep track the most important trends shaping our economy as well as make predictions and participate in discussions on hundreds of different real-time economic data points.”

With nifty swipeable, pinchable and tappable charts, Blytic’s mobile app delivers hundreds of economic trends directly to your mobile device keeping the data fresh and sorted by the most recently updated.

The predictions aspect of the app is probably the most interesting feature in that it turns the app into a macroeconomic game of sorts.

You log in (or not if you wish to remain anonymous) and then, while browsing charts, record predictions of where you think a particular data point will go in the next period (next quarter, month, week, day, etc.).

Then, when the actual data value is published for that next period, your prediction is scored and your overall score is tallied allowing you to be ranked against all other users.

It’s a very fun and interactive way of staying on top of all the most important economic trends while letting you showcase your economic forecasting prowess.

Pending Home Sales: October 2011

2011-11-30T10:04:00.001-05:00

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for October showing that home sales increased with the seasonally adjusted national index jumping a notable 10.41% since September and increasing 9.15% above the level seen in October 2010.

Meanwhile, the NARs chief economist Lawrence Yun hopes that today's numbers indicate that the buyers are coming back to the market.

"Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions..."

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).

ADP National Employment Report: November 2011

2011-11-30T09:21:00.001-05:00

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 November as private employers added 206,000 jobs in the month bringing the total employment level 1.73% above the level seen in November 2010.

Looking at the chart (click for full-screen dynamic version) showing ADP’s total private nonfarm payrolls since 2001 as well as the year-over-year and month-to-month percent change, you can see that while the job recovery had been anemic throughout most of 2010, more recently the trend had been picking up momentum.

Although the level of jobs is still far below the peak seen in late 2007 and still near the lows seen during the worst period of the "dot-com" recession, the bottom looks to be clearly defined and the trend is looking comparable to past recoveries.

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.

Reading Rates: MBA Application Survey – November 30 2011

2011-11-30T09:10:00.001-05:00

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) declined 4 basis points to 4.10% since last week while the purchase application volume declined 0.8% and the refinance application slumped 15.3% over the same period.

With rates at or near generational lows (including the 10-year T-Bill), the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how low rates on the long end can decline.

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).

S&P/Case-Shiller: September 2011

2011-11-29T11:46:00.001-05:00

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 September reported that the non-seasonally adjusted Composite-10 price index declined 0.42% since August while the Composite-20 index declined 0.64% over the same period with both measures continuing to decline notably since last year.

The latest CSI data clearly indicates that the price trends are experiencing a declining trend into the typically less active summer and fall season and as I recently pointed out, the more timely and less distorted Radar Logic RPX data is starting to capture notable falling prices driven primarily by seasonality.

The 10-city composite index declined 3.27% as compared to August 2010 while the 20-city composite declined 3.59% over the same period.

Topping the list of regional peak decliners was Las Vegas at -60.05%, Phoenix at -55.93%, Miami at -50.22%, Tampa at -46.50% and Detroit at -42.41%.

Additionally, both of the broad composite indices show significant peak declines slumping -31.18% for the 10-city national index and -31.26% 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 charts (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 as well as annual and monthly changes.

FHFA Monthly Home Prices: September 2011

2011-11-29T11:30:00.000-05:00

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that, nationally, home prices increased 0.94% since August but declined 2.52% below the level seen in September 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.

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

2011-11-28T12:26:00.001-05:00

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 September 26 and averaged for the month indicates that with the slowing summer/fall transactions has come a notable decline of prices (the typical trend) with the national index declining 1.43% since August and falling 4.80% below the level seen in September 2010.

The Radar Logic index will likely be capturing an decline in prices from now until early 2012 as transactions continue to trend down.

Look for tomorrow's S&P/Case-Shiller home price report to reflect this declining trend though to a lesser degree due to its three month rolling-average nature with prices moderately higher.

The Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey: November 2011

2011-11-28T12:04:00.001-05:00

Today, the Federal Reserve Bank of Dallas released their latest read on manufacturing in their region indicating that manufacturing activity improved slightly but remained weak with the current general business activity index increasing to a weak expansion level of 3.2 while the future general business activity index declined to 9.7.

These results are coming, more or less, inline with the other regional manufacturing survey all indicating that business activity has slowed sharply in 2011 and may possibly indicate recession is upon us.

New Home Sales: October 2011

2011-11-28T11:05:00.001-05:00

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for October showing a monthly increase with sales climbing 1.3% since September and increase 8.87% above the level seen in October of 2010 and remaining at an epically low level of 307K SAAR units.

It's important to recognize that the inventory of new homes has now fallen to a new series low at 162K units, lowest level seen in in at least 47 years while the median number of months for sale declined to 7.4.

The monthly supply remained declined to 6.3 months while the median selling price increased 0.04% and the average selling price declined 0.05% from the year ago level.

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

University of Michigan Survey of Consumers November 2011 (Final)

2011-11-23T10:24:00.001-05:00

Today's final release of the Reuters/University of Michigan Survey of Consumers for November indicated improvement in consumer sentiment with a reading of 64.1 but falling 10.47% below the level seen last year while one year inflation expectations went flat at 3.2%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 55.4, and the Current Economic Conditions Index climbed to 77.6.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims November 23 2011

2011-11-23T09:56:00.001-05:00

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as a slight rising trend was firmly called into question for initial claims.

Seasonally adjusted “initial” unemployment increased 2,000 to 393,000 claims from last week’s revised 391,000 claims while seasonally adjusted “continued” claims increased 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 3.45 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.17 million people that are currently counted as receiving traditional continued unemployment benefits, there are 6.63 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – November 23 2011

2011-11-23T09:33:00.001-05:00

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 points to 4.14% since last week while the purchase application volume declined jumped 8.2% while the refinance application declined 4% over the same period.

With rates at or near generational lows (including the 10-year T-Bill) and the FOMC members becoming more dovish by the day, it will be interesting to see where rates will go as clear details of QE3, likely to be focused more on long term rates, are revealed.

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).

Massive Unemployment: Mass Layoffs October 2011

2011-11-22T11:05:00.001-05:00

The latest release of the Bureau of Labor Statistics (BLS) Mass Layoff Report indicated a decline in large-scale layoffs with 1353 mass layoff events for October resulting in 118,689 initial unemployment claimants on a seasonally adjusted basis.

The BLS considers a mass layoff event to be a condition where there are at least fifty initial claims for unemployment insurance originating from a single employer over a period of five consecutive weeks.

The Richmond Fed Survey of Manufacturing Activity: November 2011

2011-11-22T10:57:00.001-05:00

Today, the Federal Reserve Bank of Richmond released their Survey of Manufacturing Activity for November showing that the composite index, the broadest measure of manufacturing activity, improved 6 points to a weak level of 0.

The most notable component measures also showed similar results with the new orders improving to -2, shipments increasing to 1 and backlog of orders climbing to a weak -10.

The following chart plots the composite index with the red line marking a level of 0, or the threshold between increasing and declining activity.

Bull Trip!: GDP Report Q3 2011 (Second Rough Estimate)

2011-11-22T10:41:00.001-05:00

Today, the Bureau of Economic Analysis (BEA) released their second "estimate" of the Q3 2011 GDP report showing that the economy continued to expand at a notably slower pace than originally estimated with real GDP increasing at an annualized rate of just 2.0% from Q2 2011.

On a year-over-year basis real GDP increased 1.51% while the quarter-to-quarter non-annualized percent change was 0.50%.

The latest quarterly results indicate that the most notable source of weakness in the economy came from the change in private inventories component resulting in an overall 0.9% decline to gross private domestic investment and government expenditures with non-defense spending declining 3.8% while state and local spending declined declined by 1.4%.

Fixed investment purportedly made notable contributions to Q3 GDP with non-residential fixed investment increasing 14.8% from Q2 2011 while residential fixed investment increased 1.6% over the same period.
Personal consumption expenditures also increased notably increasing 2.3% from Q2 2011.

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.

Existing Home Sales Report: October 2011

2011-11-21T11:02:00.001-05:00

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for October showing an increase in sales with total home sales climbing 1.4% since September and 13.5% above the level seen in October 2010.

Single family home sales increased 1.6% from September and rose 13.8% above the level seen in October 2010 while the median selling price declined 5.8% below the level seen in October 2010.

Inventory of single family homes declined 0.5% from September dropping 12.2% below the level seen in October 2010 which, combined with the relatively slow pace of sales, resulted in an still elevated monthly supply of 7.8 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.

The Chicago Fed National Activity Index: October 2011

2011-11-21T10:51:00.001-05:00

Today’s release of the Chicago Federal Reserve National Activity Index (CFNAI) continued to indicate weakness in national economic trends with the index remaining in contraction territory for a third consecutive month at -0.13 while the three month moving average declined to -0.27.

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.

ECRI Weekly Leading Index: November 18 2011

2011-11-18T10:42:00.001-05:00

The latest release of the Economic Cycle Research Institute’s (ECRI) Weekly Leading Index weakened slightly falling to 121.8 from last week resulting in the all important annualized “growth” component showing a value of -7.9 and continuing suggest a recession call on the part of the ECRI’s economics staff .

The chart above shows the ECRI’s Weekly Leading Index growth component since 2001.

Notice that this index has turned notably negative which, along with an erosion in many other key macro-economic series, appears to be signaling that the probability of recession is high.

For a very entertaining debate over the ECRI leading index and the recent recession call watch this clip of ECRI's Chief Operations Officer Lakshman Achuthan on CNBCs Squawk Box.

Hong Kong Bubble?: Hong Kong Residential Property Prices September 2011

2011-11-18T10:29:00.001-05:00

Today, the University of Hong Kong released their Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in September, the price of residential properties declined a whopping 2.62% since August but still climbed 15.15% above the level seen in September 2010.

It appears that after a stunning run of monthly increases that saw prices increase dramatically, prices are beginning to show a notable pullback with all measures declining on the month.

The HKU-REIS is a set of property price indices constructed monthly using a “modified” repeat-sale methodology similar to that of the S&P/Case-Shiller indices yet suited to the Hong Kong property market.

New Residential Construction Report: October 2011

2011-11-17T11:18:00.001-05:00

Today’s New Residential Construction Report showed that in October, both single family permits and starts increased from September with both measures continuing to show tepid results when compared on a year-over-year basis.

Single family housing permits, the most leading of indicators, increased 5.1% from last month to 434K single family units (SAAR), increasing 6.6% above the level seen in October 2010 but remaining an astonishing 75.86% below the peak in September 2005.

Single family housing starts increased 3.9% to 430K units (SAAR), but dropped 0.9% below the level seen in October 2010 and a stunning 76.41% below the peak set in early 2006.

With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.

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

2011-11-17T11:00:00.001-05:00

The latest release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) for November indicated a weakening in the regions manufacturing activity with the current activity index falling to a level of 3.6 while the future activity index improved to a level of 41.9.

While about half the component measures turned down in November, more data is needed in order to get a more complete sense of how the economy is trending.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims November 17 2011

2011-11-17T10:48:00.001-05:00

Today’s jobless claims report showed a decline to both initial and continued unemployment claims as a slight rising trend was firmly called into question for initial claims.

Seasonally adjusted “initial” unemployment declined 5,000 to 388,000 claims from last week’s revised 393,000 claims while seasonally adjusted “continued” claims declined by 57,000 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 3.45 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.21 million people that are currently counted as receiving traditional continued unemployment benefits, there are 6.67 million people on state and federal unemployment rolls.