Radar Watching: April 2011

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 especially in light of the distortions created by the massive government tax gimmick and other malfeasance.

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, continues to come off the low as the typical early spring transactions begin to mount.

The latest data shows that as of early April, prices have declined 5.10% below the level seen in April 2010 while turning up a bit since the lows seen this February.

It will be interesting to see how far the spring buying can push prices but it's important to note that this seasonal factor will likely end in early July when transactions begin to trail off into the summer months.

On The Stamp: Food Stamp Participation March 2011

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 set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in March, an additional 387,849 new recipients were added to the food stamps program, an increase of 11.13% on a year-over-year basis, while household participation increased 13.57%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 10.28% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 11.32% on a year-over-year basis to $5.98 billion for the month.

Fannie Mae Delinquencies: April 2011

The latest release of the Fannie Mae Monthly Summary indicated that for data through March, total serious single family delinquency declined notably while still remaining at distressed levels.

In March, 3.26% of non-credit enhanced loans went seriously delinquent while the level was 10.13% of credit enhanced loans resulting in an overall total single family delinquency of 4.27%.

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.

Envisioning Employment: Employment Situation May 2011

Today’s Employment Situation Report showed that in May, net nonfarm payrolls increased only slightly rising just 54,000 from April while private nonfarm payrolls added a just 83,000 and the unemployment rate edged up to 9.1% over the same period.

Net private sector jobs increased just 0.08% since last month climbing 1.61% above the level seen a year ago but but remained a whopping 5.79% below the peak level of employment seen in December 2007.

Full Time Workers Fully Under Pressure: May 2011

Today’s employment situation report showed that the full time unemployment rate increased to 9.7% of the civilian workforce remaining 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 May 2011

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

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

Workers unemployed 27 weeks or more jumped to 6.2 million or 45.1% of all unemployed workers while the median number of weeks unemployed increased to 22.0 weeks and the average stay on unemployment surged to 39.7 weeks, a new high for the series.

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 May 2011

Today’s Employment Situation report showed that in April “total unemployment” including all marginally attached workers stayed nearly unchanged at 15.8% from the prior month's level of 15.9% while the traditionally reported unemployment rate rose to 9.1%.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims June 02 2011

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

Seasonally adjusted “initial” unemployment declined by 6,000 to 422,000 claims from last week’s revised 428,000 claims while seasonally adjusted “continued” claims declined by 1,000 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 4.04 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.54 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.58 million people on state and federal unemployment rolls.

ISM Manufacturing Report on Business: May 2011

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that economic activity continued to expand in May though at a sharply slower pace than in April and suggested that all measures saw a slowdown.

At 53.5 the purchasing manager’s composite index (PMI) declined a whopping 11.42% since April and declined 7.44% below the level seen a year earlier.

Some respondents indicated increasing pressure on prices as higher energy prices stocked inflationary forces as well as poor results coming from bad weather:

"Chemical prices are under increasing cost pressure, driven by feedstock and transportation costs." (Chemical Products)

"Demand remains strong; however, inflation is evident everywhere in virtually every material purchased." (Paper Products)

"Bad weather is impacting retail business." (Printing & Related Support Activities)

"Business is still strong, but we are more aware of a possible softening than previously." (Machinery)

Constuction Spending: April 2011

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

On a month-to-month basis, total residential spending increased 3.14% from March falling 12.15% below the level seen in April 2010 and a whopping 65.68% below the peak level seen in 2006 while single family construction spending declined 0.95% since March falling 12.83% since April 2010 and whopping 77.75% below it's peak in 2006.

Non-residential construction spending increased 0.50% since March but declined 8.50% since April 2010 and a whopping 41.16% 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.

ADP National Employment Report: May 2011

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. stalled somewhat in May as private employers added a mere 38,000 jobs in the month bringing the total employment level 1.34% above the level seen in May 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 – June 01 2011

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

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

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 11 basis points to 4.58% since last week while the purchase application volume went flat and the refinance application volume declined 5.7% over the same period.

Rates now appear to be trending down having, more of less, declined continually for the last four months.

Given that we are nearing the end of the Feds QE2 intervention, it will be interesting to see how long rates trend in the next few months.

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

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

S&P/Case-Shiller: March 2011

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

Today’s release of the S&P/Case-Shiller (CSI) home price indices for March reported that the non-seasonally adjusted Composite-10 price index declined 0.62% since February while the Composite-20 index declined 0.77% over the same period falling to the lowest level seen since the Great Housing Collapse commenced in 2006 further indicating that housing is continuing slump into a double-dip.

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

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

The 10-city composite index declined 2.91% as compared to March 2010 while the 20-city composite declined 3.61% over the same period.

Topping the list of regional peak decliners was Las Vegas at -58.61%, Phoenix at -55.91%, Miami at -51.12%, Detroit at -47.21% and Tampa at -46.63%.

Additionally, both of the broad composite indices show significant peak declines slumping -32.98% for the 10-city national index and -33.10% for the 20-city national index on a peak comparison basis.

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

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

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

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

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

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


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

Pending Home Sales: April 2011

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for April showing home sales declined dramatically with the seasonally adjusted national index slumping a whopping 11.6% since March and falling an exceptional 26.5% below the level seen in April 2010, the largest year-over-year decline seen in the wake of the housing collapse.

Meanwhile, the NARs chief economist Lawrence Yun sounds a more somber tone while, more or less, recounting a reality that can no longer be whitewashed or avoided... housing has double dipped.

"The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months, ... The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims."

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).

Kansas City Fed Manufacturing Survey: May 2011

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

The latest results are indicating that the manufacturing expansion slowed significantly falling to a near contraction level of 1 from a level of 14 a month earlier while the employee index declined to 9 and the prices paid for raw materials declined to 54.

The most notable declines leading the weakness were seen in the volume and backlog of orders and volume of shipments and the production index.

It's important to note that these declines are largely consistent with similar trends seen in other regional manufacturing surveys including the Philly Fed Business Outlook Survey and the Richmond Feds Survey of Manufacturing.

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