Calculated Risk

Look Ahead: Weekly Unemployment Claims, Philly Fed Manufacturing Survey

2012-05-16T21:55:00.000-04:00

On Thursday:

• The initial weekly unemployment claims report will be released at 8:30 AM. The consensus is for claims to be essentially unchanged at 365 thousand compared to 367 thousand last week. Based on the consensus (and the usual upward revision to the previous week), the 4-week average will probably decline to below 375 thousand.

• At 10:00 AM, the Philly Fed Survey for May is scheduled for release. The consensus is for a reading of 10.0, up from 8.5 last month (above zero indicates expansion). This is the 2nd regional Fed survey for May; the NY Fed (Empire state) survey indicated faster expansion in May.

• Also at 10:00 AM, the Conference Board Leading Indicators for April will be released. The consensus is for a 0.1% increase in this index.

Earlier:
• Housing Starts increase to 717,000 in April
• Industrial Production up in April, Capacity Utilization increases
• MBA: Mortgage Delinquencies decline in Q1
• Q1 MBA National Delinquency Survey Comments

Some thoughts on Apartments and Rents

2012-05-16T19:37:00.000-04:00

Just over two years ago we started discussing how the environment was becoming more favorable for apartment owners. This was based on several factors:

• Favorable demographics: a large cohort was moving into the low 20s to mid-30s age group. (see graph of age groups at "Rents soar")
• There were a record low number of multi-family housing units being started, meaning very few completions in 2010 and 2011.
• A large number of families were losing their homes in foreclosure, or through a short sales, and many of these families were becoming renters. (limited new supply)
• The price-to-rent ratio favored renting.

Sure enough, the vacancy rate for apartments declined sharply over the last two years, and rents have been rising.

Looking forward, the environment will be a little less favorable for apartments owners in a year or two. Demographics will still be favorable for several more years, but it appears completions might start catching up to absorption in a year or two (based on some comments and projections today from Reis director of research Victor Canalog on a webinar).

Below is an update to a graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction are also important for employment).

This graphs use a 12 month rolling total for NSA starts and completions.

Click on graph for larger image.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) has been increasing since mid-2010. The 12 month total for completions (red line) is now following starts up. This suggests that completions (new supply) will increase sharply in 2013 and 2014, although this will still be below the level for the pre-bust period.

Other factors that might make the environment less favorable for apartment owners are:
• More investor buying of single family homes as rentals.
• Fewer foreclosures in 2013 and beyond.
• Wages not keeping up with rent increases.
• House prices are now back to "normal" levels in many areas based on rents. Further rent increases will start pushing more renters to buy (those that can qualify).

These are just some preliminary thoughts - right now conditions remain very favorable for apartment owners as indicated by the recent NMHC apartment survey and Reis quarterly survey.

Earlier:
• Housing Starts increase to 717,000 in April
• Industrial Production up in April, Capacity Utilization increases
• MBA: Mortgage Delinquencies decline in Q1
• Q1 MBA National Delinquency Survey Comments

AIA: Architecture Billings Index indicates contraction in April

2012-05-16T17:37:00.000-04:00

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Reverts to Negative Territory

After five months of positive readings, the Architecture Billings Index (ABI) has fallen into negative terrain. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the April ABI score was 48.4, following a mark of 50.4 in March. This score reflects a decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 54.4, down from mark of 56.6 the previous month.

“Considering the continued volatility in the overall economy, this decline in demand for design services isn’t terribly surprising,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Also, favorable conditions during the winter months may have accelerated design billings, producing a pause in projects that have moved ahead faster than expected.”

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 48.4 in April. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This is just one month - and as Baker noted, this might be payback for the mild weather earlier in the year - but this suggests CRE investment will stay weak all year (it will be some time before investment in offices and malls increases).

All current Commercial Real Estate graphs

Report: Housing Inventory declines 18.9% year-over-year

2012-05-16T16:27:00.001-04:00

From Realtor.com: April 2012 Real Estate Data

On the national level, inventory of for-sale single family homes, condominiums, townhouses and co-ops declined by -18.85% in April 2012 compared to a year ago, and declined in all but five of the 146 markets covered by Realtor.com.

Realtor.com also reports that inventory was up 2.0% from the March level.

Inventory usually increases seasonally from March to April. Over the last 11 years, the average increase was close to 9% since many people typically list their homes in the spring, hoping to move during the summer months. If the NAR also reports a 2% increase, this would be the smallest increase in inventory from March to April since the year 2000.

The NAR is scheduled to report April existing home sales and inventory on Tuesday, May 22nd. Economist Tom Lawler told me he expects to have a preliminary estimate of April existing home sales tomorrow.

Earlier:
• Housing Starts increase to 717,000 in April
• Industrial Production up in April, Capacity Utilization increases
• MBA: Mortgage Delinquencies decline in Q1
• Q1 MBA National Delinquency Survey Comments

FOMC Minutes: "Several members indicated that additional monetary policy accommodation could be necessary" if economy slows

2012-05-16T14:00:00.000-04:00

The Fed's program to "extend the average maturity of its holdings of securities" (aka Operation Twist) is schedule to end in June. Now analysts are looking for clues about the possibility of QE3.

Although there was no discussion of easing alternatives, several members indicated they'd support additional monetary policy accommodation if the economy slows. This was an increase from a "couple" members in the previous meeting.

From the Fed: Minutes of the Federal Open Market Committee, April 24-25, 2012 . Excerpt:

Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough.

Earlier:
• Housing Starts increase to 717,000 in April
• Industrial Production up in April, Capacity Utilization increases
• MBA: Mortgage Delinquencies decline in Q1
• Q1 MBA National Delinquency Survey Comments

Q1 MBA National Delinquency Survey Comments

2012-05-16T11:19:00.001-04:00

A few comments from Jay Brinkmann, MBA’s Chief Economist and Senior Vice President for Research and Education, and Michael Fratantoni, MBA's Vice President, Vice President of Research and Economics, on the conference call.

• All delinquency categories were down in Q1, both seasonally adjusted (SA) and NSA.

• The 30 day delinquency rate is back to normal (at the long term average). (This means a normal amount of loans are going delinquent each month)

• This was the largest quarter-to-quarter drop in delinquencies in history (there is usually a large seasonal drop in Q1, but this was larger than normal).

• The biggest problem is the number of loans in the foreclosure process. This is primarily a problem in states with a judicial foreclosure process. States like California and Arizona are now below the national average of percent of loans in the foreclosure process.

Click on graph for larger image in graph gallery.

This graph is from the MBA and shows the percent of loans in the foreclosure process by state. Posted with permission.

The top states are Florida (14.31% in foreclosure), New Jersey (8.37%), Illinois (7.46%), Nevada (the only non-judicial state in the top 10 at 6.47%), and New York (6.17%).

As Jay Brinkmann noted, California (3.29%) and Arizona (3.57%) are now below the national average and improving quickly.

The second graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent decreased to 3.13% from 3.22% in Q4. This is at about 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket decreased to 1.21% in Q1, from 1.25% in Q4. This is the lowest level since Q4 2007.

There was a decrease in the 90+ day delinquent bucket too. This decreased to 3.06% from 3.11% in Q4 2011. This is the lowest level since 2008, but still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process increased slightly to 4.39% from 4.38%.

A final comment: I asked about the impact of the mortgage settlement (signed on April 5th, after Q1 ended). Jay Brinkmann said that servicers might have been waiting for the settlement and that might have "built up" the in-foreclosure rate in Q1. The two key categories to watch for the impact of the settlement are the in-foreclosure and 90+ days delinquent buckets.

To reiterate: the key problem remains the very high level of seriously delinquent loans and loans in the foreclosure process.

Note: the MBA's National Delinquency Survey (NDS) covers about "42.8 million first-lien mortgages on one- to four-unit residential properties" and is "estimated to cover around 88 percent of the outstanding first-lien mortgages in the market." This gives about 5.7 million loans delinquent or in the foreclosure process.

MBA: Mortgage Delinquencies decline in Q1

2012-05-16T10:02:00.000-04:00

The MBA reported that 11.79 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q1 2012 (delinquencies seasonally adjusted). This is down from 11.96 percent in Q4 2011 and is the lowest level since 2008.

From the MBA: Delinquencies Decline in Latest MBA Mortgage Delinquency Survey

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 7.40 percent of all loans outstanding as of the end of the first quarter of 2012, a decrease of 18 basis points from the fourth quarter of 2011, and a decrease of 92 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 121 basis points to 6.94 percent this quarter from 8.15 percent last quarter.

The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.96 percent, down three basis points from last quarter and down 12 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.39 percent, up one basis point from the fourth quarter and 13 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.44 percent, a decrease of 29 basis points from last quarter, and a decrease of 66 basis points from the first quarter of last year.
...
“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve. Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future. The percentage of loans three payments or more past due, the loans that represent the backlog of problems that still need to be handled, is down to the lowest level since the end of 2008. Foreclosure starts are at their lowest level since the end of 2007,” said Michael Fratantoni, MBA's Vice President of Research and Economics.
...
"The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states. While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states, 6.9 percent. In contrast, that rate has fallen to 2.8 percent in non-judicial states, the lowest since early 2009. As the foreclosure starts rate is essentially the same in both groups of states, that difference is due entirely to the systems some states have in place that effectively block timely resolution of non-performing loans and is not an indicator of the fundamental health of the housing market or the economy. In fact, hard-hit markets like Arizona that have moved through their foreclosure backlog quickly are seeing home price gains this spring."

Note: 7.40% (SA) and 4.39% equals 11.79%.

I'll have more later after the conference call this morning.

Industrial Production up in April, Capacity Utilization increases

2012-05-16T09:33:00.000-04:00

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 1.1 percent in April. Output is now reported to have fallen 0.6 percent in March and to have moved up 0.4 percent in February; previously, industrial production was estimated to have been unchanged in both months. Manufacturing output increased 0.6 percent in April after having decreased 0.5 percent in March. Excluding motor vehicles and parts, which increased nearly 4 percent, manufacturing output moved up 0.3 percent, and output for all but a few major industries increased. Production at mines rose 1.6 percent, and the output of utilities gained 4.5 percent after unseasonably warm weather in the first quarter held down demand for heating. At 97.4 percent of its 2007 average, total industrial production for April was 5.2 percent above its year-earlier level. The rate of capacity utilization for total industry moved up to 79.2 percent, a rate 3.1 percentage points above its level from a year earlier but 1.1 percentage points below its long-run (1972--2011) average.

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 12.4 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 79.2% is still 1.1 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 80.6% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in April to 97.4. March was revised down (so the month-to-month increase was greater than expected), and February was revised up.

The consensus was for a 0.5% increase in Industrial Production in April, and for an increase to 79.0% (from 78.7%) for Capacity Utilization. This was above expectations.

All current manufacturing graphs

Housing Starts increase to 717,000 in April

2012-05-16T08:30:00.000-04:00

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 717,000. This is 2.6 percent (±14.8%)* above the revised March estimate of 699,000 and is 29.9 percent (±15.2%) above the revised April 2011 rate of 552,000.

Single-family housing starts in April were at a rate of 492,000; this is 2.3 percent (±11.9%)* above the revised March figure of 481,000. The April rate for units in buildings with five units or more was 217,000.

Building Permits:
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 715,000. This is 7.0 percent (±1.0%) below the revised March rate of 769,000, but is 23.7 percent (±1.9%) above the revised April 2011 estimate of 578,000.

Single-family authorizations in April were at a rate of 475,000; this is 1.9 percent (±1.1%) above the revised March figure of 466,000. Authorizations of units in buildings with five units or more were at a rate of 217,000 in April.

Click on graph for larger image.

Total housing starts were at 717 thousand (SAAR) in April, up 2.6% from the revised March rate of 699 thousand (SAAR). Note that March was revised up sharply from 654 thousand.

Single-family starts increased 2.3% to 492 thousand in April. March was revised up to 481 thousand from 462 thousand.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that total housing starts have been increasing lately after moving sideways for about two years and a half years.

Total starts are up 50% from the bottom, and single family starts are up 39% from the low.

This was above expectations of 690 thousand starts in April, and was especially strong given the upward revisions to prior months.

The housing recovery continues.

All Housing Investment and Construction Graphs

Look Ahead: Housing Starts, Industrial Production, Mortgage Delinquencies, FOMC Minutes

2012-05-15T21:16:00.000-04:00

Wednesday will be another busy day:

• Housing starts for April will be released at 8:30 AM. Total housing starts were at 654,000 in March, on a seasonally adjusted annual rate basis (SAAR), and single-family starts were at 462,000. This was a decline from the February rate, but most of the decline was related to the volatile multi-family sector. Based on housing permits, starts probably rebounded in April. The consensus is for total housing starts to increase to 690,000 (SAAR) in April.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for April. The consensus is for a 0.5% increase in Industrial Production in April, and for Capacity Utilization to increase to 79.0% (from 78.6%).

• At 10:00 AM, the Mortgage Bankers Association (MBA) is scheduled to release the 1st Quarter 2012 National Delinquency Survey (NDS). This provides a breakdown of mortgage delinquencies by number of days delinquent, type of loan, and by state. Since the mortgage settlement was signed off on April 5th, there probably wasn't any impact on Q1 delinquencies. I'll be on the conference call at 10:30 AM and pass along any comments about the settlement, HARP, house prices, etc.

• At 2 PM, the FOMC Minutes for the meeting of April 24-25 will be released. From Goldman Sachs on things to look for:

We expect that the April FOMC minutes ... will include a discussion of possible easing options. ... The first set of options center around the Fed's balance sheet, and we think that the discussion might include the benefits of mortgage purchases, the potential for more “twisting,” and the pros and cons of sterilized asset purchases.

• Also on Wednesday, the MBA will release the weekly mortgage applications survey, and the AIA will release the Architecture Billings Index for April (a leading indicator for commercial real estate).

For the monthly economic question contest:

Misc: NY Fed Manufacturing Survey, Remodeling Index

2012-05-15T17:49:00.001-04:00

A couple of releases earlier this morning ...

• From the NY Fed: May Empire State Manufacturing Survey indicates manufacturing activity expanded at a moderate pace

The May Empire State Manufacturing Survey indicates that manufacturing activity expanded in New York State at a moderate pace. The general business conditions index rose eleven points to 17.1. The new orders index inched up to 8.3, and the shipments index shot up eighteen points to 24.1. ... Employment index readings remained relatively healthy, suggesting that employment levels and hours worked continued to expand. ... The index for number of employees was little changed at 20.5, and the average workweek index rose six points to 12.1.

This was above the consensus forecast of 10.0, up from 6.6 in April (above zero is expansion).

• From BuildFax:

Residential remodels authorized by building permits in the United States in March were at a seasonally-adjusted annual rate of 2,781,000. This is 1 percent below the revised February rate of 2,811,000 and is 10 percent above the March 2011 estimate of 2,522,000.

"Overall, March 2012 had lower remodeling activity than February, which saw significantly greater-than-expected activity, likely due to the unseasonably warm winter weather," said Joe Emison, Vice President of Research and Development at BuildFax.

The BuildFax Remodeling Index (BFRI) is based on construction permits for residential remodeling projects filed with local building departments across the country. The index estimates the number of properties permitted. The national and regional indexes are based upon a subset of representative building departments in the U.S. and population estimates from the U.S. Census. The BFRI is seasonally-adjusted using the X12 procedure.

Even with the decline in March, the remodeling in is up 10% year-over-year.

Lawler: Update Table of Short Sales and Foreclosures for Selected Cities

2012-05-15T15:12:00.000-04:00

CR Note: Last week I posted some distressed sales data for Sacramento. I'm following the Sacramento market to see the change in mix over time (short sales, foreclosure, conventional). Economist Tom Lawler sent me the updated table below for several other distressed areas. For all of these areas, the share of distressed sales is down from April 2011 - and for the areas that break out short sales, the share of short sales has increased and the share of foreclosure sales are down - and down significantly in some areas.

In five of the seven cities that break out short sales, there are now more short sales than foreclosure sales!

Economist Tom Lawler also wrote today: Plunge in Foreclosures Pushes Up REO Prices/Down REO Price Discounts

ForeclosureRadar released its April Foreclosure Report, which covers foreclosure activity in Arizona, California, Nevada, Oregon, and Washington. According to the report, foreclosure starts fell sharply in April in all five states, and completed foreclosure sales declined in all five states, with sizable drops from March in all states save for Washington. And in Arizona, California, and Nevada, record high percentages (44.6%, 41,1%, and 50.7%) of completed foreclosure sales were sold to third parties, rather than becoming bank REO. In its write-up, FR lamented that “we are seeing unprecedented government intervention into the foreclosure process leaving underwater homeowners in limbo, while stealing opportunity from investors and first time buyers." In discussing the “stolen opportunities,” FR noted that “In both Arizona and Nevada winning bids on the courthouse steps on average equal the current estimated value of those properties,” and that “(i)n California the discount between market value and winning bid have on average declined to 12.3 percent” – substantially lower than a year ago. According to FR, “(t)his leaves investors who intend to resell their purchases with record low profits after eviction, repairs, and closing costs.”

An increasing number of investors, of course, are buying REO with plans to rent the properties out, which has not only intensified demand but has reduced the supply of homes offered for sale.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-Apr	11-Apr	12-Apr	11-Apr	12-Apr	11-Apr
Las Vegas	29.9%	23.8%	36.9%	46.3%	66.8%	70.1%
Reno	32.0%	31.0%	26.0%	38.0%	58.0%	69.0%
Phoenix	25.2%	19.7%	18.8%	44.5%	44.0%	64.2%
Sacramento	30.4%	22.2%	30.3%	44.6%	60.7%	66.8%
Minneapolis	10.9%	10.0%	32.0%	43.3%	42.9%	53.3%
Mid-Atlantic (MRIS)	12.2%	11.8%	11.0%	20.9%	23.2%	32.7%
Orlando	29.4%	25.4%	25.5%	40.2%	54.9%	65.6%
Northeast Florida					38.1%	50.3%
Hampton Roads					31.0%	35.0%

Key Measures of Inflation in April

2012-05-15T11:52:00.000-04:00

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in April on a seasonally adjusted basis ... The gasoline index fell 2.6 percent in April and accounted for most of the decline in energy, though the indexes for natural gas and fuel oil decreased as well. ... The index for all items less food and energy rose 0.2 percent in April, the same increase as in March.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.3% annualized rate) in April. The 16% trimmed-mean Consumer Price Index increased 0.2% (1.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.
...
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was flat at 0.0% (0.4% annualized rate) in April. The CPI less food and energy increased 0.2% (2.9% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for April here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.4%, the trimmed-mean CPI rose 2.3%, and core CPI rose 2.3%. Core PCE is for March and increased 2.0% year-over-year.

These measures show inflation on a year-over-year basis is mostly still above the Fed's 2% target.

NAHB Builder Confidence increases in May, Highest since May 2007

2012-05-15T10:05:00.000-04:00

The National Association of Home Builders (NAHB) reports the housing market index (HMI) increased 5 points in May to 29. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Rises Five Points in May

Builder confidence in the market for newly built, single-family homes gained five points in May from a downwardly revised reading in the previous month to reach a level of 29 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This is the index’s strongest reading since May of 2007.

“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.”

“While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back,” said NAHB Chief Economist David Crowe.
...
Each of the index’s components rebounded from declines in the previous month. The component gauging current sales conditions and the component gauging traffic of prospective buyers each rose five points in May to 30 and 23, respectively, with the traffic component hitting its highest level since April of 2007. The component gauging sales expectations in the next six months rose three points to 34.

Three out of four regions registered improving builder sentiment in May. This included a six-point gain to 32 in the Northeast, and five-point gains to 27 and 28 in the Midwest and South, respectively. The West posted a two-point decline, to 29.

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the May release for the HMI and the March data for starts (April housing starts will be released tomorrow).

Housing Investment and Construction Graphs

Retail Sales increased 0.1% in April

2012-05-15T08:47:00.000-04:00

On a monthly basis, retail sales were up 0.1% from March to April (seasonally adjusted), and sales were up 6.4% from April 2011. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $408.0 billion, an increase of 0.1 percent from the previous month and 6.4 percent above April 2011.

Ex-autos, retail sales also increased 0.1% in April.

Click on graph for larger image.

Sales for March was revised down to a 0.7% increase from 0.8%, and February was revised down to 1.0% from 1.1%.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 23.1% from the bottom, and now 7.7% above the pre-recession peak (not inflation adjusted)

The second graph shows the same data since 2006 (to show the recent changes). Excluding gasoline, retail sales are up 19.4% from the bottom, and now 7.3% above the pre-recession peak (not inflation adjusted).

The third graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 6.4% on a YoY basis (6.4% for all retail sales). Retail sales ex-gasoline increased 0.2% in April.

This was at the consensus forecast for retail sales of a 0.1% increase in April, and below the consensus for a 0.2% increase ex-auto.

All current retail sales graphs

Look Ahead: Retail sales, CPI, Home Builder Confidence, NY Fed Manufacturing Survey

2012-05-14T21:37:00.000-04:00

Tuesday will be a busy day with the release of several key economic indicators including retail sales, CPI, home builder confidence, and the NY Fed manufacturing survey:

• Retail sales for April will be released at 8:30 AM ET. Retail sales were very strong in February and March, increasing 1.1% and 0.8%, respectively. The consensus is for retail sales to increase 0.1% in April, and for retail sales ex-autos to increase 0.2%. This report could be weak. Note: The annual revision for retail sales was released on April 30th including new seasonal adjustments using the Census Bureau’s X-13ARIMA-SEATS (yes, a new model).

• Also at 8:30 AM, the Consumer Price Index for April will be released. The consensus is for no change in headline CPI (with the decline in energy prices) and for core CPI to increase 0.2%. From Merrill:

With gasoline prices peaking in early April, we expect headline CPI to soften, dropping 0.1% monthly, after a 0.3% rise in March. ... Overall, the annual headline CPI inflation rate is likely to decelerate in April to 2.2%, its slowest year-on-year rise since the rapid run-up in global oil prices in February 2011.

• Also at 8:30 am, the NY Fed Empire Manufacturing Survey for May will be released. The consensus is for a reading of 10.0, up from 6.6 in April (above zero is expansion).

• At 10 AM, the May NAHB home builder confidence survey will be released. The consensus is for a reading of 26, up slightly from 25 in April. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.

• The Manufacturing and Trade: Inventories and Sales report for March will be released at 10 AM, and Fed Governor Elizabeth Duke speaks at 9.30 AM: "Prescriptions for Housing Recovery".

For the monthly economic question contest:

Update on Gasoline Prices: West Coast Refinery Problems

2012-05-14T19:09:00.000-04:00

Earlier I noted that gasoline prices will probably follow the price of Brent oil down, but that there were some refinery issues.

Here is a story from the Mercury News last Friday: Rising California gas prices expected to increase even more

Prices could rise an additional 20 cents in the next few days, as refinery problems continue to choke supplies for California's special blend of clean burning gas. On Thursday, many Bay Area stations saw jumps of several cents to a dime.

"Prepare to get clobbered," said Patrick DeHaan, the senior petroleum analyst with GasBuddy.com.

West Coast gas inventories are at their lowest level in 20 years, he said, and the blame is with production on the West Coast.

"Refineries have been having a lousy spring with not just one massive facility outage," DeHaan said, "but smaller, more widespread issues."

Gasoline prices on the west coast are up about 20 cents this month, and about 10 cents over the last several days. Hopefully this is a short term problem.

Housing: The Return of Multiple Offers

2012-05-14T16:34:00.001-04:00

I've mentioned this before, but here are a couple more excerpts from articles ...

From Susan Straight at the WaPo: How to buy a house in D.C.’s sellers’ market

If you’ve dipped a toe into the Washington-area real estate market these days, you know it’s returned to an era of multiple offers, escalation clauses and competitive bidding. According to RealEstate Business Intelligence, the active inventory of homes in March was down more than 25 percent from March 2011.
...
Sellers are in heaven; buyers are feeling the stress. These days you can go to any open house of a home in good condition in a desirable neighborhood, and you’ll find you’re one of a steady stream of potential buyers.

From the Jon Lansner at the O.C. Register: O.C. homes draw multiple-offer ‘avalanche’ (an excerpt from Steve Thomas' report)

Below $500,000 range is NUTS. Homes priced at or near their market value are generating an avalanche of multiple offers. A home in this range is placed on the market and, within moments, cars filled with buyers are touring the home. ...

Upon writing an offer, buyers quickly find that they are one of many, sometimes over ten, offers on the home. Suddenly ... In the end, the seller factors the highest price with the largest down payment. I know, you are thinking, “What about the appraisal?” In many instances, shrewd sellers and Realtors are leveraging the competition to drop the appraisal contingency and require the buyer to make up the difference between the appraisal price and the purchase price, IF there is an appraisal problem. ...

Supply has dropped to levels not seen since June 2005. ... The expected market time for all of Orange County is 1.5 months, or six weeks.

The local economies in these two areas are probably better than most of the country, and anything priced right is selling pretty quickly. The key reason for the multiple offers is the sharp decline in inventory.

Although this might remind some people of 2005, I think the dynamics are very different. This is only happening in a few parts of the country, the buyers are usually making substantial down payments, and I suspect any clear increase in prices would be met with more supply ("sellers waiting for a better market").

Oil and Gasoline Prices, and the Reversal of Seaway Pipeline

2012-05-14T12:15:00.003-04:00

Oil prices have fallen sharply, and once again gasoline prices are lagging. But if oil prices stay at this level - or fall further - then gasoline prices should decline further too (there are always some refinery issues).

First, gasoline prices tend to track international oil prices, so we need to compare gasoline to Brent oil prices, and not WTI (West Texas Intermediate). A "glut" of oil at Cushing pushed down WTI prices relative to Brent over the last few years, but the spread has narrowed some now that a key pipeline is being reversed.

From Bloomberg: Sweet Crude From Seaway Pipeline Offered in the U.S. Gulf

Low-sulfur oil delivered from the soon-to-be reversed Seaway pipeline is being offered in the U.S. Gulf Coast for June delivery.

Enterprise Product Partners LP (EPD) and Enbridge Inc. (ENB) are reversing the pipeline and on May 17 will begin shipping oil from the storage hub at Cushing, Oklahoma, to the Gulf. It is expected to narrow the discount of inland U.S. grades to imports and Gulf Coast production.

The first phase will carry 150,000 barrels a day on the 500-mile (800-kilometer) line, with subsequent phases expanding capacity to 850,000 barrels a day by mid-2014.

This following graph shows the prices for Brent and WTI over the last few years.

Click on graph for larger image.

The spread narrowed last year with the announcement of the partial reversal of the Seaway pipeline. The spread will probably narrow further as the capacity is expanded.

The second graphs shows that gasoline prices track Brent more than WTI.

Before the spread emerged, WTI and Brent tracked closely - and retail gasoline prices tracked pretty closely too.

Once the "glut" emerged, gasoline prices tracked Brent oil prices. Brent was as high as $128 per barrel in March, and gasoline prices peaked at $3.94 (weekly basis) in early April.

We will probably see a similar lag this time, with gasoline prices falling to below $3.50 per gallon by early June (if oil prices stay at this level). It wouldn't be a surprise if most of the decline in gasoline prices happened after Memorial Day (May 28th).

And below is a graph of gasoline prices. Gasoline prices have been slowly moving down since peaking in early April. Note: The graph below shows oil prices for WTI; as noted above, gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Spanish and Italian Bond Yields Increase

2012-05-14T08:54:00.002-04:00

From the WSJ: Global Stocks Hit by Greece Worries

Worries about what a Greek exit would mean for other euro-zone nations with hefty deficits pushed yields on 10-year Spanish government bonds above 6% to the highest levels seen since December.

Here are the Spanish and Italian 10-year yields from Bloomberg.

The Spanish yields are at 6.3%, the highest level since last November. Compared to the German yield, Spanish borrowing costs at euro-era high:

Spreads on Spanish 10-year bonds over German Bunds hit a euro-era high of 486 basis points, surpassing the record hit last November. Yields on Spanish benchmark debt reached 6.30 per cent while German 10-year Bunds were at an all-time low of 1.44 per cent.
excerpt with permission

The Italian yields are at 5.74%, the highest level since January.

The US 10-year yield is down to 1.78%, close to the record low of 1.7% last September.

Look Ahead: Sunday Night Futures

2012-05-13T21:52:00.000-04:00

This will be a busy week, but there are no economic indicators scheduled for release on Monday. The spotlight tomorrow will be on Greece and the Eurogroup meeting.

The Asian markets are mostly green tonight. The Nikkei is up about 0.6%, and the Shanghai Composite is up 0.3% after the People's Bank of China cut reserve requirements on Saturday.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are down slightly, and Dow futures are down 5.

Oil: WTI futures are down to $95.47 (this is down from $109.77 in February) and Brent is down to $111.78 per barrel.

Yesterday:
• Summary for Week Ending May 11th
• Schedule for Week of May 13th

For the monthly economic question contest (for data to be released on Tuesday and Wednesday):

Greek Exit: Looking more likely

2012-05-13T19:26:00.000-04:00

The Financial Times has an overview of some things that might happen when Greece exits the euro: Eurozone: If Greece goes ...

In any exit scenario, the new drachma would depreciate rapidly. ... Goldman Sachs has estimated ... a devaluation of 30 per cent is needed compared with the rest of the eurozone, and more than 50 per cent with Germany.
...
Even if all interest payments were stopped [Greece defaults again], additional austerity would still be needed for a period because Greece’s tax revenues still fall short of its public spending – a primary deficit.
excerpt with permission

The price for imports would soar (like oil prices), and living standards would fall - and Greece would have to immediately bring their primary budget into balance. The hope would be that competitiveness would be restored, and the economy could start growing again.

A key question is spillover to other countries.

Professor Krugman has some thoughts on timing: Eurodämmerung

Some of us have been talking it over, and here’s what we think the end game looks like:

1. Greek euro exit, very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.

And we’re talking about months, not years, for this to play out.

Yesterday:
• Summary for Week Ending May 11th
• Schedule for Week of May 13th

Europe Update: Next Greek Election, Euro-area GDP expected to show recession

2012-05-13T11:44:00.000-04:00

Greece: It is very unlikely that a coalition government will be formed. This means there will be another election on June 17th. The Europeans have said they will fund Greece through the next election, but it is not clear what will happen next. An exit from the euro is very possible.

From the Financial Times: Greek exit from eurozone ‘possible’

Greece’s exit from the eurozone “would be possible,” even if not in Europe’s interest, and countries should have a democratic right to quit, according to ... Luc Coene, the central bank governor of Belgium, in a Financial Times interview ...

Mr Coene’s remarks – echoing similar comments by other eurozone central bankers – hinted at swirling debate within the ECB’s 23-strong council and suggested the ECB now realises such an outcome has become distinctly possible.
Excerpt with permission

And it is appears data this week will confirm the European recession. From Nomura:

An important state election in Germany and a Eurogroup meeting will take center stage amid heightened political uncertainty and GDP data likely to confirm the euro area is in recession. ... Euro-area Q1 GDP first release (Tuesday & Wednesday): The euro area seems to have entered into a technical recession in Q1, albeit with a shallower contraction than in Q4. We expect GDP growth to come in at -0.2% q-o-q in Q1 from -0.3% previously. By country, we think the core should hold up well, while the rest see a less sharp decline in economic output. In Germany and France, we forecast GDP growth of +0.1% q-o-q (vs Q4‟s -0.2%) and 0% q-o-q (vs Q4‟s +0.2%) respectively. ... In Italy, we think GDP growth is likely to print at -0.5% q-o-q in Q4 (vs -0.7% in Q4).

Yesterday:
• Summary for Week Ending May 11th
• Schedule for Week of May 13th

Unofficial Problem Bank list declines to 924 Institutions

2012-05-13T08:03:00.000-04:00

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 11, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

Only one change to report this week to the Unofficial Problem Bank List.

A reader pointed out an action termination against First Missouri National Bank back in August 2011 that was not captured. First Missouri National Bank underwent a name change to First Missouri Bank and charter flip to state member in December 2011. While the name change and charter flip were properly identified, the action termination prior to the charter conversion was not as the OCC did not include the termination within a press release nor can it be found via the OCC's enforcement action search tool. Perhaps the reader has direct access into the OCC's database or a strong interest in this bank to discover such a needle in the haystack. We can only hope they find any other remaining needles.

With the removal, the Unofficial Problem Bank list stands at 924 institutions with assets of $361.1 billion. A year ago, the list held 983 institutions with assets of $425.4 billion. We thought there was an outside chance for the OCC to release its actions through mid-April, but they will keep us waiting until next week. Also, we will be on watch for the FDIC to release the Official Problem Bank List as of March 31, 2012.

Until then, do something kind this weekend for all of the mothers in your life.

Yesterday:
• Summary for Week Ending May 11th
• Schedule for Week of May 13th

Gov. Brown: California Deficit increases to $16 Billion

2012-05-12T18:31:00.000-04:00

From the LA Times: California deficit has soared to $16 billion, Gov. Jerry Brown says

Gov. Jerry Brown announced on Saturday that the state's deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January.

The bigger deficit is a significant setback for California, which has struggled to turn the page on a devastating budget crisis. Brown, who announced the deficit on YouTube, is expected to outline his full budget proposal on Monday in Sacramento.

"This means we will have to go much further, and make cuts far greater, than I asked for at the beginning of the year," Brown said in the video.

In addition to more budget cuts, Governor Brown is asking for a temporary 3% income tax hike for the highest income bracket, and an increase in the state sales tax (but still below a year ago).

In the aggregate, it appears state and local cuts might end mid-year, but some states - like California - will see further budget cuts.

Earlier:
• Summary for Week Ending May 11th
• Schedule for Week of May 13th