Category: Real Estate

Economics Update

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If you believe that small business will be important in any recovery, then the fact that the fact that the NFIB’s index of small business optimism fell.

In employment, job turnover fell in May, indicating that this already jobless recovery might become even more jobless.

There are also signs of weakness in transportation, with the Association of American Railroads Rail Time Indicators falling.

Real estate is grim as well, with non-residential construction forecast to fall 10% in 2010, and home mortgage purchase applications fell to a 13 year low, even with rates being at historical lows.

Finally, in what makes up over 70% or so of the US economy, retail sales fell in June (see pic).

Yes, the Housing Crisis Was Caused by N%$##@&S

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You know the right wing talking point, that Fannie Mae and Freddy Mac, AKA the GSEs, and the Community Reinvestment Act (CRA) are responsible for the housing meltdown.

Ignore the fact that the GSEs proportion of mortgage securitization fell during the housing bubble, ignore the fact that the lenders that drove the craze were not banks, and were not covered by the CRA’s requirements for them to do lending, because if you are are a right winger, it’s all the fault of people who had the wrong coloration.

Once you let “darkies” buy houses, disaster is soon to follow.

It’s a f%$#ing lie, and the latest data point on this is the fact that, “The rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.”

So an essential part of this narrative, that non-whites cannot be trusted to pay their debts or to be lent to seems to be another lie:

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

(emphasis mine)

The right wing has spent a lot of time attempting to manufacture the fiction that it was attempts to deter discrimination and to put some fairness into the system that caused this problem, but the GSEs could never securitize the jumbo mortgages, and the CRA never applied to the neighborhoods where the über-rich built their homes, because you don’t need banks to be forced to lend in well-to-do neighborhoods.

Their lying in furtherance of their bankrupt ideology, as well as a corrupt press corps which elevates “balance” above the truth, is all they have.

The facts prove them to be morally bankrupt parasites who should not be trusted.

Economics Update

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It’s jobless Thurdsay, and initial claims fell by 21,00 to 454000, which is still at least 100,000 too high for anything approaching a realistic recovery.

The less volatile 4-week moving average fell by 1250, and continuing claims fell by 224,000 to 4.41 million, though I am not sure if the latter might have been caused by the Senate delaying extended benefits.

Additionally, it looks like what Paul Krugman calls the “Invisible Bond Vigilantes,” still appear not to exist, because the 30-year fixed mortgage rate has fallen to 4.57%, the lowest mortgage rate since Freddie Mac started keeping track of the data in 1971.

Note that even with the banks giving away money, people are still not buying houses now that the tax credit is basically done.

Hoocoocanode?

In other less than surprising news, the Bank of England has kept its benchmark rate at ½%, basically zero, so apparently they don’t believe in the bond vigilante fairy either.

Economics Update

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Temp hiring surges

It looks like temporary hiring is very strong, up 19.6% year over year, which, in addition to contributing to my finding employment, should be a leading indicator for direct employment, though private “permanent” employment is still down 0.7% YoY, which runs counter to earlier data. (see chart pr0n)

We are also seeing falling rates of credit card delinquencies, which are down to an 8 year low, which could be seen as either a glass half full, that people are getting a handle on their finances, or glass half empty, with people continuing to deleverage, and flying into the “paradox of thrift.”

Finally, in an update from yesterday, when I discussed office vacancies, today, we see that vacancy rates in shopping centers increased in the 2nd quarter.

Economics Update

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CRE is not a pretty picture
H/t Calculated Risk

Not a good day for real estate.

We have an increase in the rate of mortgage delinquencies, as well as decrease in delinquent mortgages becoming current.

Additionally, in the world of non-residential real estate, office vacancy rates have hit a 17 year high. (See graph pr0n)

Outside of real estate, the Institute for Supply Management’s (ISM) non manufacturing index fell in June, though the number is still above 50, it’s 53.8 down from May’s 55.4, so it is showing slower expansion, not contraction.

On the brighter side, the bankruptcy filing rate in June fell from May’s level.

Well, sort of anyway. You see, June actually had about the same number of filings, but because June had 22 business days, and May, because of where weekends fell and the Memorial Day holiday, only had 20 business days, the rate for filing days was down by 10%.

I call bullsh%$ on that one.

People don’t file on a per business day basis, they do so over a period of time that is largely unaffected by holidays, and June has 1 fewer days that May.

So, Are We Going to Repeat 1937?

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Why this picture does not scare the powers that be defies understanding
H/t Calculated Risk

Well, a quick rundown of this week’s data seems to indicate that if we listen to the austerity fetishists, we are.

In employment, the Thursday unemployment claims data indicates a continued weakening of the employment picture, with initial claims rising 13K to 472K, at least 100K more than what we need to see for meaningful job growth, and both the 4-week moving average and the continuing claims numbers went in the wrong direction too.

Additionally, the official job numbers for June came out, and the non-Farm payroll fell by 125,000, though the drop was because of the US Census winding down its temporary positions.

Private employment rose by an anemic 83,000, and the unemployment rate fell from 9.7% to 9.5%, though the latter was largely from people leaving the rolls because they had given up looking, and the hourly workweek fell.

Additionally, the Institute for Supply Management’s Manufacturing Index fell from 59.7 to 56.2, a 6-month low, though any number over 50 still shows expansion, and the Chicago Purchasing Managers’ index fell slightly as well.

Also, in yet another indication that the economy is running out of steam because the stimulus is running out, small business lending from the SBA has cratered following the expiration of its bonus program to lending banks.

Of course, the inflation hysterics hawks are saying that the bond markets are mad as hell, and that they are not going to take it any more, but if this were true, mortgage rates would not have fallen to their lowest rates in 50 years.

I would note that we are seeing the same thing in real estate, with 31% of all home sales being foreclosure or short sales, up from 1% at the height of the bubble, and these foreclosures are selling for a 27% discount relative to regular sales, which indicates that a recovery, either in price or in volume is still far away.

Economics Update

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This may be the harbinger of an economic recovery


This is not a boating accident real estate recovery!

The The Chicago Fed National Activity Index [CFNAI] has risen to its highest level since March 2006 (see top pic) indicating that there might be some sort of recovery going on.

This is further reinforced by the fact that personal income, spending and savings all rose in May.

Of course on the other side the Conference Board’s Consumer Confidence index fell nearly 10 points between May and June, and first time home-buyer traffic has fallen off a cliff, indicating that the recent bump in home sales was, as the experts* noted, was merely a sale-price time shift, not a real recovery.

*And loudmouth blowhards like yours truly.

Economics Update

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Housing Recovery My Ass!
H/t naked capitalism

The lede has to be the the Federal Open Market Committee’s (FOMC) statement.

While the rates remained the same, no surprise, you cannot drop rates below 0%, and rates won’t go up until the Fed sends a few months of signals, what is surprising is that the statement is more pessimistic than May’s statement:

The Federal Reserve acknowledged a faltering pace of U.S. economic recovery on Wednesday as it renewed its vow to hold benchmark interest rates exceptionally low for an extended period.

In a statement at the end of a two-day meeting, the Fed scaled back its assessment of the pace of recovery, taking note of pockets of weakness, and also issued a cautionary note about volatile financial markets in light of Europe’s debt woes.

Of course, it’s more than just unemployment and consumer spending, real estate appears poised to had back down the drain, with the AIA’s Architecture Billings Index declining last month, and mortgage purchase applications fell again this week.

But the real news in real estate is the continuing collapse in home sales, and we now know that new home sales have fallen to the lowest recorded number ever, a 300,000 annual rate, and records on this have been kept since 1963. (!)

The two bright sides here are that the numbers are seasonally adjusted, and that the monthly number is volatile, and was likely impacted by the expiration of the home buyer tax credit, but it is still grim.

Economics Update

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The Institute for Supply Management’s manufacturing index fell from 60.4 in April to 59.7 in May. Note that this is still expansion, but it is a slower rate of growth.

Seeing as how the 2nd derivative is a pretty twitchy number anyway, I’d wait for the June numbers, and perhaps July, to see if there is a trend.

Meanwhile, construction rose by 2.7% from March to April, the largest one month jump in almost 10 years.

Additionally, serious mortgage delinquencies fell marginally, but since this is the first time that they have fallen since the real estate bubble started to pop in 2007.

Meanwhile, in the department of, “If you listen to the Germans when you set up a currency, you will get screwed,” unemployment in the Euro zone rose to 10.1% in April. (PDF)

Economics Update (Friday Morning Edition)

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Home sales up, but prices are down


And inventory is rising again

Yes, I know, I haven’t been posting this regularly.

Yesterday’s miss was due to thunderstorms.

In any case, yesterday was jobless Thursday, and initial unemployment claims fell slightly, by 16,000 to 460,000, which was worse than expected, with the 4 week moving average rising slightly, and continuing claims fell, though, as I frequently note, people who move from continuing claims to emergency claims fall out of that number.

We also now know that mass layoffs rose in April.

additionally, we are seeing more of that whole “paradox of thrift” thing, with personal income rising, but spending remaining flat, which implies that an increase in consumers buying crap that they really don’t need won’t be our economic salvation.

Also note that the US GDP in the 1st quarter was revised downward, to an annual growth rate of 3% from 3.2%.

I think that he Obama’s already anemic stimulus package is running out of steam.

In real estate, the flight from the Euro has pushed the 30-year fixed mortgage rate to a record low, which, along with the recently expired home buyer tax credit, drove existing home sales higher, though inventories are increasing as well, and prices are falling once again, which implies that a resurgence in the housing bubble won’t be our economic salvation..

In terms of more general metrics, the consumer confidence index rose slightly, as did the Chicago Fed Activity Index, and the Chicago Fed Midwest Manufacturing Index.

I just wish that the PTB were as concerned about 9.9% unemployment as they are about a twitch in the DJIA that ran for about an hour.

Economics Update

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This is not an expanding home market
H/t Calculated Risk

Well, so much for green shoots, it’s jobless Thursday, and new claims rose by 25K this week to 471,000, with the 4 week moving average rising by 3K to 453,500, though the continuing claims number fell by 40K to 4,630,000.

It should be noted that the continuing claims number does not count those on emergency UI, like yours truly.

Additionally, it should be noted that the Conference Board’s Index of Leading Economic Indicators posted its 1st drop since March 2009. It should be noted that this is a volatile metric, and a folks who know economics generally want at least 3 months up or down before they declare a trend.

Additionally, real estate is looking dicey.

We have, “One in 7 US homeowners late paying or in foreclosure,” actually 14.01%, in the 1st quarter of the year, with 10% of home owners late 90+ days, and the AIA’s Architecture Billings Index shows continued contraction in April, though this indicator for future commercial construction is did improve in comparison to March.

Additionally, mortgage purchase applications fell to a 13 year low, even as low rates kick-started the demand for refinancing.

Note that this is despite near record low mortgage rates.

We are also seeing continuing erosion in the prices of commercial property.

On the plus side, the Philadelphia Bank of the Federal Reserve’s Manufacturing Activity Index rose in May, and Japan’s economy grew faster than expected.

On the inflation side, the CPI fell by 0.1% in April, and the core rate, which excludes food and energy, has risen .9% over the past 12 months, which is actually worrying, as it indicates a risk of a deflationary spiral/lost decade.

Economics Update

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Well, over the past few days, we’ve had a spate of good news, with the New York Bank of the Federal Reserve’s Empire State index showing continued growth, though that growth is slowing, with the index dropping from 31.9 in April to 19.1 in May.

Additionally, credit card issuers are reporting reduced delinquencies for April.

In real estate, we have the National Association of Home Builders confidence index rising to a 2½ year high in May, as well as an increase in housing starts, though housing permits have fallen, which indicates that the builders are expecting the euphoria to be short lived.

Finally, concerns about the Euro zone, and a related return to recession (we’re out of recession?) have pushed both oil and the Euro down.

Shadenfreude

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It appears that Rush Limbaugh is having problems selling his New York City penthouse apartment, so he has cut his asking price by $1 million.

I guess his little tantrum about New York raising taxes by a few pennies on rich pigs is costing him some change.

I noted this real estate transaction about 2 months ago, (Yes, the pictures are at the link, and yes, they are hideous) when I commented on the fact that his taste in decorating was less than refined.

Economics Update (Early Afternoon, 1st Time This Week Edition)

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It’s jobless Thursday, and initial jobless claims fell from 448,000 to 444,000, though it should be noted that last week’s number of 448,000 was actually revised up from 444,000, meaning that the number is even flatter than the 4K change indicates.

That being said, the 4 week moving average fell by 9,000, which might indicate a slight trend downward in claims, if not for the fact that continuing claims rose, indicating that this may be less a matter of the economy picking up than it is a matter of employers simply running out of people to let go.

In terms of other metrics for the economy:

Consumer confidence, at least as surveyed by Investor’s Business Daily and TechnoMetrica Market Intelligence, has risen in May, from 48.7 from 48.4, though numbers below 50 indicate pessimism.

The National Federation of Independent Business’ optimism index rose to 90.6 in April from 86.8 in March, which is firmly in the class of, “better, but still pretty weak tea.”

In transport and trade, we have the trade deficit hitting a 15-month high, which, while normally not a good thing, is right now, because we are well into “paradox of thrift” territory.

Additionally, we have the always worthwhile Calculated risk reporting that Diesel fuel consumption fell slightly, and rail traffic rose slightly, in April.

In real estate, mortgage applications are up, but only because refinance is up, purchase applications are down, indicating that we are seeing people who are trying to lock in low rates on homes that they already own.

Finally, the Bank of England has decided to maintain its monetary policies, keeping its benchmark rate at ½% (effectively zero), and maintaining its quantitative easing via asset purchases.

12%?!?!?!?

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Analysts at Morgan Stanley have determined that 12% of all mortgage defaults in February were from people who afford to pay, i.e. they were “strategic defaults” from people who decided that their home mortgages were just a bad investment that they needed to walk away from.

If you think that home prices are on their way to a serious rebound, the fact that there are a huge number of people who are far enough underwater that they are walking away, even with the cost to their credit rating and social pressure, should make you pause.