S&P/Case-Shiller: February 2013

Today's release of the S&P/Case-Shiller (CSI) home price indices for February reported that the non-seasonally adjusted Composite-10 price index increased for a straight month rising 0.37% since January while the Composite-20 index increased 0.29% over the same period.

The latest CSI data is continuing to demonstrate more resiliency than seen in recent years as prices continue to move up even in the face of typically lower seasonal transactions.

If this trend continues, rather than declining as has been seen in past years, prices may just remain flat into the March-April release in advance of the typical uplift from the more active spring transactions.

The 10-city composite index increased 8.60% as compared to February 2012 while the 20-city composite increased 9.32% over the same period.

Both of the broad composite indices show significant peak declines slumping -29.63% for the 10-city national index and -29.03% 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.

Pending Home Sales: March 2013

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for March showing that pending home sales improved with the seasonally adjusted national index climbing 1.5% from February and increasing 7.0% above the level seen in March 2012.

Meanwhile, the NARs chief economist Lawrence Yun is beginning to adopt the "narrow range" sentiment of years past as limited supply works to mute sales activity:

"Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply. Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses, ... Job additions and rising household wealth will continue to support housing demand."

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).

Bull Trip!: GDP Report Q1 2013 (First Estimate)

Today, the Bureau of Economic Analysis (BEA) released their first "estimate" of the Q1 2013 GDP report showing that the economy grew in the quarter with real GDP improving at an annualized rate of 2.5% from Q4 2012.

On a year-over-year basis, real GDP increased 1.80% while the quarter-to-quarter non-annualized percent change was an increase of 0.62%.

The latest quarterly results indicate that the most notable source of weakness in the economy came from declines in government spending particularly on national defense with a 11.5% decline in federal national defense spending from Q4.

Residential investment, on the other hand, worked to buoy the overall fixed investment component growing at an annualized rate of 12.6% from Q3.

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

Extended Unemployment: Initial, Continued and Extended Unemployment Claims April 25 2013

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

Seasonally adjusted “initial” unemployment claims declined by 16,000 to 339,000 claims from 355,000 claims for the prior week while seasonally adjusted “continued” claims declined by 93,000 claims to 3.0 million resulting in an “insured” unemployment rate of 2.3%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 1.79 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.20 million people that are currently counted as receiving traditional continued unemployment benefits, there are 4.99 million people on state and federal unemployment rolls.

New Home Sales: March 2013

Yesterday, the U.S. Census Department released its monthly New Residential Home Sales Report for March showing a improvement with sales climbing 1.5% from February and rising 18.5% above the level seen in March 2012 but still remaining at an historically low level of 417K SAAR units.

It's important to recognize that the inventory of new homes appears to be mounting as unsold units totaled 153K, still though near the lowest level seen in in at least 47 years while the median number of months for sale went flat at 5.0.

The monthly supply went flat at 4.4 months while the median selling price increased 3.0% and the average selling price declined 1.3% 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: February 2013

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that in February, nationally, home prices increased 0.75% from January and rose 7.07% above the level seen in February 2012.

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.

Existing Home Sales Report: March 2013

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for March showing a decrease in sales with total home sales declining 0.6% since February but still climbing 10.3% above the level seen in March 2012.

Single family home sales also declined falling 0.2% from February but still rose 9.1% above the level seen in March 2012 while the median selling price increased a notable 12.1% above the level seen a year earlier.

Inventory of single family homes increased from February to 1.69 million units dropping 16.3% below the level seen in March 2012 which, along with the sales pace, resulted in a monthly supply of 4.7 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: March 2013

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated worsening for the national economy with the index falling to a weak level of -0.23 from a level of 0.76 in February while the three month moving average declined to a level of -0.01.

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.

The Philly Fed Business Outlook Survey: April 2013

The March release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) indicated a slight worsening of the regions manufacturing activity with the current activity index falling to a weak expansionary level of 1.3 while assessments the future activity plunged to a level of 19.5.

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 April 18 2013

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

Seasonally adjusted “initial” unemployment claims increased by 4,000 to 352,000 claims from 348,000 claims for the prior week while seasonally adjusted “continued” claims declined by 35,000 claims to 3.068 million resulting in an “insured” unemployment rate of 2.4%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 1.78 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.29 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.07 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – April 17 2013

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

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

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 4 basis points to 3.52% since last week while the purchase application volume increased 4% and the refinance application volume increased 5% over the same period.

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).

Production Pullback: Industrial Production March 2013

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing an increase in March with total industrial production climbing 0.41% since February and rising 3.47% above the level seen in March 2012.

Capacity utilization also improved climbing 0.26% from February rising 1.53% above the level seen in March of 2012 to stand at 78.48%

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.

New Residential Construction Report: March 2013

Today’s New Residential Construction Report showed mixed results in March with a notable 26.9% monthly increase in multi-unit housing starts greatly influencing the 7.0% monthly increase to total housing starts while single family housing starts declined by a notable 4.8% since February with total housing permits declining significantly as well.

Single family housing permits, the most leading of indicators, declined 0.5% from February to 595K single family units (SAAR), but increased 27.7% above the level seen in March 2012 but still remained an astonishing 66.91% below the peak in September 2005.

Single family housing starts declined 4.8% from February to 619K units (SAAR), but rose 28.7% above the level seen in March 2012 but still remained 66.04% below the peak set in early 2006.

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

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that assesments of housing activity declined in April with the composite HMI index falling to 42 while the "buyer traffic" index declined to 30.

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

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

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

Conspicuous Correlation: Retail Sales March 2013

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a decline of 0.4% from February, but a gain of 2.8% 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 declined 0.42% from February and slipped 0.64% below the level seen in March 2012 while, adjusting for inflation, “real” discretionary retail sales declined a notable 2.27% 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 April 11 2013

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

Seasonally adjusted “initial” unemployment claims declined by a notable 42,000 to 346,000 claims from 388,000 claims for the prior week while seasonally adjusted “continued” claims declined by 12,000 claims to 3.079 million resulting in an “insured” unemployment rate of 2.4%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 1.83 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.35 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.18 million people on state and federal unemployment rolls.

Top N Reasons We’re Totally FUBAR

I’ve been mentally compiling a list of points of interest that I find particularly distressing for few years now but just decided to blog them in order to help discern a trend and possibly get a sense of where things are heading.

Unlike other Top-N lists, this list is a pretty free form and un-ordered though over time I hope to make it more organized.

1. Federal Reserve Chairman Ben Bernanke highlighting stock market gains as being a clear benefit and outcome of the Feds QE policy in his 2011 statement: "I do think that our policies have contributed to a stronger stock market, just as they did in March of 2009 … “.  While I don’t necessarily doubt his assertion, this type of statement offers a clear glimpse into both the extent to which the Fed currently operates as a central planner as well as to the magnitude of its bureaucratic conceit.

2. Trillion dollar federal deficits leading to over 100% debt-to-GDP with literally no possibility of bending the curve to insolvency (i.e. nominal GDP growing at an average annual rate of about 4.5% over the last 20 years while federal debt has and continues to grow at about 7.5% over the same period… pretty much says it all).  The numbers being as large as they are, the general population and media is predictably rife with nonsense with commentators routinely quoting wrong or misleading figures partly due to their own ignorance and partly due to a “Richie Rich” effect of sorts where at any moment nonsensical terms like “zillion” might fly right out of the mouths of those discussing federal budget issues without a single objection.

3. BitCoin in that as much as I think the idea is nothing short of fantastic, it CLEARLY is such a radical development that one has to take note of what it appears to indicate… a notable lack of confidence in fiat currency and of manipulative, fiscally profligate nation states.

4. 47 million American’s on Food Stamps which combined with the other “social safety net” policies are quickly placing the burden of providing basic goods and services for roughly half of all Americans on the back of the all current and generations of future taxpayers.

5. Paul Krugman and his ilk of Keynesian policy junkies that piously claim the ability to both determine every “problem” as well as submit for each (quite proudly) the typical statist solution.

6. Today’s On Point entitled “A Second Look at Capitalism” which I really can’t find words to describe other than to note that the sassy and effeminate guest intellectuals were both predictable and derivative.

7. The Occupy “Movement” (and other similar/associated fringe social phenomena) with its schizophrenic philosophy hybridization in which individuals spouting sometimes completely opposing ideas (Occupy Boston had “End the Fed” signs, “Stop Foreclosure Now” signs, community activists, union rabble and even scientologists in the same smarmy soup that was Dewey Square) somehow coexist and even find comfort in the very same filthy tents.

8. Antifragile by Nassim Taleb which is not just an excellent book, it provides (amongst many other interesting insights) one of the clearest explanations of the way in which strong central planning “fragilizes” a society.  Applying the simple linear rational process by which humans have achieved many great things in science and technology is an awful way to “manage” nonlinear and complex systems like the macro-economy yet we continue the march of policy blunders that, like failed forestry “management” (as if mother nature needed the help), will inevitably lead to an epic conflagration.

9. QE infinity, the ZIRP and the Feds balance sheet exploding by over a trillion as it hoards over 10% of all federal debt leading it to currently pump $40 billion monthly into the treasury (no “operation twist” as there are no more short T-bills… just pure bond purchases) and $45 billion monthly into Fannie/Freddie.  This is not just a problem because of the highly fictitious effects that all of this “easing” has on the economy/currency but also because this is the fullest expression of the Feds credibility.  Any additional “crisis” requiring emergency policy action would surely spark a loss of confidence and likely loss of control for the Fed.  There is currently no room for error.

10. The fact that probably 9 out of 10 Americans don’t have the slightest idea of the severity of the current situation… nuff said (for now).

Outstanding Contraction!: Commercial Paper Outstanding March 2013

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 have 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 as of late March commercial paper continues to slump on a monthly basis while still rising 7.59% on a year-over-year basis to $1002.20 billion, a level that is still substantially lower than even the worst periods of the last two recessions.

SNAP Food Stamp Participation: January 2013

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

In fact, household participation has been climbing so steadily that it has dwarfed 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 indicated that in January, a whopping 514,518 individual recipients were removed from the food stamps program with the current total still increasing 1.78% on a year-over-year basis.

Individuals receiving food stamp benefits declined to 47.27 million which, as a ratio of the overall civilian non-institutional population, increased 0.79% since January 2012 to now stand at a whopping 19.32% of the population.

Households receiving food stamps benefits increased by 23,322 to 23.08 million households with the current total rising 4.05% above the level seen a year earlier

As participation continues to swell, so too has the total nominal benefit cost climbing 2.85% on a year-over-year basis to $6.32 billion for the month.

Envisioning Employment: Employment Situation March 2013

Today’s Employment Situation Report indicated that in March, net non-farm payrolls increased just 88,000 jobs overall with the private non-farm payrolls sub-component adding just 95,000 jobs while the civilian unemployment rate declined to 7.6% over the same period.

Net private sector jobs increased 0.08% since last month climbing 1.78% above the level seen a year ago but remained 2.02% below the peak level of employment seen in December 2007.