Existing Homes: Double Digit Months-of-Supply Watch

Existing Homes: Double Digit Months-of-Supply Watch – How the NAR calculates existing home inventory is a bit of a mystery. However housing economist Tom Lawler has been tracking inventory several different ways. For July, Lawler reports listings totaled 4,038,133, up about 1.6% from June (using Realtor.com). And this brings us to the double digit months-of-supply watch …For June, the NAR reported sales were at a 5.37 million seasonally adjusted annual rate (SAAR), and inventory was at 3.992 million. To calculated the months of supply, divide 3.992 by 5.37 and multiply by 12 months. This gives 8.92 months-of-supply (note: there is a seasonal pattern for inventory, but the NAR uses the NSA data). This graph shows the ‘months-of-supply’ metric. The NAR reported that the months-of-supply increased to 8.9 months in June.
Trillions for Wall Street – On Tuesday, the 30-year fixed rate for mortgages plunged to an all-time low of 4.56 per cent. Rates are falling because investors are still  moving into risk-free liquid assets, like Treasuries. It’s a sign of panic and the Fed’s lame policy response has done nothing to sooth the public’s fears. The flight-to-safety continues a full two years after Lehman Bros blew up.  Housing demand has fallen off a cliff in spite of the historic low rates. Purchases of new and existing homes are roughly 25 per cent of what they were at peak in 2006. Case/Schiller reported on Monday that June new homes sales were the "worst on record", but the media twisted the story to create the impression that sales were actually improving! Here are a few of Monday’s misleading headlines: "New Home Sales Bounce Back in June"–Los Angeles Times. "Builders Lifted by June New-home Sales", Marketwatch. "New Home Sales Rebound 24 per cent", CNN. "June Sales of New Homes Climb more than Forecast", Bloomberg.

Popular ‘Zero Down’ Mortgage Program Makes Comeback – One of the nation’s last sources of no money down financing for home loans appears to be making a comeback: Legislation that restores a Department of Agriculture home-buying program is headed to President Barack Obama’s desk for signature.The legislation makes the USDA’s Single-Family Housing Guaranteed Loan Program self-sufficient, the National Association of Realtors reports. Borrowers will have to pay a higher “guarantee fee” of 3.5%–essentially upfront mortgage insurance–but the fee can be folded into the mortgage. Buyers won’t mind paying a bit more in fees, says Sue Botelho, a senior mortgage advisor with Waterstone Mortgage Corp. in Ft. Walton Beach, Fla. “It’s great news,” she said. “It’s a huge part of my business. I am thrilled.”

  Cutting soot emissions best hope for saving Arctic ice Soot from the burning of fossil fuels contributes far more to global warming than has been thought. But, unlike carbon dioxide (CO2), soot lingers only a few weeks in the air, so cutting emissions could have a significant and rapid impact on the climate.If soot emissions were eliminated, more than 1.5 million premature deaths from soot inhalation could be prevented worldwide each year, reports the Journal of Geophysical Research. According to a new study led by Mark Z. Jacobson of Stanford University in the US, the quickest, best way to slow the rapid melting of Arctic sea ice is to reduce soot emissions from the burning of fossil fuel, wood and dung.  His analysis shows that soot is second only to CO2 in contributing to global warming.

Shadow Inventory to Push 2011 Home Prices Lower than ’09 –Altos Research -The culprit behind the forecast is the weight of the shadow inventory of homes yet to hit the market. But, Sambucci said, anyone who generalizes the size and length of time it takes to clear the shadow inventory will be wrong. “The recovery period is dependent on inventory,” Sambucci said. “But different markets move differently. It’s important to get local.” Other firms have released estimates of the national shadow inventory and the general time it could take to clear it. According to Morgan Stanley, the shadow inventory of foreclosures could top 7m properties and take nearly four years to clear. The credit rating agency, Standard & Poor’s, put the total aggregate balance of the shadow inventory at $480bn worth of loans and would take nearly three years to clear.


Fossil Fuel Subsidies Are 12 Times Support for Renewables, Study Shows – Global subsidies for fossil fuels dwarf support given to renewable energy sources such as wind and solar power and biofuels, Bloomberg New Energy Finance said. Governments last year gave $43 billion to $46 billion of support to renewable energy through tax credits, guaranteed electricity prices known as feed-in tariffs and alternative energy credits, the London-based research group said today in a statement. That compares with the $557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008. “One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support,” said Michael Liebreich, chief executive of New Energy Finance. “This analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables.”


Incoming BP CEO: Time for ‘scaleback’ in cleanup – BP’s incoming CEO said Friday that it’s time for a "scaleback" of the massive effort to clean up the Gulf of Mexico oil spill, but stressed the commitment to make things right is the same as ever.Tens of thousands of people — many of them idled fishermen — have been involved in the cleanup, but more than two weeks after the leak was stopped there is relatively little oil on the surface, leaving less work for oil skimmers to do. Bob Dudley, who heads BP’s oil spill recovery and will take over as CEO in October, said it’s "not too soon for a scaleback" in the cleanup, and in areas where there is no oil, "you probably don’t need to see people in hazmat suits on the beach."


The Rich Drink More – The rich aren’t like you and me. They drink more. At least, upper-income Americans are more likely to report that they consume alcohol, according to a new Gallup survey: As you can see, the higher the income category, the larger the portion of respondents who say they drink alcohol.The same survey, conducted earlier this month, found that more Americans over all report drinking alcoholic beverages this year than did last year: When the survey was conducted earlier this month, 67 percent of respondents said they drink alcohol, a slight increase over last year (64 percent) and the highest share recorded since 1985.

Unofficial Problem Bank List over 800 Institutions – Note: this is an unofficial list of Problem Banks compiled only from public sources.  Here is the unofficial problem bank list for July 30, 2010. Changes and comments from surferdude808: FDIC actions this week led to many changes in the Unofficial Problem Bank List as they closed five institutions and finally released their enforcement actions for June 2010. The list total finally pushes through the much anticipated 800 level and finishes the week at 808 with aggregate assets of $414.8 billion.

ECRI WLI in Negative Territory 8 Consecutive Weeks, Index Drops to -10.7 – The ECRI’s Weekly Leading Indicators (WLI) has now fallen 8 consecutive weeks and has been below -10 for two consecutive weeks. click on chart for sharper image..Given the July bounce in the stock market, the ever-optimistic me expected some sort of anemic bounce in the WLI as well, but that bounce never came. Of course, it would be helpful to know the makeup of WLI (components and percentages), but unfortunately that information is proprietary. Nonetheless, we can say there has never been a WLI plunge in history of this depth and duration, nor any dip at all below -10 that has not been associated with a recession. Whatever the ECRI sees preventing them from issuing a recession alert remains a mystery.Then again, as I pointed out two weeks ago in ECRI Weekly Leading Indicators at Negative 9.8; Has the ECRI Blown Yet Another Recession Call? the ECRI is literally paranoid about calling a recession that does not occur. So they wait until it is blatantly obvious we are in one before issuing a warning.

Number of the Week: Default Repercussions25%: The share of Americans with a credit score of less than 600 The United States may still have a triple-A credit rating, but the creditworthiness of the people who live there has fallen sharply amid the housing bust and recession. In an economy where credit plays a central role, that presents a significant obstacle to recovery. Over the past couple years, millions of Americans have reneged on their debts — because they lost their jobs, because they took on more than they could handle, or both. For many, those defaults have brought immediate financial relief, leaving more cash to spend on other things. Now, though, they’ll also have to face the challenge of living with bad credit.As of April, 25% of Americans had fallen into the least-creditworthy category, garnering a rating of less than 600 from FICO, the main arbiter of consumer credit in the U.S. That compares to only 15% before the recession, according to data compiled by Deutsche Bank.

Estimate of July Decennial Census impact on payroll employment: minus 144,000 -The Census Bureau released the weekly payroll data for the week ending July 17th this week. If we subtract the number of temporary 2010 Census workers in the week containing the 12th of the month, from the same week for the previous month – this provides a close estimate for the impact of the Census hiring on payroll employment. This graph shows the number of Census workers paid each week. The red labels are the weeks of the BLS payroll survey. The Census payroll decreased from 344,157 for the week ending June 12th to 200,346 for the week ending July 17th. So my estimate for the impact of the Census on July payroll employment is minus 144 thousand (this will probably be close). The employment report will be released on August 6th, and the headline number for July – including Census numbers – will probably be negative again. But a key number will be the hiring ex-Census (so we will add back the Census workers again this month). The following table compares the weekly payroll report estimate to the monthly BLS report on Census hiring (the weekly report is revised slightly, so the correlation looks better than in real time):

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