Case-Shiller Home Price Index now down over 30% from peak

The S&P Case-Shiller home price index for January 2009 was released today by Standard and Poors. The composite-10 declined 2.55% from December 2008 (last month it declined by 2.34%) and declined by 19.39% from a year ago (compared to 19.14% last month). The composite-10 is now down 30.16% from its peak. The Composite-10 has now declined at a faster pace year over year for 25 straight months now.

The CME futures market is pricing in a further drop of -7.45% by next January for the composite-10.

You can click on the images for a larger view.

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Existing Home Sales Rise

The National Association of Realtors released the existing home sales figures for February 2009 today. Sales increased to a seasonally adjusted annual rate of 4.720 million units in February up from 4.490 million units in January but down from 4.950 million units in February 2008. The median sales price was $165,400 for February up from $164,800 in January (up 0.4%) but down from $195,800 in February 2008 (down 15.5%).  The January numbers were revised downward from $170,300 as reported last month to $164,800. 

Months supply was 9.7 in February, the same as it was in January.  According to the NAR, currently 40-45% of all transactions are distressed sales.

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New Home Sales Rise in February

New home sales data showed signs of settling down.  Permits rose 3% in February compared to January 2009.  Year over year permits were down 44%.  Starts in February were up 22% compared to the previous month and were down 47% year over year.  Completions in February were up 2% compared to January and were down 37% compared to a year ago. 

The bad news is this is increasing the supply of new homes.  There are already 13.3 months supply of homes.  Months supply has risen every month for the last 4 months now.  There will continue to be downward pressure on new home prices.

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Retail Sales for February show signs of life

Retail Sales, seasonally adjusted, were down by 0.11% in February compared to January.  However, they are up 1.71% from the lows reached in December 2008.  Year over year, Retail Sales are down 8.04% compared to a year ago.  This is an improvement from being down 10.58% in December 2008. 

Excluding auto sales, retail sales increased in February by 0.75% compared to January.  Year over year, retail sales are down 4.25% compared to being down 6.98% in December 2008.

Retail Sales are still at historical lows in terms of year over year growth, but the last two months have bounced off the lows reached in December.

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Unemployment Rate at 8.1%; Jobs lost reach 4.38 million

The U.S. Government is putting the largest 19 banks in the U.S. under a stress test to assess how much capital they may need to survive this recession.  They have 2 scenarios:  one, a baseline scenario, based on consensus forecasts and a second "more adverse" scenario.  The baseline forecast has GDP declining by 2.0% in 2009 and rising by 2.1% in 2010 and has the Unemployment Rate reaching 8.4% in 2009 and 8.8% in 2010.  The more adverse scenario has GPD declining by 3.3% in 2009 and rising by 0.5% in 2010 and has the Unemployment Rate at 8.9% in 2009 and 10.3% in 2010.

So far GDP and the Unemployment Rate are far worse than their "more adverse" scenario.  GDP for 4th Quarter 2008 was at -6.2%.  According to "The Employment Situation" for February 2009, released today by the U.S. Department of Labor, seasonally adjusted, the Unemployment Rate for February hit 8.1% and without seasonal adjustments it was 8.9%.  At the current pace, the unemployment rate would hit 10.3% by August 2009.  Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 3.3 percentage points in the last twelve months and is up 3.7 percentage points from its recent low of 4.4%.

Nonfarm payrolls decreased by 651,000 in February, 655,000 in January and 681,000 in December. This month they revised the previous two months of January and December downward by 265,000 jobs.  In January they revised downward the amount of jobs lost in the previous two months by 66,000 jobs. In December they made a downward revision of 154,000. In November, they made a downward revision of 199,000.  Last month, the total jobs lost from December 2007 to January 2009 was reported to be 3,572,000 jobs.  This month, with the revisions, the total jobs lost from December 2007 to February 2009 has reached 4,384,000 jobs. The average recession since World War II has had a loss of 1,917,000 jobs on average. The biggest loss before this recession came in 1982 with 2,838,000 jobs lost. In terms of job loss, we are in the biggest recession since the Great Depression. And the end is not in sight yet.

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 639,000 for the week ending February 28th. This is down from the previous week's number of 670,000. The four week average of initial claims, which is not as volatile, was at 641,750. This is up from the previous week's figure of 639,750.

Continued claims for unemployment insurance increased to 5,106,000 for the week ending February 21st down from the previous week's number of 5,120,000. The four week average for continued claims was also up to 5,011,000 from 4,934,000. This is the highest continued claims has ever been. The previous high was in 1982. Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.

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Iceland: Wall Street on the Tundra

Michael Lewis, one of my favorite authors, has a great article on the collapse of the bubble in Iceland.

The whole article is well worth the read, but here are a few of my favorite quotes:

From 2003 to 2007, while the U.S. stock market was doubling, the Icelandic stock market multiplied by nine times. Reykjavík real-estate prices tripled. By 2006 the average Icelandic family was three times as wealthy as it had been in 2003, and virtually all of this new wealth was one way or another tied to the new investment-banking industry.

Global financial ambition turned out to have a downside. When their three brand-new global-size banks collapsed, last October, Iceland’s 300,000 citizens found that they bore some kind of responsibility for $100 billion of banking losses—which works out to roughly $330,000 for every Icelandic man, woman, and child. On top of that they had tens of billions of dollars in personal losses from their own bizarre private foreign-currency speculations, and even more from the 85 percent collapse in the Icelandic stock market. The exact dollar amount of Iceland’s financial hole was essentially unknowable, as it depended on the value of the generally stable Icelandic krona, which had also crashed and was removed from the market by the Icelandic government. But it was a lot.

It must have seemed like a no-brainer: buy these ever more valuable houses and cars with money you are, in effect, paid to borrow. But, in October, after the krona collapsed, the yen and Swiss francs they must repay are many times more expensive. Now many Icelanders—especially young Icelanders—own $500,000 houses with $1.5 million mortgages, and $35,000 Range Rovers with $100,000 in loans against them. To the Range Rover problem there are two immediate solutions. One is to put it on a boat, ship it to Europe, and try to sell it for a currency that still has value. The other is set it on fire and collect the insurance: Boom!

The world is now pocked with cities that feel as if they are perched on top of bombs. The bombs have yet to explode, but the fuses have been lit, and there’s nothing anyone can do to extinguish them. Walk around Manhattan and you see empty stores, empty streets, and, even when it’s raining, empty taxis: people have fled before the bomb explodes. When I was there Reykjavík had the same feel of incipient doom, but the fuse burned strangely. The government mandates three months’ severance pay, and so the many laid-off bankers were paid until early February, when the government promptly fell.

Back in April 2006, however, an emeritus professor of economics at the University of Chicago named Bob Aliber took an interest in Iceland. Aliber found himself at the London Business School, listening to a talk on Iceland, about which he knew nothing. He recognized instantly the signs. Digging into the data, he found in Iceland the outlines of what was so clearly a historic act of financial madness that it belonged in a textbook. “The Perfect Bubble,” Aliber calls Iceland’s financial rise, and he has the textbook in the works: an updated version of Charles Kindleberger’s 1978 classic, Manias, Panics, and Crashes, a new edition of which he’s currently editing. In it, Iceland, he decided back in 2006, would now have its own little box, along with the South Sea Bubble and the Tulip Craze—even though Iceland had yet to crash. For him the actual crash was a mere formality.

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