S&P Case Shiller Index posts strong gains

The S&P Case Shiller Index posted strong gains. Month over month, the Composite-10 index increased by 1.9%. The index is still down 15.13% year over year. 17 of the 20 markets in the Composite-20 index posted positive month over month gains. The data for the index is a compiled using a three month average. Since last month was positive and the trend is moving up strongly, next month should also come in with a strong gain.
The month over month gains are the highest since the market peaked in 2005.

I have removed the CME Housing Futures data from the chart because they have become so thinly traded.

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Mortgage Delinquencies continue rising higher

The Mortgage Bankers Association released their National Delinquency Survey for the Second Quarter of 2009. The total residential mortgages that are at least 30 days delinquent rose to 9.24%. When including loans that are in the foreclosure process the figure rises to a startling 13.16%.

The percentage of loans that are in the foreclosure process rose to 4.30% in the second quarter up from 3.85% in the first quarter.

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Meredith Whitney is bullish on banks

Meredith Whitney, the so-called most powerful woman on Wall Street, moved the markets today with a bullish short term call on the banks. She was particularly bullish on Goldman Sachs. Her earnings estimate for Goldman Sachs, which reports tomorrow, is $4.65 compared to consensus estimates of $3.48. She predicts they will earn $20 for 2009 and more than $22 for 2010.

Goldman Sachs had their highest earnings in 2007 at $24.73. 2006 was at $19.71. In a year where Goldman Sachs is deleveraging, if they can pull off these types of earnings, it will be remarkable.

Naked Capitalism has two videos of Meredith Whitney making these calls.

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An overview of the housing crisis

Zero Hedge has a presentation from T2 Partners on where we are at in the housing crisis.  It is packed full of great charts.

Here are a few of my favorites:

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Case-Shiller index shows the decline in housing prices is slowing

The S&P Case-Shiller home price index for April 2009 was released today by Standard and Poors. The composite-10 declined 0.67% in April compared to March 2009 (last month it declined by 2.10%) and declined by 18.01% from a year ago (compared to 18.68% last month).

The composite-10 is now down 33.56% from its peak. The Composite-10 has now declined at a slower pace year over year for three months in a row after declining at a faster pace each month for 25 months in a row. The home price index is not seasonally adjusted. In the last 20 years, home prices have averaged appreciation of 5.29% a year. March through August are typically the strongest months for appreciation and home prices have on average appreciated by 4.40% during that 6 month period. September through February are the weakest months; home prices have on average appreciated by only 0.89% during that 6 month period. In the next month or two, the index could post a positive month over month gain. However, I expect it to fall again as we head into the winter months.

The CME futures market is pricing in a further drop of -10.20% by next March for the composite-10.

You can click on the images for a larger view.

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Existing Home Sales and Median Prices Rise Slightly

The National Association of Realtors released the existing home sales figures for May 2009 today.  Sales increased to a seasonally adjusted annual rate of 4.770 million units in March up from 4.660 million units in April and down from 4.950 million units in May 2008.

The median sales price was $176,000 for May up from $166,600 in April (up 3.8%) but down from $207,900 in May 2008 (down 16.8%). Months supply was 9.6 in May, down from 10.1 in April. According to the NAR, distressed properties accounted for 33% of all transactions in May down from 45% in April. 

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An alternate "more adverse" scenario

So far, the unemployment rate has been higher than the "more adverse" scenario used in the stress test. Calculated Risk has an updated chart using just two month's of data:

The "more adverse" scenario seems to be a plausible forecast for the economy.  In fact, the Unemployment rate looks like it will reach 10.3% this year which is the "more adverse" scenario for the average unemployment rate for 2010.    Per the Federal Reserve, "the likelihood that the average unemployment rate in 2010 could be at least as high as in the alternative more adverse scenario is roughly 10 percent."  If the "more adverse" scenario is the new baseline forecast, then I wonder how the banks would fare in a worse case scenario. 

Seeking Alpha has a great spreadsheet that let's you plug in different unemployment rate forecasts and loss rate assumptions.  In the Stress Test, the economists had forecast that the average unemployment rate for 2010 would be 8.8% with a 10% chance of being 1.5% higher at 10.3%.  In spreadsheet to the right, I am using an unemployment rate of 11.8% as the more adverse scenario (if you change the baseline forecast to 10.3%, then it seemed logical that there would be a 10% chance that the unemployment rate would reach 11.8%).

There is a big disparity between the healthy banks and the banks that would be stressed under a more adverse scenario than the Fed used. 

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Talking Heads

Jon Stewart had an interesting interview with Peter Schiff where he compiled different clips over the years of people laughing at Schiff's calls.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
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Here is Peter Schiff in a blast from the past:

But as David Rosenberg once said, "In order for an economic forecast to be relevant, it must be combined with a market call."

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Case-Shiller Home Price Index Falls at Slower Pace

The S&P Case-Shiller home price index for March 2009 was released today by Standard and Poors. The composite-10 declined 2.06% in March compared to February 2009 (last month it declined by 2.12%) and declined by 18.65% from a year ago (compared to 18.89% last month).

The composite-10 is now down 33.09% from its peak. The Composite-10 has now declined at a slower pace year over year for two months in a row after declining at a faster pace each month for 25 months in a row.

The CME futures market is pricing in a further drop of -10.40% by next March for the composite-10.

You can click on the images for a larger view.

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US Debt Clock

Take a deep breathe before clicking on the picture.

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