FRED Graph

it’s been a pretty slow week for economic data, and the major releases of the consumer and producer prices indexes, which were closely watched for inflation a decade ago, were greeted with a collective yawn and very little coverage; probably to be expected when the seasonally adjusted January Consumer Price Index from the BLS showed no change from December, the second unchanged month in a row; while the core CPI, which is the price index of all items less food and energy, was up 0.3% for the month, as the energy index fell 1.7%, led by a 3.0% drop in the price of gasoline and a 1.7% decline in the price of natural gas…an increase of 0.2% in the heavily weighted price index for shelter and 0.8% for apparel accounted for much of the increase in the core index,. with increases of 0.3% in the index for recreation, 0.2% for medical care, and 1.1% for airline fares also contributing…the food index was unchanged with food at home, it’s major component, also unchanged, and food away from home up just 0.1%in our FRED graph, we have the CPI since 2008 graphed in black, and 5 major component indexes, wherein the index values were set to 100 over the span of 1982 to 1984; you can see that the food at home index in red has barely varied from the CPI over that time span, hardly volatile enough to be excluded from the core statistics, while the gasoline index in blue obviously jumps above and below the overall trend continuously…the shelter index, the largest component of the CPI, is shown in green, and although above the trend for this current period, has not risen at a faster rate, while the personal transportation index in violet, which includes new and used cars and regular scheduled maintenance, has historically lagged the CPI, though of late has approached the long term inflation trend…and it’s quite obvious that the medical care index in orange, at 420.687, is nearly double the CPI at 230.280, and continues to rise on a steeper curve than the trend…

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the Producer Price Indexes for January, also from the BLS, are usually watched for changes in selling prices received by domestic producers for their finished goods, but the release also includes indexes for intermediate goods, such as high fructose corn syrup, and for crude goods, such as the corn itself…the seasonally adjusted producer price index for finished goods rose 0.2% in January, its first gain in four months, after declines of 0.3% in December, 0.4% in November, and 0.2% in October; the Core PPI (less food & energy) also rose 0.2% in January, although it has generally stayed positive in a narrow range between +0.2% and -0.1% over the past six months…most of the increase in producer prices in January could be attributed to the 0.7% increase in the index for finished consumer foods, led by a 39.0% jump in prices for fresh and dry vegetables, although candy and soft drinks also contributed; meanwhile, prices for finished energy goods fell 0.4%, almost all of which was attributable to a 2.1% decline in the wholesale price of gasoline..most of the 0.2% rise in the core PPI can be attributed to a 2.5% increase in the price of drugs, although an increase in communication and related equipment also added to the rise…the producer price index for intermediate materials, supplies, and components was unchanged in January following a 0.1% rise in December and a 0.9% decline in November; a 0.3% rise in intermediate core goods, 30% of which could be attributed to rising prices for organic chemicals, offset declines of 1.3% for the intermediate foods and feeds index, which saw the prepared animal feeds component fall 3.1%, and 0.3% for intermediate energy goods prices, where the index for industrial electric power decreased 6.5%…meanwhile, the producer price index for crude materials showed a gain of 0.8%, the 7th consecutive increase, following gain of 1.4% in December and 0.4% in November…the increase was almost completely driven by a 4.7% increase in the price index for crude energy materials (oil), while a decline of 7.0% in the oilseeds index led to a 0.4% decline in the crude food index, and a 2.3% decline in the price of non-ferrous scrap metals led to a 0.3% decline in the core crude index..the year over year change for finished goods was an increase of 1.4%, while the intermediate goods index was up 0.4% and the crude goods index was up 1.5% from a year ago….the chart, above right, from doug short shows the annual change in the headline and core PPI for finished goods for each month since January 2000….

there were also a few reports on the housing/mortgage situation this week; the first one that we’ll look at is the Mortgage Bankers Association’s 4th Quarter National Delinquency Survey; generally, this report covers the same data on delinquencies & foreclosures as the monthly LPS Mortgage Monitor that we cover, except this MBA survey is seasonally adjusted and quarterly only…according to the MBA, the seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties fell to 7.09% of all loans outstanding by the end of the 4th quarter, down from 7.40% at the end of the 3rd; in addition, those loans in the foreclosure process at the end of the fourth quarter represented 3.74% of all loans, down from 4.08% for the third…new foreclosure actions were started on just .70% of all mortgage loans in the 4th quarter, the lowest since the 2nd quarter of 2007, which we expect will be even lower in the 1st quarter due to a new california foreclosure fraud law which has virtually halted new initiations in that state…the seriously delinquent rate, which includes all those over 90 days past due or in the foreclosure process, fell to 6.78% from 7.03% at the end of the 3rd quarter…the not seasonal adjusted percentage of past-due loans not in foreclosure was 7.51% in the 4th quarter, down from 7.64% 3rd quarter, which the MBA sees as a reversal of the normal seasonal trend where more borrowers fall behind on their mortgage during the holidays; making no note of the unusually large spike in delinquencies at the end of the 3rd quarter co-incident with the release of the i-phone 5the combined percentage of loans either delinquent or in foreclosure was 11.25% on a non-seasonally adjusted basis, down from 11.71% last quarter and 12.53% at year end 2011…this is quite a bit higher than the total of 10.61% of loans delinquent or in foreclosure reported by LPS in december, and means that more than one in nine homeowners were not paying on their mortgages at year end…the two graphs below serve to illustrate the data from this report..the graph on the left is from bill mcbride and each bar color codes the percentage of loans past due or in foreclosure as reported by the MBA by quarter going back to 2005; in violet are those mortgages at least 30 days but less than 60 days past due; in the 4th quarter such mortgages fell to 3.04% of loans outstanding, down from 3.25% in Q3; in blue are loans more than 60 but less than 90 days past due; such loans decreased from 1.19% to 1.16% over the quarter…yellow marks the percentage of home loans that have been paid on for more than 90 days but are not yet in foreclosure; in the 4th quarter the percentage of those in this situation declined from 2.96% to 2.89%, an improvement from peak over 5% of Q1 of 2010 but still well above the normal 0.8% seriously delinquent but not in foreclosure; and in red are the percentage of mortgages in foreclosure, which as we noted decreased to 3.74% from 4.07% and is now at the lowest level since the end of 2008…in the graph on the right from the MBA shows the percentage of loans in foreclosure by state, which you’ll have to click on to enlarge the view; those states represented by a black bar are those with a judicial foreclosure process, where court proceedings take some time and thus homeowners linger longer in limbo; those states indicated by a red bar have a non-judicial process, meaning the mortgage holder can seize the overdue homes without going to court, thus the foreclosure backlog clears quicker; as of this report, the foreclosure inventory in judicial states is at 6.22% of all mortgages, & it has fallen for two consecutive quarters; meanwhile, the foreclosure inventory in non judicial states has been falling since it peaked in 2009, and now accounts for just 2.13% of all mortgages in those states…on our chart, Florida remains the state with the highest percentage of homes in foreclosure with 12.15%, but that’s a significant improvement over the 13.04% ‘in foreclosure’ status of the state at the end of the 3rd quarter; other judicial states with large foreclosure backlogs include New Jersey, with a foreclosure inventory of 8.85%, New York with 6.34% of mortgages are in foreclosure, and Illinois where 6.33% of mortgages are in the process…the only non-judicial state with a foreclosure inventory above 5% is Nevada, fairly visible on the chart as the only high red bar, where 5.87% of home mortgages are in foreclosure….

MBA Delinquency by PeriodMBA In-foreclosure by state

another major housing report out  this week was from the National Association of Realtors on January Existing-Home Sales; according to seasonal adjusted data from the NAR, sales of existing homes, which includes all forms of single family units, increased 0.4% to an annual rate of 4.92 million in January from a revised 4.90 million in December; December’s sales were original reported to be at annual rate of 4.94 million, so one could make the case that the sales rate declined from the previous report; nonetheless, January’s sale rate was 9.1% above the 4.51 million-unit rate of home sales in January a year ago…the NAR persists in telling the story that there is a shortage of homes on the market driving up prices, and very few analysts even mention that it’s known that as much as 90% of foreclosed properties are being held off the market; some even cite the decrease in the percentage of distressed sales, from 35% of all sales a year ago, to 23% with this report, as a sign of a housing recovery…total housing inventory is reported to have fallen 4.9% to 1.74 million homes in January, the lowest level since December 1999, when there were 1.71 million homes on the market; at the current sales pace that represents a 4.2 month supply, also at an 8 year low in that housing supply metric…so with the restricted supply, the national median home price rose for an 11th consecutive month to $173,600, up 12.3% from January a year ago; the median price for single family homes was $174,100 and the median for condos & co-ops was $169,600…just 14% of January’s sales were foreclosures, which sold at an average 20% discount to the market, and 9% were short sales, selling at an average 12% discount…the average rate for a conventional 30 year fixed mortgage was 3.41% in January, up from the record low national average of 3.35% in December, but still more than a half a percent below the 3.92% mortgage rate of a year ago…first time buyers accounted for 30% of homes purchased in January, unchanged from December, but below the 33% of a year ago and still well below the norm (a separate study from Pew this week showed just 34% of young households – under 35 – were homeowners in 2011, down from 40% in 2007)…all-cash sales accounted for 28% of sales in January, down from 29% in December and 31% a year ago; most of those were investors, who bought 19% of all homes sold in January…home sales were up in every region of the country except the West, where sales fell 5.7% MoM in January and were 5.7% below the pace of a year ago…restricted supply drove the median price in the West to $239,800, which was 26.6% above prices of last January..

the last report we’ll look at today is on New Residential Construction for January from the Census Bureau, which includes estimate for permits issued, housing starts and home completions, and about which we’ve previously noted a large margin of error that goes unreported in the media and blog coverage…the building permits data is reported in a fairly close range, however, as they report permits issued at a seasonally adjusted annual rate of 925,000, which was “1.8 percent (±0.9%) above the revised December rate of 909,000” and “35.2 percent (±1.5%) above the January 2012 estimate of 684,000“…however, when we check housing starts, reported at a seasonally adjusted annual rate of 890,000, we see they’re also reported as “8.5 percent (±11.3%)* below the revised December estimate of 973,000’, and “23.6 percent (±13.4%) above the January 2012 rate of 720,000“, and we’re referred by the asterisk to the footnote which explains that since the range for the month contains zero, the results aren’t statistically significant, and that the “Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero“…proper reporting on new housing starts for January should read that census is 90% confident that new home starts in January were at a seasonally adjusted annual rate of between 789,430 and 990,570, and although it’s quite clear that new housing starts are well above those of a year ago, census can’t say for sure if they’re up a little over 10% or as much as 37%….the adjacent chart from Zero Hedge accompanies their report alleging that the seasonally adjusted census data is on housing starts is showing larger increases over time than the unadjusted data…since they dont link to the data, and monthly archived data is difficult to check, we’re noting it as a curious difference of opinion between ZH and the Census…one possibility that comes to mind that could cause an error like that is that seasonal adjustment algorithms are heavily weighted to data patterns of the past 5 years, and that housing starts peaked in early 2006 at a rate of over 2.2 million and bottomed late in 2009 below 500,000…that would mean that seasonal adjustments in late 2010, where the ZH chart starts, took in much more of the housing starts peak, and seasonal adjustments for recent months are being compared to more of the data from the home construction bust…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

FDL NOTE: shrunken charts which have been blocked herein can be viewed full sized by clicking on the red blocking message or by clicking on the text link referring to them..