Daily Archives: September 25, 2008 @ 3:45 pm (Thursday)

Bloomberg: California Home Prices Drop Record 41% in August Amid Defaults

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Wrong headline, should be ‘California sales turn the corner!’

California Existing Home Sales

California Home Prices Drop Record 41% in August Amid Defaults

by Dan Levy

Sept. 25 (Bloomberg) California home prices tumbled a record 41 percent in August from a year earlier as foreclosure sales pushed down values in the biggest U.S. state.

The median price of an existing, single-family detached home fell to $350,140 and will likely fall further, the Los Angeles-based California Association of Realtors said today in a report. Sales increased 56.7 percent from August 2007 [typo – supposed to be 2008] and 1.8 percent from July.

“While sales appear to have turned the corner, the median will experience additional downward pressure as we move into the off-peak season in the coming months, and will continue to face pressure from distressed sales,” Leslie Appleton-Young, vice president and chief economist of the association, said in a statement.

More than 101,000 California households received a default notice, were warned of a pending auction or foreclosed on last month, RealtyTrac Inc., a seller of default data, said on Sept. 12. That was a third of the nation’s total and represented one in 130 homes in the state.

Eight of the 10 metropolitan areas with the highest foreclosure rates are in California, led by Stockton in first place, according to RealtyTrac. Merced, Modesto, Vallejo-Fairfield and Riverside-San Bernardino ranked second through fifth. Bakersfield, Salinas-Monterey and Sacramento ranked eighth through tenth.


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Bloomberg: Euro refineries to shut for repairs

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This happens when margins get too low: cheaper to shut for repairs than to operate at a loss.

Saudi output should fall a bid due to lack of demand, but crude prices should hold at their levels.

Gasoline prices should increase vs crude prices (crack spreads widen).

Shell, BP to Shut Refineries for Repair, Cut Europe Fuel Supply

by Nidaa Bakhsh

Sept. 25 (Bloomberg) Royal Dutch Shell Plc, BP Plc and Total SA are leading oil companies that will shut at least 6 percent of Europe’s refining for repairs next month, reducing inventories already diminished by U.S. demand after Hurricane Ike.

The outages from Rotterdam to Italy will idle at least 952,000 barrels of crude oil distillation a day in October, double the September figure, according to data compiled by Bloomberg. The total includes plants owned by Shell and BP in the Netherlands, representing a combined 400,000 barrels a day.

Refinery profits in western Europe fell to their lowest level since at least 2004 this year as record prices cut fuel demand. Gasoline inventories fell 18 percent to 612,000 metric tons in the Amsterdam-Rotterdam-Antwerp region last week, according to Dutch consultant PJK International BV, because of rising exports to the U.S. after Hurricane Ike shut Gulf Coast refineries.


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Bloomberg: Bank run in HK

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This happens all the time with fixed exchange rates and currency boards.

The only way for banks to get ‘real’ (convertible) $HK for their depositors is to buy them from the monetary authority with $US. That usually means banks have to borrow $US to meet withdrawals of $HK, and most banks won’t have $US lines of more than a relatively small percentage of their deposits. With a strict currency board arrangement the monetary authority isn’t allowed to lend (convertible) $HK or its $US reserves, though in HK they sometimes do. But even those reserves are finite, and way smaller than total bank liabilities.

Historically the result has been a deflationary mess, with GDP dropping double digits, high unemployment, bank failures, and collapsing property and other asset prices.

At the macro level, the only way the island can get the $US it needs to buy $HK from the monetary authority is to net export (or sell assets for $US). The value of the $HK can’t go down (the monetary authority has more than enough $US reserves to buy back all the real $HK it’s sold), so the way costs of production go down is via local deflation due to the collapse in aggregate demand until prices are low enough to drive the needed exports.

Hopefully nothing comes of it this time around. But it hasn’t been that kind of year…

Hong Kong Savers Fret as Bank East Asia Fights Rumors

by Kelvin Wong and Theresa Tang

Sept. 25 (Bloomberg) For the first time since the Asian financial crisis more than a decade ago, Hong Kong has faced a bank run.

Hundreds of depositors lined up at the city’s third-largest lender Bank of East Asia Ltd. yesterday as the bank hit out at “malicious rumors,” and Chairman David Li rushed back to Hong Kong from the U.S. to reassure clients and investors. The city’s central bank jumped to BEA’s defense and police said they’re investigating phone text messages questioning its health.


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2008-09-25 USER

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Durable Goods Orders MoM (Aug)

Survey -1.9%
Actual -4.5%
Prior 1.3%
Revised 0.8%

 
A very volatile series

Way lower than expected, and prior revised down as well.

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Durable Goods Orders YoY (Aug)

Survey n/a
Actual -8.1%
Prior -2.2%
Revised n/a

 
Continuing its downward drift that started about a year ago.

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Durables Ex Transportation MoM (Aug)

Survey -0.5%
Actual -3.0%
Prior 0.7%
Revised 0.1%

 
It wasn’t all transportation. This is also lower than expected, and the prior month revised lower.

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Durables Ex Defense MoM (Aug)

Survey n/a
Actual -5.0%
Prior 1.9%
Revised n/a

 
The jump in defense kept the total from being even worse.

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Durable Goods ALLX (Aug)

 
Consumer goods and defense, the only bright (modest) spots.

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Initial Jobless Claims (Sep 20)

Survey 450K
Actual 493K
Prior 455K
Revised 461K

 
A large spike up. Government estimated 50,000 due to the hurricanes; so, it would have been 430,000. This will take a few weeks to sort out.

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Continuing Jobless Claims (Sep 13)

Survey 3510K
Actual 3542K
Prior 3478K
Revised 3479K

 
This just keeps going up towards recession levels. No telling how much extended benefits has added, both now and in the last recession.

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Jobless Claims ALLX (Sep 20)

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New Home Sales (Aug)

Survey 510K
Actual 460K
Prior 515K
Revised 520K

 
Lower than expected, and last month revised up as suspected. They’ve been revising previous months up for a while.

There may be a problem with availability of desirable homes, as starts are down by 1 million per year, and inventories are down as well.

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New Home Sales- Total For Sale (Aug)

Survey n/a
Actual 408.00
Prior 427.00
Revised n/a

 
This continues to fall rapidly and should lead to a shortage in the next few months.

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New Home Sales MoM (Aug)

Survey -1.0%
Actual -11.5%
Prior 2.4%
Revised 4.0%

 
Lower than expected and prior month revised up.

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New Home Sales YoY (Aug)

Survey n/a
Actual -34.5%
Prior -34.7%
Revised n/a

 
Down a lot but signs of bottoming.

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New Home Sales Median Price (Aug)

Survey n/a
Actual 221.90K
Prior 234.90K
Revised n/a

 
Still drifting lower but so far not collapsing.

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New Home Sales TABLE 1 (Aug)

 
Something happened in the west.

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New Home Sales TABLE 2 (Aug)

 
Karim writes:

  • Quite weak data that is leading to downward revisions to Q3 and Q4 GDP estimates. Q3 revisions about -½% that I have seen, some GDP estimates now coming in below 1%.

  • The shipments data is more highly correlated to current quarter growth.
  • -3.5% m/m headline, -2.1% ex-transport, -3.6% ex-defense.
  • Orders data more problematic for Q4.
  • -4.5% m/m headline, -3% ex-transport, -5% ex-defense.
  • Fairly broad-based weakness across sectors as well.

  • Capex had been holding up fairly well this year, but now looks as if retrenching; with private consumption likely to be weak and Bernanke signaling an export slowdown, not too many pillars of support left for the economy. Look for more fiscal stimulus and rate cuts.


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