Outstanding Contraction!: Commercial Paper Outstanding April 2012

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a generally cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they had not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and as of mid-April commercial paper generally appears to be trending lower contracting at a rate of 15.23% on a year-over-year basis to $932.60 billion, a level that is still substantially lower than even the worst periods of the last two recessions.

The Philly Fed Business Outlook Survey: April 2012

Today's release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) for April indicated a slowing of the regions manufacturing activity with the current activity index declining to a level of 8.5 while assessments the future activity index increased slightly to a level of 33.8.

The following chart shows the current and future activity indexes both with their corresponding 3-month moving averages. The red line marks the threshold between contraction and expansion for these diffusion indexes.

Existing Home Sales Report: March 2012

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for March  showing an decline in sales with total home sales falling 2.6% since February but climbing 5.2% above the level seen in March 2011.

Single family home sales declined 2.5% from February but rose 5.9% above the level seen in March 2011 while the median selling price increased 1.9% above the level seen in March 2011.

Inventory of single family homes increased 0.5% from February dropping 20.1% below the level seen in March 2011 which, along with the sales pace, resulted in a monthly supply of 6.3 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims April 19 2012

Today’s jobless claims report showed a declined to initial unemployment claims and an increased to continued claims while seasonally adjusted initial claims continued to trend well below the closely watched 400K level.

Seasonally adjusted “initial” declined to 386,000 claims from last week’s revised 388,000 claims while seasonally adjusted “continued” claims increased by 26,000 resulting in an “insured” unemployment rate of 2.6%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 3.20 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.47 million people that are currently counted as receiving traditional continued unemployment benefits, there are 6.67 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – April 18 2012

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 4 basis points to 3.94% since last week while the purchase application volume declined a notable 11.2% and the refinance application umped 13.5% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Skaneateles Real Estate - The Weekly Update

I started the day off with a bang.  It was hair day, so I went in to Carlo's on West Genesee in Syracuse.  The proprietor and owner, Carmen Logan, was celebrating his 75th birthday and looking great.  A client brought in champagne, and there we all were sipping out of plastic cups at 9:30 in the morning.  I could get used to this!

Currently there are only 98 active listings in the Skaneateles area of the multiple listing service.  Of these, 30 are in the village and 26 are considered waterfront. I say "considered," because until the listings change it is difficult to distinguish between lake rights and actual on the water waterfront.  Ponds and rivers are also called waterfront.  Just a note.

Two new listings came on.  One is a lovely village home priced to sell in the mid-$300,000 range.  Another is just at the edge of the village for well under $200,000.  I predict both will be gone by September 1st.

There are 12 properties marked under contract, none of which are new.  Thirteen others are pended, with one new one, a home needing work but having a great deal of acreage.

We have now reached the magic number of 20 for closings!  Very early this year, compared with other years.  I will in the next week publish a list of homes with their addresses and disclosed selling price.  The latest closing was a small village home.

The lowest priced house this year sold for $128,000 and the highest for $980,000.  The median, as I am sure JT will ask, is a sale price of $269,000.  Of real significant interest is the fact that 40% (8) homes that closed are village homes.  They seem to be selling well - is it the gas prices or just the houses themselves?

Please consider buying now.  The rates are the lowest they have been but who knows when they will rise.  You can get so much more house than you can for the same price even at 5% interest.  Do not wait!  Consider this a warning!

Production Pullback: Industrial Production March 2012

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing a flattening with total industrial production remaining nearly unchanged since February but rising 3.78% above the level seen in March 2011.

Capacity utilization declined 0.09% from February but still rose 2.72% above the level seen in March of 2011 to stand at 78.59%

It's important to recognize that though the "recovery" is well over two years old, both industrial production and capacity utilization are notably below the peaks set in late 2007.