Saturday, February 17, 2018

Schedule for Week of Feb 18, 2018

by Bill McBride on 2/17/2018 08:11:00 AM

The key economic report this week is January existing home sales.

----- Monday, Feb 12th -----

All US markets are closed in observance of the Presidents' Day holiday.

----- Tuesday, Feb 13th -----

No major economic releases scheduled.

----- Wednesday, Feb 14th -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

Existing Home Sales10:00 AM: Existing Home Sales for January from the National Association of Realtors (NAR). The consensus is for 5.65 million SAAR, up from 5.57 million in December.

The graph shows existing home sales from 1994 through the report last month.

Housing economist Tom Lawler expects the NAR to report sales of 5.48 million SAAR for January.

During the day: The AIA's Architecture Billings Index for January (a leading indicator for commercial real estate).

2:00 PM: FOMC Minutes, Meeting of January 30-31, 2018

----- Thursday, Feb 15th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, unchanged from 230 thousand the previous week.

11:00 AM: the Kansas City Fed manufacturing survey for February.

----- Friday, Feb 16th -----

No major economic releases scheduled.

Friday, February 16, 2018

Oil Rigs "Continued gains in rig counts"

by Bill McBride on 2/16/2018 07:42:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Feb 16, 2018:

• Total US oil rigs saw another solid week, +7 to 798

• Horizontal oil rigs were up even better, +10 to 696
...
• All the action was in the inscrutable ‘Other’ plays, which added 12 horizontal oil rigs, compared to a loss of 2 across the major plays

• The oil price stabilized this past week, and the Brent spread has recovered a bit to about $3.30 / barrel
Oil Rig CountClick on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

Lawler: Early Read on Existing Home Sales in January

by Bill McBride on 2/16/2018 03:35:00 PM

From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports from across the country released through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.48 million in January, down 1.6% from December’s preliminary estimate and down 3.7% from last January’s seasonally-adjusted pace. Unadjusted sales should show a much smaller YOY decline, reflecting the higher business day count this January compared to last January.

(Note that the January EHS report will include updated seasonal factors which will result in revisions to the seasonally-adjusted data for the past several years. I have attempted to incorporate seasonal factor revisions in my forecast).

On the inventory front, realtor/MLS data suggest that home listings showed a smaller YOY decline last month compared to December, and my “best guess” is that the NAR’s estimate of the inventory of existing homes for sale in January will be 1.54 million, up 4.1% from the December estimate and down 8.3% from a year ago.

Finally, local realtor/MLS data would be consistent with a YOY increase in the NAR’s estimate of the median existing SF home sales price of about 6.5%.

CR Note: Existing home sales for December are scheduled to be released on Wednesday, February 21st. The consensus is for sales of 5.60 million SAAR.

Quarterly Housing Starts by Intent, Q4 2017

by Bill McBride on 2/16/2018 01:22:00 PM

In addition to housing starts for January, the Census Bureau also released the Q4 "Started and Completed by Purpose of Construction" report today.

It is important to remember that we can't directly compare single family housing starts to new home sales. For starts of single family structures, the Census Bureau includes owner built units and units built for rent that are not included in the new home sales report. For an explanation, see from the Census Bureau: Comparing New Home Sales and New Residential Construction

We are often asked why the numbers of new single-family housing units started and completed each month are larger than the number of new homes sold. This is because all new single-family houses are measured as part of the New Residential Construction series (starts and completions), but only those that are built for sale are included in the New Residential Sales series.
However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis.

The quarterly report released today showed there were 149,000 single family starts, built for sale, in Q4 2017, and that was above the 139,000 new homes sold for the same quarter, so inventory increased in Q4 (Using Not Seasonally Adjusted data for both starts and sales).

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

New Home Sales and Housing Starts by IntentClick on graph for larger image.

Single family starts built for sale were up about 8% compared to Q4 2016.

Owner built starts were mostly unchanged year-over-year. And condos built for sale not far above the record low. (this is curious).

The 'units built for rent' (blue) has increased significantly in recent years, but is now moving more sideways.

Comments on January Housing Starts

by Bill McBride on 2/16/2018 10:50:00 AM

Earlier: Housing Starts increased to 1.326 Million Annual Rate in January

The housing starts report released this morning showed starts were up 9.7% in January compared to December, and starts were up 7.3% year-over-year compared to January 2017.  

This first graph shows the month to month comparison between 2017 (blue) and 2017 (red).

Starts Housing 2016 and 2017Click on graph for larger image.

Starts were up 7.3% in January compared to January 2017.

Total starts are up 18.1% compared to January 2016 (two years ago).  That is solid growth.

Single family starts were up 7.6% year-over-year, and up 3.6% compared to December.

Multi-family starts were up 6.7% year-over-year, and up 23.7% compared to December (multi-family is volatile month-to-month).

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Multifamily Starts and completionsThe blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has turned down recently.  Completions (red line) have lagged behind - and completions have caught up to starts (more deliveries). 

Completions lag starts by about 12 months, so completions will probably turn down in a year or so.

As I've been noting for a couple of years, the growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR).

Single family Starts and completionsThe second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect a few more years of increasing single family starts and completions.

Housing Starts increased to 1.326 Million Annual Rate in January

by Bill McBride on 2/16/2018 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,326,000. This is 9.7 percent above the revised December estimate of 1,209,000 and is 7.3 percent above the January 2017 rate of 1,236,000. Single-family housing starts in January were at a rate of 877,000; this is 3.7 percent above the revised December figure of 846,000. The January rate for units in buildings with five units or more was 431,000.

Building Permits:
Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,396,000. This is 7.4 percent above the revised December rate of 1,300,000 and is 7.4 percent above the January 2017 rate of 1,300,000. Single-family authorizations in January were at a rate of 866,000; this is 1.7 percent below the revised December figure of 881,000. Authorizations of units in buildings with five units or more were at a rate of 479,000 in January.
emphasis added
Total Housing Starts and Single Family Housing Starts Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) increased sharply in January compared to December.   Multi-family starts were up 6.7% year-over-year in January.

Multi-family is volatile month-to-month, but has been mostly moving sideways the last few years.

Single-family starts (blue) increased in January, and are still up 7.6% year-over-year.

Total Housing Starts and Single Family Housing Starts The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically fairly low).

Total housing starts in January were above expectations, mostly due to a sharp increase in multi-family starts.  However starts for November were revised down, and December revised up slightly.

I'll have more later ...

Thursday, February 15, 2018

Friday: Housing Starts

by Bill McBride on 2/15/2018 08:43:00 PM

Friday:
• At 8:30 AM ET, Housing Starts for January. The consensus is for 1.230 million SAAR, up from 1.192 million SAAR.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for February). The consensus is for a reading of 95.5, down from 95.7.

Fannie and Freddie: REO inventory declined in Q4, Down 30% Year-over-year

by Bill McBride on 2/15/2018 02:35:00 PM

Fannie and Freddie reported results this week. Here is some information on Real Estate Owned (REOs).

Freddie Mac reported the number of REO declined to 8,299 at the end of Q4 2017 compared to 11,418 at the end of Q4 2016.

For Freddie, this is down 89% from the 74,897 peak number of REOs in Q3 2010. For Freddie, this is the lowest since at least 2007.

Fannie Mae reported the number of REO declined to 26,311 at the end of Q4 2017 compared to 38,093 at the end of Q4 2016.

For Fannie, this is down 84% from the 166,787 peak number of REOs in Q3 2010. For Fannie, this is the lowest since at least 2007.

Fannie and Freddie REO Click on graph for larger image.

Here is a graph of Fannie and Freddie Real Estate Owned (REO).

REO inventory decreased in Q4 for both Fannie and Freddie, and combined inventory is down 30% year-over-year.

There are still a number of properties in the foreclosure process with long time lines in judicial foreclosure states - but this is close to normal levels of REOs.

Earlier: Philly and NY Fed Manufacturing Surveys Showed Growth in February

by Bill McBride on 2/15/2018 11:59:00 AM

Earlier from the NY Fed: Empire State Manufacturing Survey

Business activity continued to expand in New York State, according to firms responding to the February 2018 Empire State Manufacturing Survey. The headline general business conditions index fell five points to 13.1, suggesting a somewhat slower pace of growth than in January. ... Labor market conditions pointed to a modest increase in employment and hours worked.
And from the Philly Fed: February 2018 Manufacturing Business Outlook Survey
Results from the Manufacturing Business Outlook Survey suggest that the region’s manufacturing sector continues to expand in February. ... The index for current manufacturing activity increased 4 points in February to a reading of 25.8. ... The survey’s indicators for labor market conditions suggest a pickup in hiring this month. Over 30 percent of the firms reported increases in employment this month, up from 24 percent in January. The employment index increased 8 points. The firms also reported overall higher average work hours in February, although the workweek index fell 3 points to 13.7.
emphasis added
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through February), and five Fed surveys are averaged (blue, through January) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through January (right axis).

This suggests the ISM manufacturing index night decrease slightly in February, but still show solid expansion again.

NAHB: Builder Confidence unchanged at 72 in February

by Bill McBride on 2/15/2018 10:09:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 72 in February, unchanged from 72 in January. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Stays at Strong Level in February

Builder confidence in the market for newly-built single-family homes remained unchanged at a healthy 72 level in February on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Builders are excited about the pro-business political climate that will strengthen the housing market and support overall economic growth,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, they need to manage supply-side construction hurdles, such as shortages of labor and lots and building material price increases.”

“The HMI gauge of future sales expectations has reached a post-recession high, an indicator that consumer demand for housing should grow in the months ahead,” said NAHB Chief Economist Robert Dietz. “With ongoing job creation, increasing owner-occupied household formation, and a tight supply of existing home inventory, the single-family housing sector should continue to strengthen at a gradual but consistent pace.”
...
The HMI component charting sales expectations in the next six months rose two points to 80, the index measuring buyer traffic held steady at 54, and the component gauging current sales conditions dropped one point to 78.

Looking at the three-month moving averages for regional HMI scores, the Midwest rose two points to 72, the South increased one point to 74, the West remained unchanged at 81, and Northeast fell two points to 56.
emphasis added
NAHB HMI Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was at the consensus forecast, and another strong reading.