Sunday, May 20, 2018

Sunday Night Futures

by Bill McBride on 5/20/2018 07:19:00 PM

Schedule for Week of May 20, 2018

• 8:30 AM ET, Chicago Fed National Activity Index for April. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 16, and DOW futures are up 193 (fair value).

Oil prices were up over the last week with WTI futures at $71.64 per barrel and Brent at $78.91 per barrel.  A year ago, WTI was at $50, and Brent was at $53 - so oil prices are up about 50% year-over-year.

Here is a graph from for nationwide gasoline prices. Nationally prices are at $2.92 per gallon. A year ago prices were at $2.35 per gallon - so gasoline prices are up 57 cents per gallon year-over-year.

"Do People Really Downsize?"

by Bill McBride on 5/20/2018 08:31:00 AM

Some interesting analysis from economist Josh Lehner, at the Oregon Office of Economic Analysis on whether people actually downsize in retirement. This is important since so many baby boomers are reaching retirement age. Will they downsize or will they age in place?

A few excerpts: Do People Really Downsize?

The question, or the assumption that older households downsize as they age is one that I’ve really struggled with trying to answer. Obviously it makes theoretical sense. As one’s children grow up, you no longer need as much space, and the love/hate relationship with the yard may become more physically taxing. I hear comments along these lines quite frequently. And many urbanists rightfully point out that one of the benefits of the missing middle housing — duplexes, quads, townhomes, etc — is it better allows aging in place. That is it would provide additional housing options within existing neighborhoods so if a household does sell/downsize, they do not have to leave their longtime friends and social networks. They can remain in the same area. An added benefit in this scenario would then be a larger, single family home coming back onto the market for another family to move into. We could adjust, or tailor our housing situation with our actual housing needs. Again, all of that makes sense. But do we actually see households downsize overall, let alone stay in the neighborhood? Turning to the data shows that it it kinda, sorta does happen on a small scale. …
Bottom Line: Moving rates and downsizing among households in their early retirement years is not very common. In fact it is less common today than in decades past. However, among those that do move in their 60s and 70s, they downsize. Given the large Baby Boomer generation continues to age into their retirement years, the absolute number of such moves is expected to rise, even if it remains a relatively small share of the housing market overall.

Saturday, May 19, 2018

Schedule for Week of May 20, 2018

by Bill McBride on 5/19/2018 08:12:00 AM

The key economic reports this week are April New and Existing home sales.

----- Monday, May 21st -----

8:30 AM ET: Chicago Fed National Activity Index for April. This is a composite index of other data.

----- Tuesday, May 22nd -----

10:00 AM ET: Richmond Fed Survey of Manufacturing Activity for May.

----- Wednesday, May 23rd -----

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

New Home Sales10:00 AM: New Home Sales for April from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the March sales rate.

The consensus is for 677 thousand SAAR, down from 694 thousand in March.

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

2:00 PM: FOMC Minutes for the Meeting of May 1-2, 2018

----- Thursday, May 24th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, down from 222 thousand the previous week.

9:00 AM: FHFA House Price Index for March 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

Existing Home Sales10:00 AM: Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 5.60 million SAAR, unchanged from 5.60 million in March.

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

Housing economist Tom Lawler estimates the NAR will reports sales of 5.48 million SAAR for April.

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

----- Friday, May 25th -----

8:30 AM: Durable Goods Orders for April from the Census Bureau. The consensus is for a 1.3% decrease in durable goods orders.

9:20 AM: Panel Discussion, Fed Chair Jerome Powell, Financial Stability and Central Bank Transparency, At the Sveriges Riksbank Conference: 350 Years of Central Banking--The Past, The Present and The Future, Stockholm, Sweden

10:00 AM: University of Michigan's Consumer sentiment index (Final for May). The consensus is for a reading of 99.0, up from 98.8.

Friday, May 18, 2018

Oil Rigs: "A Surprising Pause in Rig Additions"

by Bill McBride on 5/18/2018 09:28:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on May 18, 2018:

• Total US oil rigs were flat at 844

• Horizontal oil rigs added 1 to 746
• Given the strength of oil prices recently, this week’s pause in rig additions came as something of a surprise, but might be attributable to transient, technical factors
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 on FHA: Volumes Down, New Book Risk Rises

by Bill McBride on 5/18/2018 05:17:00 PM

From housing economist Tom Lawler: FHA: Volumes Down, New Book Risk Rises

FHA reported that single-family purchase mortgage endorsements in the first (calendar) quarter of 2018 totaled 166,642, down 14.8% from the comparable quarter of 2017. FHA single-family purchase applications last quarter were down 12.2% from a year earlier.

The average credit score of FHA purchase mortgage endorsements last quarter was 672, the lowest quarter average since 2008. The average debt-to-income (DTI) ratio of FHA purchase mortgage endorsements last quarter was 43.02, the highest level since at least 2008 (I only have data going back to 2008). While FHA does not show the distribution of DTI’s in its public reports, in written testimony said that in February that almost 25% of FHA single-family mortgage endorsements had DTIs above 25%.

FHAClick on graph for larger image.

CR Note: These three graphs are from Tom Lawler.

The first graph shows FHA single family purchase and applications and endorsements. FHA volumes are down recently (and according to the MBA, the FHA receives about 10% of all mortgage applications).

FHA Average Credit ScoreThe second graphs shows the average credit score of borrows who receive FHA Purchase mortgage endorsements.

Lending standards were tightened after the housing bubble, but have been slowly slipping.

As Lawler noted "The average credit score of FHA purchase mortgage endorsements last quarter was 672, the lowest quarter average since 2008."

FHA DTI ratioThe third graph shows the average debt-to-income (DTI) ratio for borrowers who receive an FHA endorsement.

The average ratio has increased significantly over the last couple of years.

Looser standards (lower credit scores, higher DRI) means more risk. This isn't too concerning; it is only 10% of the mortgage markets. However further declines in the average credit score - and / or increases in the DTI - would be a little worrisome.

"CAR: California Existing Single-Family Home Inventory Shows First YOY Gain in a Long While"

by Bill McBride on 5/18/2018 01:56:00 PM

From housing economist Tom Lawler: CAR: California Existing Single-Family Home Inventory Shows First YOY Gain in a Long While

From the California Association of Realtors monthly home sales report for April:

“Statewide active listings (of existing single-family homes) finally reversed nearly three years of decreases after rising 1.9% (YOY) in April.”
CR Note: Here is a table from housing economist Tom Lawler showing the year-over-year (YoY) change for National inventory from the NAR, and the YoY change for California from the CAR.

It appears the YoY declines are slowing nationally, and inventory has started to increase YoY in California.

YOY % Change, Existing SF Homes for Sale
1Estimate by Tom Lawler based on local reports. 

Lawler: Early Read on Existing Home Sales in April

by Bill McBride on 5/18/2018 11:44:00 AM

From housing economist Tom Lawler: Early Read on Existing Home Sales in April

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 April, down 2.1% from March’s preliminary pace and down 1.1% from last April’s seasonally adjusted pace. Unadjusted sales should show a YOY gain, with the SA/NSA difference reflecting this April’s higher business day count relative to last April’s.

Local realtor/MLS data, as well as tracking sources, indicate that the inventory of existing homes for sale in April was down from a year ago but that the YOY decline in April was less than that in March. I project that the NAR’s estimate of the number of existing homes for sale at the end of April will be 1.81 million, up 8.4% from March’s preliminary estimate and down 5.7% from last April.

Finally, local realtor/MLS data suggest the median US existing single-family home sales price last month was up about 7.0% from last April. Note, however, that of late the NAR’s median existing home sales prices have shown lower YOY gains than local realtor/MLS data would have suggested, for reasons that are not clear.

CR Note: Existing home sales for April are scheduled to be released by the NAR on Thursday, May 24th. The early consensus is the NAR will report sales of 5.57 Million SAAR.

BLS: Unemployment Rates Lower in 4 states in April; California, Hawaii and Wisconsin at New Series Lows

by Bill McBride on 5/18/2018 10:06:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in April in 4 states and stable in 46 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Twelve states had jobless rate decreases from a year earlier and 38 states and the District had little or no change. The national unemployment rate edged down from March to 3.9 percent and was 0.5 percentage point lower than in April 2017
Hawaii had the lowest unemployment rate in April, 2.0 percent. The rates in California (4.2 percent), Hawaii (2.0 percent), and Wisconsin (2.8 percent) set new series lows. (All state series begin in 1976.) Alaska had the highest jobless rate, 7.3 percent.
emphasis added
State UnemploymentClick on graph for larger image.

This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently only one state, Alaska, has an unemployment rate at or above 7% (light blue); And only Alaska is above 6% (dark blue).

Thursday, May 17, 2018

Hotels: Occupancy Rate increases Year-over-Year, On Pace for Record Year

by Bill McBride on 5/17/2018 07:12:00 PM

From STR: US hotel results for week ending 12 May

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 6-12 May 2018, according to data from STR.

In comparison with the week of 7-13 May 2017, the industry recorded the following:

Occupancy: +0.8% to 68.5%
• Average daily rate (ADR): +3.5% to US$130.06
• evenue per available room (RevPAR): +4.4% to US$89.03
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateClick on graph for larger image.

The red line is for 2018, dash light blue is 2017 (record year due to hurricanes), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

The occupancy rate, to date, is slightly ahead of the record year in 2017 (2017 finished strong due to the impact of the hurricanes).

Data Source: STR, Courtesy of

Update: Housing Inventory Tracking

by Bill McBride on 5/17/2018 03:16:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

The graph below shows the year-over-year change for non-contingent inventory in Las Vegas, Phoenix and Sacramento (all through April), and also total existing home inventory as reported by the NAR (through March 2018).

Note: For Phoenix, there was a discrepancy between the "Market Report" and the "Stats Report".  For this graph, I'm using the Stats Report.

Click on graph for larger image.

This shows the year-over-year change in inventory for Phoenix, Sacramento, and Las Vegas.  The black line if the year-over-year change in inventory as reported by the NAR.

Note that inventory in Sacramento was up 18% year-over-year in April (inventory was still very low), and has increased year-over-year for seven consecutive months. 

Also note the inventory is still down 19.5% in Las Vegas (red), but the YoY decline has been getting smaller - and it is very possible that inventory will up year-over-year in Las Vegas later this year.

I'll try to add a few other markets.

Inventory is a key for the housing market, and I will be watching inventory for the impact of the new tax law and higher mortgage rates on housing.  It appears the inventory decline might be ending in some markets.