Monday, March 02, 2015

Tuesday: February Auto Sales

by Bill McBride on 3/02/2015 07:58:00 PM

On mortgage rates from Matthew Graham at Mortgage News Daily: Mortgage Rates Back up to 3.875 Percent

What had been 3.75% on Friday is now 3.875% in terms of the most prevalent conventional 30yr fixed rates for top tier scenarios.
CR Note: The Ten Year yield increased to 2.08% today from 2.00% on Friday.

Tuesday:
• All day, Light vehicle sales for February. The consensus is for light vehicle sales to increase to 16.7 million SAAR in February from 16.6 million in January (Seasonally Adjusted Annual Rate).

• At 8:15 PM, Speech, Fed Chair Janet L. Yellen, Bank Regulation and Supervision, At the Citizens Budget Commission's Annual Awards Dinner, New York, New York

Fannie Mae: Mortgage Serious Delinquency rate declined in January, Lowest since September 2008

by Bill McBride on 3/02/2015 03:13:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined slightly in January to 1.86% from 1.89% in December. The serious delinquency rate is down from 2.33% in January 2014, and this is the lowest level since September 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Last week, Freddie Mac reported that the Single-Family serious delinquency rate was declined in January to 1.86%. Freddie's rate is down from 2.34% in January 2014, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.47 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will be under 1% in late 2016.

The "normal" serious delinquency rate is under 1%, so maybe serious delinquencies will be close to normal at the end of 2016.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog, especially in judicial foreclosure states like Florida.

Zillow: January Case-Shiller House Price Index year-over-year change expected to be about the same as in December

by Bill McBride on 3/02/2015 02:18:00 PM

The Case-Shiller house price indexes for December were released last Tuesday. Zillow forecasts Case-Shiller a month early - now including the National Index - and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: 10- & 20-City Case-Shiller Composites Expected to Show Declines In Jan. From Dec

The December S&P/Case-Shiller (SPCS) data released [last] week showed healthy home price appreciation largely at pace with prior months, with annual growth in the U.S. National Index at 4.6 percent in December.

Annual appreciation in home values as measured by SPCS has been less than 5 percent for the past four months. We anticipate this trend to continue as annual growth in home prices slows to more normal levels between 3 percent and 5 percent. Zillow predicts the U.S. National Index to rise 4.5 percent on an annual basis in January.

The 10- and 20-City Composite Indices both experienced modest bumps in annual growth rates in December; the 10-City index rose to 4.3 percent and the 20-City Index rose to 4.5 percent – up from rates of 4.2 percent and 4.3 percent, respectively, in November. The non-seasonally adjusted (NSA) 10- and 20-City indices both rose 0.1 percent from November to December. We expect both to turn negative in January, with each predicted to fall 0.1 percent month-over-month (NSA).

All forecasts are shown in the table below. These forecasts are based on the December SPCS data release and the January 2014 Zillow Home Value Index (ZHVI), released Feb. 19. Officially, the SPCS Composite Home Price Indices for January will not be released until Tuesday, March 31.
So the year-over-year change in for January Case-Shiller index will probably be about the same, or a little lower, than in the December report.

Zillow Case-Shiller Forecast
  Case-Shiller
Composite 10
Case-Shiller
Composite 20
Case-Shiller
National
NSASANSASANSASA
December
Actual YoY
4.3%4.3%4.5%4.5%4.6%4.6%
January
Forecast
YoY
4.3%4.3%4.5%4.5%4.5%4.5%
January
Forecast
MoM
-0.1%0.6%-0.1%0.6%0.0%0.5%

Construction Spending decreased 1.1% in January

by Bill McBride on 3/02/2015 11:01:00 AM

The Census Bureau reported that overall construction spending decreased in January:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during January 2015 was estimated at a seasonally adjusted annual rate of $971.4 billion, 1.1 percent below the revised December estimate of $982.0 billion. The January figure is 1.8 percent above the January 2014 estimate of $954.6 billion.
Both private and public spending decreased in January:
Spending on private construction was at a seasonally adjusted annual rate of $697.6 billion, 0.5 percent below the revised December estimate of $700.9 billion. ...

In January, the estimated seasonally adjusted annual rate of public construction spending was $273.8 billion, 2.6 percent below the revised December estimate of $281.1 billion.
emphasis added
Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas is generally declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for lodging is up 18% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 14% year-over-year (and will fall further in the coming months).

Private Construction Spending Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending dipped a little last year, but is increasing again.

Non-residential spending is 17% below the peak in January 2008.

Public construction spending is now 16% below the peak in March 2009 and about 5% above the post-recession low.

Private Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is down 3%. Non-residential spending is up 5% year-over-year. Public spending is up 5% year-over-year.

Looking forward, all categories of construction spending should increase in 2015. Residential spending is still very low, non-residential is starting to pickup (except oil and gas), and public spending has probably hit bottom after several years of austerity.

This was well below the consensus forecast of a 0.3% increase, with weakness in Public and non-residential spending.

ISM Manufacturing index declined to 52.9 in February

by Bill McBride on 3/02/2015 10:00:00 AM

The ISM manufacturing index suggests slower expansion in February than in January. The PMI was at 52.9% in February, down from 53.5% in January. The employment index was at 51.4%, down from 54.1% in January, and the new orders index was at 52.5%, down from 52.9%.

From the Institute for Supply Management: February 2015 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in February for the 26th consecutive month, and the overall economy grew for the 69th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The February PMI® registered 52.9 percent, a decrease of 0.6 percentage point from January’s reading of 53.5 percent. The New Orders Index registered 52.5 percent, a decrease of 0.4 percentage point from the reading of 52.9 percent in January. The Production Index registered 53.7 percent, 2.8 percentage points below the January reading of 56.5 percent. The Employment Index registered 51.4 percent, 2.7 percentage points below the January reading of 54.1 percent. Inventories of raw materials registered 52.5 percent, an increase of 1.5 percentage points above the January reading of 51 percent. The Prices Index registered 35 percent, the same percentage as in January, indicating lower raw materials prices for the fourth consecutive month. Comments from the panel express a growing level of concern over the West Coast dock slowdown, negatively impacting exports and imports and requiring workarounds and added costs."
emphasis added
On that last sentence - the good news is the West Cost port slowdown has been resolved, although it will take a few months to catch up.

ISM PMIClick on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was slightly below expectations of 53.0%, but still indicates expansion in February.

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