Monday, November 30, 2015

Tuesday: ISM Manufacturing, Construction Spending, Auto Sales

by Bill McBride on 11/30/2015 09:04:00 PM

From the LA Times: After subprime collapse, nonbank lenders again dominate riskier mortgages

So-called nonbank lenders are again dominating a riskier corner of the housing market — this time, loans insured by the Federal Housing Administration, aimed at first-time and bad-credit buyers. Such lenders now control 64% of the market for FHA and similar Veterans Affairs loans, compared with 18% in 2010.

A Times analysis of federal loan data shows that FHA mortgages from nonbank lenders are seeing more delinquencies than similar loans from banks.
...
"The idea that a lot of the folks who benefited during subprime are now back in action calls out for closer scrutiny," said Kevin Stein, associate director of the California Reinvestment Coalition, a fair-lending advocacy group in San Francisco.

The surge in nonbank lending also has prompted alarm at Ginnie Mae, a government corporation that monitors FHA and VA lenders. Ginnie Mae's president, Ted Tozer, has requested $5 million in additional federal funding to hire 33 additional regulators.

"These firms have grown so fast," he said.
This is probably not a serious problem, but additional oversight makes sense.

Tuesday:
• At 10:00 AM ET, ISM Manufacturing Index for November. The consensus is for the ISM to be at 50.5, up from 50.1 in October. The employment index was at 47.6% in October, and the new orders index was at 52.9%.

• Also at 10:00 AM, Construction Spending for October. The consensus is for a 0.6% increase in construction spending.

• All day: Light vehicle sales for November. The consensus is for light vehicle sales to decrease to 18.0 million SAAR in November from 18.1 million in October (Seasonally Adjusted Annual Rate).

Fannie Mae: Mortgage Serious Delinquency rate declined slightly in October

by Bill McBride on 11/30/2015 04:06:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined slightly in October to 1.58% from 1.59% in September. The serious delinquency rate is down from 1.92% in October 2014, and this is the lowest level since August 2008.

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

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

Note: Freddie Mac has not reported for October yet.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The Fannie Mae serious delinquency rate has only fallen 0.34 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017.

The "normal" serious delinquency rate is under 1%, so maybe Fannie Mae serious delinquencies will be close to normal some time in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

Restaurant Performance Index indicates faster expansion in October

by Bill McBride on 11/30/2015 12:31:00 PM

Here is a minor indicator I follow from the National Restaurant Association: Restaurant Performance Index Rose in October

Driven by stronger same-store sales and a more optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) posted a moderate gain in October. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.1 in October, up 0.7 percent from a level of 101.4 in September. In addition, October represented the 32nd consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.
...
“The October gain in the RPI was buoyed by broad-based improvements in the current situation indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators are somewhat more optimistic about both sales growth and the economy in the months ahead.”
emphasis added
Restaurant Performance Index Click on graph for larger image.

The index increased to 102.1 in October, down from 101.4 in September. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month.  This index is indicated decent expansion in October, and it appears restaurants are benefiting from lower gasoline prices and the improved labor market.

NAR: Pending Home Sales Index increased 0.2% in October, up 3.9% year-over-year

by Bill McBride on 11/30/2015 10:02:00 AM

From the NAR: Pending Home Sales Nudge Forward in October

The Pending Home Sales Index, a forward-looking indicator based on contract signings, inched 0.2 percent to 107.7 in October from an upwardly revised 107.5 in September and is now 3.9 percent above October 2014 (103.7). The index has increased year-over-year for 14 consecutive months.
...
The PHSI in the Northeast rose 4.5 percent to 93.6 in October, and is now 6.8 percent above a year ago. In the Midwest the index declined 1.0 percent to 103.9 in October, but remains 3.3 percent above October 2014.

Pending home sales in the South decreased 1.7 percent to an index of 118.1 in October and are now 0.3 percent below last October. The index in the West climbed 1.7 percent in October to 106.2, and is 10.4 percent above a year ago.
emphasis added
This is below expectations of a 1% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in November and December.

Chicago PMI declines to 48.7

by Bill McBride on 11/30/2015 09:53:00 AM

Chicago PMI: Nov Chicago Business Barometer Down 7.5 Points To 48.7

The Chicago Business Barometer decreased 7.5 points to 48.7 in November from 56.2 in October, as a sharp fall in New Orders put it back into contraction for the sixth time this year.

The significant decline in the Barometer is indicative of the see-saw pattern of demand seen in 2015, with output and orders shifting in and out of contraction. The November fall also suggests that activity over the final quarter of the year may well decelerate barring a bounceback in December.

New Orders fell 15.3 points to 44.1 in November from 59.4 in October, leaving it at the lowest level since March. Production also fell sharply, although managed to hold just above the neutral 50 level that separates expansion from contraction.
...
Chief Economist of MNI Indicators Philip Uglow said, “That the Barometer was unable to hold on to the gain seen in October is a reflection of the erratic pattern of demand seen throughout 2015. The slowdown in the global economy, the strong dollar and decline in oil prices have all impacted businesses this year to varying degrees.”
emphasis added
This was well below the consensus forecast of 54.0.

Sunday, November 29, 2015

Monday: Chicago PMI, Pending Home Sales

by Bill McBride on 11/29/2015 07:18:00 PM

From the WSJ: Divergent Paths for U.S., European Central Banks

This break in rate policy, particularly between the Fed and the European Central Bank, could strengthen the dollar even further against the euro, crimping U.S. exporters while giving a leg up to European ones.

The divergent paths highlight how much more vigorous the U.S. recovery has been, particularly on the hiring front, a trend economists expect to see continue when the U.S. job numbers for November come out Friday.
US policymakers responded to the financial crisis quicker, and with better policy (although the US made a premature pivot to austerity on fiscal policy, fiscal policy in Europe was much worse).

Monday:
• At 9:45 AM ET, the Chicago Purchasing Managers Index for November. The consensus is for a reading of 54.0, down from 56.2 in October.

• At 10:00 AM, Pending Home Sales Index for October. The consensus is for a 1.0% increase in the index.

• At 10:30 AM, Dallas Fed Manufacturing Survey for November.

Weekend:
Schedule for Week of November 29, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures and DOW futures are down slightly (fair value).

Oil prices were up slightly over the last week with WTI futures at $41.71 per barrel and Brent at $44.86 per barrel.  A year ago, WTI was at $66, and Brent was at $71 - so prices are down about 35% year-over-year (It was a year ago that prices were falling sharply).

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.04 per gallon (down about $0.75 per gallon from a year ago).

Hotels: Finishing Year Strong

by Bill McBride on 11/29/2015 10:56:00 AM

Looking back at historical data, the only time hotel occupancy was this strong in November was in 2005 - and the high occupancy rate in the Fall of 2005 was the result of people displaced from their homes due to the damage from Hurricane Katrina.

Here is an update on hotel occupancy from HotelNewsNow.com: STR: US results for week ending 21 November

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 15-21 November 2015, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy increased 3.7% to 63.1%. Average daily rate for the week was up 3.8% to US$116.26. Revenue per available room increased 7.6% to finish the week at US$73.33.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  Hotels are now in the Fall business travel season.

Hotel Occupancy RateThe red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

I added 2001 (yellow) to show the impact of 9/11/2001 on hotel occupancy.  Occupancy was already down in 2001 compared to 2000 due to the recession, and then really collapsed following 9/11.

For 2015, the 4-week average of the occupancy rate is above 2000 (best year for hotels), and 2015 will be the best year ever for hotels.

Occupancy Rate Year-to-date:
1) 2015 67.4%
2) 2000 66.5%
3) 2014 66.2%

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

Saturday, November 28, 2015

Schedule for Week of November 29th

by Bill McBride on 11/28/2015 09:09:00 AM

The key report this week is the November employment report on Friday.

Other key indicators include November vehicle sales, the November ISM manufacturing and non-manufacturing indexes, and the October trade deficit.

Federal Reserve Chair Janet Yellen will speak on the Economic Outlook.

----- Monday, November 30th -----

9:45 AM: Chicago Purchasing Managers Index for November. The consensus is for a reading of 54.0, down from 56.2 in October.

10:00 AM: Pending Home Sales Index for October. The consensus is for a 1.0% increase in the index.

10:30 AM: Dallas Fed Manufacturing Survey for November.

----- Tuesday, December 1st -----

ISM PMI10:00 AM: ISM Manufacturing Index for November. The consensus is for the ISM to be at 50.5, up from 50.1 in October.

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

The ISM manufacturing index indicated expansion at 50.1% in October. The employment index was at 47.6%, and the new orders index was at 52.9%.

10:00 AM: Construction Spending for October. The consensus is for a 0.6% increase in construction spending.

Vehicle SalesAll day: Light vehicle sales for November. The consensus is for light vehicle sales to decrease to 18.0 million SAAR in November from 18.1 million in October (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the October sales rate.

----- Wednesday, December 2nd -----

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

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 183,000 payroll jobs added in November, up from 182,000 in October.

12:25 PM: Speech by Fed Chair Janet Yellen, Economic Outlook, At the Economic Club of Washington, Washington, D.C.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, December 3rd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, up from 260 thousand the previous week.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is a 1.4% increase in orders.

10:00 AM: the ISM non-Manufacturing Index for October. The consensus is for index to decrease to 58.2 from 59.1 in October.

10:00 AM: Testimony by Fed Chair Janet Yellen, Economic Outlook, Before the Joint Economic Committee, U.S. Senate, Washington, D.C.

1:10 PM: Speech by Fed Vice Chairman Stanley Fischer, Financial Stability and Shadow Banks, At the Federal Reserve Bank of Cleveland Financial Stability Conference, Washington, D.C.

----- Friday, December 4th -----

8:30 AM: Employment Report for November. The consensus is for an increase of 190,000 non-farm payroll jobs added in November, down from the 271,000 non-farm payroll jobs added in October.

The consensus is for the unemployment rate to be unchanged at 5.0%.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In October, the year-over-year change was 2.81 million jobs.

A key will be the change in real wages - and as the unemployment rate falls, wage growth should pickup.

U.S. Trade Deficit8:30 AM: Trade Balance report for October from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through October. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $40.6 billion in October from $40.8 billion in September.

Friday, November 27, 2015

November 2015: Unofficial Problem Bank list declines to 255 Institutions

by Bill McBride on 11/27/2015 08:35:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for November 2015.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for November 2015. During the month, the list fell from 264 institutions to 255 after nine removals. Assets dropped by $2.2 billion to an aggregate $77.0 billion. The asset total was updated to reflect third quarter figures, which resulted in a small decline of $224 million. A year ago, the list held 408 institutions with assets of $124.7 billion. This past week, the FDIC released third quarter industry results and an update on the Official Problem Bank List. FDIC said the official list held 203 problem banks, a decline of 25 during the quarter. During the past three months, the unofficial list holds 27 fewer banks.

Actions have been terminated against CertusBank, National Association, Easley, SC ($877 million); First National Bank in Howell, Howell, MI ($355 million); United American Bank, San Mateo, CA ($303 million); Quontic Bank, Astoria, NY ($165 million); First Alliance Bank, Cordova, TN ($120 million); and Summit National Bank, Hulett, WY ($64 million).

Several banks merged to find their way off the problem bank list including Columbus Junction State Bank, Columbus Junction, IA ($47 million); Farmers State Bank, Lumpkin, GA ($45 million); and The State Bank of Blue Mound, Blue Mound, IL ($31 million).

One other change this month was a name change of The Farmers Bank to Persons Banking Company, Forsyth, GA ($328 million).

Zillow Forecast: Expect October Year-over-year Change for Case-Shiller Index Similar to September

by Bill McBride on 11/27/2015 04:05:00 PM

The Case-Shiller house price indexes for September were released on Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: Case-Shiller Forecast Calls for Similar Annual, Monthly Gains in October

The September S&P Case-Shiller (SPCS) data published [on Tuesday] showed home prices rising on a seasonally-adjusted monthly basis, with month-over-month rises of 0.6 percent for both the 10- and 20- city indices and 0.8 percent for the national index.

The October Case-Shiller forecast calls for similar monthly increases of 0.4 percent for the 10- and 20-City Indices in October from from September (seasonally adjusted). The national index is expected to gain another 0.8 percent in October from September. We expect the 10-City Index to grow 5 percent year-over-year, and the 20-City Index to grow 5.4 percent over the same period. The national Index looks set to gain 5.1 percent since October 2014.

All SPCS forecasts are shown in the table below. These forecasts are based on today’s September SPCS data release and the October 2015 Zillow Home Value Index (ZHVI), released November 20. The SPCS Composite Home Price Indices for October will not be officially released until Tuesday, December 29.
This suggests the year-over-year change for the October Case-Shiller National index will be about the same as in the September report.

Zillow Case-Shiller Forecast
  Case-Shiller
Composite 10
Case-Shiller
Composite 20
Case-Shiller
National
NSASANSASANSASA
September
Actual YoY
5.0%5.0%5.5%5.5%4.9%4.9%
October
Forecast
YoY
5.0%5.0%5.4%5.4%5.1%5.1%
September
Forecast
MoM
-0.2%0.4%-0.1%0.4%0.0%0.8%

Vehicle Sales Forecast for November: Over 18 Million Annual Rate Again?

by Bill McBride on 11/27/2015 11:16:00 AM

The automakers will report November vehicle sales on Tuesday, December 1st. Sales in October were at 18.1 million on a seasonally adjusted annual rate basis (SAAR), and it possible sales in October will be over 18 million SAAR again.

Note:  There were 23 selling days in November, down from 25 in November 2014.  Here are two forecasts:

From WardsAuto: Forecast: U.S. Light Vehicle Sales on Track for Record Year

A WardsAuto forecast calls for U.S. light-vehicle sales to reach an 18.4 million-unit seasonally adjusted annual rate in November, leading to the first 3-month streak of 18 million-plus results. The forecasted SAAR would be the highest monthly outcome since July 2005’s 20.6-million.
From J.D. Power: U.S Auto Sales Projected to Increase 7% in November
otal and retail new light-vehicle sales in November are expected to increase 7% on a selling-day-adjusted basis, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.

Despite a couple of calendar curveballs—November has only four selling weekends for the first time since 2012 and has the fewest selling days (23) of any month since September 2013—the industry continues to show strength, with retail light-vehicle sales approaching 1.1 million units and total light-vehicle sales nearing 1.3 million units this month. [17.7 million SAAR]
emphasis added
Another strong month for car sales.  The only question is if the sales rate will be over 18 million for three consecutive months - for the first time ever.

Thursday, November 26, 2015

Something I'm very thankful for ...

by Bill McBride on 11/26/2015 10:26:00 AM

A&E has a new reality show "illustrating the every day lives of individuals with Down Syndrome" that starts on December 9th.  The show is called Born This Way!

One of the cast members is Steven Clark, the son of my college roommate.

I'm biased but I think Steven will be the star of show. He is an awesome and loving young man.

For a preview of the show, see the clip below (Steven is shown several times including in the final shot).

I'm thankful for knowing Steven. I'm thankful he has such incredible parents. And I'm thankful that he has this opportunity on A&E.

Happy Thanksgiving to all!

Wednesday, November 25, 2015

2016: Updated Housing Forecasts

by Bill McBride on 11/25/2015 07:20:00 PM

Towards the end of each year I collect some housing forecasts for the following year, and it looks like analysts are optimistic for 2016 (many more forecasts will be added).

First a review of the previous three years ...

Here is a summary of forecasts for 2015. In 2015, new home sales will probably be just over 500 thousand, and total housing starts will be something over 1.1 million.  It is early, but CoreLogic, Zillow and the MBA were very close on New Home sales, and CoreLogic, MetroStudy, MBA and Zillow were all close on starts.

Here is a summary of forecasts for 2014. In 2014, new home sales were 437 thousand, and total housing starts were 1.003 million. No one was close on New Home sales (all way too optimistic), and Michelle Meyer (Merrill Lynch) and Fannie Mae were the closest on housing starts (about 10% too high). In 2014, many analysts underestimated the impact of higher mortgage rates and higher new home prices on new home sales and starts.

Here is a summary of forecasts for 2013. In 2013, new home sales were 429 thousand, and total housing starts were 925 thousand.  Barclays was the closest on New Home sales followed by David Crowe (NAHB).  Fannie Mae and the NAHB were the closest on housing starts.

The table below shows a few forecasts for 2016 (I'll add many more of the next several weeks).

From Fannie Mae: Housing Forecast: October 2015

From NAHB: Housing Recovery to Pick Up Steam in 2016, but Challenges Remain

UCLA Ziman Center.

Note: For comparison, new home sales in 2015 will probably be just over 500 thousand, and total housing starts over 1.1 million.

I haven't worked up a forecast yet for 2016, however I think the UCLA forecast for housing starts is too high.

Housing Forecasts for 2016
New Home Sales (000s)Single Family Starts (000s)Total Starts (000s)House Prices1
Fannie Mae5628271,2244.9%2
Merrill Lynch555
1,2753.0%
MetroStudy6258201,2353.1%
NAHB
9141,292
UCLA Ziman Center
1,420
1Case-Shiller unless indicated otherwise
2FHFA Purchase-Only Index

Philly Fed: State Coincident Indexes increased in 43 states in October

by Bill McBride on 11/25/2015 03:31:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2015. In the past month, the indexes increased in 43 states, decreased in six, and remained stable in one, for a one-month diffusion index of 74. Over the past three months, the indexes increased in 42 states, decreased in seven, and remained stable in one, for a three-month diffusion index of 70.
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Philly Fed Number of States with Increasing ActivityClick on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In October, 44 states had increasing activity (including minor increases).

The worst performing states over the last 6 months are Wisconsin and North Dakota (oil).


Philly Fed State Conincident Map Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and is mostly green now.

Source: Philly Fed.

Comments on October New Home Sales

by Bill McBride on 11/25/2015 01:11:00 PM

The new home sales report for October was slightly below expectations, however sales for July, August and September were revised down. Sales were up 4.9% year-over-year in October (SA).

Earlier: New Home Sales increased to 495,000 Annual Rate in October.

Even though the October report was somewhat disappointing, sales are still up solidly year-to-date.  The Census Bureau reported that new home sales this year, through October, were 430,000, not seasonally adjusted (NSA). That is up 15.7% from 371,000 sales during the same period of 2014 (NSA). That is a strong year-over-year gain for 2015 through October.

New Home Sales 2013 2014Click on graph for larger image.

This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate).

The year-over-year gain was small in October, and I expect the year-over-year increases to be lower over the last two months of 2015 compared to earlier this year - but the overall year-over-year gain should be solid in 2015.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through October 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

New Home Sales increased to 495,000 Annual Rate in October

by Bill McBride on 11/25/2015 10:12:00 AM

The Census Bureau reports New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 495 thousand.

The previous three months were revised down by a total of 40 thousand (SAAR).

"SSales of new single-family houses in October 2015 were at a seasonally adjusted annual rate of 495,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.7 percent (±17.7%)* above the revised September rate of 447,000 and is 4.9 percent (±17.6%)* above the October 2014 estimate of 472,000."
New Home SalesClick on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales since the bottom, new home sales are still fairly low historically.

The second graph shows New Home Months of Supply.

New Home Sales, Months of SupplyThe months of supply decreased in October to 5.5 months.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).
" The seasonally adjusted estimate of new houses for sale at the end of October was 226,000. This represents a supply of 5.5 months at the current sales rate."
New Home Sales, InventoryOn inventory, according to the Census Bureau:
"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."
Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales, NSAThe last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In October 2015 (red column), 41 thousand new homes were sold (NSA). Last year 38 thousand homes were sold in October.

The all time high for October was 105 thousand in 2005, and the all time low for October was 23 thousand in 2011.

This was close to expectations of 499,000 sales SAAR in October, however prior months were revised down - a somewhat disappointing report.  I'll have more later today.

Personal Income increased 0.4% in October, Spending increased 0.1%

by Bill McBride on 11/25/2015 08:50:00 AM

The BEA released the Personal Income and Outlays report for October:

Personal income increased $68.1 billion, or 0.4 percent ... in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $15.2 billion, or 0.1 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in October, the same increase as in September. ... The price index for PCE increased 0.1 percent in October, in contrast to a decrease of 0.1 percent in September. The PCE price index, excluding food and energy, increased less than 0.1 percent, compared to an increase of 0.2 percent.

The October price index for PCE increased 0.2 percent from October a year ago. The October PCE price index, excluding food and energy, increased 1.3 percent from October a year ago.
The following graph shows real Personal Consumption Expenditures (PCE) through October 2015 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was at consensus expectations.  And the increase in PCE was below the consensus.

On inflation: The PCE price index increased 0.2 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.3 percent year-over-year in October.

Weekly Initial Unemployment Claims declined to 260,000

by Bill McBride on 11/25/2015 08:38:00 AM

The DOL reported:

In the week ending November 21, the advance figure for seasonally adjusted initial claims was 260,000, a decrease of 12,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 271,000 to 272,000. The 4-week moving average was 271,000, unchanged from the previous week's revised average. The previous week's average was revised up by 250 from 270,750 to 271,000.

There were no special factors impacting this week's initial claims.
The previous week was revised up to 272,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged at 271,000.

This was below the consensus forecast of 270,000, and the low level of the 4-week average suggests few layoffs.

MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey, Purchase Applications up 24% YoY

by Bill McBride on 11/25/2015 07:01:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Surve

Mortgage applications decreased 3.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 20, 2015. The previous week’s results included an adjustment for the Veteran’s Day holiday.
...
The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 24 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.14 percent from 4.18 percent, with points increasing to 0.49 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance Index Click on graph for larger image.


The first graph shows the refinance index.

Refinance activity remains low.

2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015.


Mortgage Purchase Index The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 24% higher than a year ago.

Tuesday, November 24, 2015

Wednesday: New Home Sales, Unemployment Claims, Personal Income and Outlays, Durable Goods, and more

by Bill McBride on 11/24/2015 07:45:00 PM

From the WSJ: Real Home Prices Could Take 17 Years to Return to Peak

Most measures of home prices—including the S&P/Case-Shiller Home Price Index, the CoreLogic Home Price Index and the National Association of Realtors existing home sales report—don’t take inflation into account and show prices nearing or surpassing the peak hit in 2006 or early 2007.

But a new analysis by real-estate information firm CoreLogic finds that when adjusted for inflation, home prices are years away from hitting the lofty heights of the housing boom. Indeed, economists there say that prices are unlikely to surpass 2006 levels until 2023 or beyond, some 17 years past the peak.
As the article notes, the nominal Corelogic index is 7% below the peak, but 20% below the peak when adjusted for inflation. As I noted this morning, the nominal Case-Shiller index 6% below the bubble, but 19.7% below the peak when adjusted for inflation.

This is important. As I wrote in early 2005, "a bubble requires both overvaluation based on fundamentals and speculation", and currently we are seeing little speculation and valuations aren't anything like during the bubble. So no bubble.

The WSJ article quotes Corelogic chief economist Sam Khater:
“The market is overvalued but it’s not a bubble,” Mr. Khater said. “Unlike the last boom, which was heavily demand-driven, this boom [in] home prices is driven by the chronic lack of supply.”
Wednesday:
• 7:00 AM ET: the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for 270 thousand initial claims, down from 271 thousand the previous week.

• Also at 8:30 AM,  Durable Goods Orders for October from the Census Bureau. The consensus is for a 1.5% decrease in durable goods orders.

• Also at 8:30 AM, Personal Income and Outlays for October. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:00 AM, the FHFA House Price Index for September 2015. This was originally a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% month-to-month increase for this index.

• At 10:00 AM, New Home Sales for October from the Census Bureau. The consensus is for a increase in sales to 499 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 468 thousand in September.

• Also at 10:00 AM, the University of Michigan's Consumer sentiment index (final for November). The consensus is for a reading of 93.1, unchanged from the preliminary reading.

Chemical Activity Barometer "Chemical Activity Barometer Stabilizes"

by Bill McBride on 11/24/2015 03:27:00 PM

Here is an indicator that I'm following that appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Stabilizes as Year End Approaches

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), stabilized in November, rising 0.1 percent following three consecutive months of decline. October data was revised up 0.3 percent and September by 0.2 percent. All data is measured on a three-month moving average (3MMA).The pattern reverses a downward trend that had begun to gain momentum. Accounting for adjustments, the CAB remains up 1.3 percent over this time last year, a deceleration of annual growth. In November 2014, the CAB logged a 3.4 percent annual gain over October 2013. ...
...
Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added
Chemical Activity Barometer Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

This suggests that industrial production might have stabilized.

Real Prices and Price-to-Rent Ratio in September

by Bill McBride on 11/24/2015 12:04:00 PM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 4.9% year-over-year in September

The year-over-year increase in prices is mostly moving sideways now at between 4% and 5%.   In October 2013, the National index was up 10.9% year-over-year (YoY). In September 2015, the index was up 4.9% YoY.

Here is the YoY change since January 2014 for the National Index:

MonthYoY Change
Jan-1410.5%
Feb-1410.1%
Mar-148.9%
Apr-147.9%
May-147.1%
Jun-146.3%
Jul-145.7%
Aug-145.1%
Sep-144.8%
Oct-144.6%
Nov-144.6%
Dec-144.6%
Jan-154.3%
Feb-154.3%
Mar-154.3%
Apr-154.3%
May-154.4%
Jun-154.4%
Jul-154.5%
Aug-154.6%
Sep-154.9%

This slowdown in price increases this year was expected by several key analysts, and I think it is good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 6.0% below the bubble peak.   However, in real terms, the National index is still about 19.7% below the bubble peak.

Nominal House Prices


Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through September) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to August 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to June 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to September 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to January 2004.

In real terms, house prices are back to 2003 levels.

Note: CPI less Shelter is down 1.5% year-over-year, so this is pushing up real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to May 2003 levels, the Composite 20 index is back to December 2002 levels, and the CoreLogic index is back to October 2003.

In real terms, and as a price-to-rent ratio, prices are back to 2003 levels - and the price-to-rent ratio maybe moving a little sideways now.

Case-Shiller: National House Price Index increased 4.9% year-over-year in September

by Bill McBride on 11/24/2015 09:28:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for September ("September" is a 3 month average of July, August and September prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Widespread Gains in Home Prices for August According to the S&P/Case-Shiller Home Price Indices

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 4.9% annual increase in September 2015 versus a 4.6% increase in August 2015. The 10-City Composite increased 5.0% in the year to September compared to 4.7% previously. The 20-City Composite’s year-over-year gain was 5.5% versus 5.1% in the year to September. After adjusting for the CPI core rate of inflation, the S&P/Case Shiller National Home Price Index rose 3% from September 2014 to September 2015.
...
Before seasonal adjustment, the National Index posted a gain of 0.2% month-over-month in September. The 10-City Composite and 20-City Composite both reported gains of 0.2% month-over-month in September. After seasonal adjustment, the National Index posted a gain of 0.8%, while the 10-City and 20-City Composites both increased 0.6% month-over-month. Fifteen of 20 cities reported increases in September before seasonal adjustment; after seasonal adjustment, 19 cities increased for the month.
...
“Home prices and housing continue to show strength with home prices rising at more than double the rate of inflation,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 14.3% from the peak, and up 0.6% in September (SA).

The Composite 20 index is off 13.0% from the peak, and up 0.6% (SA) in September.

The National index is off 6.0% from the peak, and up 0.8% (SA) in September.  The National index is up 27.0% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 5.1% compared to September 2014.

The Composite 20 SA is up 5.5% year-over-year..

The National index SA is up 4.9% year-over-year.

Prices increased (SA) in 20 of the 20 Case-Shiller cities in September seasonally adjusted.  (Prices increased in 15 of the 20 cities NSA)  Prices in Las Vegas are off 39.2% from the peak, and prices in Denver and Dallas are at new highs (SA).

Case-Shiller CitiesThe last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 54% above January 2000 (54% nominal gain in almost 16 years).

These are nominal prices, and real prices (adjusted for inflation) are up about 40% since January 2000 - so the increase in Phoenix from January 2000 until now is about 14% above the change in overall prices due to inflation.

Three cities - Denver (up 70% since Jan 2000) and Dallas (up 52% since Jan 2000) and Boston (up 80% since Jan 2000) - are above the bubble highs (a few other Case-Shiller Comp 20 city are close - Charlotte, San Francisco, Portland and Seattle).    Detroit prices are barely above the January 2000 level.

I'll have more on house prices later.

Q3 GDP Revised Up to 2.1% Annual Rate

by Bill McBride on 11/24/2015 08:35:00 AM

From the BEA: Gross Domestic Product: Third Quarter 2015 (Second Estimate)

Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 2.1 percent in the third quarter of 2015, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.9 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.5 percent. With the second estimate for the third quarter, the decrease in private inventory investment was smaller than previously estimated ...
emphasis added
Here is a Comparison of Second and Advance Estimates. PCE growth was revised down from 3.2% to 3.0%. Residential investment was revised up from 6.1% to 7.3%.

Monday, November 23, 2015

Tuesday: GDP, Case-Shiller House Prices

by Bill McBride on 11/23/2015 08:11:00 PM

A couple of people were too kind today:

From Paul Krugman: Shorts Subject

Last night I was invited to a screening of The Big Short, which I thought was terrific; who knew that CDOs and credit default swaps could be made into an edge-of-your-seat narrative (with great acting)?
I'm looking forward to seeing the movie.

And from Joseph Weisenthal at Bloomberg: Bloomberg TV’s What’d You Miss? thinks of linear TV as “a source of content for online video”
This guy in California named Bill McBride who runs a blog called Calculated Risk. He was one of the best and greatest chroniclers of the housing market. He was talking about how the housing market was really in trouble as early as 2005. His blog was a must-read. On the way down, he also nailed the situation perfectly. And then, unlike a lot of the people who were calling for doom and gloom in 2009 and 2010, he started talking about the rebound of the economy.
Thank you.  My co-blogger during the bubble, Doris "Tanta" Dungey, always blushed when people said nice things about her - and it happened frequently to her.   As an aside, Tanta's birthday was Nov 15th and she would have been 54.  When people mention that time period, I always think of "T".  Tanta Vive!

Tuesday:
• 8:30 AM ET: Gross Domestic Product, 3rd quarter 2015 (Second estimate). The consensus is that real GDP increased 2.1% annualized in Q3, revised up from the advance estimate of 1.5%.

• At 9:00 AM, S&P/Case-Shiller House Price Index for September. Although this is the September report, it is really a 3 month average of July, August and September prices. The consensus is for a 5.3% year-over-year increase in the Comp 20 index for September. The Zillow forecast is for the National Index to increase 4.7% year-over-year in September.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for November

Kolko: "Why Millennials Still Live With Their Parents"

by Bill McBride on 11/23/2015 04:52:00 PM

Some excellent research from Jed Kolko: Why Millennials Still Live With Their Parents

This morning the Census reported that more young adults are living with their parents in 2015 than during the recession. Despite widespread expectations (including my own) that young people would move out as the job market recovered, they are not. The share of 18-34 year-olds living with parents was 31.5% in 2015, up from 31.4% in 2014. (These Census data are from March of each year. See note at end of post on data and methods.) ...

After dropping a bit from the late 1990s to the early 2000s, the share of 18-34 year-olds living in their parents’ home rose steadily from 2005 to 2012 and has remained near this post-recession high even as the economy has recovered and unemployment for young adults has dropped sharply.
Kolko digs through the data and concludes:
So that’s the punchline: the increase in young adults living with parents over the past twenty years can be explained entirely by demographic changes. The increase since 2005 is not an aberration; once demographics are taken into account, the aberration is the bubble years of the mid-2000s, when an unusually low share of young adults was living with parents.

Adjusting for demographics doesn’t make the recent increase in young adults living with parents — or the implications for today’s housing market — any less “real.” The increased share of young adults living with parents means that household formation is being driven not by millennials but by baby boomers, and helps explain the low share of first-time home-buyers.

But adjusting for demographics does change what we should expect from the future. Because the demographics-adjusted share of young adults living with parents today is similar to pre-bubble levels, long-term demographic shifts may simply have pushed up the share of young adults living with parents to a new normal. Unless demographic trends reverse, the share of young adults living with parents is unlikely to fall much. Today’s millennials will leave their parents’ homes as they age — they’re not going to live there forever. But it won’t be the sudden unleashing of pent-up demand we might have expected if the increase of living with parents were only about the housing bust and recession and not about longer-term demographic shifts.
Very interesting.

A Few Random Comments on October Existing Home Sales

by Bill McBride on 11/23/2015 01:02:00 PM

Earlier: Existing Home Sales in October: 5.36 million SAAR

I expected some increase in inventory this year, but that hasn't happened.  Inventory is still very low and falling year-over-year (down 4.5% year-over-year in September). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

It would seem if we do see lower sales - and higher prices - that should eventually lead to more inventory.  So far the opposite has been true.

Also, if sales do slow, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  So some slowing for existing home sales (if it happens) will not be a big deal for the economy.

Also, the NAR reported distressed sales declined further year-over-year and are now at the lowest level since the NAR started tracking distressed sales in 2008:

Distressed sales – foreclosures and short sales – declined to 6 percent in October, which is the lowest since NAR began tracking in October 2008; they were 9 percent a year ago. Five percent of October sales were foreclosures and 1 percent were short sales.
The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in October (red column) were the highest for October since 2006 (NSA).

Existing Home Sales in October: 5.36 million SAAR

by Bill McBride on 11/23/2015 10:11:00 AM

From the NAR: Existing-Home Sales Dial Back in October

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4 percent to a seasonally adjusted annual rate of 5.36 million in October from 5.55 million in September. Despite last month's decline, sales are still 3.9 percent above a year ago (5.16 million). ...

Total housing inventory at the end of October decreased 2.3 percent to 2.14 million existing homes available for sale, and is now 4.5 percent lower than a year ago (2.24 million). Unsold inventory is at a 4.8-month supply at the current sales pace, up from 4.7 months in September.
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in October (5.36 million SAAR) were 3.4% lower than last month, and were 3.9% above the October 2014 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory decreased to 2.14 million in October from 2.19 million in September.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory decreased 4.5% year-over-year in October compared to October 2014.  

Months of supply was at 4.8 months in October.

This was below expectations of sales of 5.41 million. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

Chicago Fed: "Index shows economic growth improved in October"

by Bill McBride on 11/23/2015 08:46:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth improved in October

Led by improvements in employment- and production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to –0.04 in October from –0.29 in September. Two of the four broad categories of indicators that make up the index increased from September, but only one category made a positive contribution to the index in October.

The index’s three-month moving average, CFNAI-MA3, decreased to –0.20 in October from –0.03 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
emphasis added
This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed National Activity Index Click on graph for larger image.

This suggests economic activity was a little below the historical trend in October (using the three-month average).

According to the Chicago Fed:
What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

Sunday, November 22, 2015

Monday: Existing Home Sales

by Bill McBride on 11/22/2015 07:45:00 PM

An excerpt from a Tim Duy piece at Fed Watch: Mission Accomplished

Bottom Line: The Fed is set to declare “Mission Accomplished” at the next FOMC meeting. Indeed, many policymakers have already said as much. Absent a very significant change in the outlook, failure to hike rates in December would renew the barrage of criticism regarding their communications strategy that prompted them to highlight the December meeting in their last statement. Once they have communicated their intentions for subsequent rate hikes, they will turn their attention to the issue of normalizing the balance sheet. Even though officials have not committed to a specific path, I am working with a baseline of 100bp of tightening between now and next December, or roughly 25bp every other meeting. I expect that by the second quarter of next year they will begin communicating the fate of the balance sheet. Whether they should hike or not remains a separate issue. Over the next twelve months we will learn the extent of which the Federal Reserve can resist the global downward pull of interest rates. Other central banks have been less-than-successful in their efforts to pull off of the zero bound – not exactly a hopeful precedent.
Monday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for October. This is a composite index of other data.

• At 10:00 AM, Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for 5.41 million SAAR, down from 5.55 million in September. Economist Tom Lawler estimates the NAR will report sales of 5.33 million SAAR.

Weekend:
Schedule for Week of November 22, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up 5 and DOW futures are up 40 (fair value).

Oil prices were up over the last week with WTI futures at $41.59 per barrel and Brent at $44.50 per barrel.  A year ago, WTI was at $75, and Brent was at $77 - so prices are down about 40% year-over-year (It was a year ago that prices were falling sharply).

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.08 per gallon (down about $0.75 per gallon from a year ago).

Analysts: Q3 GDP to be Revised Up

by Bill McBride on 11/22/2015 11:55:00 AM

Note: The second estimate of Q3 GDP will be released on Tuesday. The consensus is that real GDP increased 2.1% annualized in Q3, revised up from the advance estimate of 1.5%. Note that domestic demand was solid in Q3, and that the weakness was mostly due to changes in inventory.

Merrill Lynch on GDP revision:

In the second release of 3Q GDP, we expect growth to be revised up to 2.1% qoq saar from the preliminary estimate of 1.5%. Inventories will be the primary driver, as stronger-than-anticipated September data revealed less inventory drawdown than initially assumed. Instead of a 1.4pp drag on 3Q growth, inventories will likely have a negative contribution closer to 0.8pp. Elsewhere, consumer spending and residential investment will likely be revised up, while structures investment should head lower. Advance trade data released at the same time as GDP may contain revisions to 3Q, so there is some uncertainty in our forecast.

We expect the GDP price index to be unrevised at 1.2% qoq, with the core PCE price index similarly unrevised at 1.3%.
And from Nomura:
We expect Q3 GDP to be revised up by 0.9pp in its second estimate to 2.4% from 1.5%. We expect the upward revision to be primarily due to stronger-than-assumed inventory investment. Domestic demand in the aggregate should remain roughly unchanged, as upward revisions to government spending and residential fixed investment were likely countered by weaker-than-expected business investment. We expect final sales growth to remain at 3.0% and forecast that inventory investment will subtract 0.6pp from growth compared with the assumed 1.4pp previously.

Saturday, November 21, 2015

Schedule for Week of November 22nd

by Bill McBride on 11/21/2015 08:11:00 AM

This will be a short, but busy holiday week.

The key reports this week are the second estimate of Q3 GDP, October New Home sales, October Existing Home Sales, October personal income and outlays, and September Case-Shiller house prices.

----- Monday, November 23rd -----

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

Existing Home Sales10:00 AM: Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for 5.41 million SAAR, down from 5.55 million in September.

Economist Tom Lawler estimates the NAR will report sales of 5.33 million SAAR.

A key will be the reported year-over-year change in inventory of homes for sale.

----- Tuesday, November 24th -----

8:30 AM ET: Gross Domestic Product, 3rd quarter 2015 (Second estimate). The consensus is that real GDP increased 2.1% annualized in Q3, revised up from the advance estimate of 1.5%.

Case-Shiller House Prices Indices9:00 AM: S&P/Case-Shiller House Price Index for September. Although this is the September report, it is really a 3 month average of July, August and September prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the August 2015 report (the Composite 20 was started in January 2000).

The consensus is for a 5.3% year-over-year increase in the Comp 20 index for September. The Zillow forecast is for the National Index to increase 4.7% year-over-year in September.

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

----- Wednesday, November 25th -----

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

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, down from 271 thousand the previous week.

8:30 AM: Durable Goods Orders for October from the Census Bureau. The consensus is for a 1.5% decrease in durable goods orders.

8:30 AM ET: Personal Income and Outlays for October. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:00 AM: FHFA House Price Index for September 2015. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.4% month-to-month increase for this index.

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

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

The consensus is for a increase in sales to 499 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 468 thousand in September.

10:00 AM: University of Michigan's Consumer sentiment index (final for November). The consensus is for a reading of 93.1, unchanged from the preliminary reading.

----- Thursday, November 26th -----

All US markets will be closed in observance of the Thanksgiving Day Holiday.

----- Friday, November 27th -----

The NYSE and the NASDAQ will close at 1:00 PM ET.

Friday, November 20, 2015

Goldman Sachs: Expect FOMC to Raise Fed Funds Rate 100bp in 2016

by Bill McBride on 11/20/2015 08:37:00 PM

A few excerpts from a research piece by Goldman Sachs economists Zach Pandl and Jan Hatzius:

The US economy in 2016 is likely to be driven once again by domestic demand—particularly consumer spending. We forecast that GDP will increase by 2.25% Q4/Q4 next year, in line with our latest estimates for 2015. ... Both narrow and broad measures of unemployment have fallen significantly ...

The Federal Reserve looks likely to begin raising short-term interest rates next month, seven years after cutting them to zero. ... Based on our economic forecasts, we currently expect the committee to raise the funds rate by 100bp next year, or one hike per quarter—a fair amount above the 55-60bp pace priced into the bond market. Admittedly, we see the risks to this forecasts as skewed to the downside at the moment. The pace of rate hikes will depend on progress toward the FOMC’s employment and inflation goals, as well as evolving views on the level of equilibrium interest rates.

NY Fed: Household Debt increased $212 billion Q3 2015

by Bill McBride on 11/20/2015 02:03:00 PM

The Q3 report was released yesterday: Household Debt and Credit Report.

From the NY Fed: Just Released: New and Improved Charts and Data on Auto Loans

Today, the New York Fed announced that household debt increased by a robust $212 billion in the third quarter of 2015. Both mortgage and auto loan originations increased, as auto originations reached a ten-year high and new mortgage lending appears to have finally recovered from the very low levels seen in the past year. This quarter, we’re introducing an improved estimate of auto loan originations, some new charts, and some fresh data on the auto loan market. The Quarterly Report on Household Debt and Credit and this analysis use our Consumer Credit Panel data, which is itself based on Equifax credit data.
...
The continued growth in auto lending, subprime lending in particular, is a topic that we’ve monitored closely over the past few years, and we’re just now seeing some increase in delinquency rates on loans made by auto finance companies. Because there are a large number of subprime borrowers in this sector, these borrowers may be more sensitive to developments in the labor market, and the increases in the outstanding balances of these borrowers may pose some risks. That said, any comparison with the subprime mortgage market of the 2000s that led to the crisis should note that the volume of subprime mortgages outstanding in 2007 was nearly four times the volume of subprime auto loans outstanding today ($250 billion).
emphasis added
Total Household Debt Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q3.  Household debt peaked in 2008, and bottomed in Q2 2013.

Even mortgage debt is increasing now, from the NY Fed:
Mortgage balances, the largest component of household debt, increased in the third quarter. Mortgage balances shown on consumer credit reports stood at $8.26 trillion, a $144 billion increase from the second quarter of 2015.
Delinquency Status The second graph shows the percent of debt in delinquency. The percent of delinquent debt is declining, although there is still a large percent of debt 90+ days delinquent (Yellow, orange and red). 

The overall delinquency rate decreased slightly in Q3 to 5.6%.  From the NY Fed:
Overall delinquency rates improved modestly in 2015Q3. As of September 30, 5.6% of outstanding debt was in some stage of delinquency. Of the $672 billion of debt that is delinquent, $455 billion is seriously delinquent (at least 90 days late or “severely derogatory”).
There are a number of credit graphs at the NY Fed site.

Kansas City Fed: Regional Manufacturing Activity expanded slightly in October, First Time since February

by Bill McBride on 11/20/2015 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity was Largely Flat

The Federal Reserve Bank of Kansas City released the November Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity was largely flat, although expectations for future activity improved considerably.

We saw our composite index move just slightly into positive territory for the first time since February, as some segments of durable manufacturing improved even as activity in our energy states remained sluggish,” said Wilkerson.
...
Tenth District manufacturing activity was largely flat in November, although expectations for future activity improved considerably from the previous few months. Most price indexes edged back down after rising slightly last month.

The month-over-month composite index was 1 in November, up from -1 in October and -8 in September
...
Most future factory indexes continued to rise after falling markedly a few months ago. The future composite index jumped from -1 to 8, and the future production, shipments, and new orders indexes also increased. The future employment index rose from 6 to 13, its highest level in nine months.
emphasis added
The declines for most of this year in manufacturing activity, in the Kansas City region, was probably mostly due to lower oil prices and weaker exports due to the strong dollar.  

BLS on State Unemployment Rates: No State at or above 7%, First Time since early 2007

by Bill McBride on 11/20/2015 10:12:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were little changed in October. Thirty-two states and the District of Columbia had unemployment rate decreases from September, 3 states had increases, and 15 states had no change, the U.S. Bureau of Labor Statistics reported today.
...
North Dakota had the lowest jobless rate in October, 2.8 percent, followed by Nebraska, 2.9 percent. West Virginia had the highest rate, 6.9 percent.
State Unemployment Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976.

The states are ranked by the highest current unemployment rate. West Virginia, at 6.9%, had the highest state unemployment rate.

State UnemploymentThe second 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 no state has an unemployment rate at or above 7% (light blue); Only eight states are at or above 6% (dark blue).

Thursday, November 19, 2015

Merrill Lynch on economic impact of El Niño: Q1 "Risk" to Upside

by Bill McBride on 11/19/2015 07:15:00 PM

Friday:
• At 10:00 AM ET, Regional and State Employment and Unemployment for October.

• At 11:00 AM, the Kansas City Fed manufacturing survey for November.

Merrill Lynch economists expect El Niño to boost economic activity a little in Q1. Here are a few excerpts from a research article by Michelle Meyer and Lisa Berlin of Merrill Lynch: Summer in Winter

While we are not complaining, it does not feel like we are in the middle of November, given the warm weather. ... According to the experts, this is partly a function of El Niño, which is a prolonged warming in Pacific Ocean surface temperatures. While we are not going to attempt to forecast the weather in the coming months (forecasting the economy is hard enough), it seems that there is a considerable risk of a warm winter. This would be a stark contrast to the last two years, with unusually harsh winter weather.

If we do enjoy a warm winter, the risk is that the 1Q economic data could surprise to the upside, particularly if expectations are for a slump akin to the last two years. We make the following arguments in this piece: 1) looking back at prior episodes of El Niño, GDP growth generally accelerated in 1Q. although the evidence is weak; 2) the seasonal adjustment process will be most sensitive to the most recent years, which suggests the seasonal factors will be looking for weakness, therefore, threatening to inflate the data; and 3) the BEA took steps to address the “residual seasonality” issue that has biased 1Q GDP lower over the prior few years, which may mitigate the negative effect.
...
[W]e think that if the winter ends up being warm, the risk is that the economic data look quite strong. This might just prompt the Fed to justify a second hike earlier than markets are expecting.

DOT: Vehicle Miles Driven increased 2.3% year-over-year in August, Rolling 12 Months at All Time High

by Bill McBride on 11/19/2015 04:13:00 PM

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by 2.3% (6.3 billion vehicle miles) for August 2015 as compared with August 2014.

Travel for the month is estimated to be 277.3 billion vehicle miles.

◦The seasonally adjusted vehicle miles traveled for August 2015 is 263.3 billion miles, a 3.6% (9.1 billion vehicle miles) increase over August 2014. It also represents a -0.4% change (-1.2 billion vehicle miles) compared with July 2015.
The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors.

The rolling 12 month total is moving up - mostly due to lower gasoline prices - after moving sideways for several years.


Vehicle Miles Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Miles driven (rolling 12) had been below the previous peak for 85 months - an all time record - before reaching a new high for miles driven in January.

The second graph shows the year-over-year change from the same month in the previous year.

Vehicle Miles Driven YoY In August 2015, gasoline averaged of $2.73 per gallon according to the EIA.  That was down significantly from August 2014 when prices averaged $3.57 per gallon.

Gasoline prices aren't the only factor - demographics is also key. However, with lower gasoline prices, miles driven - on a rolling 12 month basis - is setting new highs each month.