Thursday, June 30, 2016

Friday: Auto Sales, ISM Mfg, Construction Spending

by Bill McBride on 6/30/2016 10:12:00 PM

From Paul Krugman: The Macroeconomics of Brexit: Motivated Reasoning?. From the intro:

I believe that Brexit is a tragic development, which will do substantial long-run economic harm. But what we’re hearing overwhelmingly from economists is the claim that it will also have severe short-run adverse impacts. And that claim seems dubious.
Friday:
• At 10:00 AM ET, ISM Manufacturing Index for June. The consensus is for the ISM to be at 51.5, up from 51.3 in May. The ISM manufacturing index indicated expansion at 51.3% in May. The employment index was at 49.2%, and the new orders index was at 55.7%.

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

• All day, Light vehicle sales for June. The consensus is for light vehicle sales to decrease to 17.3 million SAAR in June from 17.4 million in May (Seasonally Adjusted Annual Rate).

Restaurant Performance Index declined in May

by Bill McBride on 6/30/2016 03:50:00 PM

Here is a minor indicator I follow from the National Restaurant Association: RPI drops in May

Due in large part to softer same-store sales and customer traffic results, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in May. The RPI stood at 100.6 in May, down 0.9 percent from a level of 101.6 in April.

"The RPI continued along a choppy trend line in May, with the index bouncing between moderate gains and losses in recent months," said Hudson Riehle, senior vice president of research for the National Restaurant Association.

"Much of the May dip came from declines in the same-store sales and customer traffic indicators, which softened from their stronger April performance. In addition, operators’ expectations for future business conditions are at the lowest level in three and a half years," he said.
emphasis added
Restaurant Performance Index Click on graph for larger image.

The index decreased to 100.6 in May, down from 101.6 in April. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month.

CoStar: Commercial Real Estate prices increased in May

by Bill McBride on 6/30/2016 12:21:00 PM

Here is a price index for commercial real estate that I follow. 

From CoStar: Composite Price Indices Resume Solid Growth Boosted By Strong Net Absorption

PRICE INDICES RESUMED SOLID GROWTH IN MAY. Both of CCRSI’s two major composite price indices advanced by more than 1% in the month of May 2016, erasing earlier-year declines. After the two major indices backtracked in the first quarter of 2016 amid global economic uncertainty and a seasonal slowdown in investment activity, price growth within the commercial real estate sector during May 2016 returned to the average monthly pace set in the previous several years. The equal-weighted U.S. Composite Index rose 1.1% and the value-weighted U.S. Composite Index advanced 1.2% in May 2016, placing the value-weighted index at its highest level this cycle.

HEALTHY CRE SPACE ABSORPTION CONTRIBUTED TO STRONG PRICE GAINS. Demonstrating the overall demand for CRE space, net absorption across the three major property types—office, retail and industrial—is projected to total 688.5 million square feet for the 12-month period ending in June 2016, a 9.5% increase from the same period ending in June 2015. ...
emphasis added
Commercial Real Estate Prices Click on graph for larger image.

This graph from CoStar shows the the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index indexes.

The value-weighted index increased 1.2% in May and is up 2.2% year-over-year.

The equal-weighted index increased 1.1% in May and is up 6.7% year-over-year.

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

Chicago PMI increased in June

by Bill McBride on 6/30/2016 09:53:00 AM

Chicago PMI: June Chicago Business Barometer Up 7.5 Points to 56.8

The MNI Chicago Business Barometer rose 7.5 points to 56.8 in June from 49.3 in May, the highest since January 2015, led by strong gains in New Orders and Production.

June’s rebound was just enough to offset the previous two months of weakness, leaving the Barometer broadly unchanged over the quarter at an average of 52.2 in Q2 compared with 52.3 in Q1. New Orders increased sharply on the month to the highest since October 2014 ...
...
Chief Economist of MNI Indicators Philip Uglow said, “June’s sharp increase in the MNI Chicago Business Barometer needs to be viewed in the context of the weakness seen in April and May. Looking at the three-month average provides a better guide this month to the underlying trend in the economy with activity broadly unchanged between Q1 and Q2. Still, on a trend basis activity over the past four months is running above the very low levels seen around the turn of the year.”
emphasis added
This was above the consensus forecast of 50.5.

Weekly Initial Unemployment Claims increase to 268,000

by Bill McBride on 6/30/2016 08:34:00 AM

The DOL reported:

In the week ending June 25, the advance figure for seasonally adjusted initial claims was 268,000, an increase of 10,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 259,000 to 258,000. The 4-week moving average was 266,750, unchanged from the previous week's revised average. The previous week's average was revised down by 250 from 267,000 to 266,750.

There were no special factors impacting this week's initial claims. This marks 69 consecutive weeks of initial claims below 300,000, the longest streak since 1973.
The previous week was revised down by 1,000.

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 266,750.

This was close to the consensus forecast. The low level of claims suggests relatively few layoffs.

Wednesday, June 29, 2016

Zillow Forecast: Expect About the Same Growth in May for the Case-Shiller Indexes

by Bill McBride on 6/29/2016 04:35:00 PM

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

From Zillow: May Case-Shiller Forecast: April's Modest Monthly Slowdown Should Continue

April Case-Shiller data showed seasonally adjusted monthly home price growth that was slightly weaker than expected, and annual growth at a pace in line with recent months. Looking ahead, Zillow’s May Case-Shiller forecast calls for more of the same, with seasonally adjusted monthly growth in the 10- and 20-city indices falling slightly from April while annual growth stays largely flat.

The May Case-Shiller National Index is expected to grow 5 percent year-over-year and 0.1 percent month-to-month, both unchanged from April. We expect the 10-City Index to grow 4.7 percent year-over-year and 0.1 percent from April. The 20-City Index is expected to grow 5.3 percent between May 2015 and May 2016 and 0.1 percent from April.

Zillow’s May Case-Shiller forecast is shown in the table below. These forecasts are based on today’s April Case-Shiller data release and the May 2016 Zillow Home Value Index (ZHVI). The May Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, July 26.
The year-over-year change for the 20-city index will probably be slightly lower in the May report than in the April report.  The change for the National index will probably be about the same.

Zillow forecast for Case-Shiller

Freddie Mac: Mortgage Serious Delinquency rates declined in May

by Bill McBride on 6/29/2016 01:01:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate decreased in May to 1.11% from 1.15% in April.  Freddie's rate is down from 1.58% in May 2015.

This is the lowest rate since August 2008.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

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

Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. 

The Freddie Mac serious delinquency rate has fallen 0.47 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will be below 1% in a few months.

Note: Fannie Mae reported yesterday.

NAR: Pending Home Sales Index decreased 3.7% in May, down 0.2% year-over-year

by Bill McBride on 6/29/2016 10:02:00 AM

From the NAR: Pending Home Sales Skid in May

After steadily increasing for three straight months, pending home sales letup in May and declined year-over-year for the first time in almost two years, according to the National Association of Realtors®. All four major regions experienced a cutback in contract activity last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, slid 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April and is now slightly lower (0.2 percent) than May 2015 (111.0). With last month’s decline, the index reading is still the third highest in the past year, but declined year-over-year for the first time since August 2014.
...
The PHSI in the Northeast dropped 5.3 percent to 93.0 in May, and is now unchanged from a year ago. In the Midwest the index slipped 4.2 percent to 108.0 in May, and is now 1.8 percent below May 2015.

Pending home sales in the South declined 3.1 percent to an index of 126.6 in May but are still 0.6 percent higher than last May. The index in the West decreased 3.4 percent in May to 102.6, and is now 0.1 percent below a year ago..
emphasis added
This was below expectations of a 1.0% decrease for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in June and July.

Personal Income increased 0.2% in May, Spending increased 0.4%

by Bill McBride on 6/29/2016 08:37:00 AM

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

Personal income increased $37.1 billion, or 0.2 percent ... according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $53.5 billion, or 0.4 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in May, compared with an increase of 0.8 percent in April. ... The price index for PCE increased 0.2 percent in May, compared with an increase of 0.3 percent in April. The PCE price index, excluding food and energy, increased 0.2 percent, the same increase as in April.

The May PCE price index increased 0.9 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.6 percent from May a year ago.
The following graph shows real Personal Consumption Expenditures (PCE) through February 2016 (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 slightly less than expected.  And the increase in PCE was at the 0.4% increase consensus.

On inflation: The PCE price index increased 0.9 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.6 percent year-over-year in May.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 4.1% annual rate in Q2 2016 (using the mid-month method, PCE was increasing 4.1%). This suggests solid PCE growth in Q2.

MBA: "Mortgage Applications Decrease in Latest Weekly Survey"

by Bill McBride on 6/29/2016 07:01:00 AM

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

Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 24, 2016.
...
The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 13 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) to its lowest level since May 2013, 3.75 percent, from 3.76 percent, with points increasing to 0.36 from 0.33 (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 since 1990.

Refinance activity has increased a little this year since rates have declined.

30-year fixed rates would probably have to fall below 3.35% (the previous low - getting close) before there is a large increase in refinance activity.

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

The purchase index is "13 percent higher than the same week one year ago".

Tuesday, June 28, 2016

Wednesday: Personal Income and Outlays, Pending Home Sales

by Bill McBride on 6/28/2016 08:21:00 PM

NOTE: Fed Chair Yellen was scheduled to participate in a "Policy Panel" at the ECB Forum on Central Banking in Portugal on Wednesday. She has cancelled.  Mark Carney, Governor of the Bank of England and Chairman of the G20's Financial Stability Board, has also cancelled.

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

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

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

From Matthew Graham at Mortgage News Daily: Mortgage Rates Lower Despite Bond Market Weakness

Mortgage rates fell modestly today despite some weakness in underlying bond markets. Typically, when bond yields (which move inversely with bond prices) are rising, mortgage rates tend to be higher as well. That wasn't the case today for a few reasons. The most obvious reason is that bond markets didn't move that much. [30 year fixed mortgage rates are between 3 3/8% and 3 1/2% on best scenarios]
emphasis added
Here is a table from Mortgage News Daily:


Fannie Mae: Mortgage Serious Delinquency rate declined in May

by Bill McBride on 6/28/2016 04:23:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in May to 1.38%, down from 1.40% in April. The serious delinquency rate is down from 1.70% in May 2015.

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

This is the lowest rate since June 2008.

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

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. 

The Fannie Mae serious delinquency rate has fallen 0.32 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of 2017.

.

Earlier from Richmond Fed: Manufacturing Activity Declined in June

by Bill McBride on 6/28/2016 02:51:00 PM

Earlier from the Richmond Fed: Manufacturing Sector Activity Declined; New Orders Decreased, Firms Continued to Increase Wages

Fifth District manufacturing activity weakened in June, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and shipments declined this month, while backlogs decreased further compared to last month. Manufacturing employment softened, while firms continued to increase wages.
...
Overall, manufacturing conditions weakened in June. The composite index for manufacturing dropped to a reading of −7. ...

Manufacturing hiring softened in June. The index leveled off to a reading of −1, compared to last month's reading of 4. The average workweek index dropped 10 points this month to end −4. Average wage growth remained on pace with last month; that index slipped only one point to end at a reading of 14.
emphasis added
This was the last of the regional Fed surveys for June.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

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

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

It seems likely the ISM manufacturing index will show expansion in June. The consensus is for the ISM to be at 51.5, up from 51.3 in May.

Real Prices and Price-to-Rent Ratio in April

by Bill McBride on 6/28/2016 11:58:00 AM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 5.0% year-over-year in April

The year-over-year increase in prices is mostly moving sideways now around 5%. In April, the index was up 5.0% YoY.

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 3.0% below the bubble peak.   However, in real terms, the National index is still about 17.1% 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 April) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to November 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 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 January 2004 levels, the Composite 20 index is back to November 2003, and the CoreLogic index back to November 2003.

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

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 August 2003 levels, the Composite 20 index is back to June 2003 levels, and the CoreLogic index is back to April 2003.

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

Case-Shiller: National House Price Index increased 5.0% year-over-year in April

by Bill McBride on 6/28/2016 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for April ("April" is a 3 month average of February, March and April 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: Home Prices Continue Gains in April 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, reported a 5.0% annual gain in April, down from 5.1% the previous month. The 10-City Composite posted a 4.7% annual increase, down from 4.8% in March. The 20-City Composite reported a yearover-year gain of 5.4%, down from 5.5% from the prior month.
...
Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% in April. The 10-City Composite recorded a 1.0% month-over-month increase, while the 20-City Composite posted a 1.1% increase in April. After seasonal adjustment, the National Index recorded a 0.1% month-overmonth increase, the 10-City Composite posted a 0.3% increase, and the 20-City Composite reported a 0.5% month-over-month increase. After seasonal adjustment, 15 cities saw prices rise, two cities were unchanged, and three cities experienced negative monthly prices changes.
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 10.6% from the peak, and up 0.3% in April (SA).

The Composite 20 index is off 9.0% from the peak, and up 0.5% (SA) in April.

The National index is off 3.0% from the peak, and up 0.1% (SA) in April.  The National index is up 31.0% 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 4.7% compared to April 2015.

The Composite 20 SA is up 5.4% year-over-year..

The National index SA is up 5.0% year-over-year.

Note: According to the data, prices increased in 16 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

Q1 GDP Revised Up to 1.1% Annual Rate

by Bill McBride on 6/28/2016 08:35:00 AM

From the BEA: Gross Domestic Product: First Quarter 2016 (Third 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 1.1 percent in the first quarter of 2016, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2015, real GDP increased 1.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 0.8 percent. With the third estimate for the first quarter, the general picture of economic growth remains the same; exports increased more than previously estimated ...
emphasis added
Here is a Comparison of Third and Second Estimates. PCE growth was revised down from 1.9% to 1.5%. Residential investment was revised down from 17.1% to 15.6%.  This was close to the consensus forecast.

Monday, June 27, 2016

Tuesday: GDP, Case-Shiller House Prices

by Bill McBride on 6/27/2016 05:42:00 PM

NOTE: Fed Chair Yellen was scheduled to participate in a "Policy Panel" at the ECB Forum on Central Banking in Portugal on Wednesday. She has cancelled.  Mark Carney, Governor of the Bank of England and Chairman of the G20's Financial Stability Board, has also cancelled.

Tuesday:
• At 8:30 AM ET, Gross Domestic Product, 1st quarter 2016 (Third estimate). The consensus is that real GDP increased 1.0% annualized in Q1, revised up from a 0.8% increase.

• At 9:00 AM, S&P/Case-Shiller House Price Index for April. Although this is the April report, it is really a 3 month average of February, March and April prices. The consensus is for a 5.5% year-over-year increase in the Comp 20 index for April. The Zillow forecast is for the National Index to increase 5.1% year-over-year in April.

• At 10:00 AM, Richmond Fed Survey of Manufacturing Activity for June. This is the last of the regional Fed surveys for June.

From Tim Duy: Fed Once Again Overtaken By Events

With global financial markets reeling in the wake of Brexit - Britain's unforced error as a political gamble went too far - the Fed is back on the sidelines. A July hike was already out of the question before Brexit, while September was never more than tenuous, depending on the data falling in place just right. Now September has moved from tenuous to "what are you thinking?" ...
...
Bottom Line. The Fed will stand down for the moment; where they go down the road depends upon the depth and length of current disruption. I think at this point it goes without saying that if you hear a Fed speaker talking about July being on the table or confidently warning about two or three rate hikes this year, you should ignore them. Perhaps we can have that conversation later with regards to the December meeting, but certainly not now. ...

ATA Trucking Index increased in May

by Bill McBride on 6/27/2016 03:35:00 PM

From the ATA: ATA Truck Tonnage Index Increased 2.7% in May

American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 2.7% in May, following a revised 1.7% drop during April. In May, the index equaled 139 (2000=100), up from 135.3 in April. The all-time high was 144 in February.

Compared with May 2015, the SA index jumped 5.7%, which was up from April’s 2.4% year-over-year gain.
...
“Following two consecutive decreases totaling 6 percent, May was a nice increase in truck tonnage,” said ATA Chief Economist Bob Costello. “Better consumer spending in April and May certainly helped, but economic growth remains mixed and I’d expect the recent choppy pattern in tonnage to continue for the next quarter or two.

“We recently received good news on the inventory cycle, with the total business inventory-to-sales ratio declining for the first time in nearly a year. While one month doesn’t make a trend, this was good news for the trucking industry,” he said.
emphasis added
ATA Trucking Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is now up 5.7% year-over-year.

U.S. Demographics: Ten most common ages in 2010, 2015, 2020, and 2030

by Bill McBride on 6/27/2016 01:34:00 PM

The Census Bureau has released the population estimates for 2015.

Using that data, on Sunday I posted a table ranking the largest 5-year cohorts in 2010, 2015, 2020, and 2030: Largest 5-year Population Cohorts are now "20 to 24" and "25 to 29"

Using the same data, Jed Kolko tweeted the ten most common ages in the U.S. (seven of ten are in the twenties).

Here is a table showing the ten most common ages in 2010, 2015, 2020, and 2030 (projections are from the Census Bureau).

Note the younger baby boom generation dominated in 2010.  By 2015 the millennials are taking over.  And by 2020, the boomers are off the list.

My view is this is positive for both housing and the economy, especially in the 2020s.

Population: Most Common Ages by Year
  2010201520202030
150252939
249263040
320242838
419232737
547273136
646562635
748553241
851222530
918523534
1052283433

Dallas Fed: Regional Manufacturing Activity declined again in June

by Bill McBride on 6/27/2016 10:36:00 AM

From the Dallas Fed: Texas Manufacturing Activity Declines Again

Texas factory activity declined again in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, posted a second consecutive negative reading but rose from -13.1 to -7.0, suggesting the pace of contraction eased somewhat from May.

Other measures of current manufacturing activity also reflected continued declines this month. The new orders index held steady at -14.2, while the growth rate of orders index fell four points to -18.6. The capacity utilization and shipments indexes remained negative for a second month but edged up, coming in at -9.3 and -8.6, respectively.

Perceptions of broader business conditions stayed pessimistic in June. The general business activity index has been negative since January 2015 and came in at -18.3 this month, up slightly from its May reading.

Labor market measures indicated a sixth month of contraction in a row in June. The employment index fell to -11.5, its lowest reading since November 2009. The decline in the index was largely due to a falloff in the share of firms adding to headcounts....
emphasis added
Still grim in the Dallas region.  The impact of lower oil prices is still impacting manufacturing.

Black Knight: House Price Index up 1.0% in April, Up 5.4% year-over-year

by Bill McBride on 6/27/2016 08:01:00 AM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight Home Price Index Report: April Transactions -- U.S. Home Prices Up 1.0 Percent for the Month; Up 5.4 Percent Year-Over-Year

• U.S. home prices were up 1.0 percent for the month, and have gained 5.4 percent from one year ago

• At $260K, the U.S. HPI is up over 30 percent from the market’s bottom and is now just 2.9 percent off its June 2006 peak

• 14 of the nation's 40 largest metropolitan areas hit new peaks in April:
◦Austin, TX ($299K)
◦Boston, MA ($419K)
◦Charlotte, NC ($207K)
◦Dallas, TX ($230K)
◦Denver, CO ($351K)
◦Houston, TX ($225K)
◦Kansas City, MO ($180K)
◦Nashville, TN ($231K)
◦Pittsburgh, PA ($190K)
◦Portland, OR ($346K)
◦San Antonio, TX ($200K)
◦San Francisco, CA ($765K)
◦San Jose, CA ($921K)
◦Seattle, WA ($401K)
The year-over-year increase in the index has been about the same for the last year.

Sunday, June 26, 2016

Sunday Night Futures

by Bill McBride on 6/26/2016 06:34:00 PM

From Goldman Sachs economist Jan Hatzius and Sven Jari Stehn: After the Brexit Shock

Following the UK referendum, we have downgraded our global growth forecast, sharply in the UK and more modestly elsewhere. Increased uncertainty and deteriorating terms of trade are likely to subtract a cumulative 2¾% from UK GDP, and we now expect the economy to enter a mild recession by early 2017. We estimate the cumulative hit to Euro area GDP at ½% and have cut our growth forecast over the next two years to 1¼%. We have also slightly shaved our H2 2016 forecast for US growth to 2%
...
However, the risks to this forecast are significant and further downward adjustments could well follow.
Weekend:
Schedule for Week of June 26, 2016

Largest 5-year Population Cohorts are now "20 to 24" and "25 to 29"

June 2016: Unofficial Problem Bank list declines to 203 Institutions, Q2 2016 Transition Matrix

Monday:
• At 10:30 AM ET, the Dallas Fed Survey of Manufacturing Activity for June.

From CNBC: Pre-Market Data and Bloomberg futures: S&P are down 22 and DOW futures are down 151 (fair value).

Oil prices were down over the last week with WTI futures at $47.54 per barrel and Brent at $48.41 per barrel.  A year ago, WTI was at $59, and Brent was at $60 - so prices are down 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.31 per gallon (down about $0.45 per gallon from a year ago).

Largest 5-year Population Cohorts are now "20 to 24" and "25 to 29"

by Bill McBride on 6/26/2016 11:42:00 AM

Two years ago, I wrote: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group.

The Census Bureau has just released the population estimates for 2015, and I've updated the table from the previous post (replacing 2013 with 2015 data).

The table below shows the top 11 cohorts by size for 2010, 2015 (released this month), and Census Bureau projections for 2020 and 2030.

By the year 2020, 8 of the top 10 cohorts will be  under 40 (the Boomers will be fading away), and by 2030 the top 11 cohorts will be the youngest 11 cohorts (the reason I included 11 cohorts).

There will be plenty of "gray hairs" walking around in 2020 and 2030, but the key for the economy is the population is the prime working age will be increasing.

This is very positive for housing and the economy.  Demographics are becoming more favorable!

Population: Largest 5-Year Cohorts by Year
Largest
Cohorts
2010201520202030
145 to 49 years20 to 24 years25 to 29 years35 to 39 years
250 to 54 years25 to 29 years30 to 34 years40 to 44 years
315 to 19 years50 to 54 years35 to 39 years30 to 34 years
420 to 24 years55 to 59 yearsUnder 5 years25 to 29 years
525 to 29 years30 to 34 years55 to 59 years5 to 9 years
640 to 44 years15 to 19 years20 to 24 years10 to 14 years
710 to 14 years45 to 49 years5 to 9 yearsUnder 5 years
85 to 9 years10 to 14 years60 to 64 years15 to 19 years
9Under 5 years5 to 9 years15 to 19 years20 to 24 years
1035 to 39 years35 to 39 years10 to 14 years45 to 49 years
1130 to 34 years40 to 44 years50 to 54 years50 to 54 years

Saturday, June 25, 2016

Schedule for Week of June 26, 2016

by Bill McBride on 6/25/2016 11:29:00 AM

The key economic reports this week are the third estimate of Q1 GDP,  May personal income and outlays, June vehicle sales, the June ISM manufacturing, and Case-Shiller House prices.

----- Monday, June 27th -----

10:30 AM ET: Dallas Fed Survey of Manufacturing Activity for June.

----- Tuesday, June 28th -----

8:30 AM ET: Gross Domestic Product, 1st quarter 2016 (Third estimate). The consensus is that real GDP increased 1.0% annualized in Q1, revised up from a 0.8% increase.

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

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the March 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.5% year-over-year increase in the Comp 20 index for April. The Zillow forecast is for the National Index to increase 5.1% year-over-year in April.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for June. This is the last of the regional Fed surveys for June.

----- Wednesday, June 29th -----

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

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

9:30 AM: Discussion, Fed Chair Janet Yellen, Policy Panel, ECB Forum on Central Banking, Linho Sintra, Portugal (CANCELLED: Probably due to Brexit)

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

----- Thursday, June 30th -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 266 thousand initial claims, up from 259 thousand the previous week.

9:45 AM: Chicago Purchasing Managers Index for June. The consensus is for a reading of 50.5, up from 49.3 in May.

----- Friday, July 1st -----

ISM PMI10:00 AM: ISM Manufacturing Index for June. The consensus is for the ISM to be at 51.5, up from 51.3 in May.

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

The ISM manufacturing index indicated expansion at 51.3% in May. he employment index was at 49.2%, and the new orders index was at 55.7%.

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

Vehicle SalesAll day: Light vehicle sales for June. The consensus is for light vehicle sales to decrease to 17.3 million SAAR in June from 17.4 million in May (Seasonally Adjusted Annual Rate).

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

June 2016: Unofficial Problem Bank list declines to 203 Institutions, Q2 2016 Transition Matrix

by Bill McBride on 6/25/2016 08:09:00 AM

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

Here is the unofficial problem bank list for June 2016.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for June 2016. During the month, the list fell from 206 institutions to 203 after four removals and one addition. Assets dropped by only $177 million to an aggregate $60.6 billion. Since the list has been in a net monthly decline starting in July 2012, this is the smallest monthly decline in the list count. A year ago, the list held 309 institutions with assets of $89.8 billion.

This month, actions have been terminated against Georgia Primary Bank, Atlanta, GA ($155 million); South County Bank, National Association, Rancho Santa Margarita, CA ($137 million); First State Bank of Warner, Warner, SD ($64 million); and Independence Bank, East Greenwich, RI ($39 million).

The addition this month was Grand Rivers Community Bank, Grand Chain, IL ($76 million). Also, we returned Gateway Bank, FSB, Oakland, CA, back to the list after it inadvertently was removed as the bank only divested a branch instead of being an entire sale.
Unofficial Problem Banks
With it being the end of the second quarter, we bring an updated transition matrix to detail how banks are moving off the Unofficial Problem Bank List. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,710 institutions have appeared on a weekly or monthly list at some point. There have been 1,507 institutions that have transitioned through the list. Departure methods include 854 action terminations, 398 failures, 240 mergers, and 15 voluntary liquidations. The second quarter of 2015 started with 222 institutions on the list, so the 17 action terminations during the quarter reduced the list by 7.7 percent, which is the lowest quarterly termination rate since the 6.9 percent in the fourth quarter of 2014. Of the 389 institutions on the first published list, 23 or 5.9 percent still remain more than six years later. The 398 failures represent 23.3 percent of the 1,710 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

At the start of the month, the FDIC provided updated figures on the Official Problem Bank List with the change during the quarter being a bit perplexing. The FDIC said the official list stood at 165 institutions with assets of $30.9 billion, down from 183 institutions with assets $46.8 billion at year-end. Thus, during the first quarter, the official list declined by 18 institutions and $15.9 billion in assets, which results in the 18 removals having an average asset size of $883 million. The average asset size of institutions on the official list at the start of the first quarter was only $256 million ($46.8 billion/183 institutions). In comparison, the average asset size of institutions currently on the unofficial list is higher at $299 million ($60.6 billion/203 institutions), which includes the $13.7 billion Flagstar Bank and six other institutions that range between $1-2.3 billion. Removing Flagstar Bank from the unofficial list reduces the list's average institution asset size to $232 million and aggregate assets drop to $46.9, much closer to the official figures at the end of the first quarter. In the preceding three quarters, the FDIC reported quarterly asset declines for the official list of $3.8 billion in the second quarter of 2015, $5.4 billion in the third quarter of 2015, and $4.3 billion in the fourth quarter of 2015. So it is unclear how the FDIC was able to ramp-up the asset removal rate to $15.9 billion during the first quarter absent the removal of Flagstar Bank, which is an SEC registrant that would be required to file an 8-K notice if its enforcement action had been terminated. While the FDIC closely guards the institutions on the official list, some banking industry participants believe the FDIC will manipulate the official list to mask the identity of large banks entering/exiting the list.
Unofficial Problem Bank List
Change Summary
  Number of InstitutionsAssets ($Thousands)
Start (8/7/2009)  389276,313,429
 
Subtractions     
  Action Terminated166(63,507,432)
  Unassisted Merger39(9,713,878)
  Voluntary Liquidation4(10,584,114)
  Failures157(184,803,449)
  Asset Change(1,602,381)
 
Still on List at 6/30/2016  236,102,381
 
Additions after
8/7/2009
  18054,508,542
 
End (6/30//2016)  20360,610,923
 
Intraperiod Deletions1     
  Action Terminated688279,432,438
  Unassisted Merger20179,734,581
  Voluntary Liquidation112,389,500
  Failures241119,769,682
  Total1,141481,326,201
1Institution not on 8/7/2009 or 6/30/2016 list but appeared on a weekly list.

Friday, June 24, 2016

Mortgage Rates Near Record Lows

by Bill McBride on 6/24/2016 04:52:00 PM

From Matthew Graham at Mortgage News Daily: Single Best Day For Mortgage Rates in More Than a Year

From yesterday's most prevalent conventional 30yr fixed quote of 3.625%, we're now easily down to 3.5% for most lenders. A few of the most aggressive lenders are already down to 3.375% on top tier scenarios. Back in 2012, 3.375% was the lowest rate that was maintained for more than a few days, although there were a few windows of opportunity for 3.25% and 3.125%. Considering some of the higher costs associated with today's mortgages (government guarantee fees and servicing costs), we're effectively back in line with all-time lows.
emphasis added
Here is a table from Mortgage News Daily:


Philly Fed: State Coincident Indexes increased in 38 states in May

by Bill McBride on 6/24/2016 03:27:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for May 2016. In the past month, the indexes increased in 38 states, decreased in eight, and remained stable in four, for a one-month diffusion index of 60. 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 May, 40 states had increasing activity including minor increases.

Five states have seen declines over the last 6 months, in order they are Wyoming (worst), North Dakota, Louisiana, Alaska and Oklahoma - mostly due to the decline in oil prices.

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.

Vehicle Sales Forecasts: Sales to be Over 17 Million SAAR again in June

by Bill McBride on 6/24/2016 12:15:00 PM

The automakers will report June vehicle sales on Friday, July 1st.

Note:  There were 26 selling days in June, up from 25 in June 2015.

From WardsAuto: Forecast: June Sales to Reach 11-Year High

A WardsAuto forecast calls for U.S. automakers to deliver 1.57 million light vehicles this month.

The expected daily sales rate of 60,314 over 26 selling days represents a 2.5% improvement from like-2015 (25 days), with total volume for the month rising 6.6%.
...
The report puts the seasonally adjusted annual rate of sales for the month at 17.3 million units, shy of last month’s 17.37 million SAAR, but ahead of the current 3-month SAAR (17.0 million) and the year-to-date SAAR through May (17.2 million).
emphasis added
From TrueCar: June Auto Sales Likely to Rebound From May’s Shortfall on Buoyant Retail Demand
The seasonally adjusted annualized rate (SAAR) for total light vehicle sales in June is an estimated 17.2 million units, up from 17 million units a year ago.
Looks like another strong month for vehicle sales.

Consumer Sentiment at 93.5 in June

by Bill McBride on 6/24/2016 10:03:00 AM

The final University of Michigan consumer sentiment index for June was at 93.5, down from the preliminary reading of 94.3, and down from 94.7 in May:

"Consumers were a bit less optimistic in late June due to rising concerns about prospects for the national economy. While no recession is anticipated, consumers increasingly expect a slower pace of economic growth in the year ahead. Importantly, the persistent strength in personal finances will keep the level of consumer spending at relatively high levels and continue to support an uninterrupted economic expansion. Over the past 18 months, the Sentiment Index has shown only minor fluctuations about a very positive trend, with the June 2016 level a bit higher than the overall average (93.5 vs. 92.6). This relative stability stands in sharp contrast to the much more volatile path of GDP. The stability in the overall Sentiment Index reflects a gradual improvement in assessments of current conditions being offset by a downward drift in the economic prospects. The Current Conditions Index reached in the June survey its highest level since January of 2007, while the Expectations Index declined a modest 9.5% from its January 2015 peak. "
emphasis added
Consumer Sentiment
Click on graph for larger image.

Federal Reserve on Brexit

by Bill McBride on 6/24/2016 09:09:00 AM

From the Federal Reserve:

The Federal Reserve is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the U.K. referendum on membership in the European Union. The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.
The magnitude of the economic impact on the U.S. of Brexit is unclear, but it probably means the Fed will wait longer to raise rates (maybe December, maybe 2017). Here is an except from a Merrill Lynch note this morning on the impact:
1. Reducing real GDP growth by an average of 0.2pp over the next 6 quarters. This leaves 2016 annual growth of 1.8% but slices 0.2pp from growth next year, bringing it also to 1.8%

2.Fed will delay rate hikes. We expect the Fed to wait until December to hike ...

Thursday, June 23, 2016

Friday: Brexit Result, Durable Goods, Consumer Sentiment

by Bill McBride on 6/23/2016 08:52:00 PM

To track the Brexit vote, here is a great spreadsheet updated frequently from @britainelects

Friday:
• At 8:30 AM ET, Durable Goods Orders for May from the Census Bureau. The consensus is for a 0.7% decrease in durable goods orders.

• At 10:00 AM, University of Michigan's Consumer sentiment index (final for June). The consensus is for a reading of 94.1, down from the preliminary reading 94.0, and down from 94.7 in May.

Hotels: Occupancy Rate Tracking just behind Record Year

by Bill McBride on 6/23/2016 05:11:00 PM

On occupancy from HotelNewsNow.com: STR: US hotel results for week ending 18 June

The U.S. hotel industry reported mostly positive results in the three key performance metrics during the week of 12-18 June 2016, according to data from STR.

In year-over-year comparisons, the industry’s occupancy was nearly flat (-0.1% to 74.6%). However, average daily rate increased 3.5% to US$126.89, and revenue per available room grew 3.3% to US$94.62.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateThe red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

So far 2016 is tracking just behind 2015, and well ahead of the median rate.

The occupancy rate should remain above 70% during the Summer travel period.

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

Lawler: Table of Distressed Sales and All Cash Sales for Selected Cities in May

by Bill McBride on 6/23/2016 02:09:00 PM

Economist Tom Lawler sent me the table below of short sales, foreclosures and all cash sales for selected cities in May.

On distressed: Total "distressed" share is down year-over-year in all of these markets.

Short sales and foreclosures are down in all of these areas.

The All Cash Share (last two columns) is mostly declining year-over-year. As investors continue to pull back, the share of all cash buyers continues to decline.

  Short Sales ShareForeclosure Sales Share Total "Distressed" ShareAll Cash Share
May-
2016
May-
2015
May-
2016
May-
2015
May-
2016
May-
2015
May-
2016
May-
2015
Las Vegas4.5%7.3%6.1%8.0%10.6%15.3%28.2%29.1%
Reno**3.0%5.0%3.0%4.0%6.0%9.0%   
Phoenix1.6%2.8%2.1%3.2%3.7%6.0%21.6%24.1%
Sacramento3.5%4.7%3.2%5.4%6.7%10.1%16.7%17.4%
Minneapolis1.2%2.4%5.5%6.7%6.7%9.1%11.6%12.0%
Mid-Atlantic2.9%3.4%8.8%10.4%11.7%13.8%15.0%16.1%
So. California*2.2%3.4%3.4%4.3%5.6%7.7%19.3%23.2%
Florida SF2.3%3.8%9.4%17.8%11.7%21.6%29.1%34.7%
Florida C/TH1.5%2.6%7.7%14.1%9.3%16.7%57.0%62.6%
Miami - Dade Co. SF3.8%8.8%16.4%18.2%20.2%27.0%31.3%33.0%
Miami - Dad Co. CTH2.6%4.0%15.1%19.0%17.7%23.0%62.0%62.7%
Broward Co. SF4.7%7.3%13.8%14.8%18.5%22.1%26.3%29.9%
Broward Co. CTH1.8%3.8%11.2%18.9%13.0%22.7%61.0%66.0%
Spokane        6.3%12.8%   
Chicago (city)        11.3%16.2%   
Northeast Florida        17.0%26.6%   
Tucson            22.6%25.6%
Toledo            26.9%28.5%
S.C. Wisconsin            14.6%15.6%
Knoxville            20.7%20.5%
Peoria            21.7%17.9%
Georgia***            20.8%20.3%
Omaha            13.2%15.9%
Pensacola            29.9%31.3%
Rhode Island        9.5%11.5%   
Richmond VA    7.5%8.5%    15.1%14.9%
Memphis    11.0%14.3%       
*share of existing home sales, based on property records
**Single Family Only
***GAMLS

Kansas City Fed: Regional Manufacturing Activity "Increased Slightly" in June

by Bill McBride on 6/23/2016 11:14:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Increased Slightly

The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Megan Williams, survey manager and associate economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity increased slightly.

Regional factory activity posted a positive reading for the first time since January 2015, as energy prices have stabilized somewhat and orders have increased,” said Williams. “Additionally, firms continue to expect further improvements for the months ahead.”
...
The month-over-month composite index was 2 in June, up from -5 in May and -4 in April ... The employment index edged up from -13 to -4, its highest level in over a year
emphasis added
The Kansas City region was hit hard by lower oil prices.  Now that "energy prices have stabilized somewhat", manufacturing has stopped contracting (at least for one month).

New Home Sales decreased to 551,000 Annual Rate in May

by Bill McBride on 6/23/2016 10:13:00 AM

The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 551 thousand.

The previous three months were revised down by a total of 55 thousand (SAAR).

"Sales of new single-family houses in May 2016 were at a seasonally adjusted annual rate of 551,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.0 percent below the revised April rate of 586,000, but is 8.7 percent above the May 2015 estimate of 507,000."
emphasis added
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 increased in May to 5.3 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 May was 244,000. This represents a supply of 5.3 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 May 2016 (red column), 51 thousand new homes were sold (NSA). Last year 47 thousand homes were sold in May.

The all time high for May was 120 thousand in 2005, and the all time low for May was 26 thousand in 2010.

This was below expectations of 565,000 sales SAAR in May, and prior months were revised down.   I'll have more later today.

Weekly Initial Unemployment Claims decrease to 259,000

by Bill McBride on 6/23/2016 08:33:00 AM

The DOL reported:

In the week ending June 18, the advance figure for seasonally adjusted initial claims was 259,000, a decrease of 18,000 from the previous week's unrevised level of 277,000. The 4-week moving average was 267,000, a decrease of 2,250 from the previous week's unrevised average of 269,250.

There were no special factors impacting this week's initial claims. This marks 68 consecutive weeks of initial claims below 300,000, the longest streak since 1973.
The previous week was unrevised.

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 decreased to 267,000.

This was lower than the consensus forecast. The low level of claims suggests relatively few layoffs.

Wednesday, June 22, 2016

Thursday: New Home Sales

by Bill McBride on 6/22/2016 07:53:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, down from 277 thousand the previous week.

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

• At 10:00 AM, New Home Sales for May from the Census Bureau. The consensus is for a decrease in sales to 565 thousand Seasonally Adjusted Annual Rate (SAAR) in May from 619 thousand in April.

Something to watch after the Brexit vote - mortgage rates. From Matthew Graham at Mortgage News Daily: Mortgage Rates Higher Still Despite Market Improvement

3.625% is once again the most prevalent conventional 30yr fixed rate for top tier scenarios, although 3.5% is by no means extinct. Tomorrow brings the much-anticipated vote on membership in the European union for the U.K. (aka "Brexit"). As far as we know right now, the biggest risks from an interest rate standpoint won't materialize until Friday morning, but we could see the effects as early as tomorrow afternoon.

AIA: Architecture Billings Index increased "Sharply" in May

by Bill McBride on 6/22/2016 04:35:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Healthy demand for all building types signaled in Architecture Billings Index

Led by a still active multi-family housing market and sustained by solid levels of demand for new commercial and retail properties, the Architecture Billings Index has accelerated to its highest score in nearly a year. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 53.1, up sharply from the mark of 50.6 in the previous month. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.1, up from a reading of 56.9 the previous month.

“Business conditions at design firms have hovered around the break-even rate for the better part of this year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Demand levels are solid across the board for all project types at the moment. Of particular note, the recent surge in design activity for institutional projects could be a harbinger of a new round of growth in the broader construction industry in the months ahead.”
...
• Regional averages: West (53.8), South (53.7), Northeast (51.2), Midwest (49.9)

• Sector index breakdown: multi-family residential (53.7), institutional (53.0), commercial / industrial (51.0), mixed practice (51.0)
emphasis added
AIA Architecture Billing Index Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 53.1 in May, up from 50.6 in April. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment in 2016 and early 2017.

A Few Comments on May Existing Home Sales

by Bill McBride on 6/22/2016 01:35:00 PM

Earlier: Existing Home Sales increased in May to 5.53 million SAAR

As usual, housing economist Tom Lawler nailed the NAR report.

I project that May existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.55 million in May
For existing homes, inventory is still key.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 5.7% year-over-year in May). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

Of course low inventory keeps potential move-up buyers from selling too.  If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

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

This is a solid first five months for 2016.

Black Knight's First Look at May Mortgage Data; Foreclosure Inventory down 29% YoY

by Bill McBride on 6/22/2016 11:55:00 AM

From Black Knight: Black Knight Financial Services’ First Look at May 2016

• Foreclosure inventory now below 575,000 from over 800,000 just 12 months ago

• Foreclosure starts up from 10-year low in April, but at 62,100 remain below pre-crisis levels

• Prepayment speeds (historically a good indicator of refinance activity) continue to trail 2015 levels despite interest rates being lower than last year

• Delinquencies inched up in May; still down by over 13 percent on an annual basis
According to Black Knight's First Look report for May, the percent of loans delinquent increased 0.4% in May compared to April, and declined 13.5% year-over-year.

The percent of loans in the foreclosure process declined 3.6% in May and were down 28.8% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.25% in May, up from 4.24% in April.

The percent of loans in the foreclosure process declined in May to 1.13%.

The number of delinquent properties, but not in foreclosure, is down 325,000 properties year-over-year, and the number of properties in the foreclosure process is down 229,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for May by July 11th.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  May
2016
Apr
2016
May
2015
May
2014
Delinquent4.25%4.24%4.91%5.63%
In Foreclosure1.13%1.17%1.59%2.03%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:2,153,0002,146,0002,478,0002,836,000
Number of properties in foreclosure pre-sale inventory:574,000595,000803,0001,022,000
Total Properties2,727,0002,741,0003,280,0003,857,000

Existing Home Sales increased in May to 5.53 million SAAR

by Bill McBride on 6/22/2016 10:10:00 AM

From the NAR: Existing-Home Sales Grow 1.8 Percent in May; Highest Pace in Over Nine Years

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 1.8 percent to a seasonally adjusted annual rate of 5.53 million in May from a downwardly revised 5.43 million in April. With last month's gain, sales are now up 4.5 percent from May 2015 (5.29 million) and are at their highest annual pace since February 2007 (5.79 million). ...

Total housing inventory at the end of May rose 1.4 percent to 2.15 million existing homes available for sale, but is still 5.7 percent lower than a year ago (2.28 million). Unsold inventory is at a 4.7-month supply at the current sales pace, which is unchanged from April.
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 May (5.53 million SAAR) were 1.8% higher than last month, and were 4.5% above the May 2015 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 2.15 million in May from 2.12 million in April.   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 5.7% year-over-year in May compared to May 2015.  

Months of supply was at 4.7 months in May.

This was close to consensus expectations. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...