Thursday, May 28, 2015

Friday: Ugly GDP, Chicago PMI, Consumer Sentiment

by Bill McBride on 5/28/2015 06:52:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Microscopically Lower

Mortgage rates barely budged today. Those that budged moved almost imperceptibly lower from yesterday's latest rate sheets. In general, there was simply very little movement in underlying markets and lenders' rate sheets matched the tone. [Rates at 4.0%]

Ironically, Freddie Mac's weekly rate survey results came out this morning indicating higher rates. Keep in mind that the Freddie survey receives most of it's responses early in the week and then reports on Thursday mornings. That means that any changes in rates over the intervening days are not captured in the data. In the current case, it's not that rates have moved significantly lower in the past few days, but more to do with the fact that last week's Freddie survey didn't capture the brunt of the rise in rates that occurred on Tuesday.
emphasis added
• At 8:30 AM ET, Gross Domestic Product, 1st quarter 2015 (second estimate). The consensus is that real GDP decreased 0.9% annualized in Q1, revised down from the 0.2% advance estimate.

• At 9:45 AM, Chicago Purchasing Managers Index for May. The consensus is for a reading of 53.0, up from 52.3 in April.

• At 10:00 AM, University of Michigan's Consumer sentiment index (final for May). The consensus is for a reading of 90.0, up from the preliminary reading of 88.6, and down from the April reading of 95.9.

Vehicle Sales Forecasts for May: Over 17 Million Annual Rate

by Bill McBride on 5/28/2015 03:04:00 PM

The automakers will report May vehicle sales on Tuesday, June 2nd. Sales in April were at 16.5 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales will be strong in May too.

Note:  There were 26 selling days in May, one less than in May 2014.  Here are a few forecasts:

From Nearly 1.6 Million New Cars Sold in May Push Seasonally Adjusted Annual Rate (SAAR) to Impressive 17.4 Million, says ... forecasts that 1,591,221 new cars and trucks will be sold in the U.S. in May for an estimated Seasonally Adjusted Annual Rate (SAAR) of 17.4 million.
From J.D. Power: New-Vehicle Retail Sales SAAR in May to Hit 14.1M Units, Highest Level So Far in 2015
Total light-vehicle sales in May 2015 are projected to reach 1,591,100, a 3 percent increase on a selling day adjusted basis compared with May 2014. [Total forecast 17.3 million SAAR]
From Kelley Blue Book: New-Car Sales to Reach 17.3 Million SAAR in May 2015, According to Kelley Blue Book
New-vehicle sales are expected to decline 1 percent year-over-year to a total of 1.59 million units in May 2015, resulting in an estimated 17.3 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book ...
"May sales will reach the highest total year-to-date, and could remain the highest until December of this year," said Alec Gutierrez, senior analyst for Kelley Blue Book. "While we expect an overall decline in volume versus last year, the difference is the result of one fewer sales day from May 2014, and total SAAR will reflect year-over-year improvement."
Another strong month for auto sales.  Good times!

Freddie Mac: Mortgage Serious Delinquency rate declined in April

by Bill McBride on 5/28/2015 01:02:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in April to 1.66%, down from 1.73% in March. Freddie's rate is down from 2.15% in April 2014, and the rate in March was the lowest level since November 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". 

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for April in a few days.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

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

The serious delinquency rate has fallen 0.49 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until late 2016.

So even though delinquencies and distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

NAR: Pending Home Sales Index increased 3.4% in April, up 14% year-over-year

by Bill McBride on 5/28/2015 10:02:00 AM

From the NAR: Pending Home Sales Climb in April to Highest Level since May 2006

Pending home sales rose in April for the fourth straight month and reached their highest level in nine years, according to the National Association of Realtors®. Led by the Northeast and Midwest, all four major regions saw increases in April.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 3.4 percent to 112.4 in April from a slight upward revision of 108.7 in March and is now 14.0 percent above April 2014 (98.6) — the largest annual increase since September 2012 (15.1 percent). The index has now increased year-over-year for eight consecutive months and is at its highest level since May 2006 (112.5).
This was abpve expectations of a 0.8% increase.

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in May and June.

Weekly Initial Unemployment Claims increased to 282,000

by Bill McBride on 5/28/2015 08:34:00 AM

The DOL reported:

In the week ending May 23, the advance figure for seasonally adjusted initial claims was 282,000, an increase of 7,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 274,000 to 275,000. The 4-week moving average was 271,500, an increase of 5,000 from the previous week's revised average. The previous week's average was revised up by 250 from 266,250 to 266,500.

There were no special factors impacting this week's initial claims.
The previous week was revised to 275,000.

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 increased to 271,500.

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

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