Monday, August 03, 2015

Fed Survey: Banks reports stronger demand for Home-purchase loans and CRE Loans

by Bill McBride on 8/03/2015 05:42:00 PM

From the Federal Reserve: The July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices

Regarding loans to businesses, the July survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the second quarter of 2015. In addition, banks reported having eased some loan terms, such as spreads and covenants, especially for larger firms on net. Meanwhile, survey respondents also reported that standards on commercial real estate (CRE) loans remained unchanged on balance. On the demand side, modest to moderate net fractions of banks indicated having experienced stronger demand for C&I and CRE loans during the second quarter.

Regarding loans to households, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months on net. Most banks reported no change in standards and terms on consumer loans. On the demand side, moderate to large net fractions of banks reported stronger demand across most categories of home-purchase loans. Similarly, respondents experienced stronger demand for auto and credit card loans on net.
emphasis added
CRE Standards Click on graph for larger image.

Here are some charts from the Fed.

This graph shows the change in lending standards and for CRE (commercial real estate) loans.

Mostly standards were unchanged for various categories of CRE (right half of graph).

The second graph shows the change in demand for CRE loans.

CRE DemandBanks are seeing a pickup in demand for all categories of CRE - including multi-family.

This suggests that we will see further increases in commercial real estate development.

Also the banks are easing credit a little for residential mortgages  (see graph on page 3).

U.S. Light Vehicle Sales increased to 17.5 million annual rate in July

by Bill McBride on 8/03/2015 02:13:00 PM

Based on a WardsAuto estimate, light vehicle sales were at a 17.5 million SAAR in June. That is up 6.4% from July 2014, and up 3.3% from the 17.0 million annual sales rate last month.

Vehicle Sales
Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for July (red, light vehicle sales of 17.5 million SAAR from WardsAuto).

This was above to the consensus forecast of 17.2 million SAAR (seasonally adjusted annual rate).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Vehicle SalesNote: dashed line is current estimated sales rate.

This was another strong month for auto sales. It appears 2015 will be the best year for light vehicle sales since 2001.

Construction Spending increased 0.1% in June

by Bill McBride on 8/03/2015 10:16:00 AM

The Census Bureau reported that overall construction spending increased slightly in June:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2015 was estimated at a seasonally adjusted annual rate of $1,064.6 billion, 0.1 percent above the revised May estimate of $1,063.5 billion. The June figure is 12.0 percent above the June 2014 estimate of $950.3 billion.
Private spending decreased and public spending increased:
Spending on private construction was at a seasonally adjusted annual rate of $766.4 billion, 0.5 percent below the revised May estimate of $770.0 billion ...

In June, the estimated seasonally adjusted annual rate of public construction spending was $298.2 billion, 1.6 percent above the revised May estimate of $293.5 billion.
emphasis added
Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas has been declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because oil prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for private lodging is up 42% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 16% year-over-year.

Private Construction Spending Click on graph for larger image.

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

Private residential spending has been increasing recently, and is 45% below the bubble peak.

Non-residential spending is only 5% below the peak in January 2008 (nominal dollars).

Public construction spending is now 8% below the peak in March 2009 and about 13% above the post-recession low.

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

On a year-over-year basis, private residential construction spending is up 13%. Non-residential spending is up 15% year-over-year. Public spending is up 8% year-over-year.

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

This was below the consensus forecast of a 0.6% increase, however spending for April and May was revised up significantly.  Overall, a solid report.

ISM Manufacturing index decreased to 52.7 in July

by Bill McBride on 8/03/2015 09:44:00 AM

Note: This was released early.

The ISM manufacturing index suggested expansion in July. The PMI was at 52.7% in July, down from 53.5% in June. The employment index was at 52.7%, down from 55.5% in June, and the new orders index was at 56.5%, up from 56.0%.

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

Economic activity in the manufacturing sector expanded in July for the 31st consecutive month, and the overall economy grew for the 74th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The July PMI® registered 52.7 percent, a decrease of 0.8 percentage point below the June reading of 53.5 percent. The New Orders Index registered 56.5 percent, an increase of 0.5 percentage point from the reading of 56 percent in June. The Production Index registered 56 percent, 2 percentage points above the June reading of 54 percent. The Employment Index registered 52.7 percent, 2.8 percentage points below the June reading of 55.5 percent, reflecting growing employment levels from June but at a slower rate. Inventories of raw materials registered 49.5 percent, a decrease of 3.5 percentage points from the June reading of 53 percent. The Prices Index registered 44 percent, down 5.5 percentage points from the June reading of 49.5 percent, indicating lower raw materials prices for the ninth consecutive month. Comments from the panel reflect a combination of optimism mixed with uncertainties about international markets and the impacts of the continuing decline in oil prices."
emphasis added
ISM PMIClick on graph for larger image.

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

This was below expectations of 53.7%, and indicates slower manufacturing expansion in July.

BEA: Personal Income increased 0.4% in June, Core PCE prices up 1.3% year-over-year

by Bill McBride on 8/03/2015 08:36:00 AM

From the BEA, the Personal Income and Outlays report for June:

Personal income increased $68.1 billion, or 0.4 percent ... in June, according to the Bureau of Economic Analysis.
...
Real PCE -- PCE adjusted to remove price changes -- decreased less than 0.1 percent in June, in contrast to an increase of 0.4 percent in May. ... The price index for PCE increased 0.2 percent in June, compared with an increase of 0.3 percent in May. The PCE price index, excluding food and energy, increased 0.1 percent in June, the same increase as in May.

The June price index for PCE increased 0.3 percent from June a year ago. The June PCE price index, excluding food and energy, increased 1.3 percent from June a year ago.
On inflation: the PCE price index was up 0.3% year-over-year (the decline in oil prices pushed down the headline price index).  However core PCE is only up 1.3% year-over-year - still way below the Fed's target.

Sunday, August 02, 2015

Monday: Auto Sales, ISM Mfg Index, Construction Spending, Personal Income and Outlays

by Bill McBride on 8/02/2015 08:53:00 PM

Weekend:
Schedule for Week of August 2, 2015

Monday:
• At 8:30 AM, Personal Income and Outlays for June. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 10:00 AM, ISM Manufacturing Index for July. The consensus is for the ISM to be at 53.7, up from 53.5 in June. The ISM manufacturing index indicated expansion at 53.5% in June. The employment index was at 55.5%, and the new orders index was at 56.0%.

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

• All day: Light vehicle sales for July. The consensus is for light vehicle sales to increase to 17.2 million SAAR in July from 17.1 million in June (Seasonally Adjusted Annual Rate).

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up slightly and DOW futures are up 20 (fair value).

Oil prices were down over the last week with WTI futures at $46.84 per barrel and Brent at $51.81 per barrel.  A year ago, WTI was at $105, and Brent was at $106 - so prices are down over 50% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.65 per gallon (down about $0.85 per gallon from a year ago).

Hotels: Best Week Ever, On Pace for Record Occupancy in 2015

by Bill McBride on 8/02/2015 11:14:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 25 July

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 19-25 July 2015, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy increased 1.5% to 79.1%. Average daily rate for the week was up 5.1% to US$125.04. Revenue per available room increased 6.6% to finish the week at US$98.91.
emphasis added
The 79.1% occupancy rate reported for last week was the best week on record (the four week average will peak in August).

For the same week in 2009, ADR (average daily rate) was $98.13 and RevPAR (Revenue per available room) was $65.77. ADR is up 25% since July 2009, and RevPAR is up 50%!

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The occupancy rate will be high during the summer 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.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and above last year.

Right now 2015 is above 2000 (best year for hotels), and 2015 will probably be the best year ever for hotels.

Late July is usually the best time of the year for hotels - although the four week average usually peaks in August.  A very strong year, and a key reason new hotel construction has picked up.

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

Saturday, August 01, 2015

Schedule for Week of August 2, 2015

by Bill McBride on 8/01/2015 11:51:00 AM

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

Other key indicators include the July ISM manufacturing index and July vehicle sales, both on Monday, and the Trade Deficit on Wednesday.

----- Monday, August 3rd -----

8:30 AM ET: Personal Income and Outlays for June. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.1%.

ISM PMI10:00 AM: ISM Manufacturing Index for July. The consensus is for the ISM to be at 53.7, up from 53.5 in June.

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

The ISM manufacturing index indicated expansion at 53.5% in June. The employment index was at 55.5%, and the new orders index was at 56.0%.

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

Vehicle SalesAll day: Light vehicle sales for July. The consensus is for light vehicle sales to increase to 17.2 million SAAR in July from 17.1 million in June (Seasonally Adjusted Annual Rate).

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

----- Tuesday, August 4th -----

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for June. The consensus is a 1.7% increase in orders.

----- Wednesday, August 5th -----

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

8:15 AM: The ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in July, down from 238,000 in June.

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

This graph shows the U.S. trade deficit, with and without petroleum, through April. 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 $43.0 billion in June from $41.9 billion in May.

10:00 AM: the ISM non-Manufacturing Index for July. The consensus is for index to increase to 56.2 from 56.0 in June.

10:00 AM: Speech by Fed Governor Jerome Powell, The Structure and Liquidity of Treasury Bond Markets, At the Brookings Institute Conference: Are There Structural Issues in the U.S. Bond Markets?, Washington, D.C.

----- Thursday, August 6th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 273 thousand from 267 thousand.

----- Friday, August 7th -----

8:30 AM: Employment Report for June. The consensus is for an increase of 212,000 non-farm payroll jobs added in July, down from the 223,000 non-farm payroll jobs added in June.

The consensus is for the unemployment rate to be unchanged at 5.3%.

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

In June, the year-over-year change was over 2.9 million jobs.

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

3:00 PM: Consumer Credit for June from the Federal Reserve. The consensus is for an increase of $17.4 billion in credit.

July 2015: Unofficial Problem Bank list declines to 290 Institutions

by Bill McBride on 8/01/2015 08:13:00 AM

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

Here is the unofficial problem bank list for July 2015.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for July 2015. During the month, the list fell from 309 institutions to 290 after 20 removals and one addition. Assets dropped by $5.9 billion to an aggregate $83.9 billion. A year ago, the list held 452 institutions with assets of $146.1 billion.

Actions have been terminated against Anderson Brothers Bank, Mullins, SC ($506 million); Pacific National Bank, Miami, FL ($379 million); Geauga Savings Bank, Newbury, OH ($357 million); The Peoples Bank, Chestertown, MD ($229 million); Home Loan Investment Bank, F.S.B., Warwick, RI ($216 million); Crown Bank, Edina, MN ($193 million); Farmers & Merchants Bank, Statesboro, GA ($170 million); Eagle Valley Bank, National Association, Saint Croix Falls, WI ($127 million); Evergreen National Bank, Evergreen, CO ($102 million); Surety Bank, DeLand, FL ($96 million); Peoples State Bank, Lake City, FL ($70 million); Liberty Savings Bank, FSB, Whiting, IN ($55 million); First Security Bank of Helena, Helena, MT ($40 million); Peoples Bank and Trust Company of Clinton County, Albany, KY ($33 million); and Hometown Community Bank, Cyrus, MN ($26 million).

Premier Bank, Denver, CO ($32 million) failed. Finding merger partners were Bank of Manhattan, N.A., El Segundo, CA ($481 million Ticker: MNHN); American Bank of St. Paul, Saint Paul, MN ($312 million); Pacific Rim Bank, Honolulu, HI ($131 million); and ProBank, Tallahassee, FL ($45 million).

The addition this month was Home Federal Savings and Loan Association of Nebraska, Lexington, NE ($56 million).

Friday, July 31, 2015

Fannie Mae: Mortgage Serious Delinquency rate declined in June, Lowest since August 2008

by Bill McBride on 7/31/2015 06:27:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in June to 1.66% from 1.70% in May. The serious delinquency rate is down from 2.05% in June 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".

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The Fannie Mae serious delinquency rate has only fallen 0.39 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 serious delinquencies will be close to normal in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.