by Calculated Risk on 7/23/2014 07:01:00 AM

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

Mortgage applications increased 2.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 18, 2014. ...

The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 0.3 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33 percent, with points increasing to 0.23 from 0.20 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down 74% from the levels in May 2013.

As expected, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 15% from a year ago.

by Calculated Risk on 7/22/2014 09:48:00 PM

Earlier today, the Richmond Fed manufacturing survey for July was released: Manufacturing Sector Activity Expanded; Shipments Grew Mildly, Hiring Picked Up

Overall, manufacturing conditions strengthened. The composite index for manufacturing moved up to a reading of 7 following last month's reading of 4. The index for shipments gained one point, ending at 3. New orders grew at the same pace as a month ago, with that index finishing at a reading of 5. ...

Manufacturing employment strengthened this month, with the index gaining nine points to finish at 13. The average workweek grew at a slower pace this month; moving that gauge down two points to end at 3. Average wages advanced compared to a month ago, ending at 16.

This is the 3rd regional survey released for July (NY and Philly were released last week) and all three surveys were strong this month.

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

• During the day: The AIA's Architecture Billings Index for June (a leading indicator for commercial real estate).

by Calculated Risk on 7/22/2014 05:09:00 PM

The BLS reported this morning:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.0 percent over the last 12 months to an index level of 234.702 (1982-84=100). For the month, the index rose 0.2 percent prior to seasonal adjustment.

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

Since the highest Q3 average was last year (Q3 2013), at 230.327, we only have to compare to last year. 

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 2.0% year-over-year in June, and although this is very early - we need the data for July, August and September - my current guess is COLA will be higher than the previous two years, and will probably be a little over 2% this year.

Contribution and Benefit Base

The contribution base will be adjusted using the National Average Wage Index. This is based on a one year lag. The National Average Wage Index is not available for 2013 yet, but wages probably increased again in 2013. If wages increased the same as last year, then the contribution base next year will be increased to around $120,500 from the current $117,000.

Remember - this is an early look. What matters is average CPI-W for all three months in Q3 (July, August and September).

by Calculated Risk on 7/22/2014 02:37:00 PM

The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 6.5% year-over-year in June.   This is a smaller increase than other sources suggest (Housing Tracker shows inventory up 15% year-over-year in July), and it is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data. 

The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Click on graph for larger image.

This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 10.9% from the bottom. On a seasonally adjusted basis, inventory was up 1.8% in June compared to May.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

Another key point: The NAR reported total sales were down 2.3% from June 2013, but normal equity sales were probably up from June 2013, and distressed sales down sharply.  The NAR reported that 11% of sales were distressed in May (from a survey that is far from perfect):

Distressed homes – foreclosures and short sales – accounted for 11 percent of June sales, down from 15 percent in June 2013. Eight percent of June sales were foreclosures and 3 percent were short sales.

Last year in June the NAR reported that 15% of sales were distressed sales.

A rough estimate: Sales in June 2013 were reported at 5.16 million SAAR with 15% distressed.  That gives 774 thousand distressed (annual rate), and 4.39 million equity / non-distressed.  In June 2014, sales were 5.04 million SAAR, with 11% distressed.  That gives 554 thousand distressed - a decline of 28% from June 2013 - and 4.49 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up slightly (even with less investor buying). 

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

Click on graph for larger image.

Sales NSA in June (red column) were slightly above the level of sales in June 2013, and above sales for 2008 through 2012. 

Overall this report was a solid report.

Earlier:
• Existing Home Sales in June: 5.04 million SAAR, Inventory up 6.5% Year-over-year

by Calculated Risk on 7/22/2014 11:48:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.0% annualized rate) in June. The 16% trimmed-mean Consumer Price Index also increased 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.1% annualized rate) in June. The CPI less food and energy increased 0.1% (1.6% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for June here. Motor fuel was up sharply in June.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.9%. Core PCE is for May and increased just 1.5% year-over-year.

On a monthly basis, median CPI was at 2.0% annualized, trimmed-mean CPI was at 1.8% annualized, and core CPI increased 1.6% annualized.

There key measures of inflation have moved up over the last few months, but on a year-over-year basis these measures suggest inflation remains at or below the Fed's target of 2%.