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Tuesday, February 03, 2015

CoreLogic: House Prices up 5.0% Year-over-year in December

by Calculated Risk on 2/03/2015 09:14:00 AM

Notes: This CoreLogic House Price Index report is for December. The recent Case-Shiller index release was for November. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: Home Prices Up 5 Percent Year Over Year for December 2014

CoreLogic® ... today released its December 2014 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased 5 percent in December 2014 compared to December 2013. This change represents 34 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, fell by 0.1 percent in December 2014 compared to November 2014.

Twenty-seven states and the District of Columbia are at or within 10 percent of their peak. Three states showed year-over-year home price depreciation, including distressed sales, in December; these states were Maryland (-0.7 percent), Vermont (-0.9 percent) and Connecticut (-2.2 percent).

Excluding distressed sales, home prices increased 4.9 percent in December 2014 compared to December 2013 and increased 0.1 percent month over month compared to November 2014. Distressed sales include short sales and real estate owned (REO) transactions....

For the full year of 2014, home prices increased 7.4 percent, down from an 11.1-percent increase in 2013,” said Sam Khater, deputy chief economist at CoreLogic. “Nationally, home price growth moderated and stabilized at 5 percent the last four months of the year. The moderation can be clearly seen at the state level, with Colorado, Texas and New York at the high end of appreciation, ending the year with increases of about 8 percent. This contrasts with previous appreciation rates in the double digits—for instance, Nevada and California which experienced increases of more than 20 percent earlier in 2014.”
emphasis added
CoreLogic House Price Index Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was down 0.1% in November, and is up 5.0% over the last year.

This index is not seasonally adjusted, and this small month-to-month decrease was during the seasonally weak period.


CoreLogic YoY House Price IndexThe second graph is from CoreLogic. The year-over-year comparison has been positive for thirty four consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

The YoY increases had been slowing, but has mostly moved sideways over the last four months.

Monday, February 02, 2015

Tuesday: Vehicle Sales

by Calculated Risk on 2/02/2015 08:12:00 PM

Two quick observations ...

First, the December construction spending report probably means a slight upward revision to Q4 GDP.

The advance Q2 report showed 4.0% annualized real GDP growth, and that was eventually revised up to 4.6%.  And the advance Q3 report showed 3.5%, and that was revised up to 5.0%.  Maybe we will eventually get to 3%+ for Q4 ...

Second, on mortgage rates from Matthew Graham at Mortgage News Daily:

Mortgage rates were just slightly higher today, but generally did a good job of holding on to recent gains. For perspective, last Friday was the only day in the past 21 months with lower rates, and many borrowers may find their quotes unchanged over the weekend. Almost everyone else would simply see minor increases in upfront costs as opposed to changes in the contract rate itself. Those remain steady with conforming 30yr fixed rates of 3.625% widely available for top tier scenarios and 3.5% not far behind.
Tuesday:
• All day: Light vehicle sales for January. The consensus is for light vehicle sales to decrease to 16.6 million SAAR in January from 16.8 million in December (Seasonally Adjusted Annual Rate).

• At 10:00 AM ET, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is for a 2.0 decrease in December orders.

Fannie Mae: Mortgage Serious Delinquency rate declined slightly in December, Lowest since October 2008

by Calculated Risk on 2/02/2015 05:33:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined slightly in December to 1.89% from 1.91% in November. The serious delinquency rate is down from 2.38% in December 2013, and this is the lowest level since October 2008 (also at 1.89%).

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

Last week, Freddie Mac reported that the Single-Family serious delinquency rate was declined in December to 1.88%. Freddie's rate is down from 2.39% in December 2013, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

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 fallen 0.48 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in late 2016 - although the rate of decline has slowed recently.

Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be close to normal in late 2016.

Q4 2014 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 2/02/2015 02:11:00 PM

The BEA has released the underlying details for the Q4 advance GDP report today.

Investment in single family structures is now back to being the top category for residential investment (see first graph).  Home improvement was the top category for twenty consecutive quarters following the housing bust ... but now investment in single family structures has been back on top for the last 5 quarters.

However - even though investment in single family structures has increased from the bottom - single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect further increases over the next few years.

Residential Investment ComponentsClick on graph for larger image.

The first graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Investment in single family structures was $202 billion (SAAR) (over 1.1% of GDP).

Investment in home improvement was at a $178 billion Seasonally Adjusted Annual Rate (SAAR) in Q4 (just over 1.0% of GDP).   

Office Investment as Percent of GDPThe second graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased recently, but from a very low level.

Investment in offices is down about 44% from the recent peak (as a percent of GDP) and increasing from a very low level - and is still below the lows for previous recessions (as percent of GDP).  With the high office vacancy rate, office investment will only increase slowly.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 59% from the peak.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment peaked at 0.31% of GDP in Q3 2008 and is down about 63%.   With the hotel occupancy rate near record levels, it is likely that hotel investment will probably continue to increase.

These graphs show investment is generally increasing, but from a very low level.

Construction Spending increased 0.4% in December

by Calculated Risk on 2/02/2015 11:07:00 AM

The Census Bureau reported that overall construction spending increased in December:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during December 2014 was estimated at a seasonally adjusted annual rate of $982.1 billion, 0.4 percent above the revised November estimate of $978.6 billion. The December figure is 2.2 percent above the December 2013 estimate of $961.2 billion. ... The value of construction in 2014 was $961.4 billion, 5.6 percent above the $910.8 billion spent in 2013.
Both private and public spending increased in December:
Spending on private construction was at a seasonally adjusted annual rate of $698.6 billion, 0.1 percent above the revised November estimate of $698.2 billion. ...

In December, the estimated seasonally adjusted annual rate of public construction spending was $283.5 billion, 1.1 percent above the revised November estimate of $280.4 billion.
emphasis added
Note: Non-residential for offices and hotels is increasing, but spending for oil and gas is generally declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for lodging is up 18% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 8% year-over-year (and will fall further in the coming months).

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 is 48% below the peak in early 2006 - but up 53% from the post-bubble low.

Non-residential spending is 16% below the peak in January 2008, and up about 55% from the recent low.

Public construction spending is now 13% below the peak in March 2009 and about 9% 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 down 4%. Non-residential spending is up 5% year-over-year. Public spending is up 7% 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 probably hit bottom after several years of austerity.

This was below the consensus forecast of a 0.6% increase, however there were some minor upward revisions to spending in October and November.

ISM Manufacturing index declined to 53.5 in January

by Calculated Risk on 2/02/2015 10:00:00 AM

The ISM manufacturing index suggests slower expansion in January than in December. The PMI was at 53.5% in January, down from 55.1% in December. The employment index was at 54.1%, down from 56.0% in December, and the new orders index was at 52.9%, down from 57.8%.

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

Economic activity in the manufacturing sector expanded in January for the 20th consecutive month, and the overall economy grew for the 68th 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 January PMI® registered 53.5 percent, a decrease of 1.6 percentage points from December’s seasonally adjusted reading of 55.1 percent. The New Orders Index registered 52.9 percent, a decrease of 4.9 percentage points from the seasonally adjusted reading of 57.8 percent in December. The Production Index registered 56.5 percent, 1.2 percentage points below the seasonally adjusted December reading of 57.7 percent. The Employment Index registered 54.1 percent, a decrease of 1.9 percentage points below the seasonally adjusted December reading of 56 percent. Inventories of raw materials registered 51 percent, an increase of 5.5 percentage points above the December reading of 45.5 percent. The Prices Index registered 35 percent, down 3.5 percentage points from the December reading of 38.5 percent, indicating lower raw materials prices in January relative to December. Comments from the panel indicate that most industries, but not all, are experiencing strong demand as 2015 kicks off. The West Coast dock slowdown continues to be a problem, negatively impacting both exports and imports as well as inventories.""
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 54.5%, but still indicates expansion in January.

BEA: Personal Income increased 0.3% in December, Core PCE prices up 1.3% year-over-year

by Calculated Risk on 2/02/2015 08:30:00 AM

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

Personal income increased $41.3 billion, or 0.3 percent ... in December, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $40.0 billion, or 0.3 percent.
...
Real PCE -- PCE adjusted to remove price changes -- decreased 0.1 percent in December, in contrast to an increase of 0.7 percent in November. ... The price index for PCE decreased 0.2 percent in December, the same decrease as in November. The PCE price index, excluding food and energy, increased less than 0.1percent in December; the price index increased less than 0.1 percent in November.

The December price index for PCE increased 0.7 percent from December a year ago. The December PCE price index, excluding food and energy, increased 1.3 percent from December a year ago.
...
Personal saving -- DPI less personal outlays -- was $643.2 billion in December, compared with $568.2 billion in November. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 4.9 percent in December, compared with 4.3 percent in November.
A key point is that the PCE price index was only up 0.7% year-over-year (1.3% for core PCE). This is way below the Fed's 2% target.

Black Knight Mortgage Monitor

by Calculated Risk on 2/02/2015 07:01:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for December today. According to BKFS, 5.64% of mortgages were delinquent in December, down from 6.08% in November. BKFS reported that 1.61% of mortgages were in the foreclosure process, down from 2.48% in December 2013.

This gives a total of 7.25% delinquent or in foreclosure. It breaks down as:

• 1,736,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,132,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 820,000 loans in foreclosure process.

For a total of ​​3,688,000 loans delinquent or in foreclosure in December. This is down from 4,488,000 in December 2013.

There is much more in the mortgage monitor.

Sunday, February 01, 2015

Monday: Personal Income and Outlays, ISM Mfg, Construction Spending

by Calculated Risk on 2/01/2015 08:01:00 PM

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

• At 10:00 AM, ISM Manufacturing Index for January. The consensus is for a decrease to 54.5 from 55.5 in December. The ISM manufacturing index indicated expansion in December at 55.5%. The employment index was at 56.8%, and the new orders index was at 57.3%

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

Weekend:
Schedule for Week of February 1, 2015

Demographics and GDP: 2% is the new 4%

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are down 24 and DOW futures are down 225 (fair value).

Oil prices were up over the last week with WTI futures at $48.24 per barrel and Brent at $52.99 per barrel.  A year ago, WTI was at $99, and Brent was at $109 - so prices are down about 50% year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $2.05 per gallon (down about $1.20 per gallon from a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.



Orange County Historical Gas Price Charts Provided by GasBuddy.com

Demographics and GDP: 2% is the new 4%

by Calculated Risk on 2/01/2015 08:11:00 AM

For amusement, I checked out the WSJ opinion page comments on the Q4 GDP report. As usual, the WSJ opinion is pure politics - but it does bring up an excellent point (that the WSJ conveniently ignores).

First, from the WSJ opinion page:

The fourth quarter report means that growth for all of 2014 clocked in at 2.4%, which is the best since 2.5% in 2010. It also means another year, an astonishing ninth in a row, in which the economy did not grow by 3%.
This period of low growth isn't "astonishing". First, usually following a recession, there is a brief period of above average growth - but not this time due to the financial crisis and need for households to deleverage. So we didn't see a strong bounce back (sluggish growth was predict on the blog for the first years of the recovery).

And overall, we should have been expecting slower growth this decade due to demographics - even without the housing bubble-bust and financial crisis (that the WSJ opinion page missed).

One simple way to look at the change in GDP is as the change in the labor force, times the change in productivity. If the labor force is growing quickly, GDP will be higher with the same gains in productivity. And the opposite is true.

So here is a graph of the year-over-year change in the labor force since 1950 (data from the BLS).

Year-over-year Change Labor ForceClick on graph for larger image

The data is noisy - because of changes in population controls and the business cycle - but the pattern is clear as indicated by the dashed red trend line. The labor force has been growing slowly recently after declining for some time.

We could also look at just the prime working age population - I've pointed out before the that prime working age population has just started growing again after declining for a few years (see Prime Working-Age Population Growing Again)

Now here is a look at GDP for the same period.

Year-over-year Change GDPThe GDP data (year-over-year quarterly) is also noisy, and the dashed blue line shows the trend.

GDP was high in the early 50s - and early-to-mid 60s because of government spending (Korean and Vietnam wars).  As in example, in 1951, national defense added added 6.5 percentage points to GDP.  Of course we don't want another war ...

Now lets put the two graphs together.

Year-over-year Change Labor Force and GDPIt isn't a surprise. Other than the early period with a boost from government spending, the growth in GDP has been tracking the growth in the labor force pretty well.  The difference in growth between the dashed blue and red lines is due to gains in productivity.

The good news is that will change going forward (prime working age population will grow faster next decade).  The bad news is the political hacks will continue to ignore demographics.

Right now, due to demographics, 2% GDP growth is the new 4%.