by Calculated Risk on 2/26/2015 08:30:00 AM

The DOL reported:

In the week ending February 21, the advance figure for seasonally adjusted initial claims was 313,000, an increase of 31,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 283,000 to 282,000. The 4-week moving average was 294,500, an increase of 11,500 from the previous week's revised average. The previous week's average was revised down by 250 from 283,250 to 283,000.

There were no special factors impacting this week's initial claims.

The previous week was revised down to 282,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 294,500.

This was above the consensus forecast of 290,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 2/25/2015 08:45:00 PM

First, from the ATA: ATA Truck Tonnage Index Jumped 1.2% in January

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.2% in January, following a revised gain of 0.1% during the previous month. In January, the index equaled 135.7 (2000=100), an all-time high.

Compared with January 2014, the SA index increased 6.6%, which was the largest year-over-year gain in over a year.
...
ATA recently revised the seasonally adjusted index back five years as part of its annual revision. For all of 2014, tonnage was up 3.7%, slightly better than the 3.4% originally reported. In 2013, the index increased 5.5%.

“Truck tonnage continued to improve in January, marking the fourth straight gain totaling 3.5%,” said ATA Chief Economist Bob Costello. “Last year was slightly better for truck tonnage than we originally thought and I am expecting that momentum to continue in 2015.”
emphasis added

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 290 thousand from 283 thousand.

• Also at 8:30 AM, the Consumer Price Index for January. The consensus is for a 0.6% decrease in CPI, and for core CPI to increase 0.1%.

• Also at 8:30 AM: Durable Goods Orders for January from the Census Bureau. The consensus is for a 1.7% increase in durable goods orders.

• At 9:00 AM, FHFA House Price Index for December 2014. This was originally a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.5% increase.

• At 11:00 AM: the Kansas City Fed manufacturing survey for February.

by Calculated Risk on 2/25/2015 05:42:00 PM

Earlier from the MBA: Mortgage Delinquencies Continue to Decrease in Fourth Quarter

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.68 percent of all loans outstanding at the end of the fourth quarter of 2014. This was the lowest level since the third quarter of 2007. The delinquency rate decreased 17 basis points from the previous quarter, and 71 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 2.27 percent, down 12 basis points from the third quarter and 59 basis points lower than the same quarter one year ago. This was the lowest foreclosure inventory rate seen since the fourth quarter of 2007.
...
“Delinquency rates and the percentage of loans in foreclosure decreased for another quarter and were at their lowest levels since 2007,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “We are now back to pre-crisis levels for most measures.”

Walsh continued: “The foreclosure inventory rate has decreased every quarter since the second quarter of 2012, and is now at the lowest level since the fourth quarter of 2007. Foreclosure starts ticked up two basis points, after being flat last quarter, largely due to state-level fluctuations in the speed of the foreclosure process. Compared to the same quarter last year, foreclosure starts are down eight basis points.

“At the state level, 45 states saw a decline in their foreclosure inventory rates over the quarter, although judicial states continue to account for a disproportionately high share. Fewer than half the states had an increase in non-seasonally adjusted 30 day delinquencies, which is highly seasonal and usually increases in the fourth quarter. Foreclosure starts increased in 28 states, but this has become more volatile, with recent state-level mediation requirements and changing laws, as well as servicer procedures, dictating the changes from quarter to quarter.

“States that utilize a judicial foreclosure process continue to have a foreclosure inventory rate that is roughly three times that of non-judicial states. For states where the judicial process is more frequently used, 3.79 percent of loans were in the foreclosure process, compared to 1.23 percent in non-judicial states. States that utilize both judicial and non-judicial foreclosure processes had a foreclosure inventory rate closer that of to the non-judicial states at 1.43 percent.

“Legacy loans continue to account for the bulk of all troubled mortgages. Within loans that were seriously delinquent (either more than 90 days delinquent or in the foreclosure process), 73 percent of those loans were originated in 2007 and earlier. More recent loan cohorts, specifically loans originated in 2012 and later, continue to exhibit low serious delinquency rates.

“We expect the improvement in mortgage performance to continue due to the improving economy and a strengthening job market, and the improved credit quality of recent vintages.”
emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.

The percent of loans 30 and 60 days delinquent are back to normal levels.

The 90 day bucket peaked in Q1 2010, and is about 70% of the way back to normal.

The percent of loans in the foreclosure process also peaked in 2010 and and is about two-thirds of the way back to normal.

So it has taken about 4 years to reduce the backlog of seriously delinquent and in-foreclosure loans by two-thirds, so a rough guess is that serious delinquencies and foreclosure inventory will be back to normal in a couple more years.  Most other measures are already back to normal (still working through the backlog of bubble legacy loans).

by Calculated Risk on 2/25/2015 03:16:00 PM

Earlier: New Home Sales at 481,000 Annual Rate in January, Highest January since 2008

Here is an updated table of new home sales since 2000 and the change from the previous year, including the revisions for the last few months.  Sales in 2014 were only up 1.9% from 2013.

New Home Sales (000s)
Year	Sales	Change
2000	877	-0.3%
2001	908	3.5%
2002	973	7.2%
2003	1,086	11.6%
2004	1,203	10.8%
2005	1,283	6.7%
2006	1,051	-18.1%
2007	776	-26.2%
2008	485	-37.5%
2009	375	-22.7%
2010	323	-13.9%
2011	306	-5.3%
2012	368	20.3%
2013	429	16.6%
2014	437	1.9%

There are two ways to look at 2014: 1) sales were below expectations, or 2) this just means more growth over the next several years!  Both are correct, and what matters now is the present (sales are picking up), and the future (still bright).

It is important not to be influenced too much by one month of data, but if sales averaged the January rate in 2015 of 481 thousand - just moved sideways - then sales for 2015 would be up 10.1% over 2014.

Based on the low level of sales, more lots coming available, changing builder designs and demographics, I expect sales to increase over the next several years.

As I noted last month, it is important to remember that demographics is a slow moving - but unstoppable - force!

It was over four years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive.  One major reason for that optimism was demographics - a large cohort was moving into the renting age group.

Now demographics are slowly becoming more favorable for home buying.

Click on graph for larger image.

This graph shows the longer term trend for several key age groups: 20 to 29, 25 to 34, and 30 to 39 (the groups overlap).

This graph is from 1990 to 2060 (all data from BLS: 1990 to 2013 is actual, 2014 to 2060 is projected).

We can see the surge in the 20 to 29 age group (red).  Once this group exceeded the peak in earlier periods, there was an increase in apartment construction.  This age group will peak in 2018 (until the 2030s), and the 25 to 34 age group (orange, dashed) will peak in 2023.  This suggests demand for apartments will soften starting around 2020 +/-.

For buying, the 30 to 39 age group (blue) is important (note: see Demographics and Behavior for some reasons for changing behavior).  The population in this age group is increasing, and will increase significantly over the next 10+ years.  

This demographics is positive for home buying, and this is a key reason I expect single family housing starts - and new home sales - to continue to increase in coming years.

There are several reasons to expect a return to double digit (or close) new home sales growth in 2015: Builders bringing lower priced homes on the market, more finished lots available, looser credit and demographics (as discussed above).  The housing recovery is ongoing.

And here is another update to the "distressing gap" graph that I first started posting several years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next few years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through January 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to mostly move sideways (distressed sales will continue to decline and be offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 2/25/2015 12:46:00 PM

According to Black Knight's First Look report for January, the percent of loans delinquent decreased 1% in January compared to December, and declined 11% year-over-year.

The percent of loans in the foreclosure process declined slightly in January and were down about 31% 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 5.56% in January, down from 5.64% in December.  The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined slightly in January and remained at 1.61%.

The number of delinquent properties, but not in foreclosure, is down 327,000 properties year-over-year, and the number of properties in the foreclosure process is down 360,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for February in March.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Jan 2015	Dec 2014	Jan 2014	Jan 2013
Delinquent	5.56%	5.64%	6.27%	7.03%
In Foreclosure	1.61%	1.61%	2.35%	3.41%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,701,000	1,736,000	1,851,000	1,974,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,112,000	1,132,000	1,289,000	1,531,000
Number of properties in foreclosure pre-sale inventory:	815,000	820,000	1,175,000	1,703,000
Total Properties	3,628,000	3,688,000	4,315,000	5,208,000