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Thursday, April 21, 2016

Weekly Initial Unemployment Claims decrease to 247,000

by Calculated Risk on 4/21/2016 08:35:00 AM

The DOL reported:

In the week ending April 16, the advance figure for seasonally adjusted initial claims was 247,000, a decrease of 6,000 from the previous week's unrevised level of 253,000. This is the lowest level for initial claims since November 24, 1973 when it was 233,000. The 4-week moving average was 260,500, a decrease of 4,500 from the previous week's unrevised average of 265,000.

There were no special factors impacting this week's initial claims. This marks 59 consecutive weeks of initial claims below 300,000, the longest streak since 1973.
The previous week was unrevised.

Note: 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 decreased to 260,500.

This was well below the consensus forecast of 265,000. The low level of the 4-week average suggests few layoffs.

Wednesday, April 20, 2016

Philly Fed: State Coincident Indexes increased in 41 states in March

by Calculated Risk on 4/20/2016 06:15:00 PM

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 253 thousand the previous week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for April. The consensus is for a reading of 9.0, down from 12.4.

• Also at 8:30 AM, Chicago Fed National Activity Index for March. This is a composite index of other data.

• At 9:00 AM, FHFA House Price Index for February 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.4% month-to-month increase for this index.

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2016. In the past month, the indexes increased in 41 states, decreased in seven, and remained stable in two, for a one-month diffusion index of 68. Over the past three months, the indexes increased in 42 states and decreased in eight, for a three-month diffusion index of 68.
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Philly Fed Number of States with Increasing ActivityClick on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In March, 42 states had increasing activity including minor increases.

Five states have seen declines over the last 6 months, in order they are North Dakota (worst), Wymong, Alaska, Louisiana and Oklahoma - mostly due to the decline in oil prices.

Philly Fed State Conincident Map Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and is mostly green now.

Source: Philly Fed.

A Few Comments on March Existing Home Sales

by Calculated Risk on 4/20/2016 03:21:00 PM

Earlier: Existing Home Sales increased in March to 5.33 million SAAR

I'd consider any existing home sales rate in the 5 to 5.5 million range solid based on the normal historical turnover of the existing stock. I've seen reports calling the February sales rate "dismal" and the March sales rate "a strong rebound". Nah. This is just normal volatility. Sales in Q1 are up almost 6% from Q1 2015, and that is solid start to the year.

Going forward, there are some economic reasons for some softness in existing home sales in certain areas. Low inventory is probably holding down sales in many areas, and there will be weakness in some oil producing areas (see: Houston has a problem).

As always, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.

Inventory is still key.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 1.5% year-over-year in March). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

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

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in March (red column) were the highest for March since 2007 (NSA).

Note that January and February are usually the slowest months of the year and March is the beginning of the "selling season".  This is a solid start to the year.

AIA: "Architecture Billings Index Ends the First Quarter on an Upswing"

by Calculated Risk on 4/20/2016 12:31:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture Billings Index Ends the First Quarter on an Upswing

he Architecture Billings Index reflects consecutive months of increasing demand for design activity at architecture firms. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 51.9, up from the mark of 50.3 in the previous month. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.1, down from a reading of 59.5 the previous month.

“The first quarter was somewhat disappointing in terms of the growth of design activity, but fortunately expanded a bit entering the traditionally busy spring season. The Midwest is lagging behind the other regions, but otherwise business conditions are generally healthy across the country,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “As the institutional market has cooled somewhat after a surge in design activity a year ago, the multi-family sector is reaccelerating at a healthy pace.
...
• Regional averages: South (52.4), Northeast (51.0), West (50.4), Midwest (49.8)

• Sector index breakdown: multi-family residential (55.7), commercial / industrial (51.8), mixed practice (50.0), institutional (48.0)
emphasis added
AIA Architecture Billing Index Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 51.9 in March, up from 50.3 in February. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

The multi-family residential market was negative for most of 2015 - suggesting a slowdown or less growth for apartments - but has turned around and been positive for the last six months - so there might be another pickup in multi-family starts.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 8 of the last 12 months, suggesting a further increase in CRE investment in 2016.

Existing Home Sales increased in March to 5.33 million SAAR

by Calculated Risk on 4/20/2016 10:16:00 AM

From the NAR: Existing-Home Sales Spring Ahead in March

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 5.1 percent to a seasonally adjusted annual rate of 5.33 million in March from a downwardly revised 5.07 million in February. Sales rose in all four major regions last month and are up modestly (1.5 percent) from March 2015. ...

Total housing inventory at the end of March increased 5.9 percent to 1.98 million existing homes available for sale, but is still 1.5 percent lower than a year ago (2.01 million). Unsold inventory is at a 4.5-month supply at the current sales pace, up from 4.4 months in February.
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March (5.33 million SAAR) were 5.1% higher than last month, and were 1.5% above the March 2015 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.98 million in March from 1.87 million in February.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory decreased 1.5% year-over-year in March compared to March 2015.  

Months of supply was at 4.5 months in March.

This was above consensus expectations. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

MBA: "Mortgage Applications Increase in Latest MBA Weekly Survey"

by Calculated Risk on 4/20/2016 07:00:00 AM

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

Mortgage applications increased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 15, 2016.
...
The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 17 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.83 percent from 3.82 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance Index Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000.

Refinance activity is picking again with lower rates.


Mortgage Purchase Index The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 17% higher than a year ago.

Tuesday, April 19, 2016

Wednesday: Existing Home Sales

by Calculated Risk on 4/19/2016 06:20:00 PM

One more comment on housing starts, here is my prediction from the beginning of this year:

Most analysts are looking for starts to increase to around 1.25 million in 2016, and for new home sales around 560 thousand. This would be an increase of around 12% for both starts and new home sales.

I think there will be further growth in 2016, but I'm a little more pessimistic than some analysts. Some key areas - like Houston - will be hit hard by the decline oil prices. And I think growth will slow for multi-family starts. Also, to achieve double digit growth for new home sales in 2016, the builders would have to offer more lower priced homes (the builders have focused on higher priced homes in recent years).  There has been a shift to offering more affordable new homes, but it takes time.

My guess is growth of around 4% to 8% in 2016 for new home sales, and about the same percentage growth for housing starts.  Also I think the mix between multi-family and single family starts will shift a little more towards single family in 2016.
So far housing starts are up 14.5% year-over-year for the comparable period (January through March). I expect the year-over-year change to slow sharply. To reach the bottom of my predicted range (4% year-over-year), starts could be flat for the rest of the year compared to the same period in 2015.  That will still be decent growth all things considered (slow down in oil producing areas and in multi-family).

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

• At 10:00 AM, Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.27 million SAAR, up from 5.08 million in February.

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

Lawler: Preliminary Table of Distressed Sales and All Cash Sales for Selected Cities in March

by Calculated Risk on 4/19/2016 01:15:00 PM

Economist Tom Lawler sent me a preliminary table below of short sales, foreclosures and all cash sales for a few selected cities in March.

On distressed: Total "distressed" share is down in all of these markets.

Short sales and foreclosures are down in all of these areas.

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

  Short Sales ShareForeclosure Sales Share Total "Distressed" ShareAll Cash Share
Mar-
2016
Mar-
2015
Mar-
2016
Mar-
2015
Mar-
2016
Mar-
2015
Mar-
2016
Mar-
2015
Las Vegas5.9%8.3%7.1%9.3%13.0%17.6%27.7%32.4%
Reno**3.0%5.0%3.0%8.0%6.0%13.0%   
Phoenix            24.6%27.5%
Sacramento4.5%5.4%5.5%6.9%10.0%12.4%17.3%19.3%
Minneapolis2.5%3.0%10.9%12.4%13.4%15.4%   
Mid-Atlantic4.4%4.7%13.6%14.0%18.0%18.8%18.3%18.2%
Riverside2.4%3.5%3.2%5.0%5.6%8.5%18.2%19.2%
San Bernardino2.4%4.1%3.2%5.2%5.6%9.3%20.7%21.8%
Riverside2.4%3.5%3.2%5.0%5.6%8.5%18.2%19.2%
Richmond VA     9.8%11.9%    17.3%18.0%
Chicago (city)        19.6%21.9%   
Northeast Florida        19.9%30.9%   
Toledo            30.6%32.7%
Tucson            25.8%32.0%
Georgia***            21.0%23.2%
Omaha            16.3%16.1%
Pensacola            28.3%33.4%
Memphis    15.0%15.3%       
Springfield IL**        11.2%12.1%18.1%N.A.
*share of existing home sales, based on property records
**Single Family Only
***GAMLS

Comments on March Housing Starts

by Calculated Risk on 4/19/2016 10:12:00 AM

Earlier: Housing Starts decreased to 1.089 Million Annual Rate in March

The housing starts report this morning was below consensus, however there were upward revisions to the prior two months (combined).  Still a decent report.  Starts were up 14.2% from March 2015, but March was weak last year (see the first graph).

The key take away from the report is that multi-family is slowing, and single family growth is ongoing year-over-year.

Total housing starts were up 14.2% year-over-year, and single family was up 22.6%.

Starts Housing 2015 and 2016This graph shows the month to month comparison between 2015 (blue) and 2016 (red).

The comparison for March was easy, however the year-over-year comparisons will be more difficult going forward.

Year-to-date starts are up 14.5% compared to the same period in 2015, but that will clearly slow with the more difficult comparisons for the remainder of the year.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Multifamily Starts and completionsThe blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).

Multi-family completions are increasing sharply year-over-year.

I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

Single family Starts and completionsThe second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

The housing recovery continues, but I expect most of the growth will be from single family going forward.

Housing Starts decreased to 1.089 Million Annual Rate in March

by Calculated Risk on 4/19/2016 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,089,000. This is 8.8 percent below the revised February estimate of 1,194,000, but is 14.2 percent above the March 2015 rate of 954,000.

Single-family housing starts in March were at a rate of 764,000; this is 9.2 percent below the revised February figure of 841,000. The March rate for units in buildings with five units or more was 312,000.

Building Permits:
Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,086,000. This is 7.7 percent below the revised February rate of 1,177,000, but is 4.6 percent above the March 2015 estimate of 1,038,000.

Single-family authorizations in March were at a rate of 727,000; this is 1.2 percent below the revised February figure of 736,000. Authorizations of units in buildings with five units or more were at a rate of 324,000 in March.
emphasis added
Total Housing Starts and Single Family Housing Starts Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in March compared to February.  Multi-family starts are down 2% year-over-year.

Single-family starts (blue) decreased in March, but are up 23% year-over-year.



Total Housing Starts and Single Family Housing Starts The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

Total housing starts in March were below expectations, however combined starts for January and February were revised up.  I'll have more later ...