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Tuesday, May 23, 2017

New Home Sales decrease to 569,000 Annual Rate in April

by Calculated Risk on 5/23/2017 10:24:00 AM

The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 569 thousand.

The previous three months combined were revised up significantly.

"Sales of new single-family houses in April 2017 were at a seasonally adjusted annual rate of 569,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent below the revised March rate of 642,000, but is 0.5 percent above the April 2016 estimate of 566,000."
emphasis added
New Home SalesClick on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still fairly low historically.

The second graph shows New Home Months of Supply.

New Home Sales, Months of SupplyThe months of supply increased in April to 5.7 months.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).
"The seasonally-adjusted estimate of new houses for sale at the end of April was 268,000. This represents a supply of 5.7 months at the current sales rate."
New Home Sales, InventoryOn inventory, according to the Census Bureau:
"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."
Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales, NSAThe last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In April 2017 (red column), 54 thousand new homes were sold (NSA). Last year, 55 thousand homes were sold in April.

The all time high for April was 116 thousand in 2005, and the all time low for April was 30 thousand in 2011.

This was below expectations of 604,000 sales SAAR, however the previous months were revised up.   I'll have more later today.

Monday, May 22, 2017

Tuesday: New Home Sales

by Calculated Risk on 5/22/2017 07:09:00 PM

From Matthew Graham at Mortgage News Daily: Low and Sideways, Mortgage Rates Play Waiting Game

Mortgage rates were slightly higher for the 3rd straight day, continuing a modest bounce back from the year's lowest rates last Wednesday. ...

While the general movement in rates has been slightly higher, it hasn't lifted rates much above 2017's lows.  Especially when considered next to anything before last Wednesday, recent rate offerings have been low and the trend has been sideways.  Most lenders continue to offer conventional 30yr fixed rates of 4.0% on top tier scenarios.  The only difference from Friday would be marginally higher upfront costs, but several lenders are effectively "unchanged."
emphasis added
Tuesday:
• At 8:30 AM ET, New Home Sales for April from the Census Bureau. The consensus is for a decrease in sales to 604 thousand Seasonally Adjusted Annual Rate (SAAR) in April from 621 thousand in March.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for May.

Merrill: "Revising down our inflation forecasts"

by Calculated Risk on 5/22/2017 11:25:00 AM

A few excerpts from a Merrill Lynch research note: Revising down our inflation forecasts

After two consecutive disappointing CPI reports, it is clear that inflation is now set for a slower finish this year. After refreshing our models, we now see core CPI inflation ending the year at 1.9% 4Q/4Q, down from our prior forecast of 2.3% and slowing from 2.2% 4Q/4Q 2016 growth. The downgrade largely reflects transitory weakness from wireless telephone services that should revert next year, allowing for core CPI to accelerate back to 2.2% by the end of 2018.

We are also revising our core PCE inflation forecasts. Assuming we see a sluggish 0.1% mom reading in April, the trajectory for core PCE will be knocked lower as the % yoy clip drops to 1.5%. As a result, we take down our 4Q/4Q 2017 core PCE estimate to 1.7% yoy from 1.9%. That said, we continue to expect core PCE to hit 2% by the end of 2018, reaching the Fed’s target.

The main takeaway from these forecast changes is that inflation is still set to move higher, but it is happening later.

Chicago Fed "Increased Economic Growth in April"

by Calculated Risk on 5/22/2017 08:55:00 AM

From the Chicago Fed: Chicago Fed National Activity Index Points to Increased Economic Growth in April

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.49 in April from +0.07 in March. Two of the four broad categories of indicators that make up the index increased from March, and only one category made a negative contribution to the index in April. The index’s three-month moving average, CFNAI-MA3, increased to +0.23 in April from a neutral reading in March.
emphasis added
This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed National Activity Index Click on graph for larger image.

This suggests economic activity was above the historical trend in April (using the three-month average).

According to the Chicago Fed:
The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

Sunday, May 21, 2017

Sunday Night Futures

by Calculated Risk on 5/21/2017 08:09:00 PM

Weekend:
Schedule for Week of May 21, 2017

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for April. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are up 3, and DOW futures are up 19(fair value).

Oil prices were up over the last week with WTI futures at $50.73 per barrel and Brent at $53.61 per barrel.  A year ago, WTI was at $48, and Brent was at $49 - so oil prices are up about 5% to 8% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.36 per gallon - a year ago prices were at $2.29 per gallon - so gasoline prices are up about 7 cents a gallon year-over-year.

Existing Home Sales: Take the Under

by Calculated Risk on 5/21/2017 02:15:00 PM

The NAR will report April Existing Home Sales on Wednesday, May 24th at 10:00 AM ET.

The consensus, according to Bloomberg, is that the NAR will report sales of 5.67 million. Housing economist Tom Lawler estimates the NAR will report sales of 5.56 million on a seasonally adjusted annual rate (SAAR) basis, down from 5.71 million SAAR in March.

Housing economist Tom Lawler has been sending me his predictions of what the NAR will report for 7 years.  The table below shows the consensus for each month, Lawler's predictions, and the NAR's initial reported level of sales. 

Lawler hasn't always been closer than the consensus, but usually when there has been a fairly large spread between Lawler's estimate and the "consensus", Lawler has been closer.

NOTE: There have been times when Lawler "missed", but then he pointed out an apparent error in the NAR data - and the subsequent revision corrected that error.  As an example, see: The “Curious Case” of Existing Home Sales in the South in April

Over the last seven years, the consensus average miss was 150 thousand, and  Lawler's average miss was 70 thousand.

Many analysts now change their "forecast" after Lawler's estimate is posted, so the consensus has improved a little recently!

Existing Home Sales, Forecasts and NAR Report
millions, seasonally adjusted annual rate basis (SAAR)
MonthConsensusLawlerNAR reported1
May-106.205.835.66
Jun-105.305.305.37
Jul-104.663.953.83
Aug-104.104.104.13
Sep-104.304.504.53
Oct-104.504.464.43
Nov-104.854.614.68
Dec-104.905.135.28
Jan-115.205.175.36
Feb-115.155.004.88
Mar-115.005.085.10
Apr-115.205.155.05
May-114.754.804.81
Jun-114.904.714.77
Jul-114.924.694.67
Aug-114.754.925.03
Sep-114.934.834.91
Oct-114.804.864.97
Nov-115.084.404.42
Dec-114.604.644.61
Jan-124.694.664.57
Feb-124.614.634.59
Mar-124.624.594.48
Apr-124.664.534.62
May-124.574.664.55
Jun-124.654.564.37
Jul-124.504.474.47
Aug-124.554.874.82
Sep-124.754.704.75
Oct-124.744.844.79
Nov-124.905.105.04
Dec-125.104.974.94
Jan-134.904.944.92
Feb-135.014.874.98
Mar-135.034.894.92
Apr-134.925.034.97
May-135.005.205.18
Jun-135.274.995.08
Jul-135.135.335.39
Aug-135.255.355.48
Sep-135.305.265.29
Oct-135.135.085.12
Nov-135.024.984.90
Dec-134.904.964.87
Jan-144.704.674.62
Feb-144.644.604.60
Mar-144.564.644.59
Apr-144.674.704.65
May-144.754.814.89
Jun-144.994.965.04
Jul-145.005.095.15
Aug-145.185.125.05
Sep-145.095.145.17
Oct-145.155.285.26
Nov-145.204.904.93
Dec-145.055.155.04
Jan-155.004.904.82
Feb-154.944.874.88
Mar-155.045.185.19
Apr-155.225.205.04
May-155.255.295.35
Jun-155.405.455.49
Jul-155.415.645.59
Aug-155.505.545.31
Sep-155.355.565.55
Oct-155.415.335.36
Nov-155.324.974.76
Dec-155.195.365.46
Jan-165.325.365.47
Feb-165.305.205.08
Mar-165.275.275.33
Apr-165.405.445.45
May-165.645.555.53
Jun-165.485.625.57
Jul-165.525.415.39
Aug-165.445.495.33
Sep-165.355.555.47
Oct-165.445.475.60
Nov-165.545.605.61
Dec-165.545.555.49
Jan-175.555.605.69
Feb-175.555.415.48
Mar-175.615.745.71
Apr-175.675.56---
1NAR initially reported before revisions.

Saturday, May 20, 2017

Schedule for Week of May 21, 2017

by Calculated Risk on 5/20/2017 08:11:00 AM

The key economic reports this week are April New and Existing Home sales, and the second estimate of Q1 GDP.

----- Monday, May 22nd -----

8:30 AM: Chicago Fed National Activity Index for April. This is a composite index of other data.

----- Tuesday, May 23rd -----

New Home Sales10:00 AM ET: New Home Sales for April from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the March sales rate.

The consensus is for a decrease in sales to 604 thousand Seasonally Adjusted Annual Rate (SAAR) in April from 621 thousand in March.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for May.

----- Wednesday, May 24th -----

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

9:00 AM: FHFA House Price Index for March 2017. This was originally a GSE only repeat sales, however there is also an expanded index.

Existing Home Sales10:00 AM: Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 5.67 million SAAR, down from 5.71 million in March.

Housing economist Tom Lawler estimates the NAR will report sales of 5.56 million SAAR for April.

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

2:00 PM: FOMC Minutes for the Meeting of May 2 - 3, 2017

----- Thursday, May 25th -----

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 237 thousand initial claims, up from 232 thousand the previous week.

11:00 AM: the Kansas City Fed manufacturing survey for May.

----- Friday, May 26th -----

8:30 AM: Durable Goods Orders for April from the Census Bureau. The consensus is for a 0.9% decrease in durable goods orders.

8:30 AM: Gross Domestic Product, 1st quarter 2017 (Second estimate). The consensus is that real GDP increased 0.8% annualized in Q1, up from the advance estimate of 0.7%.

10:00 AM: University of Michigan's Consumer sentiment index (final for May). The consensus is for a reading of 97.6, down from the preliminary reading 97.7.

Friday, May 19, 2017

Oil: "Another Surge" in Rig Count

by Calculated Risk on 5/19/2017 05:06:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on May 19, 2017:

• Another smokin’ week for the rig count

• Total US oil rigs were up 8 to 720

• US horizontal oil rigs added 14 to 621
Oil Rig CountClick on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

Merrill: "Will it be a summer break for the Fed?"

by Calculated Risk on 5/19/2017 01:14:00 PM

A few excerpts from a Merrill Lynch research piece: Will it be a summer break for the Fed?

The US stock market witnessed its biggest sell-off of the year on Wednesday while Treasuries rallied and the market priced in a shallower path for rate hikes. The expectation for a June hike slipped to approximately 70% from near certainty earlier in the week. We are puzzled that the market remains committed to a hike in June but skeptical about future hikes in 2018. In our view, June is a close call and will be sensitive to financial conditions in the next few weeks. We are therefore holding to our forecast that the Fed will pause at the upcoming meeting, but the Fed’s narrative between now and June 3rd (blackout period begins) will be critical for the call.
...
Even before this week’s events, we had been arguing that June was a close call for the following reasons:

1. Inflation has slowed: While the March weakness was due to "special factors" the disappointment in April was widespread. This has prompted us to revise down our forecast for core PCE inflation this year to 1.7% from 1.9% previously (see the Hot Topic). Meanwhile, wage growth remains sticky, which could lead the Fed to revise down their estimate of NAIRU in June’s SEP.

2. Credit conditions have deteriorated: According to the Fed's own loan officer survey, demand for consumer loans declined over the prior three months while banks have continued to tighten lending standards.

3. Real activity data have surprised to the downside: Survey measures have come off the highs and hard data have been mixed to slightly weaker, sending data surprise measures lower.

4. The Fed's narrative is stale: The April FOMC statement was a placeholder given the uncertainty around the data. The Fed can easily change the narrative about the June meeting in the coming two weeks.
...
We think the June meeting remains a close call and would put the probability of a hike at just under even odds – 45% chance of a hike and 55% of a pause. Conditional on the Fed not hiking in June, we think the probability of a hike in September is about 70%.
emphasis added

BLS: Unemployment Rates Lower in 10 states in April, Three States at New Series Lows

by Calculated Risk on 5/19/2017 10:21:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in April in 10 states, higher in 1 state, and stable in 39 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Nineteen states had jobless rate decreases from a year earlier, and 31 states and the District had little or no change
...
Colorado had the lowest unemployment rate in April, 2.3 percent, followed by Hawaii and North Dakota, 2.7 percent each. The rates in Arkansas (3.5 percent), Colorado (2.3 percent), and Oregon (3.7 percent) set new series lows. (All state series begin in 1976.) New Mexico and Alaska had the highest jobless rates, 6.7 percent and 6.6 percent, respectively.
emphasis added
State Unemployment Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976.

The states are ranked by the highest current unemployment rate. New Mexico, at 6.7%, had the highest state unemployment rate.

State UnemploymentThe second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 7% (light blue); Only two states are at or above 6% (dark blue). The states are New Mexico (6.7%), and Alaska (6.6%).