Friday, March 31, 2017

Q1 GDP Forecasts Downgraded

by Calculated Risk on 3/31/2017 05:11:00 PM

The advance GDP report for Q1 GDP will be released in April.  Based on the February Personal Income and Outlays report released this morning, it appears PCE growth is tracking less than 0.5% in Q1. Here are a few updated forecasts for Q1:

From the Altanta Fed: GDPNow

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.9 percent on March 31, down from 1.0 percent on March 24.
emphasis added
From the NY Fed Nowcasting Report
The FRBNY Staff Nowcast stands at 2.9% for 2017:Q1 and 2.6% for 2017:Q2.

Negative news from consumption data reduced the nowcast by about one-tenth of a percentage point for both quarters.
From Merrill Lynch:
Real personal spending fell 0.1% mom in February, missing expectations of 0.1% growth ... On balance, these data sliced 0.7pp from 1Q GDP tracking, bringing us down to 1.2% qoq saar.

Fannie Mae: Mortgage Serious Delinquency rate declined in February, Lowest since March 2008

by Calculated Risk on 3/31/2017 02:02:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.19% in February, from 1.20% in January. The serious delinquency rate is down from 1.52% in February 2016.

This is the lowest serious delinquency rate since March 2008.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

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

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the "normal" serious delinquency rate is under 1%. 

The Fannie Mae serious delinquency rate has fallen 0.33 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until later this year.

Note: Freddie Mac reported earlier.

Reis: Apartment Vacancy Rate increased in Q1 to 4.3%

by Calculated Risk on 3/31/2017 11:59:00 AM

Reis reported that the apartment vacancy rate was at 4.3% in Q1 2017, up from 4.2% in Q4, and unchanged from 4.3% in Q1 2016. The vacancy rate peaked at 8.0% at the end of 2009.

From Reis: Effective Apartment Rents Decline in 23 of 79 Metros Across the U.S. The National Effective Rent Grew 0.3% in the Quarter, 3.1% over the Year

Apartment markets are slowing in 23 metros across the U.S. as indicated by a decline in effective rents in these metros. Effective rents net out landlord concessions which suggests that rents are flat in most of these markets but landlords have boosted free rent and other concessions to maintain occupancy.

At 4.3%, the national vacancy rate increased 10 basis points in the first quarter of 2017 from 4.2% in the previous quarter. One year ago, the vacancy rate was also 4.3%. New apartment construction has been robust across the U.S., yet occupancy growth has moved in step with supply growth for most metros.
emphasis added
Apartment Vacancy Rate Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Reis is just for large cities.

The vacancy rate had been mostly moving sideways for the last few years.  It is possible that the vacancy rate has bottomed.

Apartment vacancy data courtesy of Reis.

Chicago PMI increases in March

by Calculated Risk on 3/31/2017 09:58:00 AM

Chicago PMI: March Chicago Business Barometer at 57.7 vs 57.4 in February

The MNI Chicago Business Barometer was broadly stable at 57.7 in March, following a hefty rise of 7.1 points in February to 57.4.

Following a strong February, firms remained upbeat this month, with the increase led by four of the five components of the Barometer, as only Employment receded. March’s positive outturn left the Q1 calendar quarter average at 55.1, the highest level since Q4 2014.

Demand continued to grow, rising for the second month in a row. New orders rose by 1.2 points, to touch a fourmonth high. To keep pace with rising demand, Production also increased, up 1.4 points to a 14-month high of 61.7 in March. Order Backlogs rose for the third consecutive month, but remained just below the breakeven level, where it has sat for the previous three months. Suppliers took longer to deliver key inputs, with the respective indicator 1.6 points higher at 54.4 in March. Employment slipped back into contraction after rising above 50 briefly last month.
...
“The March Chicago report echoed last month’s upbeat tone of general business conditions. Though the Barometer was little changed, the underlying trend for many key indicators shows improvement, with a shift away from firms reporting worsening to that of remaining at the same level as last month,” said Shaily Mittal, senior economist at MNI Indicators.
emphasis added
This was above the consensus forecast of 57.1.

Personal Income increased 0.4% in February, Spending increased 0.1%

by Calculated Risk on 3/31/2017 08:49:00 AM

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

Personal income increased $57.7 billion (0.4 percent) in February according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $7.4 billion (0.1 percent).
...
Real PCE decreased 0.1 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
The February PCE price index increased 2.1 percent year-over-year and the February PCE price index, excluding food and energy, increased 1.8 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through February 2017 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was at expectations,  however the increase in PCE was below expectations.

Using the two-month method to estimate Q1 PCE growth, PCE was increasing at a 0.4% annual rate in Q1 2017. (using the mid-month method, PCE was increasing 1.0%). This suggests weak PCE growth in Q1.

Thursday, March 30, 2017

Friday: Personal Income and Outlays, Chicago PMI

by Calculated Risk on 3/30/2017 08:03:00 PM

Friday:
• At 8:30 Personal Income and Outlays for February. The consensus is for a 0.4% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• Also at 9:45 AM, Chicago Purchasing Managers Index for March. The consensus is for a reading of 57.1, down from 57.4 in February.

• At 10:00 AM, University of Michigan's Consumer sentiment index (final for March). The consensus is for a reading of 97.6, unchanged from the preliminary reading 95.7.

Census: "One-third of the adult population in the United States has a bachelor’s degree or higher"

by Calculated Risk on 3/30/2017 04:46:00 PM

From the Census Bureau: More than one-third of the adult population in the United States has a bachelor’s degree or higher

More than one-third of the adult population in the United States has a bachelor’s degree or higher marking the first time in decades of data.

The percentage rose to 33.4 percent in 2016, a significant milestone since the Current Population Survey began collecting educational attainment in 1940,” said Kurt Bauman, Chief of the Education and Social Stratification Branch. “In 1940, only 4.6 percent had reached that level of education.”

In 2010, less than 30 percent of those 25 and older had completed a bachelor’s degree or higher, and in 2006, 28 percent had reached that level of education.
emphasis added
Educational AttainmentThis graph shows the percent of adults, 25 years and older, with a bachelor's degree or higher.

More education is one of the reasons I've argued the Future is Bright!

Hotels: Hotel Occupancy Rate Solid in March

by Calculated Risk on 3/30/2017 11:23:00 AM

After some weakness early in the year, hotel occupancy has picked up in recent weeks and is now close to the record year (2015 was the record).

From HotelNewsNow.com: STR: US hotel results for week ending 25 March

U.S. hotels saw year-over-year performance increases for the week of 19-25 March. Occupancy rose 5% to 68.7%, ADR increased 2.9% to $127.68 and RevPAR jumped 7.9% to $87.75.

STR analysts note that performance growth was boosted by an Easter calendar shift (27 March 2016). In comparison with the week of 20-26 March 2016, the industry reported the following in year-over-year comparisons:

Occupancy: +5.0% to 68.7%
Average daily rate (ADR): +2.9% to US$127.68
Revenue per available room (RevPAR): +7.9% to US$87.75
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateThe red line is for 2017, dashed is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

For hotels, occupancy will now move mostly sideways until the summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

Weekly Initial Unemployment Claims decrease to 258,000

by Calculated Risk on 3/30/2017 08:40:00 AM

The DOL reported:

In the week ending March 25, the advance figure for seasonally adjusted initial claims was 258,000, a decrease of 3,000 from the previous week's unrevised level of 261,000. The 4-week moving average was 254,250, an increase of 7,750 from the previous week's unrevised average of 246,500.
emphasis added
The previous week was revised up.

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 increased to 254,250.

This was above the consensus forecast.

The low level of claims suggests relatively few layoffs.

Wednesday, March 29, 2017

Thursday: GDP, Unemployment Claims

by Calculated Risk on 3/29/2017 06:03:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Steady, Depending on Lender

Compared to yesterday, today's mortgage rates are a moving target depending on the lender.  Some are better.  Some are worse.  On average, rates are unchanged from yesterday's latest rate sheets.  The variability has to do with yesterday's fairly sharp losses in bond markets (which dictate rates).
...
4.25% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios
emphasis added
Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 247 thousand initial claims, down from 258 thousand the previous week.

• Also at 8:30 AM, Gross Domestic Product, 4th quarter 2016 (third estimate). The consensus is that real GDP increased 2.0% annualized in Q4, up from the second estimate of 1.9%.

Zillow Forecast: "Case-Shiller national index is forecast to grow 6 percent year-over-year" in February

by Calculated Risk on 3/29/2017 11:55:00 AM

The Case-Shiller house price indexes for January were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: February Case-Shiller Forecast: Year-Over-Year Price Gains to Continue

Annual gains in the S&P CoreLogic Case-Shiller home price indices are expected to maintain their smoking pace in February, while month-over-month gains are expected to slow, according to Zillow’s February Case-Shiller forecast.

The February Case-Shiller national index is forecast to grow 6 percent year-over-year and 0.5 percent from January, up from January’s 5.9 percent annual growth but down a bit from its 0.6 percent monthly growth. The smaller 10- and 20-city indices are expected to post annual growth of 5.4 percent and 5.7 percent, respectively, up from 5.1 percent for the 10-city index and even with the 20-city index’s performance in January.

The 10- and 20-city indices are projected to post seasonally adjusted, month-over-month gains of 0.8 percent and 0.6 percent, respectively. Both would represent slowing from the 0.9 percent growth they each saw between December and January.

Zillow’s February Case-Shiller forecast is shown below. These forecasts are based on today’s January Case-Shiller data release and the February 2017 Zillow Home Value Index. The February S&P CoreLogic Case-Shiller Indices will not be officially released until Tuesday, April 25.
The year-over-year change for the Case-Shiller national index will probably increase in February.

Zillow forecast for Case-Shiller

NAR: Pending Home Sales Index increased 5.5% in February, up 2.6% year-over-year

by Calculated Risk on 3/29/2017 10:06:00 AM

From the NAR: Pending Home Sales Leap 5.5% in February

The Pending Home Sales Index,* www.nar.realtor/topics/pending-home-sales, a forward-looking indicator based on contract signings, jumped 5.5 percent to 112.3 in February from 106.4 in January. Last month's index reading is 2.6 percent above a year ago, is the highest since last April (113.6) and the second highest since May 2006 (112.5).
...
The PHSI in the Northeast rose 3.4 percent to 102.1 in February, and is now 6.6 percent above a year ago. In the Midwest the index jumped 11.4 percent to 110.8 in February, but is still 0.6 percent lower than February 2016.

Pending home sales in the South climbed 4.3 percent to an index of 127.8 in February and are now 4.2 percent above last February. The index in the West increased 3.1 percent in February to 97.5, but is still 0.2 percent higher than a year ago.
emphasis added
This was well above expectations of a 1.8% increase for this index. The warm weather in February might have impacted this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in March and April.

MBA: Mortgage Applications Decrease Slightly in Latest Weekly Survey

by Calculated Risk on 3/29/2017 07:00:00 AM

From the MBA: Mortgage Applications Slightly Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 24, 2017.

... The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 4 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.33 percent from 4.46 percent, with points increasing to 0.43 from 0.41 (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 remains low - and would not increase significantly unless rates fall sharply.


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

Even with the increase in mortgage rates over the last few months, purchase activity is still holding up.

However refinance activity has declined significantly since rates increased.

Tuesday, March 28, 2017

A few comments on the Seasonal Pattern for House Prices

by Calculated Risk on 3/28/2017 05:33:00 PM

CR Note: This is a repeat of a previous post with updated graphs.

A few key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.
3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now overstating the seasonal change (second graph below).
4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.

For in depth description of these issues, see Trulia chief economist Jed Kolko's article "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data"

Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data).

House Prices month-to-month change NSA Click on graph for larger image.

This graph shows the month-to-month change in the CoreLogic (through January 2017) and NSA Case-Shiller National index since 1987 (through January 2017).   The seasonal pattern was smaller back in the '90s and early '00s, and once the bubble burst.

The seasonal swings have declined since the bubble.

Case Shiller Seasonal FactorsThe second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust.

The swings in the seasonal factors has started to decrease, and I expect that over the next several years - as the percent of distressed sales declines further and recent history is included in the factors - the seasonal factors will move back towards more normal levels.  However, as Kolko noted, there will be a lag with the seasonal factor since it is based on several years of recent data.

Real House Prices and Price-to-Rent Ratio in January

by Calculated Risk on 3/28/2017 12:41:00 PM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 5.9% year-over-year in January

It has been more than ten years since the bubble peak. In the Case-Shiller release this morning, the seasonally adjusted National Index (SA), was reported as being 1.9% above the previous bubble peak. However, in real terms, the National index (SA) is still about 14.5% below the bubble peak.

The year-over-year increase in prices is mostly moving sideways now just over 5%. In January, the index was up 5.9% YoY.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $280,000 today adjusted for inflation (40%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through January) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is at a new peak, and the Case-Shiller Composite 20 Index (SA) is back to September 2005 levels, and the CoreLogic index (NSA) is back to September 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to April 2004 levels, the Composite 20 index is back to December 2003, and the CoreLogic index back to March 2004.

In real terms, house prices are back to late 2003 / early 2004 levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to November 2003 levels, the Composite 20 index is back to August 2003 levels, and the CoreLogic index is back to July 2003.

In real terms, and as a price-to-rent ratio, prices are back to late 2003 / early 2004  - and the price-to-rent ratio maybe moving a little more sideways now.

Richmond Fed: Regional Manufacturing Activity Expanded in March

by Calculated Risk on 3/28/2017 10:56:00 AM

From the Richmond Fed: Manufacturing Firms Upbeat in March with Shipments, New Orders, and Employment Indexes Rising

Manufacturers in the Fifth District were generally upbeat in March, according to the latest survey by the Federal Reserve Bank of Richmond. The index for shipments and new orders both rose and employment gains were more common. This improvement led to a composite index for manufacturing that rose from 17 in February to 22 in March — the strongest reading for that index since April 2010. In addition to improvement in the employment index, more firms reported longer workweeks and wage increases appeared to be more widespread. ...
emphasis added
This was the last of the regional Fed surveys for March.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through March), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through February (right axis).

It seems likely the ISM manufacturing index will show solid expansion in March (to be released next week).

Case-Shiller: National House Price Index increased 5.9% year-over-year in January

by Calculated Risk on 3/28/2017 09:18:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for January ("January" is a 3 month average of November, December and January prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: S&P Corelogic Case-Shiller National Index Annual Return Sets 31-Month High

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.9% annual gain in January, up from 5.7% last month and setting a 31-month high. The 10-City Composite posted a 5.1% annual increase, up from 4.8% the previous month. The 20-City Composite reported a year-over-year gain of 5.7%, up from 5.5% in December

Seattle, Portland, and Denver reported the highest year-over-year gains among the 20 cities over each of the last 12 months. In January, Seattle led the way with an 11.3% year-over-year price increase, followed by Portland with 9.7%, and Denver with a 9.2% increase. Twelve cities reported greater price increases in the year ending January 2017 versus the year ending December 2016.
...
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.2% in January. The 10-City Composite posted a 0.3% increase and the 20-City Composite reported a 0.2% increase in January. After seasonal adjustment, the National Index recorded a 0.6% month-over-month increase, while both the 10-City and 20-City Composites each reported a 0.9% month-over-month increase. Thirteen of 20 cities reported increases in January before seasonal adjustment; after seasonal adjustment, 19 cities saw prices rise.
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 7.7% from the peak, and up 0.9% in January (SA).

The Composite 20 index is off 5.4% from the peak, and up 0.9% (SA) in January.

The National index is 1.9% above the bubble peak (SA), and up 0.6% (SA) in January.  The National index is up 37.7% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 5.1% compared to January 2015.

The Composite 20 SA is up 5.7% year-over-year.

The National index SA is up 5.9% year-over-year.

Note: According to the data, prices increased in all 19 cities month-over-month seasonally adjusted.

I'll have more later.

Monday, March 27, 2017

Tuesday: Case-Shiller House Prices

by Calculated Risk on 3/27/2017 07:09:00 PM

Here is the Zillow forecast (They've been very close each month):

The January Case-Shiller national index is expected to grow 6 percent year-over-year and 0.5 percent from December, up from 5.8 percent annual growth recorded in November but down somewhat from 0.7 percent monthly growth in December. The smaller 10- and 20-city indices are both expected to grow by 0.7 percent month-over-month (SA), slower than the 0.9 percent monthly growth recorded in December. On an annual basis, the 10- and 20-city indices are expected to grow by 5.1 percent and 5.7 percent in January, respectively, up from 4.9 percent and 5.6 percent in November.
Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for January. Although this is the January report, it is really a 3 month average of November, December and January prices. The consensus is for a 5.7% year-over-year increase in the Comp 20 index for January.

• At 10:00 AM: Richmond Fed Survey of Manufacturing Activity for March. This is the last of the regional Fed surveys for March.

• At 12:50 PM: Speech by Fed Chair Janet Yellen, Addressing Workforce Development Challenges in Low-Income Communities, At the National Community Reinvestment Coalition Annual Conference, Washington, D.C.

Freddie Mac: Mortgage Serious Delinquency rate declines in February, Lowest since June 2008

by Calculated Risk on 3/27/2017 12:42:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in February was at 0.98%, down from 0.99% in January.  Freddie's rate is down from 1.26% in February 2016.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

This is the lowest serious delinquency rate since June 2008.

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

Although the rate is still declining, the rate of decline has slowed.

Maybe the rate will decline another 0.25 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report soon.

Dallas Fed: "Texas Manufacturing Activity Strengthens" in March

by Calculated Risk on 3/27/2017 10:44:00 AM

From the Dallas Fed: Texas Manufacturing Activity Strengthens

Texas factory activity increased for the ninth consecutive month in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose two points to 18.6, suggesting output growth picked up pace this month. ...
...
The general business activity index fell eight points but remained positive at 16.9, and the company outlook index was largely unchanged at 17.9. The March figures represent the sixth and seventh positive readings in a row for general business activity and company outlook indexes, respectively.
...
Labor market measures indicated employment gains and longer workweeks in March. The employment index posted a third consecutive positive reading and edged down from 9.6 to 8.4. Nineteen percent of firms noted net hiring, compared with 10 percent noting net layoffs. The hours worked index moved up one point to 8.7. ...
emphasis added
The Richmond Fed manufacturing survey for March will be released tomorrow. Based on the surveys released so far, it appears the ISM index will be strong again in March.

Black Knight: House Price Index up 0.1% in January, Up 5.4% year-over-year

by Calculated Risk on 3/27/2017 07:01:00 AM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight Home Price Index Report - January 2017 Transactions: U.S. Home Prices Up 0.1 Percent for the Month; Up 5.4 Percent Year-Over-Year

• U.S. home prices at the start of 2017 continued the trend of incremental monthly gains, rising 0.1 percent from December

• January marks 57 consecutive months of annual national home price appreciation

• Home prices in three of the nation’s 20 largest states and nine of the 40 largest metros hit new peaks
The year-over-year increase in this index has been about the same for the last year.

Note that house prices are close to the bubble peak in nominal terms (just 0.3% below), but not in real terms (adjusted for inflation).  Case-Shiller for January will be released tomorrow.

Sunday, March 26, 2017

Sunday Night Futures

by Calculated Risk on 3/26/2017 09:30:00 PM

Weekend:
Schedule for Week of Mar 26, 2017

Monday:
• 10:30 AM: Dallas Fed Survey of Manufacturing Activity for March.

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are down 13 and DOW futures are down 90 (fair value).

Oil prices were down over the last week with WTI futures at $47.93 per barrel and Brent at $50.80 per barrel.  A year ago, WTI was at $40, and Brent was at $40 - so oil prices are up about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.28 per gallon - a year ago prices were at $2.05 per gallon - so gasoline prices are up about 23 cents a gallon year-over-year.

Fed: Q4 Household Debt Service Ratio Very Low

by Calculated Risk on 3/26/2017 12:59:00 PM

The Fed's Household Debt Service ratio through Q4 2016 was released on Friday: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations.

These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013.

The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income.

The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR.
This data has limited value in terms of absolute numbers, but is useful in looking at trends. Here is a discussion from the Fed:
The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only an approximation of the debt service ratio faced by households. Nonetheless, this approximation is useful to the extent that, by using the same method and data series over time, it generates a time series that captures the important changes in the household debt service burden.
Financial Obligations Click on graph for larger image.

The graph shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio decreased slightly in Q4, and has been moving sideways and is near a record low.  Note: The financial obligation ratio (FOR) was decreased slightly in Q4 and is also near a record low (not shown)

The DSR for mortgages (blue) are near the low for the last 35 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.

The consumer debt DSR (yellow) has been increasing for the last four years.

This data suggests aggregate household cash flow has improved.

Saturday, March 25, 2017

Schedule for Week of Mar 26, 2017

by Calculated Risk on 3/25/2017 08:11:00 AM

The key economic reports this week are the third estimate of Q4 GDP, Personal Income and Outlays for February, and the Case-Shiller house price index.

----- Monday, Mar 27th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for March.

----- Tuesday, Mar 28th-----

Case-Shiller House Prices Indices 9:00 AM ET: S&P/Case-Shiller House Price Index for January. Although this is the January report, it is really a 3 month average of November, December and January prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the December 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.7% year-over-year increase in the Comp 20 index for January.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for March. This is the last of the regional Fed surveys for March.

12:50 PM: Speech by Fed Chair Janet Yellen, Addressing Workforce Development Challenges in Low-Income Communities, At the National Community Reinvestment Coalition Annual Conference, Washington, D.C.

----- Wednesday, Mar 29th -----

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

10:00 AM: Pending Home Sales Index for February. The consensus is for a 1.8% increase in the index.

----- Thursday, Mar 30th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 247 thousand initial claims, down from 258 thousand the previous week.

8:30 AM: Gross Domestic Product, 4th quarter 2016 (third estimate). The consensus is that real GDP increased 2.0% annualized in Q4, up from the second estimate of 1.9%.

----- Friday, Mar 31st -----

8:30 AM: Personal Income and Outlays for February. The consensus is for a 0.4% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for March. The consensus is for a reading of 57.1, down from 57.4 in February.

10:00 AM: University of Michigan's Consumer sentiment index (final for March). The consensus is for a reading of 97.6, unchanged from the preliminary reading 95.7.

Friday, March 24, 2017

Oil: "Incredible strength in rig additions"

by Calculated Risk on 3/24/2017 07:08:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Mar 24, 2017:

• US oil rig count was up an eye-popping 21 this week to 652

• US horizontal oil rigs were up by 13 to 543
...
• Despite a major correction in oil prices, rig additions continue at a rapid pace.
Oil Rig CountClick on graph for larger image.

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

CoreLogic: "Between 2007–2016, Nearly 7.8 Million Homes Lost to Foreclosure"

by Calculated Risk on 3/24/2017 04:22:00 PM

Here is a report from CoreLogic: US Residential Foreclosure Crisis: 10 Years Later. There are several interesting graphs in the report, including foreclosures completed by year.

This graph for CoreLogic the Ten States with the highest peak foreclosure rate during the crisis, and the current foreclosure rate.

CoreLogic Foreclosure ReportSome states like Nevada and Florida have improved significantly. Other states, like New Jersey and New York, have only recovered slowly.

Here is a table based on data from the CoreLogic report showing completed foreclosure per year.

Completed foreclosure by Year
Source: CoreLogic
YearCompleted Foreclosures
2000191,295
2001183,437
2002232,330
2003255,010
2004275,900
2005293,541
2006383,037
2007592,622
2008983,881
20091,035,033
20101,178,234
2011958,957
2012853,358
2013679,923
2014608,321
2015506,609
2016385,748

Vehicle Sales Forecast: Sales Over 17 Million SAAR in March

by Calculated Risk on 3/24/2017 02:20:00 PM

The automakers will report March vehicle sales on Tuesday, April 4th.

Note: There were 27 selling days in March 2017, unchanged from 27 in March 2016.

From WardsAuto: Forecast: U.S. March Sales to Reach 17-Year High

A WardsAuto forecast calls for U.S. automakers to deliver 1.61 million light vehicles in March, a 17-year high for the month. The forecasted daily sales rate of 59,776 over 27 days is a best-ever March result. This DSR represents a 2.6% improvement from like-2016 (also 27 days). March is anticipated to be the first month in 2017 to outpace prior-year.

The report puts the seasonally adjusted annual rate of sales for the month at 17.2 million units, below the 17.4 million SAAR from the first two months of 2017 combined, but well above the 16.6 million from same-month year-ago. ...
emphasis added
From J.D. Power: March U.S. auto sales seen up nearly 1.9 pct -JD Power and LMC
U.S. auto sales in March will increase almost 1.9 percent from a year earlier, even as consumer discounts continue to remain at record levels, industry consultants J.D. Power and LMC Automotive said on Friday.

March U.S. new vehicle sales will be about 1.62 million units, up about 1.9 percent from 1.59 million units a year earlier, the consultancies said. The forecast was based on the first 16 selling days of the month.

The seasonally adjusted annualized rate for the month will be 17.3 million vehicles, up from 16.8 million a year earlier.
Looks like another strong month for vehicle sales, but incentives are at record levels and inventories are high.

U.S. Heavy Truck Sales increasing following Oil Price Related Slump

by Calculated Risk on 3/24/2017 11:52:00 AM

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the February 2017 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 181 thousand in April and May 2009, on a seasonally adjusted annual rate basis (SAAR). Then sales increased more than 2 1/2 times, and hit 479 thousand SAAR in June 2015.

Heavy truck sales declined again - probably mostly due to the weakness in the oil sector - and bottomed at 352 thousand SAAR in October of last year.

Heavy Truck Sales
Click on graph for larger image.

With the increase in oil prices over the last year, heavy truck sales have been increasing too.

Heavy truck sales were at 400 thousand SAAR in February 2017.

BLS: Unemployment Rates "significantly lower in February in 10 states", Arkansas and Oregon at New Lows

by Calculated Risk on 3/24/2017 10:11:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were significantly lower in February 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. Nine states had notable jobless rate decreases from a year earlier, and 41 states and the District had no significant change. The national unemployment rate, at 4.7 percent, was little changed from January but 0.2 percentage point lower than in February 2016.
...
New Hampshire had the lowest unemployment rate in February, 2.7 percent, closely followed by Hawaii and South Dakota, 2.8 percent each, and Colorado and North Dakota, 2.9 percent each. The rates in both Arkansas (3.7 percent) and Oregon (4.0 percent) set new series lows. ... New Mexico had the highest jobless rate, 6.8 percent, followed by Alaska and Alabama, 6.4 percent and 6.2 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 6.8%, 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 three states are at or above 6% (dark blue). The states are New Mexico (6.8%), Alaska (6.4%), and Alabama (6.2%).

Thursday, March 23, 2017

A few Comments on February New Home Sales

by Calculated Risk on 3/23/2017 12:51:00 PM

New home sales for February were reported at 592,000 on a seasonally adjusted annual rate basis (SAAR).  This was well above the consensus forecast, however the three previous months combined were revised down slightly.  Overall this was a solid report.

Note: February 2017 was warmer than normal in most of the country, and since new home sales are counted when the contract is signed, the nice weather might have had a positive impact on sales in February.

Sales were up 12.8% year-over-year in February.  However, January and February were the weakest months last year on a seasonally adjusted annual rate basis - so this was an easy comparison.

It will take several months of data to see the impact of higher mortgage rates - and this is the seasonally weak period - so we might have to wait for the March and April data to see if there was any impact.

Earlier: New Home Sales increase to 592,000 Annual Rate in February.

New Home Sales 2015 2016Click on graph for larger image.

This graph shows new home sales for 2016 and 2017 by month (Seasonally Adjusted Annual Rate).  Sales were up 12.8% year-over-year in January.

For the first two months of 2017, new home sales are up 7.1% compared to the same period in 2016.

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

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2017. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes.

I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

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.

Kansas City Fed: Regional Manufacturing Activity "Strengthened Further" in March

by Calculated Risk on 3/23/2017 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Strengthened Further

The Federal Reserve Bank of Kansas City released the March Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity strengthened further with strong expectations for future activity.

Our composite index accelerated again, and has only been higher one time in the last 15 years,” said Wilkerson.  “The future employment index was the strongest in the 23-year history of the survey."
...
The month-over-month composite index was 20 in March, its highest reading since March 2011, up from 14 in February and 9 in March.  The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.  Activity in both durable and nondurable goods plants increased, particularly for metals, computer, electronic, and aircraft products.  Most month-over-month indexes rose further in March.  The production and shipments indexes increased considerably, while the new orders and order backlog indexes rose more moderately but remained high.  The employment index moderated slightly from 17 to 13, and the new orders for exports index also eased.  Both inventory indexes increased for the second straight month.
emphasis added
The Kansas City region was hit hard by the decline in oil prices, but activity is expanding solidly again. The regional Fed surveys released so far suggest another strong reading for the ISM manufacturing index for March.

New Home Sales increase to 592,000 Annual Rate in February

by Calculated Risk on 3/23/2017 10:12:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 592 thousand.

The previous three months combined were revised down slightly.

"Sales of new single-family houses in February 2017 were at a seasonally adjusted annual rate of 592,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.1 percent above the revised January rate of 558,000 and is 12.8 percent above the February 2016 estimate of 525,000."
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 declined in February to 5.4 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 February was 266,000. This represents a supply of 5.4 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 February 2017 (red column), 49 thousand new homes were sold (NSA). Last year, 45 thousand homes were sold in February.

The all time high for February was 109 thousand in 2005, and the all time low for February was 22 thousand in 2011.

This was above expectations of 565,000 sales SAAR.   I'll have more later today.

Weekly Initial Unemployment Claims increase to 258,000

by Calculated Risk on 3/23/2017 08:39:00 AM

The DOL reported:

In the week ending March 18, the advance figure for seasonally adjusted initial claims was 258,000, an increase of 15,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 241,000 to 243,000. The 4-week moving average was 240,000, an increase of 1,000 from the previous week's revised average. The previous week's average was revised up by 1,750 from 237,250 to 239,000.
emphasis added
The previous week was revised up.

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 increased to 240,000.

This was above the consensus forecast.

The low level of claims suggests relatively few layoffs.

Black Knight: Mortgage Delinquencies Declined in February

by Calculated Risk on 3/23/2017 07:00:00 AM

From Black Knight: Black Knight Financial Services’ First Look at February Mortgage Data: Prepayment Activity Continues to Decline, Down 40 Percent So Far in 2017

• Prepayment speeds (historically a good indicator of refinance activity) declined 15 percent in February, marking a 40 percent overall year-to-date decline and the lowest monthly rate in three years

  • Delinquencies continued their seasonal decline, ticking down .98 percent from January

  • Foreclosure starts fell 18 percent from last month to 31 percent below last year’s levels

  • Active foreclosure inventory now stands at 470,000, the lowest such level since June 2007
According to Black Knight's First Look report for February, the percent of loans delinquent decreased 1.0% in February compared to January, and declined 5.5% year-over-year.

The percent of loans in the foreclosure process declined 1.9% in February and were down 28.5% 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 4.21% in February, down from 4.25% in January.

The percent of loans in the foreclosure process declined in February to 0.93%.

The number of delinquent properties, but not in foreclosure, is down 117,000 properties year-over-year, and the number of properties in the foreclosure process is down 185,000 properties year-over-year.

Still improving, but the improvement has slowed.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  Feb
2017
Jan
2017
Feb
2016
Feb
2015
Delinquent4.21%4.25%4.45%5.30%
In Foreclosure0.93%0.94%1.30%1.72%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:2,135,0002,162,0002,252,0002,671,000
Number of properties in foreclosure pre-sale inventory:470,000481,000655,000866,000
Total Properties2,605,0002,643,0002,907,0003,537,000

Wednesday, March 22, 2017

Thursday: New Home Sales, Unemployment Claims

by Calculated Risk on 3/22/2017 06:32:00 PM

The warmer weather probably didn't impact February existing home sales, because existing home sales are counted when the contract closes. However the warm February may have boosted New Home sales since new home sales are counted when contracts are signed - and there were probably more people out looking in some parts of the country with the warmer weather.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 240 thousand initial claims, down from 241 thousand the previous week.

• At 8:45 AM, Speech by Fed Chair Janet L. Yellen, Opening Remarks, At the 2017 Federal Reserve System Community Development Research Conference, Washington, D.C.

• At 10:00 AM, New Home Sales for February from the Census Bureau. The consensus is for an increase in sales to 565 thousand Seasonally Adjusted Annual Rate (SAAR) in February from 555 thousand in January.

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

A Few Comments on February Existing Home Sales

by Calculated Risk on 3/22/2017 02:39:00 PM

Earlier: NAR: "Existing-Home Sales Stumble in February"

A few key points:

1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus.  See: Existing Home Sales: Take the Under

2) The warmer weather probably had no impact on February sales (existing home sales are reported at closing).  Warmer weather in February might have boosted sales for March and early April.

3) The contracts for February existing home sales were entered after the recent increase in mortgage rates (rates started increasing after the election).

With the recent increase in rates, I'd expect some decline in sales volume as happened following the "taper tantrum" in 2013.   This is the first month with softer sales (and it is just one month), so maybe sales will hold up.

4) Inventory is still very low and falling year-over-year (down 6.4% year-over-year in January). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

To repeat: Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. In 2015, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

Of course low inventory keeps potential move-up buyers from selling too.  If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade.

I expect inventory will be increasing year-over-year by the end of 2017.

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

Existing Home Sales NSAClick on graph for larger image.

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

Note that sales NSA are in the slow seasonal period, and will increase sharply (NSA) in March.

AIA: Architecture Billings Index increased in February

by Calculated Risk on 3/22/2017 12:24:00 PM

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

From the AIA: Architecture Billings Index rebounds into positive territory

The Architecture Billings Index (ABI) returned to growth mode in February, after a weak showing in January. 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 February ABI score was 50.7, up from a score of 49.5 in the previous month. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.5, up from a reading of 60.0 the previous month, while the new design contracts index climbed from 52.1 to 54.7.

“The sluggish start to the year in architecture firm billings should give way to stronger design activity as the year progresses,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “New project inquiries have been very strong through the first two months of the year, and in February new design contracts at architecture firms posted their largest  monthly gain in over two years.”  
...
• Regional averages: Midwest (52.4), South (50.5), Northeast (50.0), West (47.5)

• Sector index breakdown: institutional (51.8), multi-family residential (49.3), mixed practice (49.2), commercial / industrial (48.9)
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 50.7 in February, up from 49.5 in January. 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.

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 9 of the last 12 months, suggesting a further increase in CRE investment in 2017.

NAR: "Existing-Home Sales Stumble in February"

by Calculated Risk on 3/22/2017 10:12:00 AM

From the NAR: Existing-Home Sales Stumble in February

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, retreated 3.7 percent to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month's decline, February's sales pace is still 5.4 percent above a year ago.

Total housing inventory 3 at the end of February increased 4.2 percent to 1.75 million existing homes available for sale, but is still 6.4 percent lower than a year ago (1.87 million) and has fallen year-over-year for 21 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (3.5 months in January).
emphasis added
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 January (5.48 million SAAR) were 3.7% lower than last month, but were 5.4% above the February 2016 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.75 million in February from 1.68 million in January.   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 last 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 6.4% year-over-year in February compared to February 2016.  

Months of supply was at 3.8 months in February.

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

MBA: Mortgage Applications Decrease in Latest Weekly Survey

by Calculated Risk on 3/22/2017 07:00:00 AM

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

Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 17, 2017.

... The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 5 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.46 percent, with points increasing to 0.41 from 0.37 (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 remains low - and would not increase significantly unless rates fall sharply.


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

Even with the increase in mortgage rates over the last few months, purchase activity is still holding up.

However refinance activity has declined significantly since rates increased.

Tuesday, March 21, 2017

Wednesday: Existing Home Sales

by Calculated Risk on 3/21/2017 05:41:00 PM

First, I expect existing home sales to be below consensus tomorrow. See: Existing Home Sales: Take the Under

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

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

• At 10:00 AM, Existing Home Sales for February from the National Association of Realtors (NAR). The consensus is for 5.55 million SAAR, down from 5.69 million in January. Housing economist Tom Lawler expects the NAR to report sales of 5.41 million SAAR in February.

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

S&P 500

Here is a graph (click on graph for larger image) from Doug Short and shows the S&P 500 since the 2007 high.  Today is that little blip at the end.

More graphs here: S&P 500 Snapshot: Biggest Loss in Five Months

Chemical Activity Barometer increases in March

by Calculated Risk on 3/21/2017 11:52:00 AM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Consumer, Business Confidence Reach Levels Not Seen in Decades; Optimism Reflected in Increased Chemical Industry Activity

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted its strongest year-over-year gain in nearly seven years. The 5.5 percent increase over this time last year reflects elevated consumer and business confidence and an overall rising optimism in the U.S. economy. Speaking last week, Federal Reserve Chairwoman Janet Yellen also referenced a “confidence in the robustness of the economy” as a reason to move forward with an interest rate hike.

The barometer posted a 0.5 percent gain in March, following a 0.5 percent gain in February and 0.4 percent gain in January. All data is measured on a three-month moving average (3MMA). Coupled with consecutive monthly gains in the fourth quarter of 2016, the pattern shows consistent, accelerating activity. On an unadjusted basis the CAB climbed 0.4 percent in March, following a 0.4 percent gain in February and a 0.6 percent increase in January.
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added
Chemical Activity Barometer Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

CAB has increased solidly over the last several months, and this suggests an increase in Industrial Production in 2017.

"Mortgage Rates at 2 Week Lows"

by Calculated Risk on 3/21/2017 10:03:00 AM

From Matthew Graham at Mortgage News Daily: Mortgage Rates at 2 Week Lows Amid Political Uncertainty

Mortgage rates were steady-to-slightly lower today, keeping them in line with the lowest levels in 2 weeks and very close to the lowest levels of the month.  For most lenders, that means conventional 30yr fixed rate quotes of 4.25% on top tier scenarios.  Some lenders are still up at 4.375% and an aggressive few are back down to 4.125%.

Last week, we discussed the motivations for the rate improvements in detail.  To recap: longer-term rates like mortgages had already risen in anticipation of the Fed rate hike.  It wasn't a surprise.  Instead, markets were focused on the Fed's forward-looking rate hike forecasts, which came out slightly slower than markets expected.  Thus, rates were overly-prepared for a fast rate hike timeline and had some room to return to early March levels.

From there, attention has turned to fiscal uncertainty as several policy objectives of the Trump administration have run into roadblocks.  Specifically, investors are concerned that tax cuts will be significantly delayed as the health care debate seems to be front and center.  The expectation of tax cuts (and other fiscal measures) was a major contributor to the move higher in rates and stocks after the election.  To whatever extent those measures are delayed, investors can easily question if rates and stocks are higher than they should be. 
emphasis added
Here is a table from Mortgage News Daily:


Monday, March 20, 2017

Hotels: Hotel Occupancy Solid in early March

by Calculated Risk on 3/20/2017 03:11:00 PM

Hotel occupancy has picked up in recent weeks and is now close to the record year (2015 was the record).

From HotelNewsNow.com: STR: US hotel results for week ending 11 March

The U.S. hotel industry reported positive results in the three key performance metrics during the week of 5-11 March 2017, according to data from STR.

In a year-over-year comparison with the week of 6-12 March 2016:
Occupancy: +0.8% to 67.4%
• Average daily rate (ADR): +3.9% to US$128.61
• Revenue per available room (RevPAR): +4.8% to US$86.72
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateThe red line is for 2017, dashed is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

For hotels, occupancy will now move mostly sideways until the summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

Housing: Upside and Downside Risks

by Calculated Risk on 3/20/2017 10:33:00 AM

In a note today, Merrill Lynch economist Michelle Meyer notes a few upside and downside risks for housing. A few excerpts:

The housing market is being hit by several cross currents. On the upside, the warmer than-normal weather in the winter likely boosted housing activity over the past few months. The risk, however, is that this could be pulling activity forward from the spring. In addition, the general improvement in the economy and gain in consumer confidence could be underpinning housing activity. The NAHB homebuilder confidence index has climbed higher, reaching a new cyclical high of 71 in March. Clearly builders are optimistic. However, on the downside, interest rates have increased which weighs on affordability.

There are also a variety of potential policy changes which can impact the outlook for the housing market. High on the list is financial market deregulation and its impact on the flow of credit. In addition, there seems to be renewed focus on reforming the mortgage finance system and bringing Fannie Mae and Freddie Mac out of conservatorship. In addition, immigration reform could have significant impacts on the housing market over the medium term.
emphasis added
CR note: If, later this year, the Fed starts to reduce their balance sheet, that might push up longer rates (and pushing up mortgage rates a little more). Another downside risk for housing is reduced foreign buying due to the strong dollar, U.S. political concerns, and capital controls in China.

Chicago Fed "Economic Growth Increased in February"

by Calculated Risk on 3/20/2017 08:44:00 AM

From the Chicago Fed: Economic Growth Increased in February

Led by improvements in employment-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.34 in February from –0.02 in January. All four broad categories of indicators that make up the index increased from January, and only one of the four categories made a negative contribution to the index in February.

The index’s three-month moving average, CFNAI-MA3, improved to +0.25 in February from +0.07 in January, reaching its highest level since December 2014. February’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.
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 somewhat above the historical trend in February (using the three-month average).

According to the Chicago Fed:
What is the National Activity Index? The index is a weighted average of 85 indicators of 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 index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

Sunday, March 19, 2017

Sunday Night Futures

by Calculated Risk on 3/19/2017 07:35:00 PM

Weekend:
Schedule for Week of Mar 19, 2017

Existing Home Sales: Take the Under

Goldman on Fed Balance Sheet Runoff

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

Oil prices were up over the last week with WTI futures at $48.68 per barrel and Brent at $51.74 per barrel.  A year ago, WTI was at $40, and Brent was at $40 - so oil prices are up about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.29 per gallon - a year ago prices were at $2.00 per gallon - so gasoline prices are up about 30 cents a gallon year-over-year.