Thursday, February 28, 2019

Friday: Personal Income and Outlays, ISM Manufacturing

by Calculated Risk on 2/28/2019 09:30:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays for December, and Personal Income for January. The consensus is for a 0.4% increase in personal income, and for a 0.2% decrease in personal spending. And for the Core PCE price index to increase 0.2%. This release also includes Personal Income for January. The consensus is for a 0.4% increase in personal income.

• At 10:00 AM, ISM Manufacturing Index for February. The consensus is for the ISM to be at 55.0, down from 56.6 in January.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for February). The consensus is for a reading of 95.5.

Fannie Mae: Mortgage Serious Delinquency Rate unchanged in January

by Calculated Risk on 2/28/2019 04:09:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate was unchanged at 0.76% in January, from 0.76% in December. The serious delinquency rate is down from 1.23% in January 2018.

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%.

This matches the last two months as the lowest serious delinquency rate for Fannie Mae since August 2007.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

By vintage, for loans made in 2004 or earlier (3% of portfolio), 2.71% are seriously delinquent. For loans made in 2005 through 2008 (5% of portfolio), 4.58% are seriously delinquent, For recent loans, originated in 2009 through 2018 (92% of portfolio), only 0.33% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

The increase late last year in the delinquency rate was due to the hurricanes - there were no worries about the overall market.

I expect the serious delinquency rate will probably decline to 0.5 to 0.7 percent or so to a cycle bottom.

Note: Freddie Mac reported earlier.

Q4 GDP: Investment

by Calculated Risk on 2/28/2019 01:02:00 PM

The first graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Investment ContributionsClick on graph for larger image.

Residential investment (RI) decreased in Q4 (-3.5% annual rate in Q4).  Equipment investment increased at a 6.7% annual rate, and investment in non-residential structures decreased at a 4.2% annual rate.

On a 3 quarter trailing average basis, RI (red) is down slightly, equipment (green) is positive, and nonresidential structures (blue) is up slightly.

Recently RI has been soft, but the decrease is fairly small.

I'll post more on the components of non-residential investment once the supplemental data is released.

Residential InvestmentThe second graph shows residential investment as a percent of GDP.

Residential Investment as a percent of GDP decreased in Q4, however RI has generally been increasing.  RI as a percent of GDP is only just above the bottom of the previous recessions - and I expect RI to continue to increase further in this cycle.

The increase is now primarily coming from single family investment and home remodeling.

I'll break down Residential Investment into components after the GDP details are released.

Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

non-Residential InvestmentThe third graph shows non-residential investment in structures, equipment and "intellectual property products".  Investment in equipment and  non-residential structures - as a percent of GDP - were mostly unchanged.

Kansas City Fed: "Tenth District Manufacturing Activity Up Only Slightly"

by Calculated Risk on 2/28/2019 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Up Only Slightly

The Federal Reserve Bank of Kansas City released the February 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 was up only slightly, while expectations for future activity remained positive but were slightly lower than in previous months.

Regional factories saw hardly any growth in February,” said Wilkerson. “More than three-quarters of firms reported difficulties in finding workers, despite wage increases.”
...
The month-over-month composite index was 1 in January, down from 5 in January and 6 in December. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factories expanded durable goods production, particularly machinery and transportation equipment, while manufacturing of more non-durable goods, including food and beverage products, declined. Most month-over-month indexes decreased in February, with production, shipments, and new orders dropping into negative territory. However, the month-over-month employment index expanded moderately.
emphasis added
This was the last of the regional Fed surveys for February.

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

Based on these regional surveys, it seems likely the ISM manufacturing index will be at about the same level in February as in January. The consensus forecast is for a reading of 55.0 (to be released on Friday, March 1st).

HVS: Q4 2018 Homeownership and Vacancy Rates

by Calculated Risk on 2/28/2019 10:09:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q4 2018.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

Homeownership Rate Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate increased to 64.8% in Q4, from 64.4% in Q3.

I'd put more weight on the decennial Census numbers - given changing demographics, the homeownership rate has bottomed.

Homeowner Vacancy RateThe HVS homeowner vacancy decreased to 1.5% in Q3.

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

Rental Vacancy RateThe rental vacancy rate decreased to 6.6% in Q4.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey.

Overall this suggests that vacancies have declined significantly, and my guess is the homeownership rate has bottomed - and that the rental vacancy rate is close to the bottom for this cycle.

Weekly Initial Unemployment Claims increased to 225,000

by Calculated Risk on 2/28/2019 08:40:00 AM

The DOL reported:

In the week ending February 23, the advance figure for seasonally adjusted initial claims was 225,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 216,000 to 217,000. The 4-week moving average was 229,000, a decrease of 7,000 from the previous week's revised average. The previous week's average was revised up by 250 from 235,750 to 236,000.
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 decreased to 229,000.

This was at the consensus forecast.

BEA: Real GDP increased at 2.6% Annualized Rate in Q4

by Calculated Risk on 2/28/2019 08:35:00 AM

From the BEA: Gross Domestic Product, Fourth Quarter and Annual 2018 (Initial Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the fourth quarter of 2018, according to the "initial" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.4 percent.

Due to the recent partial government shutdown, this initial report for the fourth quarter and annual GDP for 2018 replaces the release of the "advance" estimate originally scheduled for January 30th and the "second" estimate originally scheduled for February 28th.
...
The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, private inventory investment, and federal government spending. Those were partly offset by negative contributions from residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter reflected decelerations in private inventory investment, PCE, and federal government spending and a downturn in state and local government spending. These movements were partly offset by an upturn in exports and an acceleration in nonresidential fixed investment. Imports increased less in the fourth quarter than in the third quarter.
emphasis added
The advance Q4 GDP report, with 2.6% annualized growth, was above expectations.

This puts annual GDP growth at 2.9%.

Personal consumption expenditures (PCE) increased at 2.8% annualized rate in Q4, down from 3.5% in Q3.   Residential investment (RI) decreased 3.5% in Q4. Equipment investment increased at a 6.7% annualized rate, and investment in non-residential structures decreased at a 4.2% pace.

I'll have more later ...

Wednesday, February 27, 2019

Thursday: Q4 GDP, Unemployment Claims and More

by Calculated Risk on 2/27/2019 09:03:00 PM

Finally - Q4 GDP!

Thursday:
• At 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 225 thousand initial claims, up from 216 thousand the previous week.

• Also at 8:30 AM: Gross Domestic Product, 4th quarter 2018 (Initial estimate). The consensus is that real GDP increased 2.4% annualized in Q4, down from 3.4% in Q3.

• At 9:45 AM: Chicago Purchasing Managers Index for February. The consensus is for a reading of 55.8, down from 56.7 in January.

• At 10:00 AM: the Q4 2018 Housing Vacancies and Homeownership from the Census Bureau.

• At 11:00 AM: the Kansas City Fed manufacturing survey for February. This is the last of regional manufacturing surveys for February.

Chemical Activity Barometer "Flat" in February

by Calculated Risk on 2/27/2019 06:45:00 PM

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

From the American Chemistry Council: Chemical Activity Barometer Is Flat In February

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted a 0.0 percent change in February on a three-month moving average (3MMA) basis. On a year-over-year (Y/Y) basis, the barometer is up 0.2 percent (3MMA).
...
“The Chemical Activity Barometer reading was essentially flat in February following three months of decline,” said Kevin Swift, chief economist at ACC. “The cumulative drop was 1.0 percent – still well below the 3.0 percent threshold for a recession signal. The latest CAB signals gains in U.S. commercial and industrial activity through mid-2019, but at a slower rate of growth as compared with a year earlier.”

The government shutdown resulted in delays in publishing many data series that ACC uses to compare the CAB. Such delays can make it more difficult to gauge current economic conditions.

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).

The year-over-year increase in the CAB has softened recently, suggesting further gains in industrial production into 2019, but at a slower pace.

Zillow Case-Shiller Forecast: Smaller YoY House Price Gains in January

by Calculated Risk on 2/27/2019 12:30:00 PM

The Case-Shiller house price indexes for December 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 Aaron Terrazas at Zillow: December Case-Shiller Results and January Forecast: Slowing home price gains

For years, the housing market has been anything but “normal” or “balanced.” But as the start of the busy home shopping season looms, someone squinting at the market might be able to find signs of both normalcy and balance as the market continues to cool off after a years-long sizzle.

Annual home price growth, while still rapid in a handful of the most in-demand and/or affordable markets, has fallen to a pace not far off historic norms and feels largely sustainable for now at a national level of 4.7 percent year-over-year in December. That pace is down from 5.1 percent in November, according to the Case-Shiller home price index.
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to decline to 4.4% in January compared to 4.7% in December.

Zillow forecast for Case-ShillerThe Zillow forecast is for the 20-City index to decline to 3.5% YoY in January, and for the 10-City index to decline to 3.2% YoY.

NAR: Pending Home Sales Index Increased 4.6% in January

by Calculated Risk on 2/27/2019 10:02:00 AM

From the NAR: Pending Home Sales Jump 4.6 Percent in January

Pending home sales rebounded strongly in January, according to the National Association of Realtors®. All four major regions saw growth last month, including the largest surge in the South.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 4.6 percent to 103.2 in January, up from 98.7 in December. Year-over-year contract signings, however, declined 2.3 percent, making this the thirteenth straight month of annual decreases.
...
The PHSI in the Northeast rose 1.6 percent to 94.0 in January, and is now 7.6 percent above a year ago. In the Midwest, the index rose 2.8 percent to 100.2 in January, 0.3 percent lower than January 2018.

Pending home sales in the South jumped 8.9 percent to an index of 119.8 in January, which is 3.1 percent lower than this time last year. The index in the West increased 0.3 percent in January to 87.3 and fell 10.1 percent below a year ago.
emphasis added
This was well above expectations of a 3% decrease for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in February and March.

MBA: Mortgage Applications Increased in Latest Weekly Survey

by Calculated Risk on 2/27/2019 07:00:00 AM

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

Mortgage applications increased 5.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 22, 2019. This week’s results include an adjustment for the Washington's Birthday (Presidents’ Day) holiday.

... The Refinance Index increased 5 percent from the previous week. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 3 percent higher than the same week one year ago.
...
“Mortgage rates were little changed last week, but as we anticipated, homebuyers are responding favorably to this more stable rate environment,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Purchase applications for both conventional and government loans rose last week, with the government gain led by a 14 percent increase in applications for VA purchase loans.”

Added Fratantoni, “Refinance application volume increased as well, with the index reaching its highest level in a month. Borrowers with larger loans tend to be more responsive for a given drop in rates, and competition for these loans is fierce. Therefore, it was not surprising to see the average rate for a 30-year fixed jumbo loan drop to its lowest level since January 2018.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.65 percent from 4.66 percent, with points remaining unchanged at 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance IndexClick on graph for larger image.


The first graph shows the refinance index since 1990.

Rates would have to fall further for a significant increase in refinance activity.

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

According to the MBA, purchase activity is up 3% year-over-year.

Tuesday, February 26, 2019

Wednesday: Pending Home Sales, Fed Chair Powell

by Calculated Risk on 2/26/2019 08:08:00 PM

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, Pending Home Sales Index for January. The consensus is for a 3.0% decrease in the index.

• Also at 10:00 AM, Testimony by Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

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

by Calculated Risk on 2/26/2019 04:41:00 PM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 4.7% year-over-year in December

It has been over eleven years since the bubble peak. In the Case-Shiller release this morning, the seasonally adjusted National Index (SA), was reported as being 11.9% above the previous bubble peak. However, in real terms, the National index (SA) is still about 8.2% below the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 14.8% below the bubble peak.

The year-over-year increase in prices has slowed to 4.7% nationally, and will probably slow more as inventory picks up.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller 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 $286,000 today adjusted for inflation (43%).  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, and the monthly Case-Shiller Composite 20 SA (through October) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA)and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).



Real House Prices

Real House PricesThe second graph shows the same two 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 January 2005 levels, and the Composite 20 index is back to June 2004.

In real terms, house prices are at 2004/2005 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 and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to March 2004 levels, and the Composite 20 index is back to November 2003 levels.

In real terms, prices are back to late 2004 levels, and the price-to-rent ratio is back to late 2003, early 2004.

Update: A few comments on the Seasonal Pattern for House Prices

by Calculated Risk on 2/26/2019 02:33:00 PM

CR Note: This is a repeat of earlier posts 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 former 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 NSA Case-Shiller National index since 1987 (through December 2018).   The seasonal pattern was smaller back in the '90s and early '00s, and increased 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 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.

Comments on December Housing Starts

by Calculated Risk on 2/26/2019 11:32:00 AM

Earlier: Housing Starts Decreased to 1.078 Million Annual Rate in December

Total housing starts in December were well below expectations, and starts for October and November were revised down.

The housing starts report released this morning showed starts were down 11.2% in December compared to November (November starts were revised down), and starts were down 10.9% year-over-year compared to December 2017.

Single family starts were down 10.5% year-over-year.  This was the weakest month for single family starts since August 2016.

This first graph shows the month to month comparison for total starts between 2017 (blue) and 2018 (red).

Starts Housing 2017 and 2018Click on graph for larger image.

Starts were down 10.9% in December compared to December 2017.

Even with the year end weakness, total starts were up 3.6% in 2018 compared to 2017. The weakness at the end of 2018 has been blamed on higher mortgage rates (that have since come down to around 4.5%), the stock market volatility (since stabilized), trade and immigration policies (impacting foreign buyers), and the partial government shutdown (started in December, but mostly in January).

My sense is starts will pick up in Q1 compared to Q4 2018.

Single family starts were up 2.8% in 2018 compared to 2017.

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 for several years following the great recession - but turned down, and has moved sideways recently.  Completions (red line) had lagged behind - however completions and starts are at about the same level now (more deliveries). 

As I've been noting for a few years, the significant growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR) - however multi-family has picked up a little recently.

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 relatively low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect some further increases in single family starts and completions.

Fed Chair Powell: Semiannual Monetary Policy Report to the Congress

by Calculated Risk on 2/26/2019 10:02:00 AM

From Fed Chair Jerome Powell: Semiannual Monetary Policy Report to the Congress. Excerpts:

While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals. Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year. Growth has slowed in some major foreign economies, particularly China and Europe. And uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations. We will carefully monitor these issues as they evolve.
emphasis added
And on the balance sheet:
In light of the substantial progress we have made in reducing reserves, and after extensive deliberations, the Committee decided at our January meeting to continue over the longer run to implement policy with our current operating procedure. That is, we will continue to use our administered rates to control the policy rate, with an ample supply of reserves so that active management of reserves is not required. Having made this decision, the Committee can now evaluate the appropriate timing and approach for the end of balance sheet runoff. I would note that we are prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments. In the longer run, the size of the balance sheet will be determined by the demand for Federal Reserve liabilities such as currency and bank reserves.

Case-Shiller: National House Price Index increased 4.7% year-over-year in December

by Calculated Risk on 2/26/2019 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for December ("December" is a 3 month average of October, November and December 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: Annual Gains Fall to 4.7% to End 2018 According to the S&P CoreLogic Case-Shiller Index

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.7% annual gain in December, down from 5.1% in the previous month. The 10City Composite annual increase came in at 3.8%, down from 4.2% in the previous month. The 20-City Composite posted a 4.2% year-over-year gain, down from 4.6% in the previous month.

Las Vegas, Phoenix and Atlanta reported the highest year-over-year gains among the 20 cities. In December, Las Vegas led the way with an 11.4% year-over-year price increase, followed by Phoenix with an 8.0% increase and Atlanta with a 5.9% increase. Three of the 20 cities reported greater price increases in the year ending December 2018 versus the year ending November 2018.
...
Before seasonal adjustment, the National Index posted a month-over-month decrease of 0.1% in December. The 10-City and 20-City Composites both reported 0.2% decreases for the month. After seasonal adjustment, the National Index recorded a 0.3% month-over-month increase in December. The 10-City Composite and the 20-City Composite both posted 0.2% month-over-month increases. In December, five of 20 cities reported increases before seasonal adjustment, while 14 of 20 cities reported increases after seasonal adjustment.

“The annual rate of price increases continues to fall,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Even at the reduced pace of 4.7% per year, home prices continue to outpace wage gains of 3.5% to 4% and inflation of about 2%. A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales. The monthly number of existing single family homes sold dropped throughout 2018, reaching an annual rate of 4.45 million in December. The 2018 full year sales pace was 4.74 million.

“Regional patterns continue to shift. Seattle and Portland, OR experienced the fastest price increases of any city from late 2016 to the spring of 2018; in December, they ranked 11th and 16th. Currently, the cities with the fastest price increases are Las Vegas and Phoenix. These are a reminder of how prices rose and collapsed in the financial crisis 12 years ago. Despite their recent gains, Las Vegas and Phoenix are the furthest below their 2006 peaks of any city followed in the S&P CoreLogic Case-Shiller Indices.
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 up slightly from the bubble peak, and up 0.2% in December (SA).

The Composite 20 index is 3.8% above the bubble peak, and up 0.2% (SA) in December.

The National index is 11.9% above the bubble peak (SA), and up 0.3% (SA) in December.  The National index is up 51.3% 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 3.7% compared to December 2017.  The Composite 20 SA is up 4.2% year-over-year.

The National index SA is up 4.7% year-over-year.

Note: According to the data, prices increased in 17 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

Housing Starts Decreased to 1.078 Million Annual Rate in December

by Calculated Risk on 2/26/2019 08:40:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,078,000. This is 11.2 percent below the revised November estimate of 1,214,000 and is 10.9 percent below the December 2017 rate of 1,210,000. Single‐family housing starts in December were at a rate of 758,000; this is 6.7 percent below the revised November figure of 812,000. The December rate for units in buildings with five units or more was 302,000.

An estimated 1,246,600 housing units were started in 2018. This is 3.6 percent (±2.1%) above the 2017 figure of 1,203,000.

Building Permits:
Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,326,000. This is 0.3 percent above the revised November rate of 1,322,000 and is 0.5 percent above the December 2017 rate of 1,320,000. Single‐family authorizations in December were at a rate of 829,000; this is 2.2 percent below the revised November figure of 848,000. Authorizations of units in buildings with five units or more were at a rate of 460,000 in December.

An estimated 1,310,700 housing units were authorized by building permits in 2018. This is 2.2 percent above the 2017 figure of 1,282,000.
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 December compared to November.   Multi-family starts were down 12% year-over-year in December.

Multi-family is volatile month-to-month, and  has been mostly moving sideways the last few years.

Single-family starts (blue) decreased in December, and were down 11% 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 eventual recovery (but still historically low).

Total housing starts in December were below expectations, and starts for October and November were revised down.

I'll have more later ...

Monday, February 25, 2019

Tuesday: Housing Starts, Case-Shiller House Prices, Fed Chair Powell Testimony, Richmond Fed Mfg

by Calculated Risk on 2/25/2019 08:23:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Only Modestly Higher After Tariff News

Mortgage rates were very nearly unchanged today, although the average lender was just slightly higher.
...
Potentially more important will be congressional testimony tomorrow with Federal Reserve Chair Jerome Powell. [30YR FIXED 4.375 - 4.5%]
emphasis added
Tuesday:
• At 8:30 AM ET, Housing Starts for December. The consensus is for 1.256 million SAAR, unchanged from 1.256 million SAAR.

• At 9:00 AM, FHFA House Price Index for December 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

• Also at 9:00 AM, S&P/Case-Shiller House Price Index for December. The consensus is for a 4.5% year-over-year increase in the Comp 20 index for December.

• At 10:00 AM, Richmond Fed Survey of Manufacturing Activity for February.

• Also at 10:00 AM: Testimony by Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

Freddie Mac: Mortgage Serious Delinquency Rate Increased Slightly in January

by Calculated Risk on 2/25/2019 06:12:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in January was 0.70%, up slightly from 0.69% in December. Freddie's rate is down from 1.07% in January 2018.

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

This is the lowest serious delinquency rate for Freddie Mac since December 2007.

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

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The increase in the delinquency rate in late 2017 and early 2018 was due to the hurricanes (These are serious delinquencies, so it took three months late to be counted).

I expect the delinquency rate to decline to a cycle bottom in the 0.5% to 0.7% range - but this is close to a bottom.

Note: Fannie Mae will report for January soon.

February Vehicle Sales Forecast: 16.6 Million SAAR

by Calculated Risk on 2/25/2019 02:21:00 PM

From JD Power: J.D. Power and LMC Automotive Forecast February 2019

"The year is off to its slowest start since 2014 with the industry set to post sales declines again in February. While retail sales through the first two months will be down more than 4%, it's important to note that January and February are among the lowest volume sales months of the year." (Last year the two months combined to account for only 13.5% of the annual total.)

Looking ahead to the coming months, the industry should expect to receive a slight boost with the recovery of any lost sales due to inclement weather. [Forecast: total sales 16.6 million SAAR]
This forecast is for sales to be about the same level as in January, and down from 16.9 million SAAR in February 2018.  

Dallas Fed: "Texas Manufacturing Expansion Continues"

by Calculated Risk on 2/25/2019 10:37:00 AM

From the Dallas Fed: Texas Manufacturing Expansion Continues

Texas factory activity continued to expand in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, slipped four points to 10.1, indicating a slight deceleration in output growth.

Most other measures of manufacturing activity also suggested continued but slower expansion in February. The new orders index fell five points to 6.9, its lowest reading in more than two years. Similarly, the capacity utilization index fell eight points to 7.1 and reached a two-year low. Meanwhile, the shipments index was largely unchanged at 10.7.

Perceptions of broader business conditions improved notably in February. The general business activity index rose 12 points to 13.1 after posting weak readings the prior two months. The company outlook index rose seven points to 14.2, a four-month high. The index measuring uncertainty regarding companies’ outlooks retreated 12 points to 4.1, its lowest reading in nine months.

Labor market measures suggested stronger employment growth and little change in workweek length in February. The employment index rebounded from 6.6 to 12.6.
emphasis added
So far the regional surveys have been mixed for February.

Black Knight: National Mortgage Delinquency Rate Decreased in January

by Calculated Risk on 2/25/2019 09:19:00 AM

From Black Knight: Black Knight’s First Look: January’s Prepayment Rate Lowest in More Than 18 Years as Seasonal Home Sale Reductions Outweigh Rise in Refinance Incentive

• The national delinquency rate fell by 3.5 percent and is now nearly 13 percent below last year’s level

• Foreclosure starts rose seasonally month-over-month but were down more than 19 percent year-over-year

• The number of loans in active foreclosure continued its downward trend; there are now 265,000 active foreclosures, down 72,000 from one year ago
...
• Despite recent declines in interest rates, January’s prepayment rate was the lowest since November 2000

• Seasonal reductions in home sales outweighed any early, rate-driven rise in refinance incentive
According to Black Knight's First Look report for January, the percent of loans delinquent decreased 3.45% in January compared to December, and decreased 12.9% year-over-year.

The percent of loans in the foreclosure process decreased 2.2% in January and were down 22.4% 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 3.75% in January, down from 3.88% in December.

The percent of loans in the foreclosure process decreased slightly in January to 0.51% from 0.52% in December.

The number of delinquent properties, but not in foreclosure, is down 257,000 properties year-over-year, and the number of properties in the foreclosure process is down 72,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  Jan
2019
Dec
2018
Jan
2018
Jan
2017
Delinquent3.75%3.88%4.31%4.25%
In Foreclosure0.51%0.52%0.66%0.94%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:1,945,0002,013,0002,202,0002,162,000
Number of properties in foreclosure pre-sale inventory:265,000271,000337,000481,000
Total Properties2,210,0002,283,0002,539,0002,643,000

Chicago Fed "Index Points to Slower Economic Growth in January"

by Calculated Risk on 2/25/2019 08:53:00 AM

From the Chicago Fed: Index Points to Slower Economic Growth in January

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.43 in January from +0.05 in December. One of the four broad categories of indicators that make up the index decreased from December, and two of the four categories made negative contributions to the index in January. The index’s three-month moving average, CFNAI-MA3, decreased to a neutral reading in January from +0.16 in December.
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 at the historical trend in January (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, February 24, 2019

Sunday Night Futures

by Calculated Risk on 2/24/2019 07:35:00 PM

Weekend:
Schedule for Week of February 24, 2019

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

• At 10:30 AM: Dallas Fed Survey of Manufacturing Activity for February.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 7 and DOW futures are up 63 (fair value).

Oil prices were up over the last week with WTI futures at $57.36 per barrel and Brent at $67.25 per barrel.  A year ago, WTI was at $62, and Brent was at $65 - so WTI oil prices are down year-over-year, although Brent is up slightly.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.40 per gallon. A year ago prices were at $2.50 per gallon, so gasoline prices are down 10 cents per gallon year-over-year.

February 2019: Unofficial Problem Bank list decreased to 76 Institutions

by Calculated Risk on 2/24/2019 12:51:00 PM

Note: Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for February 2019.

Here are the monthly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List for February 2019. During the month, the list decreased by a net of two institutions to 76 banks after three removals and one addition. Aggregate assets dropped to $52.8 billion from $55.2 billion at month earlier, with $1.9 billion of the $2.4 billion decline due to the release of updated financials. A year ago, the list held 101 institutions with assets of $20.5 billion.

Removals included Beach Community Bank, Fort Walton Beach, FL ($468 million) because of action termination; Gunnison Valley Bank, Gunnison, UT ($71 million) because of an unassisted merger; and Maryland Financial Bank, Towson, MD ($42 million) because of voluntary liquidation.

Added this month was Fort Gibson State Bank, Fort Gibson, OK ($61 million) because the FDIC issued it a Prompt Corrective Action order on January 9, 2019. Strange, the FDIC has yet to provide public notice of a safety & soundness consent order against this bank.

On February 21, 2019 the FDIC released industry results for the fourth quarter of 2018. In that release, the FDIC disclosed that the Official Problem Bank List includes 60 institutions with assets of $48.5 billion, down from 71 institutions with assets of $53.3 billion in the third quarter of 2018.

Saturday, February 23, 2019

Schedule for Week of February 24, 2019

by Calculated Risk on 2/23/2019 08:11:00 AM

Some key catch up reports this week!  The key reports are Q4 GDP and December Housing Starts.

Other key reports include Case-Shiller house prices, and Personal Income and Outlays for December, and Personal Income for January.

For manufacturing, the February Dallas, Richmond and Kansas City manufacturing surveys will be released.

Fed Chair Jerome Powell will provide the semi-annual Monetary Policy report to Congress this week.

----- Monday, Feb 25th -----

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

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

----- Tuesday, Feb 26th -----

Total Housing Starts and Single Family Housing Starts8:30 AM ET: Housing Starts for December.

This graph shows single and total housing starts since 1968.

The consensus is for 1.256 million SAAR, unchanged from 1.256 million SAAR.

9:00 AM: FHFA House Price Index for December 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

Case-Shiller House Prices Indices9:00 AM: S&P/Case-Shiller House Price Index for December.

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

The consensus is for a 4.5% year-over-year increase in the Comp 20 index for December.

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

10:00 AM: Testimony by Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

----- Wednesday, Feb 27th -----

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 January. The consensus is for a 3.0% decrease in the index.

10:00 AM: Testimony by Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

----- Thursday, Feb 28th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 225 thousand initial claims, up from 216 thousand the previous week.

8:30 AM: Gross Domestic Product, 4th quarter 2018 (Initial estimate). The consensus is that real GDP increased 2.4% annualized in Q4, down from 3.4% in Q3.

9:45 AM: Chicago Purchasing Managers Index for February. The consensus is for a reading of 55.8, down from 56.7 in January.

10:00 AM: the Q4 2018 Housing Vacancies and Homeownership from the Census Bureau.

11:00 AM: the Kansas City Fed manufacturing survey for February. This is the last of regional manufacturing surveys for February.

----- Friday, Mar 1st -----

8:30 AM ET: Personal Income and Outlays for December, and Personal Income for January. The consensus is for a 0.4% increase in personal income, and for a 0.2% decrease in personal spending. And for the Core PCE price index to increase 0.2%. This release also includes Personal Income for January. The consensus is for a 0.4% increase in personal income.

ISM PMI10:00 AM: ISM Manufacturing Index for February. The consensus is for the ISM to be at 55.0, down from 56.6 in January.

Here is a long term graph of the ISM manufacturing index.

The PMI was at 56.6% in January, the employment index was at 55.5%, and the new orders index was at 58.2%.

10:00 AM: University of Michigan's Consumer sentiment index (Final for February). The consensus is for a reading of 95.5.

Friday, February 22, 2019

Q4 GDP Forecasts: High-1s, Low-2s, 2018 Annual GDP around 2.8%

by Calculated Risk on 2/22/2019 02:01:00 PM

The BEA has announced that the Q4 advanced GDP report will be combined with the 2nd estimate of GDP, and will be released on Feb 28th.

From Merrill Lynch:

Weak retail sales data and inventory build caused a 0.8pp decline in our 4Q GDP tracking estimate to 1.5% from 2.3% [Feb 14 estimate]
emphasis added
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 2.3% for 2018:Q4 and 1.2% for 2019:Q1. [Feb 22 estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2018 is 1.4 percent on February 21, down from 1.5 percent on February 14. [Feb 21 estimate]
CR Note: These estimates suggest GDP in the high 1s for Q4.

Using the middle of these three forecasts (about 1.8% real GDP growth in Q4), that would put 2018 annual GDP growth at around 2.8%.  This would be the best year since 2015, but lower than many forecasts.

Fannie and Freddie: Combined REO inventory declined in Q4, Down 21% Year-over-year

by Calculated Risk on 2/22/2019 01:48:00 PM

Fannie and Freddie reported results for Q4 2018. Here is some information on Real Estate Owned (REOs).

Freddie Mac reported the number of REO declined to 7,100 at the end of Q4 2018 compared to 8,299 at the end of Q4 2017.

For Freddie, this is down 91% from the 74,897 peak number of REOs in Q3 2010.

Fannie Mae reported the number of REO declined to 20,156 at the end of Q4 2018 compared to 26,311 at the end of Q4 2017.

For Fannie, this is down 88% from the 166,787 peak number of REOs in Q3 2010.

Fannie and Freddie REO Click on graph for larger image.

Here is a graph of Fannie and Freddie Real Estate Owned (REO).

REO inventory decreased in 2018, and combined inventory is down 21% year-over-year.

This is close to normal levels of REOs.

MBA: The Unemployment Rate and Mortgage Delinquency Rate

by Calculated Risk on 2/22/2019 09:52:00 AM

An interesting chart from the Mortgage Bankers Association’s (MBA):

Last week, MBA Research released fourth quarter of 2018 results of its National Delinquency Survey (NDS). The delinquency rate for mortgage loans on one‐to‐four‐unit residential properties was 4.06 percent – down 41 basis points from the previous quarter, 111 basis points from the fourth quarter of 2017 and at its lowest level since the first quarter of 2000.

In this week’s chart, we show the relationship between the unemployment rate, supplied by the U.S. Bureau of Labor Statistics (BLS), and the mortgage delinquency rate for all loans over a 30‐year period.

Nine years ago (the first quarter of 2010) during the aftermath of the Great Recession, the unemployment rate reached 9.83 percent, and the mortgage delinquency rate was at its peak of 10.06 percent. Fast forward to last year’s fourth quarter, the unemployment rate was 3.80 percent and nearing 50‐year lows, and the mortgage delinquency rate (4.06 percent) was at an 18‐year low.
Unemployment Rate and MBA Delinquency RateClick on graph for larger image.
The close tracking between unemployment and mortgage delinquency rates from the period 1988‐2008 appears less pronounced than from 2008‐2018. For example, the unemployment rate reached 7.63 percent in the third quarter of 1992, while the mortgage delinquency rate was relatively low in comparison, at 4.58 percent. Possible factors influencing this change include differences in mortgage product mix and criteria, borrower behavior and recession severity.
CR Note: The mortgage delinquency rate is currently near all time lows for this series.

Thursday, February 21, 2019

Hotels: Occupancy Rate Increased Year-over-year

by Calculated Risk on 2/21/2019 05:34:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 16 February

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 10-16 February 2019, according to data from STR.

In comparison with the week of 11-17 February 2018, the industry recorded the following:

Occupancy: +0.7% to 63.5%
• Average daily rate (ADR): +2.7% to US$131.99
• Revenue per available room (RevPAR): +3.4% to US$83.88
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateClick on graph for larger image.

The red line is for 2019, dash light blue is 2018, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

A decent start for 2019.

Seasonally, the occupancy rate will increase over the next month or so into the Spring travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

Comments on January Existing Home Sales

by Calculated Risk on 2/21/2019 12:41:00 PM

Earlier: NAR: Existing-Home Sales Decreased to 4.94 million in January

A few key points:

1) The key for housing - and the overall economy - is new home sales, single family housing starts and overall residential investment. Unfortunately this key data has been delayed due to the government shutdown.  However, overall, this is still a somewhat reasonable level for existing home sales, and the weakness at the end of 2018 and early 2019 was no surprise given the increase in mortgage rates.

2) Inventory is still low, but was up 4.6% year-over-year (YoY) in January. This was the sixth consecutive month with a year-over-year increase in inventory, although the YoY increase was slightly smaller in January than in December.

3) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus. See: Lawler: Early Read on Existing Home Sales in January .   The consensus was for sales of 5.05 million SAAR, Lawler estimated the NAR would report 4.92 million SAAR in January, and the NAR actually reported 4.94 million SAAR.

Existing Home Inventory NSAClick on graph for larger image.

The current YoY increase in inventory is nothing like what happened in 2005 and 2006. In 2005 (see red arrow), inventory kept increasing all year, and that was a sign the bubble was ending.  This winter (light blue arrow), inventory is following the normal seasonal pattern.

Although I expected inventory to increase YoY in 2019, I also expected inventory to once again follow the normal seasonal pattern.

Also inventory levels remain somewhat low, and could increase more and still be at normal levels. No worries.

Existing Home Sales NSAThe second graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA in January (285,000, red column) were below sales in January 2018 (313,000, NSA), and sales were the lowest for January since 2015.

NAR: Existing-Home Sales Decreased to 4.94 million in January

by Calculated Risk on 2/21/2019 10:12:00 AM

From the NAR: Existing-Home Sales Drop 1.2 Percent in January

Existing-home sales experienced a minor drop for the third consecutive month in January, according to the National Association of Realtors®. Of the four major U.S. regions, only the Northeast saw an uptick in sales activity last month.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.2 percent from December to a seasonally adjusted annual rate of 4.94 million in January. Sales are now down 8.5 percent from a year ago (5.40 million in January 2018).
...
Total housing inventory at the end of January increased to 1.59 million, up from 1.53 million existing homes available for sale in December, and represents an increase from 1.52 million a year ago. Unsold inventory is at a 3.9-month supply at the current sales pace, up from 3.7 months in December and from 3.4 months in January 2018.
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 (4.94 million SAAR) were down 1.2% from last month, and were 8.5% below the January 2018 sales rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.59 million in January from 1.53 million in December.   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 was up 4.6% year-over-year in January compared to January 2018.

Months of supply was at 3.9 months in January.

For existing home sales, a key number is inventory - and inventory is still low, but appears to have bottomed. I'll have more later ...

Philly Fed Mfg "Weakened" in February

by Calculated Risk on 2/21/2019 09:11:00 AM

From the Philly Fed: February 2019 Manufacturing Business Outlook Survey

Manufacturing conditions in the region weakened this month, according to firms responding to the February Manufacturing Business Outlook Survey. The indicators for general activity, new orders, and shipments fell into negative territory, but the indicator for employment remained positive. Input prices also moderated notably this month. The survey’s indexes for future conditions were mostly steady, with firms remaining generally optimistic about growth over the next six months.

The index for current manufacturing activity in the region decreased from a reading of 17.0 in January to -4.1 this month. This is the index’s first negative reading since May 2016. Both the new orders and shipments indexes also fell this month. The current new orders index decreased nearly 24 points to -2.4, and the current shipments index decreased 17 points to -5.3.

The firms continued to add to their payrolls this month. The current employment index improved from a reading of 9.6 in January to 14.5 this month.
emphasis added
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 February), and five Fed surveys are averaged (blue, through January) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through January (right axis).

This suggests the ISM manufacturing index will show expansion again in February, but at a level than in January.

Weekly Initial Unemployment Claims decreased to 216,000

by Calculated Risk on 2/21/2019 08:38:00 AM

The DOL reported:

In the week ending February 16, the advance figure for seasonally adjusted initial claims was 216,000, a decrease of 23,000 from the previous week's unrevised level of 239,000. The 4-week moving average was 235,750, an increase of 4,000 from the previous week's unrevised average of 231,750. This is the highest level for this average since January 20, 2018 when it was 237,500.
emphasis added
The previous week was unrevised.

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 235,750.

This was lower than the consensus forecast.

Wednesday, February 20, 2019

Thursday: Existing Home Sales, Unemployment Claims, Philly Fed Mfg, Durable Goods

by Calculated Risk on 2/20/2019 09:04:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 230 thousand initial claims, down from 239 thousand the previous week.

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

• Also at 8:30 AM, the Philly Fed manufacturing survey for February. The consensus is for a reading of 14.5, down from 17.0.

• At 10:00 AM, Existing Home Sales for January from the National Association of Realtors (NAR). The consensus is for 5.05 million SAAR, up from 4.99 million. See: Existing Home Sales for January: Take the Under

Existing Home Sales for January: Take the Under

by Calculated Risk on 2/20/2019 05:23:00 PM

The NAR is scheduled to release Existing Home Sales for January at 10:00 AM on Thursday, February 21st.

The consensus is for 5.05 million SAAR, up from 4.99 million in December. Housing economist Tom Lawler estimates the NAR will reports sales of 4.92 million SAAR for January and that inventory will be up 6.6% year-over-year. Based on Lawler's estimate, I expect existing home sales to be below the consensus for January.

Housing economist Tom Lawler has been sending me his predictions of what the NAR will report for almost 9 years.  The table below shows the consensus for each month, Lawler's predictions, and the NAR's initially 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.

Last month, in December 2018, the consensus was for sales of 5.24 million on a seasonally adjusted annual rate (SAAR) basis. Lawler estimated the NAR would report 4.97 million, and the NAR reported 4.99 million (as usual Lawler was closer than the consensus).

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 eight plus years, the consensus average miss was 144 thousand, and  Lawler's average miss was 67 thousand.

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-175.675.565.57
May-175.555.655.62
Jun-175.585.595.52
Jul-175.575.385.44
Aug-175.485.395.35
Sep-175.305.385.39
Oct-175.305.605.48
Nov-175.525.775.81
Dec-175.755.665.57
Jan-185.655.485.38
Feb-185.425.445.54
Mar-185.285.515.60
Apr-185.605.485.46
May-185.565.475.43
Jun-185.455.355.38
Jul-185.435.405.34
Aug-185.365.365.34
Sep-185.305.205.15
Oct-185.205.315.22
Nov-185.195.235.32
Dec-185.244.974.99
Jan-195.054.92---
1NAR initially reported before revisions.