Sunday, March 31, 2019

Monday: Retail Sales, ISM Mfg Survey, Construction Spending

by Calculated Risk on 3/31/2019 09:30:00 PM

Weekend:
Schedule for Week of March 31, 2019

Monday:
• At 8:30 AM, Retail sales for February is scheduled to be released.  The consensus is for a 0.3% increase in retail sales.

• Early, Reis Q1 2019 Office Survey of rents and vacancy rates.

• At 10:00 AM, ISM Manufacturing Index for March. The consensus is for the ISM to be at 54.0, down from 54.2 in February.

• At 10:00 AM, Construction Spending for February. The consensus is for a 0.1% decrease in construction spending.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 16 and DOW futures are up 150 (fair value).

Oil prices were up over the last week with WTI futures at $60.49 per barrel and Brent at $68.01 per barrel.  A year ago, WTI was at $65, and Brent was at $69 - so oil prices are down slightly year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.69 per gallon. A year ago prices were at $2.66 per gallon, so gasoline prices are up slightly year-over-year.

March 2019: Unofficial Problem Bank list declined to 72 Institutions, Q1 2019 Transition Matrix

by Calculated Risk on 3/31/2019 08:12:00 AM

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

Here is the unofficial problem bank list for March 2019.

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

Update on the Unofficial Problem Bank List for March 2019. During the month, the list dropped by four to 72 institutions after four removals. Assets decreased by $1.2 billion to $51.6 billion. A year ago, the list held 98 institutions with assets of $19.9 billion.

This month, actions have been terminated against Crown Bank, Elizabeth, NJ ($505 million); Connecticut Community Bank, National Association, Westport, CT ($461 million); WestSide Bank, Hiram, GA ($128 million); and Stonebridge Bank (n/k/a LINKBANK), West Chester, PA ($84 million).

With the conclusion of the first quarter, we bring an updated transition matrix to detail how banks are moving off the Unofficial Problem Bank List. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,742 institutions have appeared on a weekly or monthly list since the start of publication. Only 4.1 percent of the banks that have appeared on a list remain today as 1,670 institutions have transitioned through the list. Departure methods include 983 action terminations, 406 failures, 262 mergers, and 19 voluntary liquidations. Of the 389 institutions on the first published list, only 6 or 1.5 percent, are still designated as being in a troubled status more than nine years later. The 406 failures represent 23.3 percent of the 1,742 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.
Unofficial Problem Bank List
Change Summary
  Number of InstitutionsAssets ($Thousands)
Start (8/7/2009)  389276,313,429
 
Subtractions     
  Action Terminated179(68,279,301)
  Unassisted Merger41(10,072,112)
  Voluntary Liquidation5(10,672,586)
  Failures158(186,397,337)
  Asset Change251,957
 
Still on List at 3/31/2019  61,144,050
 
Additions after
8/7/2009
  6650,478,968
 
End (3/31/2019)  7251,623,018
 
Intraperiod Removals1     
  Action Terminated804325,189,043
  Unassisted Merger22182,691,403
  Voluntary Liquidation142,558,186
  Failures248125,152,210
  Total1,287535,590,842
1Institution not on 8/7/2009 or 3/31/2019 list but appeared on a weekly list.

Saturday, March 30, 2019

Schedule for Week of March 31, 2019

by Calculated Risk on 3/30/2019 08:11:00 AM

The key reports scheduled for this week are the March employment report, February Retail Sales, March Auto Sales, and the ISM Manufacturing survey.

Also, the Q1 quarterly Reis surveys for office and malls will be released this week.

----- Monday, Apr 1st -----

Retail Sales8:30 AM: Retail sales for February is scheduled to be released.  The consensus is for a 0.3% increase in retail sales.

This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 2.9% on a YoY basis in December.

Early: Reis Q1 2019 Office Survey of rents and vacancy rates.

ISM PMI10:00 AM: ISM Manufacturing Index for March. The consensus is for the ISM to be at 54.0, down from 54.2 in February.

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

The PMI was at 54.2% in February, the employment index was at 53.2%, and the new orders index was at 55.5%

10:00 AM: Construction Spending for February. The consensus is for a 0.1% decrease in construction spending.

----- Tuesday, Apr 2nd -----

Vehicle SalesAll day: Light vehicle sales for March. The consensus is for light vehicle sales to be 16.8 million SAAR in March, up from 16.5 million in February (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the February sales rate.

Early: Reis Q1 2019 Mall Survey of rents and vacancy rates.

8:30 AM: Durable Goods Orders for February from the Census Bureau. The consensus is for a 1.9% decrease in durable goods orders.

10:00 AM: Corelogic House Price index for February.

----- Wednesday, Apr 3rd -----

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

8:15 AM: The ADP Employment Report for March. This report is for private payrolls only (no government). The consensus is for 160,000 payroll jobs added in March, down from 183,000 added in February.

10:00 AM: the ISM non-Manufacturing Index for March.   The consensus is for a reading of 58.0, down from 59.7.

----- Thursday, Apr 4th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 216 thousand initial claims, up from 211 thousand the previous week.

----- Friday, Apr 5th -----

Year-over-year change employment8:30 AM: Employment Report for March.   The consensus is for 169,000 jobs added, and for the unemployment rate to be unchanged at 3.8%.

There were 20,000 jobs added in February, and the unemployment rate was at 3.8%.

This graph shows the year-over-year change in total non-farm employment since 1968.

In February the year-over-year change was 2.509 million jobs.

3:00 PM: Consumer Credit from the Federal Reserve.

Friday, March 29, 2019

Reis: Apartment Vacancy Rate unchanged in Q1 at 4.8%

by Calculated Risk on 3/29/2019 04:27:00 PM

Reis reported that the apartment vacancy rate was at 4.8% in Q1 2019, unchanged from 4.8% in Q4, and up from 4.7% in Q1 2018.  This ties the last two quarters as the highest vacancy rate since Q3 2012. The vacancy rate peaked at 8.0% at the end of 2009, and bottomed at 4.1% in 2016.

From economist Barbara Denham at Reis:

The apartment vacancy rate was flat in the quarter at 4.8%. In the first quarter of 2018 it was 4.7%, while at the start of 2017 it was 4.3%.

Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.5% in the first quarter. At $1,451 per unit (asking) and $1,380 per unit (effective), the average rents have increased 4.4% and 4.2%, respectively, from the first quarter of 2018.
...
Apartment occupancy growth had accelerated in 2018 after slowing a bit in 2017. At the same time, the housing market slumped in 2018 after gaining momentum in 2017. Recently, existing home sales jumped yet apartment occupancy growth was subdued. We had attributed the acceleration in the apartment market in 2018 to the tax cut at the end of 2017 that reduced the incentive to buy a home. Many have cited the drop in mortgage rates to the housing market jump in February.

A closer look at the numbers shows that the condo and coop sales were flat in the first two months of 2019 after falling in 2018. This is consistent with our apartment occupancy numbers and suggests that the housing market uptick was concentrated in less urban areas that do not compete as much with strong apartment construction. There are a number of factors impacting housing, but it is too early to say if the apartment market will suffer if the housing market has strengthened. The preliminary housing numbers from the National Association of Realtors are subject to change.

We still expect construction to remain robust in 2019 before completions decelerate in 2020. Occupancy should stay consistent with both supply growth and job growth, but the pent-up demand for buying a home could impact some markets more than others.
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 mostly moved sideways for the last several years and moved up a little more recently.  

With more supply coming on line - and somewhat less favorable demographics - the vacancy rate will probably increase over the next year or so.

Apartment vacancy data courtesy of Reis.

Q1 GDP Forecasts: Mid 1% Range

by Calculated Risk on 3/29/2019 02:25:00 PM

From Merrill Lynch:

Consumer spending inched up only 0.1% mom in Jan, and a downwardly revised Dec provided a weaker handoff into the quarter. The data sliced 0.3pp from 1Q GDP tracking, bringing our estimate down to 1.7% qoq saar [March 29 estimate]
emphasis added
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 1.3% for 2019:Q1 and 1.6% for 2019:Q2 [Mar 29 estimate].
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2019 is 1.7 percent on March 29, up from 1.5 percent on March 27. A decrease in the nowcast of first-quarter real personal consumption expenditures growth from 0.9 percent to 0.5 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis was more than offset by increases in the nowcasts of real nonresidential equipment investment growth, real residential investment growth, and the contribution of inventory investment to first-quarter real GDP growth. [Mar 13 estimate]
CR Note: These estimates suggest real GDP growth will be in the 1% to 2% range annualized in Q1.

A few Comments on February New Home Sales

by Calculated Risk on 3/29/2019 12:10:00 PM

New home sales for February were reported at 667,000 on a seasonally adjusted annual rate basis (SAAR). This was well above the consensus forecast, and sales for January were revised up. However sales for November and December were revised down.

With these revisions, sales increased 1% in 2018 compared to 2017.   I expect sales to be around the same level in 2019 as in 2018, and my guess is we haven't seen the peak of this cycle yet.

On Inventory: Months of inventory is now just above the top of the normal range, however the number of units completed and under construction is still somewhat low.   Inventory will be something to watch very closely.

Earlier: New Home Sales increased to 667,000 Annual Rate in February.

New Home Sales 2017 2018Click on graph for larger image.

This graph shows new home sales for 2018 and 2019 by month (Seasonally Adjusted Annual Rate).

Sales in February were up 0.6% year-over-year compared to February 2018.

Year-to-date (just through February), sales are up 2.8% compared to the same period in 2018.  The comparison will be most difficult in Q1, so this is a solid start for 2019.

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.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2019. 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 have focused on more expensive homes.

I still expect this gap to slowly close.  However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

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.

New Home Sales increased to 667,000 Annual Rate in February

by Calculated Risk on 3/29/2019 10:14:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 667 thousand.

The previous month was revised up.

"Sales of new single‐family houses in February 2019 were at a seasonally adjusted annual rate of 667,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.9 percent above the revised January rate of 636,000 and is 0.6 percent above the February 2018 estimate of 663,000."
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 somewhat low historically.

The second graph shows New Home Months of Supply.

New Home Sales, Months of SupplyThe months of supply decreased in February to 6.1 months from 6.5 months in January.

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

This is above 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 340,000. This represents a supply of 6.1 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 somewhat low, and the combined total of completed and under construction is a little low.

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

In February 2019 (red column), 56 thousand new homes were sold (NSA). Last year, 54 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 20 thousand in 2010.

This was well above expectations of 616 thousand sales SAAR, however, although sales in January were revised up, the two previous months (November and December) were revised down significantly. I'll have more later today.

Personal Income Increased 0.2% in February

by Calculated Risk on 3/29/2019 09:38:00 AM

The BEA released the Personal Income, February 2019; Personal Outlays, January 2019:

Due to the recent partial government shutdown, this report combines estimates for January and February 2019. January estimates include both personal income and outlays measures, while February estimates are limited to personal income. Estimates of outlays for February will be available with the next release on April 29, 2019.

Personal income decreased $22.9 billion (-0.1 percent) in January according to estimates released today by the Bureau of Economic Analysis. Disposable personal income decreased $34.9 billion (-0.2 percent), and personal consumption expenditures increased $8.6 billion (0.1 percent).

Real DPI decreased 0.2 percent in January, and real PCE increased 0.1 percent. The PCE price index decreased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.
...
Personal income increased $42.0 billion (0.2 percent) in February. Disposable personal income (DPI) increased $31.3 billion (0.2 percent)
The increase in personal income for February was below expectations.

Thursday, March 28, 2019

Friday: New Home Sales, Personal Income and Outlays

by Calculated Risk on 3/28/2019 05:38:00 PM

Friday:
• At 8:30 AM ET, Personal Income, February 2019; Personal Outlays, January 2019. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:45 AM, Chicago Purchasing Managers Index for March. The consensus is for a reading of 60.3, down from 64.7 in February.

• At 10:00 AM, New Home Sales for February from the Census Bureau. The consensus is for 616 thousand SAAR, up from 607 thousand in January.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for March). The consensus is for a reading of 97.8.

Chemical Activity Barometer "Up Slightly" in March

by Calculated Risk on 3/28/2019 02:51:00 PM

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

From the American Chemistry Council: Chemical Activity Barometer Up Slightly in March

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.1 percent in March on a three-month moving average (3MMA) basis, the first gain in five months. On a year-over-year (Y/Y) basis, the barometer is down 0.3 percent (3MMA).
...
“The CAB continues to indicate gains in U.S. commercial and industrial activity through mid-2019, but at a markedly slower rate of growth, as measured by year-earlier comparisons,” said Kevin Swift, chief economist at ACC.

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.

Kansas City Fed: "Tenth District Manufacturing Activity Accelerated Moderately"

by Calculated Risk on 3/28/2019 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Accelerated Moderately

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 accelerated moderately, and expectations for future activity also increased.

“Factories in the region reported an uptick in growth in March, following three straight months in which the pace of growth slowed,” said Wilkerson. “Plans for both hiring and capital spending picked up.”
...
The month-over-month composite index was 10 in March, up from 1 in February and 5 in January. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factories expanded production of both durable and nondurable goods, particularly food and beverage products, as well as wood, paper, and printing manufacturing. Most month-over-month indexes increased in March, with production, shipments, new orders, order backlog, new orders for exports, and materials inventories rebounding back into positive territory. Most year-over-year factory indexes grew in March, and the composite index rose from 23 to 27. The future composite index also climbed up from 13 to 22, as future factory activity expectations increased across the board.
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).

Based on these regional surveys, it seems likely the ISM manufacturing index will be at about the same level in March as in February, maybe slightly higher. The early consensus forecast is for a reading of 54.5, up slightly from 54.2 in February (to be released on Monday, April 1st).

NAR: Pending Home Sales Index Decreased 1.0% in February

by Calculated Risk on 3/28/2019 10:04:00 AM

From the NAR: Pending Home Sales Dip 1.0 Percent in February

Pending home sales endured a minor drop in February, according to the National Association of Realtors®. The four major regions were split last month, as the South and West saw a bump in contract activity and the Northeast and Midwest reported slight declines.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 1.0 percent to 101.9 in February, down from 102.9 in January. Year-over-year contract signings declined 4.9 percent, making this the fourteenth straight month of annual decreases.
...
The PHSI in the Northeast declined 0.8 percent to 92.1 in February, and is now 2.6 percent below a year ago. In the Midwest, the index fell 7.2 percent to 93.2 in February, 6.1 percent lower than February 2018.

Pending home sales in the South inched up 1.7 percent to an index of 121.8 in February, which is 2.9 percent lower than this time last year. The index in the West increased 0.5 percent in February to 87.5 and fell 9.6 percent below a year ago.
emphasis added
This was at expectations of a 1% 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 March and April.

Q4 GDP Revised Down to 2.2% Annual Rate

by Calculated Risk on 3/28/2019 08:47:00 AM

From the BEA: Gross Domestic Product, 4th quarter and annual 2018 (third estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.2 percent in the fourth quarter of 2018, according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "initial" estimate issued last month. In the initial estimate, the increase in real GDP was 2.6 percent. With this estimate for the fourth quarter, the general picture of economic growth remains the same; personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment were revised down; imports, which are a subtraction in the calculation of GDP, were also revised down.
emphasis added
PCE growth was revised down from 2.8% to 2.5%. Residential investment was revised down from -3.5% to -4.7%. This was at the consensus forecast.

This puts 2018 annual GDP at 2.86%, and Q4-over-Q4 GDP at 2.97%.

Here is a Comparison of Third and Initial Estimates.

Weekly Initial Unemployment Claims decreased to 211,000

by Calculated Risk on 3/28/2019 08:37:00 AM

The DOL reported:

In the week ending March 23, the advance figure for seasonally adjusted initial claims was 211,000, a decrease of 5,000 from the previous week's revised level. The previous week's level was revised down by 5,000 from 221,000 to 216,000. The 4-week moving average was 217,250, a decrease of 3,250 from the previous week's revised average. The previous week's average was revised down by 4,500 from 225,000 to 220,500.
emphasis added
The previous week was revised down.

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 217,250.

This was below the consensus forecast.

Wednesday, March 27, 2019

Thursday: GDP, Unemployment Claims, Pending Home Sales

by Calculated Risk on 3/27/2019 07:17:00 PM

Thursday:
• At 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for 225 thousand initial claims, up from 221 thousand the previous week.

• At 8:30 AM, Gross Domestic Product, 4th quarter 2018 (Third estimate). The consensus is that real GDP increased 2.2% annualized in Q4, down from the initial estimate of 2.6%.

• At 10:00 AM, Pending Home Sales Index for February. The consensus is for a 1.0% decrease in the index.

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

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

by Calculated Risk on 3/27/2019 03:41:00 PM

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 Matthew Speakman at Zillow: January Case-Shiller Results and February Forecast: Lowest Gains Since 2015

he national housing market’s ongoing, slow march back to “normal” is continuing into the start of 2019 — setting up a spring in which buyers will have more power than they have in years, although they still may need to work hard to find a favorable deal.

House prices climbed 4.3 percent in January from a year early, down 4.6 percent from the prior month, according to the Case-Shiller home price index. The last time it advanced this slowly was April 2015.
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to decline to 4.0% in February compared to 4.3% in January.

Zillow forecast for Case-ShillerThe Zillow forecast is for the 20-City index to decline to 2.9% YoY in February, and for the 10-City index to decline to 2.4% YoY.

March Vehicle Sales Forecast: 16.9 Million SAAR

by Calculated Risk on 3/27/2019 11:26:00 AM

From JD Power: Auto Retail Sales Off to Slowest Q1 Start Since 2013

Total sales in March are projected to reach 1,562,800 units, a 2.1% decrease compared with March 2018. The seasonally adjusted annualized rate (SAAR) for total sales is expected to be 16.9 million units, down 400,000 from a year ago.

New vehicle total sales in Q1 are projected to reach 3,952,100 units, a 2.5% decrease compared to the first quarter of last year.

“This is the first time in six years that Q1 sales will fall short of 3 million units. While the volume story could be better, there is remarkable growth in transaction prices, with records being set monthly. New-vehicle prices are on pace to reach $33,319 in Q1—the highest ever for the first quarter—and it’s more than $1,000 higher than last year.”

Given the current weakness and uncertain future, LMC’s forecast for 2019 total light-vehicle sales has been trimmed by 75,000 units to 16.9 million units, a decline of 2.2% from 2018.
emphasis added
This forecast is for sales to be higher than in January and February, and down from 17.2 million SAAR in March 2018.  

Trade Deficit decreased to $51.1 Billion in January

by Calculated Risk on 3/27/2019 08:52:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $51.1 billion in January, down $8.8 billion from $59.9 billion in December, revised.

January exports were $207.3 billion, $1.9 billion more than December exports. January imports were $258.5 billion, $6.8 billion less than December imports.
U.S. Trade Exports Imports Click on graph for larger image.

Exports increased and imports decreased in January.

Exports are 25% above the pre-recession peak and up 3% compared to January 2018; imports are 11% above the pre-recession peak, and up 2% compared to January 2018.

In general, trade has been picking up, although both imports and exports have declined slightly recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

U.S. Trade Deficit The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $42.59 in January, up from $50.27 in January, and down from $54.76 in January 2018.

The trade deficit with China decreased to $34.5 billion in January, from $36.0 billion in January 2018.

MBA: Mortgage Applications Increased in Latest Weekly Survey

by Calculated Risk on 3/27/2019 07:00:00 AM

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

Mortgage applications increased 8.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 22, 2019.

... The Refinance Index increased 12 percent from the previous week. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 4 percent higher than the same week one year ago.
...
The spring buying season is off to a strong start. Thanks to an unexpectedly large drop in mortgage rates following last week’s FOMC meeting, purchase applications jumped 6 percent and refinance applications surged over 12 percent,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Rates dropped across all loan types, and the 30-year fixed-rate mortgage is now more than 70 basis points below last November’s peak. The average loan size increased once again to new highs for both purchase and refinance loans, as borrowers with – or seeking – larger loans tend to be more reactive to the drop in rates.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.45 percent from 4.55 percent, with points decreasing to 0.39 from 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.

Now that mortgage rates have fallen more than 50 bps from the highs last year, a number of recent buyers will be able to refinance.

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

According to the MBA, purchase activity is up 4% year-over-year.

Tuesday, March 26, 2019

Wednesday: Trade Deficit

by Calculated Risk on 3/26/2019 07:33:00 PM

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

• At 8:30 AM: Trade Balance report for January from the Census Bureau. The consensus is the trade deficit to be $57.4 billion.  The U.S. trade deficit was at $59.8 billion in December.

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

by Calculated Risk on 3/26/2019 03:42:00 PM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 4.3% year-over-year in January

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 12.0% above the previous bubble peak. However, in real terms, the National index (SA) is still about 7.9% below the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 14.6% below the bubble peak.

The year-over-year increase in prices has slowed to 4.3% nationally, and I expect price growth will slow some more.

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 January) 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 February 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 February 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 3/26/2019 01:31:00 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 January 2019).   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 February Housing Starts

by Calculated Risk on 3/26/2019 10:39:00 AM

Earlier: Housing Starts Decreased to 1.162 Million Annual Rate in February

Total housing starts in February were below expectations, however starts for December and January were revised up.

The housing starts report released this morning showed starts were down 8.7% in February compared to January, and starts were down 9.9% year-over-year compared to February 2018.

Single family starts were down 10.6% year-over-year, and multi-family starts were down 5.4%.

This first graph shows the month to month comparison for total starts between 2018 (blue) and 2019 (red).

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

Starts were down 9.9% in February compared to February 2018.

The weakness in February was primarily in the single family sector.  February starts might have been impacted by the weather.

Last year, in 2018, starts were strong early in the year, and then fell off in the 2nd half - so the early comparisons are the most difficult.

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. 

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).

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.

Case-Shiller: National House Price Index increased 4.3% year-over-year in January

by Calculated Risk on 3/26/2019 09:12:00 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 Index Shows Annual Gains Lowest Since 2015

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.3% annual gain in January, down from 4.6% in the previous month. The 10-City Composite annual increase came in at 3.2%, down from 3.7% in the previous month. The 20-City Composite posted a 3.6% year-over-year gain, down from 4.1% in the previous month.

Las Vegas, Phoenix and Minneapolis reported the highest year-over-year gains among the 20 cities. In January, Las Vegas led the way with a 10.5% year-over-year price increase, followed by Phoenix with a 7.5% increase and Minneapolis with a 5.1% increase. Only one of the 20 cities reported greater price increases in the year ending January 2019 versus the year ending December 2018.
...
Before seasonal adjustment, the National Index posted a month-over-month decrease of 0.2% in January. The 10-City and 20-City Composites reported 0.3% and 0.2% decreases for the month, respectively. After seasonal adjustment, the National Index recorded a 0.2% month-over-month increase in January. The 10-City Composite did not post any gains, and the 20-City Composite posted 0.1% month-over-month increase. In January, five of 20 cities reported increases before seasonal adjustment, while 14 of 20 cities reported increases after seasonal adjustment.

“Home price gains continue to shrink,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “In the year to January, the S&P CoreLogic Case-Shiller National Index rose 4.3%, two percentage points slower than its pace in January 2018. The last time it advanced this slowly was April 2015. In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018. Only Phoenix saw any appreciable acceleration. Some cities where prices surged in 2017-2018 now face much smaller increases: in Seattle, annual price gains dropped from 12.8% to 4.1% from January 2018 to January 2019. San Francisco saw annual price increases shrink from 10.2% to 1.8% over the same time period.

Mortgage rates are as important as prices for many home buyers. Mortgage rates climbed from 3.95% in January 2018 to a peak of 4.95% in November 2018. Since then, rates have dropped to 4.28% as of mid-March. Sales of existing single-family homes slid gently downward from the 2017 fourth quarter until January of this year before jumping higher in February 2019. Home sales annual rate dropped from 5 million units in February 2018 to 4.36 million units in January 2019 before popping to 4.94 in February. It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”
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 slightly in January (SA).

The Composite 20 index is 3.8% above the bubble peak, and up 0.1% (SA) in January.

The National index is 12.0% above the bubble peak (SA), and up 0.2% (SA) in January.  The National index is up 51.5% 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 3.2% compared to January 2018.  The Composite 20 SA is up 3.6% year-over-year.

The National index SA is up 4.3% year-over-year.

Note: According to the data, prices increased in 15 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

Housing Starts Decreased to 1.162 Million Annual Rate in February

by Calculated Risk on 3/26/2019 08:40:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,162,000. This is 8.7 percent below the revised January estimate of 1,273,000 and is 9.9 percent below the February 2018 rate of 1,290,000. Single‐family housing starts in February were at a rate of 805,000; this is 17.0 percent below the revised January figure of 970,000. The February rate for units in buildings with five units or more was 352,000.

Building Permits:
Privately‐owned housing completions in February were at a seasonally adjusted annual rate of 1,303,000. This is 4.5 percent above the revised January estimate of 1,247,000 and is 1.1 percent above the February 2018 rate of 1,289,000. Single‐family housing completions in February were at a rate of 816,000; this is 10.0 percent below the revised January rate of 907,000. The February rate for units in buildings with five units or more was 473,000.
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) increased  in February compared to January.   Multi-family starts were down 5% year-over-year in February.

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

Single-family starts (blue) decreased in February, 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 February were below expectations, however starts for December and January were revised up.

I'll have more later …

Monday, March 25, 2019

Tuesday: Housing Starts, Case-Shiller House Prices, and More

by Calculated Risk on 3/25/2019 06:27:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Still Moving Lower After Last Week's Stellar Drop

Mortgage rates continued deeper into long-term lows today as the underlying bond market experiences its most impressive rally of the year. In a rally, bond prices are moving higher and rates are moving lower. [30YR FIXED - 4.00 - 4.125]
emphasis added
Tuesday:
• At 8:30 AM ET: Housing Starts for February. The consensus is for 1.201 million SAAR, down from 1.230 million SAAR in January.

• At 9:00 AM: FHFA House Price Index for January 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 9:00 AM: S&P/Case-Shiller House Price Index for January. The consensus is for a 4.2% year-over-year increase in the Comp 20 index for December.

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

Freddie Mac: Mortgage Serious Delinquency Rate Decreased Slightly in February

by Calculated Risk on 3/25/2019 05:22:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in February was 0.69%, down slightly from 0.70% in January. Freddie's rate is down from 1.06% in February 2018.

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

This matches 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 February soon.

Housing Inventory Tracking

by Calculated Risk on 3/25/2019 01:39:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

Inventory, on a national basis, was up 4.6% year-over-year (YoY) in January, this was the sixth consecutive month with a YoY increase, following over three years of YoY declines.

The graph below shows the YoY change for non-contingent inventory in Houston, Las Vegas, and Sacramento and Phoenix, and total existing home inventory as reported by the NAR (through February).  (I'll be adding more areas).

Click on graph for larger image.

The black line is the year-over-year change in inventory as reported by the NAR.

Note that inventory was up 105% YoY in Las Vegas in February (red), the eight consecutive month with a YoY increase.

Houston is a special case, and inventory was up for several years due to lower oil prices, but declined YoY recently as oil prices increased.  Inventory was up 17% year-over-year in Houston in February.

Inventory is a key for the housing market.  I expect a further increase in inventory in 2019, but overall I think inventory will still be fairly low.

Also note that inventory in Seattle was up 164% year-over-year in February (not graphed)!

Dallas Fed: "Texas Manufacturing Activity Continues to Grow"

by Calculated Risk on 3/25/2019 10:32:00 AM

From the Dallas Fed: Texas Manufacturing Activity Continues to Grow

Texas factory activity continued to expand in Marc­h, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, held fairly steady at 11.5, indicating output growth continued at about the same pace as last month.

Other measures of manufacturing activity also suggested continued expansion in March, although demand growth slowed. The new orders index fell from 6.9 to 2.4, and the growth rate of orders index slipped into negative territory for the first time since December 2016. The shipments index declined five points to 5.8, while the capacity utilization index moved up four points to 10.9.

Perceptions of broader business conditions continued to improve in March, although outlooks were less optimistic than in February. The general business activity index remained positive but fell five points to 8.3. Similarly, the company outlook index stayed in positive territory but fell from 14.2 to 6.0. The index measuring uncertainty regarding companies’ outlooks was largely unchanged at a 10-month low of 3.4.

Labor market measures suggested continued employment growth and longer workweeks in March. The employment index held steady at 13.1, a reading well above average. Twenty-two percent of firms noted net hiring, compared with 9 percent noting net layoffs. The hours worked index came in at 4.6, up slightly from February.
emphasis added
So far the regional surveys have been somewhat positive for March.

Chicago Fed "Index points to little change in economic growth in February"

by Calculated Risk on 3/25/2019 09:13:00 AM

From the Chicago Fed: Index points to little change in economic growth in February

The Chicago Fed National Activity Index (CFNAI) edged down to –0.29 in February from –0.25 in January. Two of the four broad categories of indicators that make up the index decreased from January, and three of the four categories made negative contributions to the index in February. The index’s three-month moving average, CFNAI-MA3, moved down to –0.18 in February from a neutral reading in January.
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 below the historical trend in February (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, March 24, 2019

Sunday Night Futures

by Calculated Risk on 3/24/2019 08:01:00 PM

Weekend:
Schedule for Week of March 24, 2019

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

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

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 5 and DOW futures are up 55 (fair value).

Oil prices were mixed over the last week with WTI futures at $58.79 per barrel and Brent at $66.85 per barrel.  A year ago, WTI was at $66, and Brent was at $69 - so oil prices are down about 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.63 per gallon. A year ago prices were at $2.63 per gallon, so gasoline prices are unchanged year-over-year.

Hotels: Occupancy Rate Decreased Year-over-year

by Calculated Risk on 3/24/2019 12:31:00 PM

From HotelNewsNow.com: STR: U.S. hotel results for week ending 16 March

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

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

Occupancy: -0.9% to 70.2%
• Average daily rate (ADR): +0.6% to US$134.50
• Revenue per available room (RevPAR): -0.3% to US$94.40
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 - close, but slightly lower occupancy rate, to-date, compared to the previous 4 years.

Seasonally, the occupancy rate will mostly move sideways during the Spring travel season, and then increase during the Summer.

Data Source: STR, Courtesy of HotelNewsNow.com

Saturday, March 23, 2019

Schedule for Week of March 24, 2019

by Calculated Risk on 3/23/2019 08:11:00 AM

The key reports this week are the third estimate of Q4 GDP, February Housing Starts and New Home Sales.

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

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

----- Monday, Mar 25th -----

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

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

----- Tuesday, Mar 26th -----

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

This graph shows single and total housing starts since 1968.

The consensus is for 1.201 million SAAR, down from 1.230 million SAAR in January.

9:00 AM: FHFA House Price Index for January 2019. 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 January.

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 4.2% year-over-year increase in the Comp 20 index for December.

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

----- Wednesday, Mar 27th -----

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

U.S. Trade Deficit8:30 AM: Trade Balance report for January from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $57.4 billion.  The U.S. trade deficit was at $59.8 billion in December.

----- Thursday, Mar 28th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 225 thousand initial claims, up from 221 thousand the previous week.

8:30 AM: Gross Domestic Product, 4th quarter 2018 (Third estimate). The consensus is that real GDP increased 2.2% annualized in Q4, down from the initial estimate of 2.6%.

10:00 AM: Pending Home Sales Index for February. The consensus is for a 1.0% decrease in the index.

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

----- Friday, Mar 29th -----

8:30 AM ET: Personal Income, February 2019; Personal Outlays, January 2019. The consensus is for a 0.3% increase in personal income, and for a 0.3% 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 60.3, down from 64.7 in February.

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

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

The consensus is for 616 thousand SAAR, up from 607 thousand in January.

10:00 AM: University of Michigan's Consumer sentiment index (Final for March). The consensus is for a reading of 97.8.

Friday, March 22, 2019

Q1 GDP Forecasts: Around 1%

by Calculated Risk on 3/22/2019 03:27:00 PM

From Goldman Sachs:

We boosted our Q1 GDP tracking estimate by three tenths to +0.7% (qoq ar). However ... we lowered our past-quarter GDP tracking estimate for Q4 by two tenths to +2.1%. [March 22 estimate]
emphasis added
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 1.3% for 2019:Q1 and 1.7% for 2019:Q2. [Mar 22 estimate].
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2019 is 1.2 percent on March 22, up from 0.4 percent on March 13. [Mar 13 estimate]
CR Note: These early estimates suggest real GDP growth will be around 1% annualized in Q1.

BLS: Unemployment Rates at New Series Lows in Alabama, North Dakota, Tennesse and Vermont

by Calculated Risk on 3/22/2019 03:01:00 PM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in February in 4 states and stable in 46 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today.
...
Iowa, New Hampshire, North Dakota, and Vermont had the lowest unemployment rates in February, 2.4 percent each. The rates in Alabama (3.7 percent), North Dakota (2.4 percent), Tennessee (3.2 percent), and Vermont (2.4 percent) set new series lows.
emphasis added
State UnemploymentClick on graph for larger image.

This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 1976.

At the worst of the great recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently only one state, Alaska, has an unemployment rate at or above 6% (dark blue).  Note that the series low for Alaska is above 6%.  Four states and the D.C. have unemployment rates above 5%; Alaska, Arizona, New Mexico and West Virginia.

A total of nine states are at the series low.

Comments on February Existing Home Sales

by Calculated Risk on 3/22/2019 11:49:00 AM

Earlier: NAR: Existing-Home Sales Increased to 5.51 million in February

A few key points:

1) Seasonally February is one of the weakest months of the year for existing home sales (See Not Seasonally Adjusted NSA graph below).  Since existing home sales are counted at closing, these are properties that usually went under contract during the holidays or in early January.   So I wouldn't read too much into the pickup in February.   Sales will be stronger seasonally over the next several months.  The headline number was not a surprise (see note 3), and the pickup was probably due to lower mortgage rates and a stronger stock market (so buyers were more confident).  But the next several months are more important for existing home sales.

2) Inventory is still low, and was only up 3.2% year-over-year (YoY) in February. This was the seventh consecutive month with a year-over-year increase in inventory, although the YoY increase was smaller in February than in the three previous months.

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 February.   The consensus was for sales of 5.08 million SAAR, Lawler estimated the NAR would report 5.46 million SAAR in February, and the NAR actually reported 5.51 million SAAR.

Existing Home Sales NSAClick on graph for larger image.

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

Sales NSA in February (312,000, red column) were below sales in February 2018 (319,000, NSA), and sales were the lowest for February since 2015.

NAR: Existing-Home Sales Increased to 5.51 million in February

by Calculated Risk on 3/22/2019 10:11:00 AM

From the NAR: Existing-Home Sales Surge 11.8 Percent in February

Existing-home sales rebounded strongly in February, experiencing the largest month-over-month gain since December 2015, according to the National Association of Realtors®. Three of the four major U.S. regions saw sales gains, while the Northeast remained unchanged from last month.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, shot up 11.8 percent from January to a seasonally adjusted annual rate of 5.51 million in February. However, sales are down 1.8 percent from a year ago (5.61 million in February 2018).
...
Total housing inventory at the end of February increased to 1.63 million, up from 1.59 million existing homes available for sale in January, a 3.2 percent increase from 1.58 million a year ago. Unsold inventory is at a 3.5-month supply at the current sales pace, down from 3.9 months in January but up from 3.4 months in February 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 February (5.51 million SAAR) were up 11.8% from last month, and were 1.8% below the February 2018 sales rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.63 million in February from 1.59 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 was up 3.2% year-over-year in February compared to February 2018.

Months of supply was at 3.5 months in February.

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

Thursday, March 21, 2019

Friday: Existing Home Sales

by Calculated Risk on 3/21/2019 08:54:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Move Deeper Into Long-Term Lows

Granted, we're not back to the sub-4% mortgage rates that dominated much of the past 8 years, but breaking into the high 3% range is a valid consideration after the past few days. Yesterday's surprising Fed news hit the rates that were already holding near their lowest levels in well over a year. The net effect has been a decisive break lower with the average lender easily able to offer 4.375% on a typical 30yr fixed scenario. Many lenders are at 4.25% … [30YR FIXED - 4.375%]
Friday:
• At 10:00 AM, Existing Home Sales for February from the National Association of Realtors (NAR). The consensus is for 5.08 million SAAR, up from 4.94 million. Take the over!

• At 10:00 AM, State Employment and Unemployment (Monthly) for February 2019

Black Knight: National Mortgage Delinquency Rate Increased in February

by Calculated Risk on 3/21/2019 03:43:00 PM

CR Note: It is possible that some of the increase in the delinquency rate in February was due to late tax refunds.

From Black Knight: Black Knight’s First Look: Bucking Historical Seasonal Trend, February Sees Delinquencies Rise; Prepayments Up 11 Percent, Driven by Softening Interest Rates

• Delinquencies rose by 3.7 percent in February, the first February increase in 12 years

• Despite the monthly rise, delinquencies remain more than 9.5 percent below last year’s level

• At 40,400 for the month, foreclosure starts were down 19.5 percent from January and edged close to September 2018’s 15-year low

• The national foreclosure rate improved marginally and is now down more than 21 percent year-over-year

• Prepayment speeds rose by 11 percent from January’s 18-year low, suggesting an increase in refinance activity driven by the recent decline in 30-year interest rates
According to Black Knight's First Look report for February, the percent of loans delinquent increased 3.7% in February compared to January, and decreased 9.5% year-over-year.

The percent of loans in the foreclosure process decreased 0.4% in February and were down 21.3% 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 3.89% in February, up from 3.75% in January.

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

The number of delinquent properties, but not in foreclosure, is down 179,000 properties year-over-year, and the number of properties in the foreclosure process is down 67,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  Feb
2019
Jan
2019
Feb
2018
Feb
2017
Delinquent3.89%3.75%4.30%4.21%
In Foreclosure0.51%0.51%0.65%0.93%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:2,019,0001,945,0002,198,0002,135,000
Number of properties in foreclosure pre-sale inventory:264,000265,000331,000470,000
Total Properties2,284,0002,210,0002,528,0002,605,000

Existing Home Sales for February: Upside Surprise (Surprise for others)

by Calculated Risk on 3/21/2019 12:37:00 PM

The NAR is scheduled to release Existing Home Sales for February at 10:00 AM on Friday, March 22nd.

The consensus is for 5.08 million SAAR, up from 4.94 million in January. Housing economist Tom Lawler estimates the NAR will reports sales of 5.46 million SAAR for February and that inventory will be up 5.7% year-over-year. Based on Lawler's estimate, I expect existing home sales to be well above the consensus for February.

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 January 2018, the consensus was for sales of 5.05 million on a seasonally adjusted annual rate (SAAR) basis. Lawler estimated the NAR would report 4.92 million, and the NAR reported 4.94 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 almost 9 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-195.054.924.94
Feb-195.085.46---
1NAR initially reported before revisions.