Tuesday, April 30, 2019

Fannie Mae: Mortgage Serious Delinquency Rate Decreased in March

by Calculated Risk on 4/30/2019 06:24:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate was decreased to 0.74% in March, from 0.76% in February. The serious delinquency rate is down from 1.16% in March 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 is 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), 2.68% are seriously delinquent. For loans made in 2005 through 2008 (4% of portfolio), 4.50% are seriously delinquent, For recent loans, originated in 2009 through 2018 (93% 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.

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

by Calculated Risk on 4/30/2019 02:01:00 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 February 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.

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

by Calculated Risk on 4/30/2019 11:53:00 AM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 4.0% year-over-year in February

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 12.4% above the previous bubble peak. However, in real terms, the National index (SA) is still about 7.7% below the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 14.5% below the bubble peak.

The year-over-year increase in prices has slowed to 4.0% 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 July 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.

NAR: Pending Home Sales Index Increased 3.8% in March

by Calculated Risk on 4/30/2019 10:03:00 AM

From the NAR: Pending Home Sales Climb 3.8% in March

Pending home sales rose in March, reversing course from a month prior, according to the National Association of Realtors®. Three of the four major regions saw growth last month, as the Northeast reported a minor slip in contract activity.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 3.8% to 105.8 in March, up from 101.9 in February. Year-over-year contract signings declined 1.2%, making this the 15th straight month of annual decreases.
...
The PHSI in the Northeast declined 1.7% to 90.5 in March and is now 0.4% below a year ago. In the Midwest, the index grew 2.3% to 95.3 in March, 5.0% lower than March 2018.

Pending home sales in the South jumped up 4.4% to an index of 127.2 in March, which is 0.7% higher than last March. The index in the West ascended 8.7% in March to 95.1 and fell only 1.6% below a year ago.
emphasis added
This was above expectations of a 0.6% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in April and May.

Case-Shiller: National House Price Index increased 4.0% year-over-year in February

by Calculated Risk on 4/30/2019 09:10:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February 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 Continue to Decline

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.0% annual gain in February, down from 4.2% in the previous month. The 10-City Composite annual increase came in at 2.6%, down from 3.1% in the previous month. The 20-City Composite posted a 3.0% year-over-year gain, down from 3.5% in the previous month.

Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities. In February, Las Vegas led the way with a 9.7% year-over-year price increase, followed by Phoenix with a 6.7% increase, and Tampa with a 5.4% increase. Only one of the 20 cities reported greater price increases in the year ending February 2019 versus the year ending January 2019.
...
Before seasonal adjustment, the National Index posted a month-over-month increase of 0.2% in February. The 10-City and 20-City Composites both reported 0.2% increases for the month. After seasonal adjustment, the National Index recorded a 0.3% month-over-month increase in February. The 10-City and the 20-City Composites both posted 0.2% month-over-month increases. In February, 14 of 20 cities reported increases before seasonal adjustment, while 17 of 20 cities reported increases after seasonal adjustment.

“The pace of increases for home prices continues to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Homes began their climb in 2012 and accelerated until late 2013 when annual increases reached double digits. Subsequently, increases slowed until now when the National Index is up 4% in the last 12 months. Sales of existing single family homes have recovered since 2010 and reached their peak one year ago in February 2018. Home sales drifted down over the last year except for a one-month pop in February 2019. Sales of new homes, housing starts, and residential investment had similar weak trajectories over the last year. Mortgage rates are down one-half to three-quarters of a percentage point since late 2018.

“The largest year-over-year price increase is 9.7% in Las Vegas; last year, the largest gain was 12.7% in Seattle. Regional patterns are shifting. The three California cities of Los Angeles, San Francisco and San Diego have the three slowest price increases over the last year. Chicago, New York and Cleveland saw only slightly larger prices increases than California. Prices generally rose faster in inland cities than on either the coasts or the Great Lakes. Aside from Las Vegas, Phoenix, and Tampa, which saw the fastest gains, Atlanta, Denver, and Minneapolis all saw prices rise more than 4% -- twice the rate of inflation.”
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 0.1% in February (SA).

The Composite 20 index is 4.0% above the bubble peak, and up 0.2% (SA) in February.

The National index is 12.4% above the bubble peak (SA), and up 0.3% (SA) in February.  The National index is up 52.0% 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 2.5% compared to February 2018.  The Composite 20 SA is up 2.9% year-over-year.

The National index SA is up 4.0% 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.

Monday, April 29, 2019

Tuesday: Case-Shiller House Prices, Chicago PMI, Pending Home Sales

by Calculated Risk on 4/29/2019 07:05:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Modestly Higher, But Volatility Could Increase

Mortgage rates moved up today, but at a fairly tame pace in the bigger picture. The rest of the week, however, may not be as tame. There are multiple economic reports on tap with a history of impacting the bond market (which dictates rates). The data gets most serious starting on Wednesday and finally culminates with ... the big jobs report. [30YR FIXED - 4.25-4.375%]
emphasis added
Tuesday:
• At 9:00 AM, S&P/Case-Shiller House Price Index for February. The consensus is for a 3.2% year-over-year increase in the Comp 20 index for February.

• At 9:45 AM, Chicago Purchasing Managers Index for April.

• At 10:00 AM, Pending Home Sales Index for March. The consensus is for a 0.6% increase in the index.

Energy expenditures as a percentage of PCE

by Calculated Risk on 4/29/2019 04:05:00 PM

Note: Back in early 2016, I noted that energy expenditures as a percentage of PCE had hit an all time low. Here is an update through the March 2019 PCE report released this morning.

Below is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through March 2019.

This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices.

Energy Expenditures as Percent of GDP
Click on graph for larger image.

Data source: BEA Table 2.3.5U.

The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.

In March 2019, energy expenditures as a percentage of PCE increased to 4.04% of PCE, up from the all time low three years ago of 3.6%.

Historically this is a low percentage of PCE for energy expenditures.

Q1 2019 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 4/29/2019 01:02:00 PM

The BEA has released the underlying details for the Q1 initial GDP report.

The BEA reported that investment in non-residential structures decreased at a 0.8% annual pace in Q1. Investment in petroleum and natural gas exploration was mostly unchanged in Q1 compared to Q4, but has increased substantially over the last two years.

Office Investment as Percent of GDPClick on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices increased in Q1, and is up 7% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 22% year-over-year in Q1.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment increased in Q1, and lodging investment is up 10% year-over-year.

Residential Investment Components The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Usually single family investment is the top category, although home improvement was the top category for five consecutive years following the housing bust.  Then investment in single family structures was back on top for six years - but home improvement investment exceeded single family in Q1.

Even though investment in single family structures has increased from the bottom, single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect some further increases.

Investment in single family structures was $264 billion (SAAR) (about 1.3% of GDP)..

Investment in multi-family structures increased in Q1.

Investment in home improvement was at a $274 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (about 1.3% of GDP).  Home improvement spending has been solid.

Dallas Fed: "Growth in Texas Manufacturing Activity Picks Up Slightly"

by Calculated Risk on 4/29/2019 10:36:00 AM

From the Dallas Fed: Growth in Texas Manufacturing Activity Picks Up Slightly

Texas factory activity continued to expand in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, ticked up two points to 12.4, indicating output growth accelerated slightly from March.

Other measures of manufacturing activity also suggested slightly faster expansion in April. The survey’s demand indicators bounced back after dipping last month: The new orders index rose eight points to 9.8, and the growth rate of orders index rose from -2.0 to 5.2. The capacity utilization index pushed to a seven-month high of 15.6, while the shipments index held fairly steady at 6.3.

Perceptions of broader business conditions continued to improve in April. The general business activity index remained positive for a third month in a row but fell five points to 2.0. Meanwhile, the company outlook index climbed two points to 6.3.

Labor market measures suggested weaker employment growth but slightly stronger growth in workweek length in April. The employment index fell eight points to 4.6, its lowest reading since the end of 2016.
emphasis added
This was the last of the regional Fed surveys for April.

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

Based on these regional surveys, it seems likely the ISM manufacturing index will be at about the same level in April as in March, maybe slightly lower. The consensus forecast is for a reading of 55.0, down slightly from 55.3 in March (to be released on Wednesday, May 1st).

Personal Income increased 0.1% in March, Spending increased 0.9%

by Calculated Risk on 4/29/2019 08:36:00 AM

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

Personal income increased $11.4 billion (0.1 percent) in March according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $0.6 billion, (less than 0.1 percent) and personal consumption expenditures (PCE) increased $123.5 billion (0.9 percent).

Real DPI decreased 0.2 percent in March, and real PCE increased 0.7 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased less than 0.1 percent.
The March PCE price index increased 1.5 percent year-over-year and the March PCE price index, excluding food and energy, increased 1.6 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through September 2018 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

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

The increase in personal income was below expectations, and the increase in PCE was above expectations.

PCE growth was weak in Q1, and inflation is below the Fed's target.

Sunday, April 28, 2019

Sunday Night Futures

by Calculated Risk on 4/28/2019 07:04:00 PM

Weekend:
Schedule for Week of April 28, 2019

Monday:
• 8:30 AM ET, Personal Income and Outlays, March 2019. The consensus is for a 0.4% increase in personal income, and for a 0.7% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• 10:30 AM, Dallas Fed Survey of Manufacturing Activity for April. This is the last of regional manufacturing surveys for April.

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

Oil prices were mixed over the last week with WTI futures at $62.87 per barrel and Brent at $71.63 per barrel.  A year ago, WTI was at $68, and Brent was at $76 - so oil prices are down 5% to 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.89 per gallon. A year ago prices were at $2.80 per gallon, so gasoline prices are up 9 cents per gallon year-over-year.

April 2019: Unofficial Problem Bank list increased slightly to 73 Institutions

by Calculated Risk on 4/28/2019 11:05:00 AM

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

Here is the unofficial problem bank list for April 2019.

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

Update on the Unofficial Problem Bank List for April 2019. It was quiet during the month in terms of changes as the list increased by one institution to 73 banks. Aggregate assets increased to $52.1 billion from $51.6 billion a month earlier. A year ago, the list held 94 institutions with assets of $18.9 billion. The addition this month was CFSBANK, Charleroi, PA ($488 million).

Saturday, April 27, 2019

Schedule for Week of April 28, 2019

by Calculated Risk on 4/27/2019 08:11:00 AM

The key report scheduled for this week is the April employment report.

Other key reports include Case-Shiller house prices, ISM Manufacturing survey, Vehicle Sales and Personal Income and Outlays for March.

For manufacturing, the April Dallas manufacturing survey will be released.

The FOMC meets this week, and no change to policy is expected at this meeting.

----- Monday, Apr 29th -----

8:30 AM ET: Personal Income and Outlays, March 2019. The consensus is for a 0.4% increase in personal income, and for a 0.7% increase in personal spending. And for the Core PCE price index to increase 0.1%.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for April. This is the last of regional manufacturing surveys for April.

----- Tuesday, Apr 30th -----

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

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 3.2% year-over-year increase in the Comp 20 index for February.

9:45 AM: Chicago Purchasing Managers Index for April.

10:00 AM: Pending Home Sales Index for March. The consensus is for a 0.6% increase in the index.

----- Wednesday, May 1st -----

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

Vehicle SalesAll day: Light vehicle sales for April. The consensus is for light vehicle sales to be 17.0 million SAAR in April, down from 17.5 million in March (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.

8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 180,000 payroll jobs added in April, up from 129,000 added in March.

ISM PMI10:00 AM: ISM Manufacturing Index for April. The consensus is for the ISM to be at 55.0, down from 55.3 in March.

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

The PMI was at 55.3% in March, up from 54.2% in February. The employment index was at 57.5% and the new orders index was at 57.4%.

10:00 AM: Construction Spending for March. The consensus is for a 0.2% increase in construction spending.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, May 2nd -----

8:30 AM: The initial weekly unemployment claims report will be released.  Last week the DOL reported 230 thousand initial claims.

----- Friday, May 3rd -----

Year-over-year change employment8:30 AM: Employment Report for April.   The consensus is for 180,000 jobs added, and for the unemployment rate to be unchanged at 3.8%.

There were 196,000 jobs added in March, and the unemployment rate was at 3.8%.

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

In March the year-over-year change was 2.537 million jobs.

10:00 AM: the ISM non-Manufacturing Index for April.   The consensus is for a reading of 57.2, up from 56.1.

Friday, April 26, 2019

For Fun: Jim the Realtor in 2009

by Calculated Risk on 4/26/2019 06:18:00 PM

Long time readers will remember the hilarious Jim the Realtor videos. Back, during the foreclosure crisis, Jim videoed a number of REO (Bank Real Estate Owned), and this one reminded him of Scarface.

Check out the backyard!

Freddie Mac: Mortgage Serious Delinquency Rate Decreased in March

by Calculated Risk on 4/26/2019 03:31:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in March was 0.67%, down from 0.69% in February. Freddie's rate is down from 0.97% in March 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

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

Note: Fannie Mae will report for March soon.

Q1 Review: Ten Economic Questions for 2019

by Calculated Risk on 4/26/2019 01:07:00 PM

At the end of last year, I posted Ten Economic Questions for 2019. I followed up with a brief post on each question. The goal was to provide an overview of what I expected in 2019 (I don't have a crystal ball, but I think it helps to outline what I think will happen - and understand - and change my mind, when the outlook is wrong).

By request, here is a quick Q1 review (it is very early in the year). I've linked to my posts from the beginning of the year, with a brief excerpt and a few comments:

10) Question #10 for 2019: Will housing inventory increase or decrease in 2019?

"I expect to see inventory up again year-over-year in December 2019.   My reasons for expecting more inventory are 1) inventory is still historically low (inventory in November 2018 was  the second lowest since 2000), 2) higher mortgage rates, and 3) further negative impact in certain areas from new tax law."
According to the March NAR report on existing home sales, inventory was up 2.4% year-over-year in March, and the months-of-supply was at 3.9 months. It is very early, and the inventory build has slowed recently as mortgage rates declined, but I still expect some increase in inventory this year.

9) Question #9 for 2019: What will happen with house prices in 2019?
"If inventory increases further year-over-year as I expect by December 2019, it seems likely that price appreciation will slow to the low single digits - maybe around 3%."
If is very early, but the CoreLogic data for February showed prices up 4.0% year-over-year. The January Case-Shiller data showed prices up 4.3% YoY - and slowing.  Currently it appears price gains will slow in 2019.

8) Question #8 for 2019: How much will Residential Investment increase?
"Most analysts are looking for starts and new home sales to increase to slightly in 2019. For example, the NAHB is forecasting a slight increase in starts (to 1.269 million), and no change in home sales in 2019. And Fannie Mae is forecasting a slight increase in starts (to 1.265 million), and for new home sales to increase to 619 thousand in 2019.

My sense is the weakness in late 2018 will continue into 2019, and starts will be down year-over-year, but not a huge decline.  My guess is starts will decrease slightly in 2019 and new home sales will be close to 600 thousand."
Through March, starts were down 9.7% year-over-year compared to the same period in 2018.  New home sales were also up 1.7% year-over-year.   It is early, but it appears starts will be down slightly this year, and new home sales will be up.

7) Question #7 for 2019: How much will wages increase in 2019?
"As the labor market continues to tighten, we should see more wage pressure as companies have to compete for employees. I expect to see some further increases in both the Average hourly earning from the CES, and in the Atlanta Fed Wage Tracker. Perhaps nominal wages will increase close to 3.5% in 2019 according to the CES."
Through March 2019, nominal hourly wages were up 3.2% year-over-year. It is early, but it appears wages will increase faster in 2019 than in 2018.

6) Question #6 for 2019: Will the Fed raise rates in 2019, and if so, by how much?
"My current guess is just one hike in the 2nd half of the year."
It now appears the Fed will be "patient" and not increase rates this year.

5) Question #5 for 2019: Will the core inflation rate rise in 2019? Will too much inflation be a concern in 2019?
The Fed is projecting core PCE inflation will increase to 2.0% to 2.1% by Q4 2019.  There are risks for higher inflation with the labor market near full employment, however I do think there are structural reasons for low inflation (demographics, few employment agreements that lead to wage-price-spiral, etc).

So, although I think core PCE inflation (year-over-year) will increase in 2019 and be around 2% by Q4 2019 (up from 1.9%), I think too much inflation will still not be a serious concern in 2019.
It is early, but inflation is currently close to the Fed's target. There is growing concern that inflation will soften in 2019, and that will be something to watch.

4) Question #4 for 2019: What will the unemployment rate be in December 2019?
Depending on the estimate for the participation rate and job growth (next question), it appears the unemployment rate will decline into the mid 3's by December 2019 from the current 3.7%. My guess is based on the participation rate being mostly unchanged in 2019, and for decent job growth in 2019, but less than in 2018 or 2017.
The unemployment rate was at 3.8% in March, and it appears the unemployment rate will decline further in 2019.

3) Question #3 for 2019: Will job creation in 2019 be as strong as in 2018?
So my forecast is for gains of around 133,000 to 167,000 payroll jobs per month in 2019 (about 1.6 million to 2.0 million year-over-year) .  This would be the fewest job gains since 2010, but another solid year for employment gains given current demographics.
Through March 2019, the economy has added 541,000 thousand jobs, or 180,000 per month. This is slightly above my forecast, and - so far - it appears job growth will slow this year compared to 2018.

2) Question #2 for 2019: How much will the economy grow in 2019?
"Looking to 2019, fiscal policy will still be a positive for growth - although the boost will fade over the course of the year, and become a drag in 2020.   And oil prices declined sharply in late 2018, and this will be a drag on economic growth in 2019.   Auto sales are mostly moving sideways, and housing has been under pressure due to higher mortgage rates and the new tax plan.

These factors suggest growth will slow in 2019, probably to the low 2s -and maybe even a 1 handle."
GDP growth was solid in Q1 at 3.2%, although the underlying details were weaker than the headline number.  Last year I was forecasting a pickup in growth - and that happened - and this year I expect growth to slow over the course of the year.

1) Question #1 for 2019: Will Mr. Trump negatively impact the economy in 2019?
My forecasts are based on a limited negative impact from Mr. Trump - and I hope that remains the case.   But he is a key downside risk for the economy.
So far so good, but Mr. Trump's words and actions remain key risks for the economy.

The Fed will probably not raise rates this year, and it appears new home sales might be higher than I originally expected, but overall - and it is very early - it looks like 2019 is unfolding mostly as expected.

Q1 GDP: Investment

by Calculated Risk on 4/26/2019 08:54:00 AM

Investment was weak in Q1 (although private inventories increased).   Also personal consumption expenditures (PCE) was weak (only increased at a 1.2% annual rate).

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 Q1 (-2.8% annual rate in Q1).  Equipment investment increased slightly at a 0.2% annual rate, and investment in non-residential structures decreased at a 0.8% annual rate.

On a 3 quarter trailing average basis, RI (red) is down slightly, equipment (green) is slightly positive, and nonresidential structures (blue) is down 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 Q1, 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 - declined slightly.

BEA: Real GDP increased at 3.2% Annualized Rate in Q1

by Calculated Risk on 4/26/2019 08:34:00 AM

From the BEA: Gross Domestic Product, First Quarter 2019 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the first quarter of 2019, according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2018, real GDP increased 2.2 percent....

The increase in real GDP in the first quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, state and local government spending, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased. These contributions were partly offset by a decrease in residential investment.

The acceleration in real GDP growth in the first quarter reflected an upturn in state and local government spending, accelerations in private inventory investment and in exports, and a smaller decrease in residential investment. These movements were partly offset by decelerations in PCE and nonresidential fixed investment, and a downturn in federal government spending. Imports, which are a subtraction in the calculation of GDP, turned down.
emphasis added
The advance Q1 GDP report, with 2.6% annualized growth, was above expectations.

Personal consumption expenditures (PCE) increased at 1.2% annualized rate in Q1, down from 3.2% in Q4.   Residential investment (RI) decreased 2.8% in Q1. Equipment investment increased at a 0.2% annualized rate, and investment in non-residential structures decreased at a 0.8% pace.

I'll have more later ...

Thursday, April 25, 2019

Friday: Q1 GDP

by Calculated Risk on 4/25/2019 08:25:00 PM

From Goldman Sachs today on Q1 GDP:

We boosted our Q1 GDP forecast by two tenths to +2.6% (qoq ar) ahead of tomorrow’s advance release, reflecting the firm pace of durable inventory growth and the surprising rebound in commercial aircraft shipments in March.
emphasis added
Friday:
• At 8:30 AM ET, Gross Domestic Product, 1st quarter 2019 (Advance estimate). The consensus is that real GDP increased 2.0% annualized in Q1, down from 2.2% in Q4.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for April). The consensus is for a reading of 97.1.

Merrill April Employment Report Forecast: 250K, 3.7%

by Calculated Risk on 4/25/2019 04:20:00 PM

A few brief excerpts from a Merrill Lynch research note:

We look for nonfarm payroll employment growth of 250k in the April Bureau of Labor Statistics (BLS) employment report, to be released on May 3rd. …

we think the strong job growth should put further downward pressure on the unemployment rate and look for it to decline to 3.7% from 3.8%. …

we look for wage growth to return back to the recent trend and forecast that average hourly earnings growth of 0.3% mom

Kansas City Fed: "Tenth District Manufacturing Activity Grew More Modestly"

by Calculated Risk on 4/25/2019 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Grew More Modestly

The Federal Reserve Bank of Kansas City released the April 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 grew more modestly, but expectations for future activity remained generally solid.

“Regional factory growth in April was a bit weaker than in March, but similar to previous months,” said Wilkerson. “About a third of firms noted that flooding and extreme weather had negatively affected their activity in recent months.”
...
The month-over-month composite index was 5 in April, down slightly from 10 in March but higher than 1 in February. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Growth eased slightly in factory production of both durable and nondurable goods, particularly food, machinery, electronic, and chemical products. Most month-over-month indexes slowed in April but remained positive, with production, shipments, order backlog, and employment all decreasing. In contrast, the new orders index edged higher from 4 to 10. Most year-over-year factory indexes fell in April, and the composite index eased from 27 to 22. The future composite index also moved lower from 22 to 11, as most future factory activity indexes eased somewhat.
emphasis added
Most of the regional surveys have shown slower growth in April than in March.

HVS: Q1 2019 Homeownership and Vacancy Rates

by Calculated Risk on 4/25/2019 10:10:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q1 2019.

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.

"National vacancy rates in the first quarter 2019 were 7.0 percent for rental housing and 1.4 percent for homeowner housing. The rental vacancy rate of 7.0 percent was virtually unchanged from the rate in the first quarter 2018, but 0.4 percentage points higher than the rate in the fourth quarter 2018 (6.6 percent). The homeowner vacancy rate of 1.4 percent was 0.1 percentage point lower than the rate in the first quarter 2018 (1.5 percent), but not statistically different from the rate in the fourth quarter 2018.

The homeownership rate of 64.2 percent was virtually unchanged from the rate in the first quarter 2018, but 0.6 percentage points lower than the rate in the fourth quarter 2018 (64.8 percent)."
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 decreased to 64.2% in Q1, from 64.8% in Q4.

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 1.4% in Q1.

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

Rental Vacancy RateThe rental vacancy rate increased to 7.0% in Q1.

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 230,000

by Calculated Risk on 4/25/2019 08:34:00 AM

The DOL reported:

In the week ending April 20, the advance figure for seasonally adjusted initial claims was 230,000, an increase of 37,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 192,000 to 193,000. The 4-week moving average was 206,000, an increase of 4,500 from the previous week's revised average. The previous week's average was revised up by 250 from 201,250 to 201,500.
emphasis added
The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 206,000.

This was well above the consensus forecast.

Wednesday, April 24, 2019

Thursday: Unemployment Claims, Durable Goods, Q1 Housing Vacancies and Homeownership

by Calculated Risk on 4/24/2019 07:26:00 PM

Thursday:
• At 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 200 thousand initial claims, up from 192 thousand the previous week.

• At 8:30 AM: Durable Goods Orders for March from the Census Bureau. The consensus is for a 0.8% increase in durable goods orders.

• At 10:00 AM: the Q1 2019 Housing Vacancies and Homeownership from the Census Bureau.

Chemical Activity Barometer Increases in April

by Calculated Risk on 4/24/2019 03:28:00 PM

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

From the American Chemistry Council: Chemical Activity Barometer Shows Second Monthly Gain in April

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.5 percent in April on a three-month moving average (3MMA) basis, the second monthly gain after several weak months.
...
The latest CAB signals gains in U.S. commercial and industrial activity through mid-2019, but at a slow pace,” said Kevin Swift, chief economist at ACC. “As a result, the recovery and expansion underway is likely to surpass the record of 120 months set during the 1990s. The CAB reading suggests that there are glimmers of hope for improving activity in the closing months of the year.”
...
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 suggests further gains in industrial production into 2019, but at a slow pace.

Philly Fed: State Coincident Indexes increased in 37 states in March

by Calculated Risk on 4/24/2019 10:58:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2019. Over the past three months, the indexes increased in 44 states, decreased in five states, and remained stable in one, for a three-month diffusion index of 78. In the past month, the indexes increased in 37 states, decreased in eight states, and remained stable in five, for a one-month diffusion index of 58.
emphasis added
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Philly Fed State Conincident Map Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all or mostly green during most of the recent expansion.

The map is mostly green on a three month basis, but there are some red and grey (unchanged) states.

Source: Philly Fed.

Note: For complaints about red / green issues, please contact the Philly Fed.

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

In March, 41 states had increasing activity (including minor increases).

New Home Prices

by Calculated Risk on 4/24/2019 09:26:00 AM

As part of the new home sales report released yesterday, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in March 2019 was $302,700. The average sales price was $376,000."

The following graph shows the median and average new home prices.

New Home Prices Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

Now it appears the home builders are offering some less expensive (and probably smaller) homes.

The average price in Mar 2019 2018 was $376,300, and the median price was $302,700.

The second graph shows the percent of new homes sold by price.

New Home Sales by PriceAbout 6% of new homes sold were under $150K in Mar 2019.  This is down from 30% in 2002, but up from recent levels.  In general, the under $150K bracket is going away.   

The $400K+ bracket increased significantly since the housing recovery started, but has started to decline.  Still, a majority of new homes (about 56%) in the U.S., are in the $200K to $400K range.

MBA: Mortgage Applications Decreased in Latest Weekly Survey

by Calculated Risk on 4/24/2019 07:00:00 AM

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

Mortgage applications decreased 7.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 19, 2019.

... The Refinance Index decreased 11 percent from the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 3 percent higher than the same week one year ago.
...
“The 30-year fixed mortgage rate has risen 10 basis points in three weeks, and is now at its highest level in over a month. Borrowers remain extremely sensitive to rate changes, which is why there has been a 28 percent drop in refinance applications over this three-week period. Purchase activity also declined, but remains almost 3 percent higher than a year ago,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Borrowing costs have recently drifted higher because of ebbing geopolitical concerns, as well as signs of strengthening in the U.S. economy, including the recent data pointing to robust retail sales.”

Added Fratantoni, “The strong economy and job market is keeping buyer interest high, but rising mortgage rates could add pressure to the budgets of some would-be buyers.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.46 percent from 4.44 percent, with points increasing to 0.44 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.

Once mortgage rates fell more than 50 bps from the highs of last year, a number of recent buyers were able to refinance.  But it would take another significant decrease in rates to see a further 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, April 23, 2019

Earlier Richmond Fed: "Fifth District Manufacturing Activity Moderated in April"

by Calculated Risk on 4/23/2019 02:31:00 PM

From the Richmond Fed: Fifth District Manufacturing Activity Moderated in April

Fifth District manufacturing activity moderated in April, according to the latest survey from the Richmond Fed. The composite index fell from 10 in March to 3 in April, weighed down by slightly negative readings in the indexes for both shipments and new orders but buoyed by a positive reading for the third component index, employment. Firms were optimistic, expecting conditions to improve in the next six months.

Survey results suggested continued positive growth in both employment and wages, although these indexes dropped slightly in April. However, firms reported a decline in the average workweek as they continued to struggle to find workers with the necessary skills. Firms expected this difficulty to continue in the coming months.
emphasis added

A few Comments on March New Home Sales

by Calculated Risk on 4/23/2019 11:35:00 AM

New home sales for March were reported at 692,000 on a seasonally adjusted annual rate basis (SAAR). This is the second highest sales rate for this cycle (just behind November 2017). This was well above the consensus forecast, however sales for the previous three months were revised down.

With these revisions, sales increased slightly, just 0.7%, in 2018 compared to 2017.   And my guess is we haven't seen the peak of this cycle yet.

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 March were up 3.0% year-over-year compared to March 2018.

Year-to-date (just through March), sales are up 1.7% 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 March 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 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.

Distressing GapAnother way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down since the housing bust, and this ratio will probably continue to trend down over the next few years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

New Home Sales increased to 692,000 Annual Rate in March

by Calculated Risk on 4/23/2019 10:12:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 692 thousand.

The previous three months were revised down.

"Sales of new single‐family houses in March 2019 were at a seasonally adjusted annual rate of 692,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.5 percent above the revised February rate of 662,000 and is 3.0 percent above the March 2018 estimate of 672,000."
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 March to 6.0 months from 6.3 months in February.

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

This is at the top of the normal range (less than 6 months supply is normal).
"The seasonally‐adjusted estimate of new houses for sale at the end of March was 344,000. This represents a supply of 6.0 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 March 2019 (red column), 68 thousand new homes were sold (NSA). Last year, 66 thousand homes were sold in March.

The all time high for March was 127 thousand in 2005, and the all time low for March was 28 thousand in 2011.

This was well above expectations of 645 thousand sales SAAR, however, sales in the three previous months were revised. I'll have more later today.

Black Knight: National Mortgage Delinquency Rate Decreased in March

by Calculated Risk on 4/23/2019 08:58:00 AM

From Black Knight: Black Knight’s First Look: Prepayments Surge on Lower Interest Rates; Seasonal Delinquency Rate Improvement Remains Muted

• Prepayment activity increased by 28% month-over-month, the largest single-month increase in more than 2.5 years, in response to declining interest rates and the start of the homebuying season

• The national delinquency rate fell by 5.3% for the month, the smallest improvement for any March in six years in what is typically the strongest-performing month of the year

• March 2019 ended on a Sunday, which has historically led to an increase in delinquencies, and came on the heels of February’s atypical increase in delinquencies

• 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 month’s 39,700 foreclosure starts marked the lowest single-month volume in more than 18 years, while reduced outflow held active foreclosure inventory steady at 264,000

• Outstanding 90-day delinquencies have now fallen below 500,000 for the first time in more than 12 years
According to Black Knight's First Look report for March, the percent of loans delinquent decreased 5.3% in March compared to February, and decreased 2.0% year-over-year.

The percent of loans in the foreclosure process decreased 0.2% in March and were down 18.8% 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 3.65% in March, down from 3.89% in February.

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

The number of delinquent properties, but not in foreclosure, is down 9,000 properties year-over-year, and the number of properties in the foreclosure process is down 57,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  Mar
2019
Feb
2019
Mar
2018
Mar
2017
Delinquent3.65%3.89%3.73%3.62%
In Foreclosure0.51%0.51%0.63%0.88%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:1,903,0002,019,0001,912,0001,831,000
Number of properties in foreclosure pre-sale inventory:264,000264,000321,000448,000
Total Properties2,167,0002,284,0002,232,0002,279,000

Monday, April 22, 2019

Tuesday: New Home Sales, Richmond Fed Mfg

by Calculated Risk on 4/22/2019 07:28:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Modestly Higher to Start The Week

Mortgage rates were higher again on Monday, but just barely. The average lender was still in worse shape on Tuesday or Wednesday of last week when rates were the highest they'd been in about a month. [30YR FIXED - 4.25%]
emphasis added
Tuesday:
• At 9:00 AM: FHFA House Price Index for February 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM: New Home Sales for March from the Census Bureau. The consensus is for 645 thousand SAAR, down from 667 thousand in February.

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

Housing Inventory Tracking

by Calculated Risk on 4/22/2019 05:48:00 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 2.4% year-over-year (YoY) in March, this was the eighth 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 March).

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 92% YoY in Las Vegas in March (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 last year as oil prices increased.  Inventory was up 17.5% year-over-year in Houston in March.

Inventory is a key for the housing market.  Right now it appears the inventory build that started last year is slowing.

Also note that inventory in Seattle was up 136% year-over-year in March (not graphed)!

Comments on March Existing Home Sales

by Calculated Risk on 4/22/2019 02:17:00 PM

Earlier: NAR: Existing-Home Sales Decreased to 5.21 million in March

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.

Overall, this is still a somewhat reasonable level for existing home sales.  No worries.

2) Inventory is still low, and was only up 2.4% year-over-year (YoY) in March. This was the eighth consecutive month with a year-over-year increase in inventory, although the YoY increase was smaller in March than in the five previous months.

Existing Home Sales NSAClick on graph for larger image.

3) Year-to-date sales are down about 6.5% compared to the same period in 2018.   On an annual basis, that would put sales around 5 million in 2019.  Sales slumped at the end of 2018 and in January 2019 due to higher mortgage rates, the stock market selloff, and fears of an economic slowdown (unfounded).

The comparisons will be easier towards the end of the year.

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

Sales NSA in March (400,000, red column) were below sales in March 2018 (434,000, NSA), and sales were the lowest for March since 2014.

NAR: Existing-Home Sales Decreased to 5.21 million in March

by Calculated Risk on 4/22/2019 10:14:00 AM

From the NAR: Existing-Home Sales Slide 4.9% in March

Existing-home sales retreated in March, following February’s surge of sales, according to the National Association of Realtors®. Each of the four major U.S. regions saw a drop-off in sales, with the Midwest enduring the largest decline last month.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 4.9% from February to a seasonally adjusted annual rate of 5.21 million in March. Sales as a whole are down 5.4% from a year ago (5.51 million in March 2018).
...
Total housing inventory at the end of March increased to 1.68 million, up from 1.63 million existing homes available for sale in February and a 2.4% increase from 1.64 million a year ago. Unsold inventory is at a 3.9-month supply at the current sales pace, up from 3.6 months in February and up from 3.6 months in March 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 (5.21 million SAAR) were down 4.9% from last month, and were 5.4% below the March 2018 sales rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.68 million in March from 1.63 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 2.4% year-over-year in March compared to March 2018.

Months of supply was at 3.9 months in March.

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

Chicago Fed "Index Points to a Pickup in Economic Growth in March"

by Calculated Risk on 4/22/2019 08:37:00 AM

From the Chicago Fed: Index Points to a Pickup in Economic Growth in March

Led by improvements in employment-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to –0.15 in March from –0.31 in February. Three of the four broad categories of indicators that make up the index increased from February, but three of the four categories made negative contributions to the index in March. The index’s three-month moving average, CFNAI-MA3, moved down to –0.24 in March from –0.18 in February
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 March (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, April 21, 2019

Monday: Existing Home Sales

by Calculated Risk on 4/21/2019 09:05:00 PM

Weekend:
Schedule for Week of April 21, 2019

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

• At 10:00 AM: Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.30 million SAAR, down from 5.51 million. Housing economist Tom Lawler expects the NAR to report sales of 5.40 million SAAR for March.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 4 and DOW futures are up 40 (fair value).

Oil prices were up over the last week with WTI futures at $64.67 per barrel and Brent at $72.65 per barrel.  A year ago, WTI was at $68, and Brent was at $75 - so oil prices are down slightly year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.83 per gallon. A year ago prices were at $2.75 per gallon, so gasoline prices are up 8 cents per gallon year-over-year.

Hotels: Occupancy Rate Increased Year-over-year

by Calculated Risk on 4/21/2019 08:11:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 13 April

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 7-13 April 2019, according to data from STR.

In comparison with the week of 8-14 April 2018, the industry recorded the following:

Occupancy: +2.4% to 69.9%
• Average daily rate (ADR): +4.4% to US$136.25
• Revenue per available room (RevPAR): +6.9% to US$95.22
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, 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