by Calculated Risk on 2/02/2012 10:21:00 PM

Probably worth a mention - especially since refinance activity will probably pick up soon (I expect HARP to increase in March) ...

From Freddie Mac: Average Mortgage Rates Ease Setting New Record Lows

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average mortgage rates dropping to new all-time record lows as data on economic growth fell short of market projections. All products in the PMMS survey, except the 1-Year ARM, averaged new lows.
...
30-year fixed-rate mortgage (FRM) averaged 3.87 percent with an average 0.8 point for the week ending February 2, 2012, down from last week when it averaged 3.98 percent. Last year at this time, the 30-year FRM averaged 4.81 percent.
...
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week, with an average 0.7 point, down from last week when it averaged 2.85 percent. A year ago, the 5-year ARM averaged 3.69 percent.

This is the lowest 30 year fixed rate since Freddie Mac started tracking rates in 1971. Rates were pretty low in the early 50s too - if anyone has a source for mortgage rates back then, please let me know.

by Calculated Risk on 2/02/2012 06:31:00 PM

From economist Tom Lawler:

Of the nine large publicly traded home builders whose fiscal quarters end on the same day as calendar quarters, eight have published earnings and operating stats. I don’t comment on earnings, put below are some selected stats on orders, settlements, and order backlogs.

Pulte, of course, noted that in the quarter ended December 31, 2010 there was a “one-time pickup” of about 200 net orders “associated with a change in the Company’s order recognition process,” and that as of result a “like-to-like” comparison of the latest quarter vs. the comparable year-ago quarter would show a YOY gain of “about” 8%. Adjusting the totals for all eight builders for the “Pulte shift,” the YOY gain in net orders for the above group would be 13.3% (and the YOY decline for the previous year would be 16.7%). For these eight companies combined, the backlog of orders at the end of last year was up 18.1% from the end of 2010, though it was little changed from the end of 2009.

	Settlements			Net Orders			Backlog
	End 2011	End 2010	End 2009	End 2011	End 2010	End 2009	End 2011	End 2010	End 2009
D.R. Horton	4,118	3,637	5,529	3,794	3,363	4,037	4,530	3,854	4,136
PulteGroup	4,303	4,405	6,200	3,084	3,044	3,748	3,924	3,984	5,931
NVR	2,391	2,639	2,550	2,158	1,765	2,000	3,676	2,916	3,531
The Ryland Group	1,040	909	1,666	915	775	969	1,514	1,187	1,732
Meritage Homes	894	837	1,202	749	713	621	915	778	1,095
Beazer Homes	882	549	961	724	553	728	1,309	800
MDC Holdings	950	865	1,109	523	519	637	1,043	842	826
M/I Homes	667	650	858	505	460	448	676	532	650
Total	15,245	14,491	20,075	12,452	11,192	13,188	17,587	14,893	17,901
YoY % Change	5.2%	-27.8%		11.3%	-15.1%		18.1%	-16.8%

MDC Holdings, by the way, reported that January 2012 net sales were up “about 30%” from January 2011 sales.

Census new SF home sales data showed a YOY increase in sales for the fourth quarter of 2011 (NSA, of course), of just 3.0%, while the YOY % decline for Q4/10 was 20.5%. Unfortunately, the Census new SF sales data are not directly comparable to reports from home builders, partly because of the treatment of sales cancellations, and partly because the timing of a “sale” can differ slightly. As such, it’s difficult to ascertain the degree to which “large” builder sales gains have exceeded Census’ gains reflects market share gains, different reporting, or “bad” Census data!

Net, though, my gut is that the large builders were seeing better net orders last quarter than Census new home sales data might have suggested.

by Calculated Risk on 2/02/2012 03:55:00 PM

Tomorrow (Friday) the BLS will release the January Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 135,000 payroll jobs in January, and for the unemployment rate to remain unchanged at 8.5%.

Here are a few revisions and issues to look for tomorrow:

• Establishment Data: "With the release of January 2012 data on February 3, 2012, the Current Employment Statistics (CES) survey will introduce revisions to nonfarm payroll employment, hours, and earnings data to reflect the annual benchmark adjustment for March 2011 and updated seasonal adjustment factors. Not seasonally adjusted data beginning with April 2010 and seasonally adjusted data beginning with January 2007 are subject to revision."

The preliminary benchmark was for an increase of 192,000 total nonfarm payroll jobs, and 140,000 private sector jobs as of March 2011. The annual revision is benchmarked to state tax records, and usually the preliminary estimate is pretty close to the final benchmark estimate.

This will be the first upward revision since 2006.

• Household Survey: "Effective with the release of The Employment Situation for January 2012 scheduled for February 3, 2012, population controls that reflect the results of Census 2010 will be used in the monthly household survey estimation process. Historical data will not be revised to incorporate the new controls; consequently, household survey data for January 2012 will not be directly comparable with that for December 2011 or earlier periods. A table showing the effects of the new controls on the major labor force series will be included in the January 2012 release."

• Issue: Several analysts have noted that it appears the seasonal adjustment for "Transportation and warehousing" over-counted employment in December by about 42,000 and this should be unwound in January. So December payroll growth was probably overstated, and January will be understated.

• And on the unemployment rate from Gallup:

The U.S. government's January unemployment rate that it will report Friday morning will be based largely on mid-month conditions. At mid-month, Gallup reported that its unemployment rate had declined to 8.3%, based on data collected through the 15th of the month.

The mid-month reading normally provides a pretty good estimate of the government's unadjusted unemployment rate for the month. However, the government is revising its methodology beginning with the January 2012 report. As a result, the government notes, "household survey data for January 2012 will not be directly comparable with that for December 2011 or earlier periods." In turn, this makes estimating the government's unemployment rate for January even more difficult than usual.

The Gallup survey hasn't predicted the BLS "not seasonally adjusted" unemployment rate very well, but this suggests a possible unemployment rate surprise. January has the largest downward seasonal adjustment, and usually the seasonally adjusted rate is 0.5% to 0.7% lower than the NSA rate. If the headline unemployment rate is 8.5% (as analysts expect) then I'd expect the NSA rate to be in the 9.1% range - not 8.3% as the Gallup survey found.

by Calculated Risk on 2/02/2012 01:25:00 PM

From the National Multi Housing Council (NMHC): Apartment Industry Continues Recovery, Survey Says

Market conditions continued to improve for the multifamily industry across all areas, according to the latest National Multi Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. For the seventh time in the last eight quarters, all four indexes reflecting Market Tightness, Sales Volume, Equity Financing and Debt Financing were at or above 50 – indicating growth from the previous quarter.

"In the face of an unprecedented virtual shutdown of development, the apartment market continues its strong recovery as developers play catch-up to the growing demand for rental housing," said NMHC Chief Economist Mark Obrinsky.
...
The Market Tightness Index rose to 60 from 52, marking the eighth straight quarter with the index at or above 50.

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tightening from the previous quarter. The index has indicated tighter market conditions for the last eight quarters and suggests falling vacancy rates and or rising rents.

This fits with the recent Reis data showing apartment vacancy rates fell in Q4 2011 to 5.2%, down from 5.6% in Q3 2011, and 9.0% at the end of 2009.

New multi-family construction remains a bright spot for the U.S. economy and this survey indicates demand for apartments is still strong.

A final note: This index helped me call the bottom for effective rents (and the top for vacancy rate) early in 2010.

by Calculated Risk on 2/02/2012 11:08:00 AM

Notes: This CoreLogic House Price Index report is for December. The Case-Shiller index released last week was for November. Case-Shiller is currently the most followed house price index, however CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average of September, October and November (November weighted the most) and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® Prices fell by 4.7 percent nationally in 2011

The CoreLogic HPI shows that, including distressed sales, home prices in the U.S. decreased 4.7 percent in 2011 compared with December 2010. This year-end report shows that home prices continued the trend of year-end decreases—this is the fifth consecutive year with a decrease in the HPI. The HPI excluding distressed sales shows that home prices decreased by 0.9 percent in 2011, giving an indication of the impact of distressed sales on home prices in 2011.

The report also shows that national home prices including distressed sales decreased 1.4 percent on a month-over-month basis, the fifth consecutive monthly decline. However, the HPI excluding distressed sales posted its first month-over-month gain since July 2011, rising 0.2 percent.

“While overall prices declined by almost 5 percent in 2011, non-distressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices,” said Mark Fleming, chief economist for CoreLogic.

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was down 1.4% in December, and is down 4.7% over the last year.

The index is off 33.7% from the peak - and is now at a new post-bubble low.

Some of this decline was seasonal (the CoreLogic index is NSA) and month-to-month price changes will probably remain negative through March 2012. Last year prices fell about 4% from December 2010 to March 2011, and there will probably be a similar decline this year.

All House Price Graphs

by Calculated Risk on 2/02/2012 10:00:00 AM

Fed Chairman Ben Bernanke's testimony, "The Economic Outlook and the Federal Budget Situation", Before the Committee on the Budget, U.S. House of Representatives.

Here is the CSpan feed

Here is the CNBC video feed.

Prepared testimony: The Economic Outlook and the Federal Budget Situation

by Calculated Risk on 2/02/2012 08:30:00 AM

The DOL reports:

In the week ending January 28, the advance figure for seasonally adjusted initial claims was 367,000, a decrease of 12,000 from the previous week's revised figure of 379,000. The 4-week moving average was 375,750, a decrease of 2,000 from the previous week's revised average of 377,750.

The previous week was revised up to 379,000 from 377,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 this week to 375,750.

The 4-week moving average remains below 400,000.

And here is a long term graph of weekly claims:



Weekly claims have been bouncing around lately - January is a period with large seasonal adjustments and that can lead to some large swings. The 4-week average of weekly claims has been moving sideways this year after trending down over the last few months of 2011.

All current Employment Graphs

by Calculated Risk on 2/01/2012 07:21:00 PM

The BEA released the underlying details this week for the Q4 Advance GDP report. As expected, the recent pickup in non-residential structure investment has been for power and communication.

The first graph shows investment in offices, malls and lodging as a percent of GDP. Office investment as a percent of GDP peaked at 0.46% in Q1 2008 and then declined sharply. Investment has increased a little recently (probably mostly tenant improvements as opposed to new office buildings).

Click on graph for larger image.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 62% from the peak (note that investment includes remodels, so this will not fall to zero).

Lodging investment peaked at 0.32% of GDP in Q2 2008 and has fallen by about 80%.

Notice that investment for all three categories typically falls for a year or two after the end of a recession, and then usually recovers very slowly (flat as a percent of GDP for 2 or 3 years). This is happening again, and there will not be a recovery in these categories until the vacancy rates fall significantly.

The second graph is for Residential investment (RI) components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).

Usually the most important components are investment in single family structures followed by home improvement.

Investment in single family structures has been moving sideways for almost three years, although it might be moving up a little.

Investment in home improvement was at a $158 billion Seasonally Adjusted Annual Rate (SAAR) in Q4 (about 1.0% of GDP), significantly above the level of investment in single family structures of $109 billion (SAAR) (or 0.7% of GDP).

Brokers' commissions declined slightly in Q4, and has been moving sideways as a percent of GDP.

And investment in multifamily structures is still moving sideways as a percent of GDP (increasing slowly in dollars). This is a small category, and even though investment is increasing, the positive impact on GDP will be relatively small.

These graphs show there is currently very little investment in offices, malls and lodging. It appears that residential investment is starting to pickup, but from a very low level.

All Housing Investment and Construction graphs

Earlier:
• ADP: Private Employment increased 170,000 in January
• Construction Spending increased 1.5% in December
• ISM Manufacturing index indicates faster expansion in January
• U.S. Light Vehicle Sales at 14.18 million annual rate in January

by Calculated Risk on 2/01/2012 03:50:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 14.18 million SAAR in January. That is up 12.1% from January 2011, and up 5.1% from the sales rate last month (13.5 million SAAR in Dec 2011).

This was well above the consensus forecast of 13.6 million SAAR.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for December (red, light vehicle sales of 14.18 million SAAR from Autodata Corp).

Click on graph for larger image.

The annualized sales rate was up sharply from December, and this was about the same level as August 2009 with the spike in sales from "cash-for-clunkers". Excluding cash-for-clunkers this was the strongest sales month since April 2008.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

This shows the huge collapse in sales in the 2007 recession. This also shows the impact of the tsunami and supply chain issues on sales, especially in May and June.

Note: dashed line is current estimated sales rate.

Growth in auto sales will probably make another strong positive contribution GDP in Q1 2012 GDP, although not as strong as in Q4 2011.

Another strong gain for auto sales.

All current Retail Graphs

by Calculated Risk on 2/01/2012 01:20:00 PM

From the FHFA: FHFA Announces Interested Investors May Pre-Qualify For REO Initiative

The Federal Housing Finance Agency (FHFA) today announced the first step of a Real Estate Owned (REO) Initiative targeted to hardest-hit metropolitan areas announced in August 2011. Investors interested in participating may “pre-qualify” to establish eligibility to bid on transactions in the initial pilot phase as well as subsequent phases.
...
During the pilot phase, Fannie Mae will offer for sale pools of various types of assets including rental properties, vacant properties and non-performing loans with a focus on the hardest-hit areas. The first transaction will be announced in the near-term.
...
FHFA is also looking at ways to improve REO sales to homeowners and small investors, enhancing the existing retail sales strategy at Fannie Mae and Freddie Mac. Both companies sell the majority of their REO properties to owner-occupants at close to market value.

From the WSJ: Obama Announces Refinancing Plan

The centerpiece of the announcement was the refinancing push, which complements an existing program that makes it easier for homeowners with mortgages backed by Fannie Mae and Freddie Mac to refinance.

The new initiative would extend that opportunity to roughly one-third of all mortgages that aren't backed by federal entities and instead are owned by banks or were bundled by private firms that sold them off to investors as mortgage-backed securities. The Federal Housing Administration would instead guarantee the new loan.

To qualify, homeowners would have to be current on their last six mortgage payments and have no more than one delinquency in the previous six months.

This would replace non-GSE loans with FHA insured loans. Since it requires congressional approval, it probably will not happen.

And from the WSJ: January U.S. Auto Sales Jump

Chrysler Group LLC led the way as its January U.S. sales leapt 44% to 101,149 cars and light trucks while ... GM's January sales fell 6%, reflecting deep discounts and new models that fueled sales gains a year ago. ... Ford Motor Co. also said its U.S. sales rose 7.3% to 136,294 cars and light trucks.

I'll post a graph after all the data is released - usually around 4 PM ET - of the seasonally adjusted annual sales rate for January.

Earlier:
• ADP: Private Employment increased 170,000 in January
• Construction Spending increased 1.5% in December
• ISM Manufacturing index indicates faster expansion in January