by Calculated Risk on 4/10/2013 03:01:00 PM

Economist Tom Lawler sent me the table below of short sales and foreclosures for several selected cities in March. 

Look at the right two columns in the table below (Total "Distressed" Share for March 2013 compared to March 2012). In every area that has reported distressed sales so far, the share of distressed sales is down year-over-year - and down significantly in most areas. 

Also there has been a decline in foreclosure sales just about everywhere. Look at the middle two columns comparing foreclosure sales for March 2013 to March 2012. Foreclosure sales have declined in all these areas, and some of the declines have been stunning (the Nevada sales were impacted by the new foreclosure law). 

Also there has been a shift from foreclosures to short sales. In all of these areas - except Minneapolis- short sales now out number foreclosures.

This is worth repeating: Imagine that the number of total existing home sales doesn't change or even declines over the next year - some people would argue that is "bad" news and the housing market isn't recovering. But also imagine that the share of distressed sales declines sharply, and conventional sales increase significantly. That would be a positive sign - and that is what is now happening.

An example would be Sacramento (I posted data on Sacramento earlier today).  In Sacramento, total sales were down 17% in March 2013 compared to March 2012, but conventional sales were up 29%!  That is a positive sign.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	13-Mar	12-Mar	13-Mar	12-Mar	13-Mar	12-Mar
Las Vegas	33.3%	26.6%	11.2%	40.7%	44.5%	67.3%
Reno	32.0%	34.0%	9.0%	32.0%	41.0%	66.0%
Phoenix	15.1%	25.7%	11.6%	21.1%	26.8%	46.8%
Sacramento	27.0%	29.0%	10.5%	30.7%	37.5%	59.7%
Minneapolis	9.3%	12.4%	28.6%	36.5%	37.9%	48.9%
Mid-Atlantic (MRIS)	11.4%	13.2%	10.7%	14.7%	22.1%	27.9%

by Calculated Risk on 4/10/2013 12:29:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (conventional, REOs, and short sales). For some time, not much changed. But over the last 2 years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market.  Other distressed markets are showing similar improvement.

Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In March 2013, 37.5% of all resales (single family homes and condos) were distressed sales. This was down from 43.8% last month, and down from 59.6% in March 2012. This is the lowest percentage of distressed sales - and therefore the highest percentage of conventional sales - since the association started tracking the data.

The percentage of REOs decreased to 10.5%, and the percentage of short sales decreased to 27.0%.

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales recently, and there were almost three times as many short sales as REO sales in March. 

Active Listing Inventory for single family homes declined 37.8% from last March.  Cash buyers accounted for 36.4% of all sales (frequently investors), and median prices were up 30% year-over-year (the mix has changed). UPDATE: I recommend using the repeat sales indexes for prices as opposed to the median price calculated by the local MLS.

Total sales were down 17% from March 2012, but conventional sales were up 29% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increase.

We are seeing a similar pattern in other distressed areas, with a move to more conventional sales, and a shift from REO to short sales. This is a sign of a recovering housing market.

by Calculated Risk on 4/10/2013 10:09:00 AM

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

The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier.
...
“Although total purchase application volume fell last week, there was a significant divergence between the conventional and government markets,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Following the April 1 increase in FHA mortgage insurance premiums, government purchase applications fell by almost 14 percent, to their lowest level since February 2013. On the other hand, applications for conventional purchase loans increased by more than 5 percent, bringing the conventional purchase index to its highest level since October 2009 and the highest level since the expiration of the homebuyer tax credit. With these changes, the government share of all purchase loans fell to 30 percent, the lowest level since we began tracking this series in 2011.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.68 percent, the lowest rate since January 2013, from 3.76 percent, with points remaining unchanged at 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the refinance index.

There has been a sustained refinance boom for over a year.

Refinance activity will probably slow in 2013.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up (slowly) over the last year. 

As Fratantoni noted, conventional purchase activity is at the highest level since the expiration of the homebuyer tax credit.

by Calculated Risk on 4/10/2013 09:19:00 AM

From the Fed: Minutes of the Federal Open Market Committee, March 19-20, 2013. A few excerpts:

The staff provided presentations covering the efficacy of the Federal Reserve's asset purchases, the effects of the purchases on security market functioning, the ways in which asset purchases might amplify or reduce risks to financial stability, and the fiscal implications of purchases. In their discussion of this topic, meeting participants generally judged the macroeconomic benefits of the current purchase program to outweigh the likely costs and risks, but they agreed that an ongoing assessment of the benefits and costs was necessary. Pointing to academic and Federal Reserve staff research, most participants saw asset purchases as having a meaningful effect in easing financial conditions and so supporting economic growth. ...

A range of views was expressed regarding the economic and labor market conditions that would call for an adjustment in the pace of purchases. Many participants emphasized that any decision to reduce the pace of purchases should reflect both an improvement in their overall outlook for labor market conditions, as implied by a wide range of available indicators, and their confidence in the sustainability of that improvement. A couple of these participants noted that if progress toward the Committee's economic goals were not maintained, the pace of purchases might appropriately be increased. A number of participants suggested that the Committee could change the mix of its policy tools if necessary to increase or maintain overall accommodation, including potentially adjusting its forward guidance or its balance sheet policies.
emphasis added

There is some disagreement, but the committee generally views the benefits of QE outweighing the costs.

by Calculated Risk on 4/09/2013 09:00:00 PM

This is an actual quote today from the German Finance Minister Wolfgang Schauble:

"Nobody in Europe sees this contradiction between fiscal policy consolidation and growth,” Schauble said. “We have a growth-friendly process of consolidation, and we have sustainable growth, however you want to word it.”

Obviously there is a contradiction between "fiscal policy consolidation and growth". And not everyone is blind to the obvious - some people in Europe see the obvious contradiction (just look at the data).

And a "growth friendly process"? "Sustainable growth"?  Nonsense. Maybe Schauble should look at the data (here is the eurostat data on GDP and unemployment.

Comment: Obviously Schauble is the worst kind of policymaker. He believes in "austerity über alles" and can't be swayed by the results. Very sad.

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

• At 2:00 PM, the FOMC Minutes for the Meeting of March 19-20, 2013 will be released.

by Calculated Risk on 4/09/2013 05:32:00 PM

Reader Picosec suggests "An interesting graph would be a time series showing both Job Openings and Change in Payroll Jobs. [This] might indicate whether one was predictive of the other, and to what extent."

Sometimes I do requests ... Unfortunately the JOLTS time series for job openings is very limited (released for February this morning) and only has data back to December 2000.

We always have to be extra careful with limited data.

The following graph shows non-farm payroll (left axis) and job openings (right axis).

Click on graph for larger image in graph gallery.

In general the two series move together, although it appears job openings leads non-farm payroll at turning points.  However the JOLTS is a noisy series, so we might not be able to tell at turning points - but if job openings turned down over several months, I'd be concerned about payrolls.  Right now job openings are at the highest level since May 2008.

by Calculated Risk on 4/09/2013 03:10:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported GLVAR reports increase in local home prices, traditional sales

With local home prices up and inventory down, REALTORS® have been reporting more homes sold by "traditional" sellers – as opposed to lenders, who are responsible for the short sales and foreclosures that have dominated the market in recent years. In fact, for the first time in years, [GLVAR President Dave] Tina said "traditional" sales have accounted for more than half of all local home sales so far in 2013.

In March, 33.3 percent of all existing local home sales were short sales, down from 37.9 percent in February. Meanwhile, another 11.2 percent of all local home sales were bank-owned, up from 10.2 percent in February. The remaining 55.5 percent of all sales are the traditional type, Tina said.

GLVAR said the total number of existing local homes, condominiums and townhomes sold in March was 3,642. That’s up from 3,232 in February, but down from 4,388 total sales in March 2012.
...
As for available homes listed for sale without any sort of pending or contingent offer by the end of March, GLVAR reported 2,839 single-family homes listed without any sort of offer. That’s down 6.8 percent from 3,047 such homes listed in February and down 42.1 percent from one year ago.
emphasis added

A few key points:
1) In March 2012, 67.3% of total sales were distressed.  That declined to 44.5% in March 2013. So even though total sales declined year-over-year from 4,388 in March 2012 to 3,642 in March 2013, conventional sales were up about 40%. That is a sign of an improving market (it would be a mistake to focus only on the decline in total sales and miss the improvement in conventional sales).

2) Inventory of non-contingent homes is down 42.1% from a year ago to 2,839.  That is a sharp decline and less than one months supply (not including homes with offers).  Total inventory (including contingent offers) is down 24%.

3) Most distressed sales are now short sales.  About 3 times as many homes were short sales as foreclosures.

Overall this is an improving distressed market. Note: The median price was up 30.9% from a year ago, but I suggest using the repeat sales indexes because the median is impacted by the mix and there are fewer low end homes being sold.

by Calculated Risk on 4/09/2013 12:00:00 PM

Demand for lumber is increasing, but demand is still far below the levels during the housing bubble. However supply is lower than during the bubble years too. There are several factors impacting supply including a large number of sawmills still idled (it takes time to restart), the impact of the Mountain pine beetle, reduced maximum cuts in parts of Canada, and the permanent closure of high cost mills.

Note: Here is a great series on the mountain pine beetle from the Vancouver Sun: Pine Beetle

The B.C. government estimates that of the 2.3-billion cubic metres of merchantable lodgepole pine in the province, the beetles have claimed 726-million cubic metres over at least 17.5-million hectares.

Last month the WSJ had an article about some producers increasing supply:

Georgia-Pacific, the largest U.S. producer of plywood ... plans to invest about $400 million over the next three years to boost softwood plywood and lumber capacity by 20%.

Much more capacity is needed.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices (not plywood): 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Lumber prices are now near the housing bubble highs.

by Calculated Risk on 4/09/2013 10:05:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 3.9 million job openings on the last business day of February, up from 3.6 million in January, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.3 percent) and separations rate (3.1 percent) were little changed in February. ...
...
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... The number of quits (not seasonally adjusted) rose over the 12 months ending in February for total nonfarm and was essentially unchanged for total private and government.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for February, the most recent employment report was for March.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in February to 3.925 million, up from 3.611 million in January. The number of job openings (yellow) has generally been trending up, and openings are up 11% year-over-year compared to February 2012.  This is most job openings since May 2008.

Quits were unchanged in February, and quits are up 7% year-over-year and at the highest level since 2008. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Not much changes month-to-month in this report, but the trend suggests a gradually improving labor market.

by Calculated Risk on 4/09/2013 08:42:00 AM

From the National Federation of Independent Business (NFIB): Small Business Optimism Down in March

After three months of sustained growth, the March NFIB Index of Small Business Optimism ended its slow climb, declining 1.3 points and landing at 89.5. In the 44 months of economic expansion since the beginning of the recovery in July 2009, the Index has averaged 90.7, putting the March reading below the mean for this period. ...

Job creation in the small-business sector was perhaps the only bright spot in the March report. The fourth consecutive month of positive job growth, owners reported increasing employment an average of 0.19 workers per firm in the month of March. This is the best reading NFIB has recorded in a year.

In a small sign of good news, only 17% of owners reported weak sales as the top problem (lack of demand).  During good times, small business owners usually complain about taxes and regulations - and taxes are now the top problem again.

Click on graph for larger image.

This graph shows the small business optimism index since 1986. The index decreased to 89.5 in March from 90.8 in February.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.