by Calculated Risk on 4/12/2013 10:37:00 PM

From the NY Times: Fewer Home Loans Start to Affect Banks

The nation’s biggest banks, capitalizing on government efforts to bolster the housing market, have raked in handsome mortgage profits of late. On Friday, that started to change.

Wells Fargo, the nation’s largest home lender, disclosed that it originated fewer home loans and recorded lower mortgage banking income in the first quarter of 2013. JPMorgan Chase, the biggest bank by assets, reported limited appetite for new mortgages and a drop in mortgage banking income.
...
Underscoring a slowdown in refinancing, Wells Fargo said those loans accounted for 65 percent of mortgage originations in the first quarter, down from 76 percent in the period a year earlier.

As the weekly MBA surveys have shown, refinancing activity is still at a very high level, but starting to slow.   Purchase activity is slowly picking up, but not enough to make up for the decline in refinance activity.  So overall mortgage originations will most likely decline in 2013.

by Calculated Risk on 4/12/2013 02:51:00 PM

From economist Tom Lawler:

Below are charts showing some historical data on residential properties under contract versus residential homes closed in Tucson, the mid-Atlantic region covered by MRIS, and Orlando. As the charts indicate, over the last few years home closings (closed sales) have been far below what one normally might have expected based on the pre-housing bust relationship between homes under contract and home closings. All of these areas have much higher share of outstanding contract with contingencies (including short sales pending lender approval) today than was the case five or six years ago.

CR Note: Tom makes an important point. I mention this every month when the NAR releases their existing home sales report: "The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005.   In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year."

I think active listings mostly impact price, but all the contingent and pending listings make it hard to compare "inventory" directly to earlier years.

by Calculated Risk on 4/12/2013 11:17:00 AM

From Realtor.com: Realtor.com March data indicates that the amount of homes on the market showed a modest increase since February 2013

In March, the total number of single-family homes, condos, townhomes and co-ops for sale in the U.S. (1,529,432) increased by 2.36 percent month-over-month. On an annual basis, however, inventory decreased by 15.22 percent.

The median age of inventory of for sale listings fell to 78 days in March, down 20.41 percent from February and 12.35 percent below the median age one year ago (March 2012).

California continues to lead the list ... with largest year-over-year decline in for-sale inventories. Seattle is the only market outside of California in the top 10, and experienced a decline of 40.17 percent in for-sale inventories year-over-year. The 10 markets with the largest year-over-year declines in inventory are Stockton-Lodi, Sacramento, Orange County, Oakland, San Jose, Los Angeles-Long Beach, Ventura, San Diego, Riverside-San Bernardino and Seattle. Of the 146 markets realtor.com monitors, only nine experienced an increase in for-sale inventory.

Note: Realtor.com reports the average number of listings in a month, whereas the NAR uses an end-of-month estimate.

Inventory decreased year-over-year in 134 of the 146 markets realtor.com tracks,  and inventory decreased by 20% or more year-over-year in 55 markets.

The NAR is scheduled to report March existing home sales and inventory on Monday, April 22nd.

by Calculated Risk on 4/12/2013 09:59:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for April declined to 72.3 from the March reading of 78.6.

This was well below the consensus forecast of 79.0. There are a number of factors that impact sentiment including unemployment, gasoline prices and, for 2013, the payroll tax increase and even politics (sequestration, default threats, etc).

Sentiment is mostly moving sideways at a fairly low level (with ups and downs).

by Calculated Risk on 4/12/2013 08:49:00 AM

On a monthly basis, retail sales decreased 0.4% from February to March (seasonally adjusted), and sales were up 2.8% from March 2012. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $418.3 billion, a decrease of 0.4 percent from the previous month, but 2.8 percent above March 2012. ... The January to February 2013 percent change was revised from +1.1 percent to +1.0 percent (±0.2%).

Click on graph for larger image.

Sales for January were revised down too.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 26.2% from the bottom, and now 11.2% above the pre-recession peak (not inflation adjusted)

Retail sales ex-autos decreased 0.4%. Retail sales ex-gasoline decreased 0.2%.

Excluding gasoline, retail sales are up 23.5% from the bottom, and now 10.4% above the pre-recession peak (not inflation adjusted).

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 3.3% on a YoY basis (2.8% for all retail sales).

This was below the consensus forecast of no change in retail sales.  Lower gasoline prices subtracted from retail sales - after boosting sales in February.

by Calculated Risk on 4/11/2013 08:01:00 PM

Congratulations to Laura Fromme, the 2013 recipient of the Doris "Tanta" Dungey scholarship!

Click on picture for larger image.

Note: For new readers, Tanta was my co-blogger from from Dec 2006 through November 2008. Please see: Sad News: Tanta Passes Away, NY Times: Doris Dungey, Prescient Finance Blogger, Dies at 47 and much more at In Memoriam: Doris "Tanta" Dungey and on the scholarship.

Friday economic releases:
• 8:30 AM ET, Retail sales for March will be released. The consensus is for retail sales to be unchanged in March (following the large increases in January and February), and to increase 0.1% ex-autos.

• Also at 8:30 AM, the Producer Price Index for March will be released. The consensus is for a 0.2% decrease in producer prices (0.2% increase in core).

• At 9:55 AM, the preliminary Reuter's/University of Michigan's Consumer sentiment index for April will be released. The consensus is for a reading of 79.0, up from 78.6.

• At 10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for February. The consensus is for a 0.4% increase in inventories.

• At 12:30 PM, Speech by Fed Chairman Ben Bernanke, Creating Resilient Communities, At the 2013 Federal Reserve System Community Development Research Conference, Washington, D.C.

by Calculated Risk on 4/11/2013 04:45:00 PM

From Freddie Mac today: Mortgage Rates Edge Down for Second Week

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates edging down for the second consecutive week following weak employment reports.

30-year fixed-rate mortgage (FRM) averaged 3.43 percent with an average 0.8 point for the week ending April 11, 2013, down from last week when it averaged 3.54 percent. Last year at this time, the 30-year FRM averaged 3.88 percent.

15-year FRM this week averaged 2.65 percent with an average 0.7 point, down from last week when it averaged 2.74 percent. A year ago at this time, the 15-year FRM averaged 3.11 percent.

Click on graph for larger image.

This graph shows the MBA's refinance index (monthly average) and the the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®.

The Freddie Mac survey started in 1971 and mortgage rates are currently near the record low for the last 40 years.

by Calculated Risk on 4/11/2013 01:53:00 PM

The Case-Shiller house price indexes for February will be released Tuesday, April 30th. Zillow has started forecasting the Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.

Zillow Zillow Anticipates Strengthening Appreciation in February Case-Shiller Index

[W]e predict that next month’s Case-Shiller data (February 2013) will show that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) increased 8.9 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) increased 8.0 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from January to February will be 0.7 percent for the 20-City Composite and 0.6 percent for the 10-City Composite Home Price Indices (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for February will not be released until Tuesday, April 30.
...
To forecast the Case-Shiller indices we use past data from Case-Shiller, as well as the Zillow Home Value Index (ZHVI), which is available more than a month in advance of Case-Shiller numbers, paired with foreclosure resale numbers, which we also have available more than a month prior to Case-Shiller numbers. ...

The ZHVI does not include foreclosure resales and shows home values for February 2013 up 5.8 percent from year-ago levels. We expect home value appreciation to moderate in 2013, rising only 3.2 percent from February 2013 to February 2014. Further details on our forecast can be found here ...

Zillow also just released their city by city forecasts for the next year: Zillow Home Value Forecast for February 2014

The following table shows the Zillow forecast for February.

Zillow February Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Feb 2012	146.64	149.46	134.09	136.98
Case-Shiller (last month)	Jan 2013	158.72	160.73	146.14	147.86
Zillow Forecast	YoY	8.0%	8.0%	8.9%	8.9%
	MoM	-0.2%	0.6%	-0.1%	0.7%
Zillow Forecasts1		158.4	161.4	146.0	149.0
Current Post Bubble Low		146.46	149.46	134.07	136.77
Date of Post Bubble Low		Mar-12	Feb-12	Mar-12	Jan-12
Above Post Bubble Low		8.1%	8.0%	8.9%	9.0%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 4/11/2013 11:58:00 AM

From a research note by Goldman Sachs chief economist Jan Hatzius: The Rapidly Shrinking Federal Deficit

The federal budget deficit is shrinking rapidly. ...[I]n the 12 months through March 2013, the deficit totaled $911 billion, or 5.7% of GDP. In the first three months of calendar 2013--that is, since the increase in payroll and income tax rates took effect on January 1--we estimate that the deficit has averaged just 4.5% of GDP on a seasonally adjusted basis. This is less than half the peak annual deficit of 10.1% of GDP in fiscal 2009.

There are three main reasons for the sharp reduction in the deficit:

1. Lower spending. On a 12-month average basis, federal outlays have fallen by a total of 4% in the past two years, the first decline in nominal dollar terms over a comparable period since the demobilization from the Korean War in the mid-1950s.

2. Higher tax rates. The increase in payroll tax rates in January 2013 has boosted federal receipts by around $120 billion (annualized), or about 0.8% of GDP.

3. Economic improvement. Although real GDP has only grown at a sluggish 2%-2.5% pace since the end of the 2007-2009 recession, this has been enough to generate a sizable improvement in tax receipts, over and above the more recent impact of higher tax rates. Even prior to the tax hike that took effect in early 2013, total federal receipts had grown by 7% (annualized) from the 2009 bottom, nearly twice the growth rate of nominal GDP.

We expect the deficit to continue to decline and are forecasting a deficit of 3% of GDP or less in fiscal 2015. Some of this is policy-related. ... But the more important reason, in our view, is that there is still a great deal of room for the economic recovery to reduce the deficit for cyclical reasons. ...

In our view, the most important implication from the reduction in the budget deficit for the near-term economic outlook is reduced pressure for further fiscal retrenchment. Partly for this reason, we expect the drag from fiscal policy on real GDP growth to decline sharply from around 2% of GDP in 2013 to around 0.5% in coming years. This is a key reason for our expectation that real GDP growth will accelerate from around 2% (annualized) in Q2/Q3 2013 to 3%-3.5% in 2014-2016.

It shocks people when I tell them the deficit as a percent of GDP is already close to being cut in half (this doesn't seem to ever make headlines). As Hatzius notes, the deficit is currently running under half the peak of the fiscal 2009 budget and will probably decline further over the next few years with no additional policy changes.

by Calculated Risk on 4/11/2013 08:36:00 AM

The DOL reports:

In the week ending April 6, the advance figure for seasonally adjusted initial claims was 346,000, a decrease of 42,000 from the previous week's revised figure of 388,000. The 4-week moving average was 358,000, an increase of 3,000 from the previous week's revised average of 355,000.

The previous week was revised up from 385,000.

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 increased to 358,000 - the highest level since February.

Weekly claims were below the 365,000 consensus forecast.