by Calculated Risk on 4/23/2013 12:41:00 PM

Now that we have three months of data for 2013, one way to look at the growth rate is to use the "not seasonally adjusted" (NSA) year-to-date data.

According to the Census Bureau, there were 104 thousand new homes sold in Q1 2013, up about 19.5% from the 87 thousand sold in Q1 2012. That is a solid increase in sales, and this was the highest sales for Q1 since 2008.

Note: For 2013, estimates are sales will increase to around 450 to 460 thousand, or an increase of around 22% to 25% on an annual basis from the 369 thousand in 2012.

Although there has been a large increase in the sales rate, sales are still near the lows for previous recessions. This suggest significant upside over the next few years.  Based on estimates of household formation and demographics, I expect sales to increase to 750 to 800 thousand over the next several years. Also housing is historically the best leading indicator for the economy, and this is one of the reasons I think The future's so bright, I gotta wear shades.

And here is another update to the "distressing gap" graph that I first started posting over four years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to start to close over the next few years.

Click on graph for larger image.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through March 2013. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales kept existing home sales elevated, and depressed new home sales since builders weren't able to compete with the low prices of all the foreclosed properties.

I don't expect much of an increase in existing home sales (distressed sales will slowly decline and be offset by more conventional sales). But I do expect this gap to close - mostly from an increase in new home sales.

Another 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, and I expect this ratio to trend down over the next several years as the number of distressed sales declines and new home sales increase.

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.

by Calculated Risk on 4/23/2013 10:00:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 417 thousand. This was up from 411 thousand SAAR in February. 

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

"Sales of new single-family houses in March 2013 were at a seasonally adjusted annual rate of 417,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.5 percent above the revised February rate of 411,000 and is 18.5 percent above the March 2012 estimate of 352,000."

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

The months of supply was unchanged in March at 4.4 months.

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

This is now in 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 153,000. This represents a supply of 4.4 months at the current sales rate."

On 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.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is just above the record low. The combined total of completed and under construction is also just above the record low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In March 2013 (red column), 40 thousand new homes were sold (NSA). Last year 34 thousand homes were sold in March. This was the seventh weakest March since this data has been tracked. The high for March was 127 thousand in 2005, and the low for March was 28 thousand in 2011.



This was at expectations of 419,000 sales in March, and a fairly solid report.  I'll have more soon ...

by Calculated Risk on 4/23/2013 08:01:00 AM

According to the First Look report for March to be released today by Lender Processing Services (LPS), the percent of loans delinquent decreased in March compared to February, and declined about 3% year-over-year. Also the percent of loans in the foreclosure process declined further in March and were down significantly over the last year.

Note: March usually see a decline in mortgage delinquencies, so some of the month-to-month decline is seasonal.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) decreased to 6.59% from 6.80% in January. Note: the normal rate for delinquencies is around 4.5% to 5%.

 The percent of loans in the foreclosure process declined to 3.37% in March from 3.38% in February. 

The number of delinquent properties, but not in foreclosure, is down about 4% year-over-year (151,000 fewer properties delinquent), and the number of properties in the foreclosure process is down 21% or 441,000 properties year-over-year.

The percent (and number) of loans 90+ days delinquent and in the foreclosure process is still very high, but the number of loans in the foreclosure process is now declining.

LPS will release the complete mortgage monitor for March in early May.

LPS: Percent Loans Delinquent and in Foreclosure Process
	Mar 2013	Feb 2013	Mar 2012
Delinquent	6.59%	6.80%	6.80%
In Foreclosure	3.38%	3.38%	4.19%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,842,000	1,927,000	1,835,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,466,000	1,483,000	1,624,000
Number of properties in foreclosure pre-sale inventory:	1,689,000	1,694,000	2,130,000
Total Properties	4,997,000	5,104,000	5,589,000

by Calculated Risk on 4/22/2013 08:59:00 PM

Since the existing home sales report was released today, I didn't mention the weekly housing tracker inventory data this morning.

The Realtor (NAR) data is monthly and released with a lag (the data released today was for March).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory mostly followed the normal seasonal pattern, however in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

So far - through April 22nd - inventory is increasing much faster than in 2011 and 2012.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

In 2010, inventory was up 15% by the end of March, and close to 20% by the end of April.

For 2011 and 2012, inventory only increased about 5% at the peak and then declined for the remainder of the year.

So far in 2013, inventory is up 11.8% (well above the peak percentage increase for 2011 and 2012).  It is still possible that inventory could bottom this year - it will probably be close - but right now I expect inventory to bottom in early 2014.

Tuesday economic releases:
• Early: the LPS 'First Look' at March mortgage performance will be released. This data shows the delinquency and in foreclosure rates for residential mortgages.

• At 9:00 AM ET, the FHFA House Price Index for February 2013 will be released. This was original a GSE only repeat sales, however there is also an expanded index that deserves more attention. The consensus is for a 0.7% increase.

• Also at 9:00 AM, the Markit US PMI Manufacturing Index Flash for April. The consensus is for a decrease to 54.2 from 54.9 in March.

• At 10:00 AM, the Census Bureau will release New Home Sales for March. The consensus is for an increase in sales to 419 thousand Seasonally Adjusted Annual Rate (SAAR) in March from 411 thousand in February.

• Also at 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for April. The consensus is for a reading of 3.0 for this survey, unchanged from March (Above zero is expansion).

by Calculated Risk on 4/22/2013 05:58:00 PM

Economist Tom Lawler sent me the following table of cash buyers for selected cities in March 2013 compared to March 2012.  This suggests significant investor buying in certain areas (like Florida):

All-Cash Share of Home Sales
	Mar-13	Mar-12
Las Vegas	57.5%	54.5%
Orlando	55.2%	52.9%
Metro Detroit	45.5%	N/A
Memphis	41.2%	41.0%
Toledo	38.9%	40.3%
Phoenix	41.5%	49.8%
Sacramento	36.4%	32.0%
So. Cal (DQ)	34.1%	32.4%
Wichita	27.9%	30.2%
Knoxville	27.4%	28.4%
Des Moines	19.1%	21.7%
Bay Area Cal (DQ)	31.1%	29.4%
Mid-Atlantic	20.6%	20.8%
Florida SF	48.4%	47.1%
Florida C/TH	75.2%	77.8%
Miami-FL-PB MSA SF	45.5%	46.4%
Miami-FL-PB MSA C/TH	79.6%	82.1%
Tucson	35.0%	38.3%
Omaha	22.1%	15.7%
Pensacola	35.9%	32.1%
Akron	34.1%	38.7%

Lawler also sent me the updated table below of short sales and foreclosures for several selected cities in March.  Note the declines in total distressed sales and foreclosure sales.

	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%
Orlando	21.7%	33.1%	21.3%	26.0%	43.1%	59.2%
California (DQ)*	21.5%	24.5%	15.2%	32.8%	36.7%	57.3%
Bay Area CA (DQ)*	10.7%	25.5%	19.0%	23.8%	29.7%	49.3%
So. California (DQ)*	21.5%	24.6%	13.9%	31.5%	35.4%	56.1%
Florida SF	15.9%	21.8%	16.4%	19.4%	32.3%	41.1%
Florida C/TH	11.4%	18.1%	14.1%	16.0%	25.5%	34.2%
Miami MSA SF	20.6%	24.1%	11.9%	18.7%	32.5%	42.7%
Miami MSA C/TH	13.7%	20.2%	14.5%	16.7%	28.2%	36.9%
Northeast Florida					40.0%	43.2%
Chicago					43.0%	46.0%
Hampton Roads					28.4%	33.5%
Charlotte					12.3%	15.8%
Sarasota					30.0%	32.0%
Metro Detroit			35.4%	46.6%
Houston			12.3%	19.6%
Memphis*			26.8%	32.7%
*share of existing home sales, based on property records

by Calculated Risk on 4/22/2013 03:09:00 PM

First, Brad Plumer at the WaPo has an excellent article: Why aren’t younger Americans driving anymore?

The Frontier Group has the most comprehensive look yet of why younger Americans are driving less. Public transportation use is up 40 percent per capita in this age group since 2001. Bicycling is up 24 percent overall in that time period. And this is true even for young Americans who are financially well off. Here are five big hypotheses:

–The cost of driving has gone up. ...

–The recession. This is a big one. If fewer people have jobs, fewer people will commute. ...

–It’s harder to get a license. ...

–More younger people are living in transit-oriented areas. ...

Ecological concerns play a small role too, judging from survey data: “Some young people purposely reduce their driving in an effort to curb their environmental impact.”

–Technology is making it easier to go car-free.

Although Plumer focused on younger drivers, he missed a major reason for the decline in miles driven - the aging of the population (over 55 drivers drive fewer miles)!

Note: the graphs Plumer uses from Doug Short and are per capita (population adjusted).

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by -1.4% (-3.1 billion vehicle miles) for February 2013 as compared with February 2012. Travel for the month is estimated to be 214.6 billion vehicle miles.

The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways.

Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 63 months - over 5 years - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

Gasoline prices were up in February compared to February 2012. In February 2013, gasoline averaged of $3.74 per gallon according to the EIA. In 2012, prices in February averaged $3.64 per gallon.   However prices declined in March, and miles driven will probably increase even more than the usual season increase.

However, as I've mentioned before, gasoline prices are just part of the story.  The lack of growth in miles driven over the last 5 years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take several more years before we see a new peak in miles driven. 

by Calculated Risk on 4/22/2013 12:55:00 PM

Here are a few excerpts from a Reuters article: Existing Home Sales Fall as Prices Rise Most Since 2005

U.S. home resales edged downward in March, a pause in the housing market recovery that has helped boost the economy.
...
Nationwide, the median price for a home resale rose to $184,300 in March, up 11.8 percent from a year earlier, the biggest increase since November 2005. The limited supply of available properties is pushing up home values.

First, this isn't a "pause in the housing market recovery". The housing recovery is based on residential investment, and only the commission on existing home sales is included in residential investment (the main contributors are new home sales and home improvement).   A decline in the headline number for existing home sales due to fewer distressed sales, is a positive, not a negative!

Second, the median price is a poor measure of overall market prices since this reflects changes in the mix in addition to changes in prices (the repeat sales indexes are a better measure of price changes).  Note: Lawler used the median over the weekend to show that investors are buying at a higher price point - an appropriate use of the median price.

The NAR reported total sales were up 10.3% from March 2012, but conventional sales are probably up over 20% from March 2012, and distressed sales down.  The NAR reported (from a survey):

Distressed homes - foreclosures and short sales - accounted for 21 percent of March sales, down from 25 percent in February and 29 percent in March 2012.

Although this survey isn't perfect, if total sales were up 10.3% from March 2012, and distressed sales declined from 29% of total sales to 21%, this suggests conventional sales were up sharply year-over-year - a good sign. However some of this increase is investor buying, although the NAR is reporting investors are buying about the same percentage as a year ago:

Individual investors, who account for most cash sales, purchased 19 percent of homes in March, down from 22 percent in February; they were 21 percent in March 2012.

Other data suggests investor buying has increased, see Housing: Some thoughts on Investor Buying, Inventory and recent Price Increases and from the WaPo: Wall Street betting billions on single-family homes in distressed markets

Of course inventory is the key number in the NAR report.  The NAR reported inventory increased to 1.93 million units in March, up from 1.90 million in February.  Some of this increase was seasonal, and this is still a very low level of inventory.  And inventory is still down sharply year-over-year; down 16.8% from March 2012.  But this is the smallest year-over-year decline since 2011.    

Important: 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.

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

Click on graph for larger image.

Sales NSA in March (red column) are  above the sales for for 2008 through 2012, but below the bubble years of 2005 and 2006. 

The bottom line is this was a solid report. Conventional sales have increased sharply, although some of this is investor buying. And inventory is low, but the year-over-year decline in inventory is decreasing.

Earlier:
• Existing Home Sales in March: 4.92 million SAAR, 4.7 months of supply

by Calculated Risk on 4/22/2013 10:00:00 AM

The NAR reports: March Existing-Home Sales Slip Due to Limited Inventory, Prices Maintain Uptrend

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.6 percent to a seasonally adjusted annual rate of 4.92 million in March from a downwardly revised 4.95 million in February, but remain 10.3 percent higher than the 4.46 million-unit pace in March 2012.

Total housing inventory at the end of March increased 1.6 percent to 1.93 million existing homes available for sale, which represents a 4.7-month supply at the current sales pace, up from 4.6 months in February. Listed inventory remains 16.8 percent below a year ago when there was a 6.2-month supply.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March 2013 (4.92 million SAAR) were 0.6% lower than last month, and were 10.3% above the March 2012 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.93 million in March up from 1.90 million in February.   Inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer (so some of this increase was seasonal).

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.

Inventory decreased 16.8% year-over-year in March compared to March 2012. This is the 25th consecutive month with a YoY decrease in inventory, but the smallest YoY decrease since 2011 (I expect the YoY decrease to get smaller all year).

Months of supply increased to 4.7 months in March.

This was below expectations of sales of 5.03 million, but close to Tom Lawler's forecast.  For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing.   This was a solid report.  I'll have more later ...

by Calculated Risk on 4/22/2013 08:37:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Economic Activity Slower in March

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.23 in March from +0.76 in February. Three of the four broad categories of indicators that make up the index decreased from February, and only one of the four categories made a positive contribution to the index in March.

The index’s three-month moving average, CFNAI-MA3, decreased to –0.01 in March from +0.12 in February. March’s CFNAI-MA3 suggests that growth in national economic activity was very near its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity slowed in March, and growth was near the historical trend (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of 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 index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 4/21/2013 08:17:00 PM

A major revision to GDP is coming this summer, from Robin Harding at the Financial Times: Data shift to lift US economy 3%

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development.

This is a technical change on what is included in GDP, as an example R&D has been considered an expense and will now be included as an investment and capitalized. Another change will be that underfunded pension plans will be included as a liability.  According to the article, the BEA doesn't expect any "large changes in trends or cycles".

Monday economic releases:
• 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 sales of 5.03 million on seasonally adjusted annual rate (SAAR) basis. Sales in February were at a 4.98 million SAAR. Economist Tom Lawler is estimating the NAR will report a March sales rate of 4.89 million.

Weekend:
• Summary for Week Ending April 19th
• Schedule for Week of April 21st

The Japanese market opened up sharply with the Nikkei up 1.7%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up slightly and Dow futures are up 16 (fair value).

Oil prices are down over the last week with WTI futures at $88.01 per barrel and Brent at $99.44 per barrel.

According to Gasbuddy.com, gasoline prices are down about 24 cents over the last 7 weeks to $3.50 per gallon. Using the calculator from Professor Hamilton, and the current price of Brent crude oil, the national average should be around $3.32 per gallon. That is about 18 cents below the current level according to Gasbuddy.com, so I expect gasoline prices to fall further.