by Calculated Risk on 7/24/2013 07:03:00 AM

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

The Refinance Index decreased 1 percent from the previous week driven by a 12 percent drop in the Government Refinance index while the Conventional Refinance index rose by 2 percent. The Refinance Index is at the lowest level since July 2011. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier.
...
The refinance share of mortgage activity remained unchanged at 63 percent of total applications.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.58 percent from 4.68 percent, with points decreasing to 0.40 from 0.42 (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.

With 30 year mortgage rates above 4.5%, refinance activity has fallen sharply, decreasing in 10 of the last 11 weeks.

This index is down 55% over the last eleven weeks.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up over the last year (but down over the last several weeks), and the 4-week average of the purchase index is up about 6% from a year ago.

by Calculated Risk on 7/23/2013 09:17:00 PM

From the WSJ: Easing of Mortgage Curb Weighed

Concerned that tougher mortgage rules could hamper the housing recovery, regulators are preparing to relax a key plank of the rules proposed after the financial crisis.

The watchdogs, which include the Federal Reserve and Federal Deposit Insurance Corp., want to loosen a proposed requirement that banks retain a portion of the mortgage securities they sell to investors, according to people familiar with the situation.

The plan, which hasn't been finalized and could still change, would be a major U-turn for the regulators charged with fleshing out the Dodd-Frank financial-overhaul law passed three years ago.

We need to see the final rules, but it is important that the interests of the mortgage lenders align - at least a little - with the interest of those who invest in mortgage backed securities.

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

• At 9:00 AM, the Markit US PMI Manufacturing Index Flash for July. The consensus is for an increase to 52.8 from 52.2 in June.

• At 10:00 AM, New Home Sales for June from the Census Bureau. The consensus is for an increase in sales to 481 thousand Seasonally Adjusted Annual Rate (SAAR) in June from 476 thousand in May.

• During the day: the AIA's Architecture Billings Index for June (a leading indicator for commercial real estate).

by Calculated Risk on 7/23/2013 05:24:00 PM

From DataQuick: California Foreclosure Starts Up From First Quarter

While up from the first quarter, the number of California homeowners entering the foreclosure process was at its second-lowest level in seven years last quarter, largely the result of a steep rise in home values, a real estate information service reported.

Lenders filed 25,747 Notices of Default (NoDs) during the April-to-June period. That was up 38.7 percent from 18,568 for the previous quarter, and down 52.9 percent from 54,615 for second-quarter 2012, according to San Diego-based DataQuick.

The 18,568 NoDs filed in the first quarter of this year marked the lowest quarterly total since fourth-quarter 2005, when 15,337 NoDs were recorded. In addition to less distress in the housing market pipeline, this year's remarkably low first-quarter number mainly reflected policy and regulatory changes.

NoD filings plummeted early this year as a package of new state foreclosure laws - the "Homeowner Bill of Rights" - took effect on January 1. In California and other states in recent years foreclosure activity has sometimes plunged temporarily after a new law kicks in and the industry takes time to adjust.

Setting aside this year's first quarter, last quarter's NoD tally was the lowest since second-quarter 2006, when 20,909 NoDs were recorded. California NoDs peaked in first-quarter 2009 at 135,431. DataQuick's NoD statistics go back to 1992.

"At this point in the cycle, it's fairly straightforward to see what's going on. Just do the math - it's not calculus, it's 4th grade arithmetic. A foreclosure only makes sense when the home is worth less than what is owed on it. As home values rise, fewer homeowners owe more on their homes than the homes are worth," said John Walsh, DataQuick president.

Click on graph for larger image.

This graph shows the number of Notices of Default (NoD) filed in California each year.   For 2013 (red), the bar is an estimated annual rate (since the California "Homeowner Bill of Rights" slowed foreclosure activity in Q1, the estimate rate is Q1 + 3 times Q2).

 It looks like this will be the lowest year for foreclosure starts since 2005, and also below the levels in 1997 through 1999 when prices were rising following the much smaller housing bubble / bust in California.

by Calculated Risk on 7/23/2013 02:51:00 PM

Here is a minor indicator that I follow that is at a new record high, from ATA: ATA Truck Tonnage Index Rose 0.1% in June

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index edged 0.1% higher in June after surging 2.1% in May. ... In June, the SA index equaled 125.9 (2000=100) versus 125.8 in May. June 2013 is the highest level on record. Compared with June 2012, the SA index surged 5.9%, which is robust, although below May’s 6.5% year-over-year gain. Year-to-date, compared with the same period in 2012, the tonnage index is up 4.7%.

“The fact that tonnage didn’t fall back after the 2.1% surge in May is quite remarkable,” ATA Chief Economist Bob Costello said. “While housing starts were down in June, tonnage was buoyed by other areas like auto production which was very strong in June and durable-goods output, which increased 0.5% during the month according to the Federal Reserve.”
emphasis added

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is fairly noisy, but the index is at a record high and is up solidly year-over-year.

by Calculated Risk on 7/23/2013 12:06:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for June 2013. In the past month, the indexes increased in 29 states, decreased in seven states, and remained stable in 14, for a one-month diffusion index of 44. Over the past three months, the indexes increased in 42 states, decreased in six, and remained stable in two, for a three-month diffusion index of 72.

Note: These are coincident indexes constructed from state employment data. 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, 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.

Click on graph for larger image.

This 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 June, 36 states had increasing activity, down from 40 in May (including minor increases). This measure has been and up down over the last few years ...


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 green at times during the recovery.

The map is mostly green, but several states are red again.

by Calculated Risk on 7/23/2013 10:00:00 AM

From the Richmond Fed: Manufacturing Activity Weakens - Outlook Remains Optimistic

Manufacturing activity in the central Atlantic region declined in July, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments, new orders, backlogs, and capacity utilization fell this month. Vendor lead-time remained virtually unchanged, while finished goods inventories rose more quickly. On the employment front, hiring and the average workweek flattened. Average wages rose more slowly than in June. ...

The seasonally adjusted composite index of manufacturing activity—our broadest measure of manufacturing—fell eighteen points in July to a reading of −11. Among the components of that index, shipments dropped twenty-six points to −15 in July. The new orders index also fell to −15; the previous reading was 9; and the gauge for the number of employees remained at 0 for a second month in July.

The index for the number of employees settled at 0, matching last month, and the gauge for the average manufacturing workweek slowed to 2 from June's reading of 11. Average wages also grew somewhat more slowly, with the index shedding two points to end at 8 in July.

Surveyed manufacturers were optimistic about prospects for the next six months. The indexes for expected shipments and new orders both rose to 24, three points above the June readings, while the backlogs gauge flattened to 0 from a June reading of 6.
emphasis added

This was well below the consensus forecast of a reading of 8 for the composite index.

by Calculated Risk on 7/23/2013 09:21:00 AM

Two more house price indexes ... the FHFA is for May, Zillow is for June.

From the FHFA: FHFA House Price Index Up 0.7 Percent in May

U.S. house price appreciation continued in May 2013, rising 0.7 percent on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). The May HPI change marks the sixteenth consecutive monthly price increase in the purchase-only, seasonally adjusted index. The previously reported 0.7 percent increase in April was revised downward to a 0.5 percent increase.

The HPI is calculated using home sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac. Compared to May 2012, house prices were up 7.3 percent in May. The U.S. index is 11.2 percent below its April 2007 peak and is roughly the same as the January 2005 index level.
emphasis added

From Zillow: 2013 Spring Selling Season Was Hottest Since 2004, As Recovery Accelerates & Widens

On an annual basis, the Zillow Home Value Index (ZHVI) rose 5.8% from June 2012 levels. Monthly appreciation remains strong with national home values growing by 0.9% from May. Not only did the pace of home value appreciation quicken in the second quarter, but the recovery also fully took hold nationwide. Markets in some areas of the Northeast, Midwest and Southeastern U.S., such as Atlanta, Chicago and St. Louis, that had previously been slow to turn the corner began to appreciate, which helped boost the overall national market. All of the top 30 largest metro areas covered by Zillow experienced annual appreciation in home values as of the end of the second quarter, and all have hit their bottom.

According to the Zillow Home Value Forecast (ZHVF), we expect national home values to increase 5% over the next year (June 2013 to June 2014). ... Overall, national home values are back to August 2004 levels, down 17.2% since their peak in May 2007.

by Calculated Risk on 7/22/2013 09:41:00 PM

It looks like many people are still "doubling up" or living in their parent's basement. From Josh Mitchell at the WSJ: Economic Casualties: 'Missing Households'

The number of so-called missing households—representing adults who would be owning or renting their own home if household formation had stayed at normal rates since the recession—has increased 4% over the past year, according to an analysis for The Wall Street Journal.

There are now some 2.4 million such people, many of them living with their parents, but also seniors living with their adult offspring and people renting rooms in a home headed by an unrelated person.
...
The analysis on missing households, performed using census data by Jed Kolko, chief economist of real-estate website Trulia Inc., suggests that four years into the U.S. recovery, slow household formation remains an obstacle to a more robust economy. It is damping demand in the housing market, where home sales have been rising but remain below historical levels.

Young adults "have not regained confidence in the economy enough to start moving out of their parents' homes," Mr. Kolko said. "Even people with jobs are choosing the security ... of living under their parents' roof rather than forming their own households."

Tuesday:
• Early, the Zillow Value Index for June.

• At 9:00 AM ET, FHFA House Price Index for May 2013. This was original a GSE only repeat sales, however there is also an expanded index that deserves more attention. The consensus is for a 0.8% increase.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for July. The consensus is for a reading of 8 for this survey, unchanged from June (Above zero is expansion).

by Calculated Risk on 7/22/2013 06:42:00 PM

Weekly Update: One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'm tracking inventory weekly in 2013. 

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the data this morning was for June).  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 increased more than the normal seasonal pattern, and finished the year up 7%. 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.

Click on graph for larger image.

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

So far in 2013, inventory is up 18.4%, and I expect some further increases over the next month or two.

It now seems likely that inventory bottomed early this year. 

It is important to remember that inventory is still very low, and is down 10.7% from the same week last year according to Housing Tracker.  Once inventory starts to increase (more than seasonal), I expect price increases to slow.

Earlier on existing home sales:
• Existing Home Sales in June: 5.08 million SAAR, 5.2 months of supply
• Comments on Existing Home Sales: Solid Report, Inventory near Bottom

by Calculated Risk on 7/22/2013 04:59:00 PM

From housing economist Tom Lawler:

Based on a survey of a relatively small sample of realtors that does not necessarily represent the overall market, the NAR alleged that foreclosure sales were 8% of last month’s sales, down from 13% last June; that short sales were 7% of last month’s sales compared to 12% last June; that first-time home buyers comprised 29% of last month’s transactions, down from 32% last June; that all-cash buyers comprised 31% of last month’s sales, up from 29% last June; and that “individual investors” comprised 17% of last month’s sales, down from 19% last June.

CR Note: This is an updated table for a number of cities where distress sales are reported.  Lawler has included the NAR's Confidence Index Report.  Most of the reporting areas experienced a high percentage of distressed sales (Las Vegas, Phoenix, California, Florida, etc), and it appears that distressed sales are declining just about everywhere.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Jun-13	Jun-12	Jun-13	Jun-12	Jun-13	Jun-12	Jun-13	Jun-12
Las Vegas	31.0%	34.2%	9.0%	27.8%	40.0%	62.0%	55.3%	54.0%
Reno	24.0%	37.0%	6.0%	21.0%	30.0%	58.0%
Phoenix	12.7%	32.8%	8.7%	14.1%	21.5%	46.8%	37.5%	46.9%
Sacramento	23.2%	31.0%	7.5%	19.7%	30.7%	50.7%	29.9%	33.4%
Minneapolis	6.0%	9.6%	15.7%	25.1%	21.7%	34.6%
Mid-Atlantic (MRIS)	7.6%	10.2%	6.3%	8.7%	13.9%	18.9%	15.9%	16.5%
Orlando	18.7%	28.5%	18.1%	25.2%	36.8%	53.7%	49.8%	51.7%
California (DQ)*	16.0%	24.3%	10.0%	24.9%	26.0%	49.2%
Bay Area CA (DQ)*	12.1%	22.7%	6.0%	17.8%	18.1%	40.5%	25.6%	27.3%
So. California (DQ)*	16.2%	24.4%	9.1%	24.4%	25.3%	48.8%	30.2%	32.3%
Miami MSA SF	16.8%	21.3%	9.6%	16.3%	26.4%	37.6%	43.3%	44.9%
Miami MSA C/TH	13.8%	19.5%	14.3%	18.3%	28.1%	37.8%	76.3%	79.1%
Northeast Florida					35.6%	39.9%
Chicago					28.0%	33.0%
Houston			8.4%	16.8%
Memphis*			18.2%	29.6%
Birmingham AL			19.4%	26.4%
Springfield IL			12.0%	9.2%
Tucson							32.8%	35.9%
Toledo							28.1%	33.0%
Des Moines							17.5%	18.9%
Omaha							14.9%	14.4%
Pensacola							29.8%	34.3%
NAR RCI**	7.0%	12.0%	8.0%	13.0%	15.0%	25.0%	31.0%	29.0%
*share of existing home sales, based on property records
**NAR Survey of Realtors, Realtor Confidence Index Report