by Calculated Risk on 9/12/2013 08:30:00 AM

The DOL reports:

In the week ending September 7, the advance figure for seasonally adjusted initial claims was 292,000, a decrease of 31,000 from the previous week's unrevised figure of 323,000. The 4-week moving average was 321,250, a decrease of 7,500 from the previous week's revised average of 328,750.

From MarketWatch:

a Labor Department official on Thursday said two states made changes to their computer systems that resulted in some claims not being processed in time. The Labor Day holiday may have also skewed the report. As a result, initial claims are likely to rise in the following week

The previous week was unchanged at 323,000.

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 to 332,250.

The 4-week average is at the lowest level since October 2007 (before the recession started).  Claims were below the 330,000 consensus forecast.

Here is a long term graph of the 4-week average of weekly unemployment claims back to 1971.

Note: There were reporting delays and an adjustment for the holiday.

by Calculated Risk on 9/11/2013 07:19:00 PM

Early this morning, the MBA mortgage application survey was released showing a 71% decline in refinance applications since early May (purchase applications are down 13% over the same period, but still up year-over-year). It appears the refinance boom is over. From CNBC: Rates rising, banks hit the brakes on mortgage business

JPMorgan laid off more than 2,000 employees in early August—about half of them in originations, according to a person familiar with the situation. ... The August round of layoffs represented the first time the bank had moved to downsize its origination business, which surged as mortgage rates went to historic lows.

Other Wall Street banks are making similar moves, as a sharp rise in rates has kept consumers from taking out or refinancing mortgages.

Late last month, Bank of America notified 2,100 employees that their jobs were being cut; Wells Fargo has laid off more than 3,000 since July. Citigroup confirmed Wednesday the July closure of an office in Danville, Ill., that affected 120 jobs.

Most mortgage applications this year have been for refis (the refinance share was 76% of total applications in early May), and most of that business is going away.  And so are the jobs.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 330 thousand from 323 thousand last week.

• At 2:00 PM, the Monthly Treasury Statement for August. The CBO has already released their Monthly Budget Review for August 2013 showing a monthly deficit of $146 billion in August, and a year-to-date deficit of $750 through August (the fiscal year ends in September, and there will be a large surplus in September since quarterly estimated payments are due in mid-September. The annual deficit for fiscal 2013 should be around $650 billion or 4% of GDP, down sharply from 7.0% of GDP in fiscal 2012.

by Calculated Risk on 9/11/2013 04:13:00 PM

For laughs, a collection of a few of Jim's gems from 2008 ...

by Calculated Risk on 9/11/2013 11:45:00 AM

From Kris Hudson at the WSJ: New-Home Sales Not So August

A survey of 273 builders by John Burns Real Estate Consulting in Irvine, Calif., found that the respondents’ sales of new homes declined by 4% in August from a month earlier. In past years, August typically has yielded a 2% gain from the July figure. Burns estimates that its survey, conducted Aug. 29 to Sept. 3, spans roughly 16% of new-home sales in the U.S.

Perhaps more telling: far fewer of Burns’s survey respondents reported raising their prices in August than had in previous months. Of the respondents in August, 47% reported raising prices, 48% held prices steady and 5% lowered prices—the largest percentage of reductions since March 2012.

Those figures show substantial change from the results of Burns’s July survey in which 64% of builders reported raising prices, 36% held them study and one builder—statistically 0%—said it cut prices.

This is similar to the report from home builder Hovnanian earlier this week.

Builders have been raising prices significantly, and combined with rising mortgage rates, this has slowed down new home buying.

Click on graph for larger image in graph gallery.

However, as this graph shows (through July), new home sales are still historically low, and I expect sales to continue to increase over the next few years. 

But I do think the new home price increases will slow sharply.

by Calculated Risk on 9/11/2013 09:42:00 AM

The bottom line is Congress is being silly (again), and they will raise the debt ceiling. It is just a matter of when.  It looks like the "debt ceiling" will be reached on October 18th.  Note: There is a reason Congress never threatens to default right before an election, they hope everyone will forget! 

I wrote several posts about the "debt ceiling" debates in 2011 and early 2013 (only odd years, not even years because of elections). The debate clearly scared many Americans in 2011 and negatively impacted the economy.   Congress folded earlier in early 2013.  Hopefully this time the "debt ceiling" will be raised again in advance of the deadline.

Here are some excerpts from some previous posts ...

I prefer "default ceiling" because "debt ceiling" sounds like some sort of virtuous limit, when, in reality, the vote is about whether or not to the pay the bills - and not paying the bills is reckless and irresponsible.

A key point is that all of the talk in Congress is just a bluff.  They will fold.  As Republican Senator Mitch McConnell noted in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.

I reread some of my posts from 2011, as an example Debt Ceiling Charade: The Smart Options.

Option #1: Eliminate the debt ceiling. The debt ceiling is a joke. It serves no purpose except political posturing. It is not about the deficit - it is about paying the bills, and the U.S. will pay the bills.
...
Option #2: Pass a "clean" bill raising the debt ceiling enough to get through the next election (so the politicians don't have to embarrass themselves again). Congress could do this at any time. That is why voters would blame the party controlling the House if the debt ceiling is not raised.

I still prefer Option #1, but one thing is clear, the Congress will fold and the debt ceiling will be raised.

In 2011, I started writing about the debt ceiling when it became clear the threat of default was impacting the economy. A couple of old posts: Debt Ceiling Charade impacting Short-Term Credit Markets and Random Thoughts.  From July 30, 2011:

"I remain confident that Congress will raise the debt ceiling; however the circus in D.C. is clearly impacting the economy. This morning I spoke to a business owner who is negotiating a new lease to expand. His lawyer told him not to sign the lease until the debt ceiling issue is resolved. I believe similar caution has gripped business owners and consumers in many places - and impacting consumer and business confidence."

It is now time to start criticizing Congress again before the economy is impacted; 2011 was ridiculous and reckless.

by Calculated Risk on 9/11/2013 07:03:00 AM

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

Mortgage applications decreased 13.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 6, 2013. This week’s results included an adjustment for the Labor Day holiday. ...

The Refinance Index decreased 20 percent from the previous week. The Refinance Index has fallen 71 percent from its recent peak the week of May 3, 2013 and is at the lowest level since June 2009. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.80 percent from 4.73 percent, with points increasing to 0.46 from 0.33 (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.

The refinance index is down 71% since early May.  

The last time the index declined like this was in late 2010 and early 2011 when mortgage increased sharply with the Ten Year Treasury rising from 2.5% to 3.5%.  We've seen an even larger increase over the last few months with the Ten Year Treasury yield up from 1.6% to over 2.96% today.  We will probably see the refinance index back to 2000 levels soon.

The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index was generally been trending up over the last year (but down over the last few months), and the 4-week average of the purchase index is up about 3% from a year ago. 

by Calculated Risk on 9/10/2013 10:51:00 PM

For enjoyment, from Jim the Realtor Bubbleinfo TV:Two Grandmas (at the bottom or link here).

The first house is way overpriced, and although we are seeing more inventory, some of it is OPT (Over Priced Turkeys).


Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index. Expect another sharp drop in refinance activity.

• At 10:00 AM, the Monthly Wholesale Trade: Sales and Inventories for July. The consensus is for a 0.3% increase in inventories.

by Calculated Risk on 9/10/2013 05:42:00 PM

CR Note: This is from housing economist Tom Lawler. Lawler has been pointing out the inconsistency in US housing data; this time on negative equity.

CoreLogic released its “Equity Report” for the second quarter of 2013, in which the company estimates the distribution of equity (home value less mortgage balance) across all U.S. single-family residential properties with a mortgage. ...

Given that this report is based on US housing data, it just “wouldn’t be right” if there weren’t other reports that show significantly different “negative equity” estimates. Zillow and RealtyTrac, e.g., have negative equity reports for the second quarter, and LPS Analytics released its own estimate for the number of residential properties in a negative equity position in March, 2013 (14.7%, compared to CoreLogic’s Q1 estimate of 19.7%). Below is a table showing different estimates.

RealtyTrac’s report has three categories: “deeply underwater” (LTV >=125%); “resurfacing equity” (LTV 90% to 110%); and “equity rich” (LTV 50% or lower). RT said that its “estimates” were as of the beginning of September, but I have no clue how it derived home values as of the beginning of September.

There are two main sources of differences in negative equity estimates: the first, of course, is the value of the underlying property. The second is the current mortgage balance (including first and junior liens) on each underlying property. In many cases the only public data available are the original mortgage balances of closed-end first and second liens, and for HELOCs the total line of credit (as opposed to utilization). CoreLogic adjusts public record data on mortgages for amortization and home equity utilization to get a “true” (read "estimated”) level of the mortgage balance for each property. Zillow says that it has “partnered” with TransUnion to get “actual” current outstanding mortgage balances.  I’m fairly certain RealtyTrac doesn’t make any such adjustment, and its estimate that 23.7% of homes with mortgages are “deeply underwater” is almost certainly [incorrect].

Homes w/Mortgages (millions and percent), Latest Negative Equity Report
	CoreLogic (6/30/13)	Zillow (6/30/13)	RealtyTrac (9/1/13)	LPS (3/31/13)
Homes w/ Mortgage	48.6	51.4	46.5	50.0
Negative Equity	7.1	12.2		7.3
Negative Equity >25%	2.8		10.7
Negative Equity >20%		7.0
Negative Equity (%)	14.6%	23.8%		14.7%
Negative Equity >25% (%)	5.8%		23.0%
Negative Equity >20% (%)		13.6%

by Calculated Risk on 9/10/2013 01:13:00 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 19-month run of rising home prices, increased inventory

GLVAR said the total number of existing local homes, condominiums and townhomes sold in August was 3,539. That’s down from 3,633 in July and down from 3,688 total sales in August 2012. ...
...
GLVAR has also been reporting fewer foreclosures and short sales – which occur when a lender agrees to sell a home for less than what the borrower owes on the mortgage. In August, 25 percent of all existing home sales were short sales, down from 28 percent in July. Another 8 percent of all August sales were bank-owned properties, unchanged from July. The remaining 67 percent of all sales were the traditional type, up from 64 percent in July and as high as that percentage has been in several years.
...
The total number of properties listed for sale on GLVAR’s Multiple Listing Service increased in August, with 14,472 single-family homes listed for sale at the end of the month. That’s up 2.4 percent from 14,133 single-family homes listed for sale at the end of July, but down 15.1 percent from last year. ...

GLVAR also reported more available homes listed for sale without any sort of pending or contingent offer. By the end of August, GLVAR reported 5,612 single-family homes listed without any sort of offer. That’s up 19.9 percent from 4,681 such homes listed in July and up 41.1 percent from one year ago.
emphasis added

There are several key trends that we've been following:

1) Overall sales were down slightly from July, and down about 4% year-over-year.

2) Conventional sales are up sharply.  In August 2012, only 39.4% of all sales were conventional.  This year, in August 2013, 67% were conventional.  That is an increase in conventional sales of about 63% (of course there is heavily investor buying, but that is still quite an increase in non-distressed sales).

3)  Most distressed sales are short sales instead of foreclosures (over 3 to 1).

4) and most interesting right now is that non-contingent inventory (year-over-year) is now increasing quickly.  Non-contingent inventory is up 41.1% year-over-year!

This suggests inventory has bottomed in Las Vegas (A major theme for housing in 2013).  And this suggests price increases will slow.

by Calculated Risk on 9/10/2013 10:30:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 3.7 million job openings on the last business day of July, little changed from June, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.2 percent) and separations rate (3.0 percent) also were little changed in July. ...
...
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 July for total nonfarm and total private but was little changed for 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 July, the most recent employment report was for August.

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 decreased in July to 3.689 million, down from 3.869 million in June. The number of job openings (yellow) is up 5.4% year-over-year compared to July 2012. 

Quits were up in July, and quits are up about 8% year-over-year. 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 - and the data is noisy month-to-month, but the general trend suggests a gradually improving labor market.