by Calculated Risk on 11/27/2013 07:02:00 AM

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

Mortgage applications decreased 0.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 22, 2013. ...

The Refinance Index increased 0.1 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.2 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 4.48 percent from 4.46 percent, with points decreasing to 0.31 from 0.38 (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 62% from the levels in early May.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 5% from a year ago.

by Calculated Risk on 11/26/2013 08:01:00 PM

Sort of a follow-up to my posts two weeks ago: The Return of the Cranes and The Cranes of Miami ... from the WSJ: In Downtown L.A., a Housing Revival

Six parking lots in downtown Los Angeles recently sold for $82 million. But the buyers aren't interested in the parking business: They want to build 1,500 rental apartments on the properties.
...
A dearth of apartments is fueling one of the city's largest building booms in years. There are about 14,000 apartment units in downtown Los Angeles. About 5,100 units are under construction, and more than 3,400 units were built between 2008 and 2013, according to Polaris Pacific, a real-estate sales, marketing and research firm. More than 3,000 additional rental units have been approved, with another 7,000 proposed.

The cranes are returning to downtown LA!

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

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

• Also at 8:30 AM, the Durable Goods Orders for October from the Census Bureau. The consensus is for a 2.0% decrease in durable goods orders.

• Also at 8:30 AM, the Chicago Fed National Activity Index for October.

• At 9:45 AM, the Chicago Purchasing Managers Index for November. The consensus is for a decrease to 60.5, down from 65.9 in October.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for November). The consensus is for a reading of 73.3, up from the preliminary reading of 72.0, and up from the October reading of 73.2.

• At 10:00 AM, the Conference Board Leading Indicators for October. The consensus is for a 0.1% increase in this index.

by Calculated Risk on 11/26/2013 06:30:00 PM

The FDIC released the Quarterly Banking Profile for Q3 today.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $36.0 billion in the third quarter of 2013, a $1.5 billion (3.9 percent) decline from the $37.5 billion in profits that the industry reported a year earlier. This is the first time in 17 quarters — since the second quarter of 2009 — that earnings registered a year-over-year decline. The earnings decline was mainly attributable to a $4 billion increase in litigation expenses at one institution. Lower revenue from reduced mortgage activity and lower gains on asset sales also contributed to the reduction in earnings. Half of the 6,891 insured institutions reporting had year-over-year growth in earnings, while half reported declines. The proportion of banks that were unprofitable fell to 8.6 percent, from 10.7 percent a year earlier.
emphasis added

The FDIC reported the number of problem banks declined:

The number of banks on the FDIC's "Problem List" declined from 553 to 515 during the quarter. The number of "problem" banks is down more than 40 percent from the recent high of 888 at the end of the first quarter of 2011. Six FDIC-insured institutions failed in the third quarter of 2013, down from 12 in the third quarter of 2012. Thus far in 2013, there have been 23 failures, compared to 50 during the same period in 2012.

Click on graph for larger image.

The dollar value of 1-4 family residential Real Estate Owned (REOs, foreclosure houses) declined from $6.98 billion in Q2 2013 to $6.79 billion in Q3. This is the lowest level of REOs since Q4 2007. Even in good times, the FDIC insured institutions have about $2.5 billion in residential REO.

This graph shows the dollar value of Residential REO for FDIC insured institutions. Note: The FDIC reports the dollar value and not the total number of REOs.

by Calculated Risk on 11/26/2013 03:37:00 PM

From the FHFA: FHFA Announces Fannie Mae and Freddie Mac Conforming Loan Limits for 2014

The Federal Housing Finance Agency (FHFA) today announced that the 2014 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will remain at $417,000 for one-unit properties in most areas of the country.

The Housing and Economic Recovery Act of 2008 (HERA) establishes the maximum conforming loan limit that Fannie Mae and Freddie Mac are permitted to set for mortgage acquisitions. HERA also requires annual adjustments to these limits to reflect changes in the national average home price.
...
Link to maximum conforming loan limits for 2014
...
In determining the 2014 HERA loan limits in high-cost areas, FHFA continued its policy of not permitting declines relative to prior HERA limits. While HERA did not explicitly prohibit declines in high-cost area loan limits, that approach is consistent with the statutory procedure for responding to changes in prices on a national basis. Subject to this policy, the 2014 HERA limits reflect the higher of the limits directly calculated for 2014 and HERA loan limits determined for years 2009 through 2013.

The 2014 loan limits are higher than 2013 HERA limits in several counties. Those increases were, in some cases, a function of rising median home values.

The conforming loan limit was increased in 18 counties. Seven counties saw large increases from $417,000 in 2013 to $625,000 in 2014, including Garfield, CO, and some counties in New York, Virginia and Idaho.

Note: For comparison, here are the 2013 conforming loan limits.

by Calculated Risk on 11/26/2013 01:32:00 PM

It appears house price increases have slowed recently based on agent reports and asking prices (a combination of a little more inventory and higher mortgage rates), but this slowdown in price increases is not showing up yet in the Case-Shiller index because of the reporting lag and because of the three month average (the September report was an average of July, August and September prices). I expect to see smaller year-over-year price increases going forward and some significant deceleration towards in early 2014.

Zillow's chief economist Stan Humphries said today: “Zillow’s own data, which excludes REO re-sales, shows the same markets that dominate the Case-Shiller indices – particularly some of the California markets – to be cooling. This suggests that Case-Shiller’s inclusion of REO re-sales is heavily skewing overall appreciation in these markets."

I also think many of us expect house price increase to slow.

Note: My image server (Google) was down this morning. Here are some graphs:

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 22.3% from the peak, and up 0.9% in September (SA). The Composite 10 is up 17.8% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 21.5% from the peak, and up 0.9% (SA) in September. The Composite 20 is up 18.5% from the post-bubble low set in Jan 2012 (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 13.2% compared to September 2012.

The Composite 20 SA is up 13.2% compared to September 2012. 

Prices increased (SA) in 20 of the 20 Case-Shiller cities in August seasonally adjusted.  Prices in Las Vegas are off 46.9% from the peak, and prices in Denver and Dallas are at new highs.

The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 41% above January 2000. 

These are nominal prices, and as I noted above real prices (adjusted for inflation) are up about 38% since January 2000 - so the increase in Phoenix from January 2000 until now is about the change in inflation.

Two cities - Denver (up 44% since Jan 2000) and Dallas (up 30% since Jan 2000) - are at new highs (no other Case-Shiller Comp 20 city is very close).    Denver is up slightly more than inflation over that period, and Dallas slightly less.  Detroit prices are still below the January 2000 level.

by Calculated Risk on 11/26/2013 11:45:00 AM

From the Richmond Fed: Fifth District Survey of Manufacturing Activity

Manufacturing in the Fifth District improved in November, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders rose. Employment, average workweek, and wages also picked up this month. Capacity utilization and the backlog of orders flattened, while vendor lead-time rose at a slower pace.

Manufacturers were optimistic about their future business prospects. Firms anticipated shipments and the volume of new orders would grow more quickly during the next six months.
...

The composite index of manufacturing strengthened, climbing to a reading of 13 in November following last month's reading of 1. The index of shipments improved 18 points, ending at 16, and the index for new orders advanced 15 points compared to a month ago. In addition, the index for the number of employees gained two points, finishing at a reading of 6.

Manufacturing employment edged up this month, moving the index to 6 from 4. The average workweek grew solidly, pushing that index up 13 points to end at a reading of 12. Additionally, average wages grew more quickly, reaching an index of 15 compared to last month's reading of 9.
emphasis added

This is the last of the regional surveys.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (dashed green, through November), and five Fed surveys are averaged (blue, through November) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through October (right axis).

The NY Fed survey indicated contraction in November, but the other surveys showed expansion.  The ISM index for November will be released Monday, December 2nd and will probably decline from the 56.4 reading in October (but still show expansion).

by Calculated Risk on 11/26/2013 09:15:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for September ("September" is a 3 month average of July, August and September prices).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities) and the national quarterly index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Advance in Third Quarter According to the S&P/Case-Shiller Home Price Indices

Data through September 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices ... showed that the U.S. National Home Price Index rose 3.2% in the third quarter of 2013 and 11.2% over the last four quarters.

In September 2013, the 10- and 20-City Composites gained 0.7% month-over-month and 13.3% year-over-year. While 13 of 20 cities posted higher year-over-year growth rates, 19 cities had lower monthly returns in September than August.

“The second and third quarters of 2013 were very good for home prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The National Index is up 11.2% year over- year, the strongest figure since the boom peaked in 2006. The 10-City and 20-City Composites year-over-year growth at 13.3% was their highest annual numbers since February 2006."

This was at the consensus forecast. I'll post graphs later (Google is having a server problem this morning).

by Calculated Risk on 11/26/2013 08:30:00 AM

Note: The Census Bureau has announced that the housing starts releases for September and October will be delayed until December 18th.

From the Census Bureau: New Residential Construction in October 2013

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,034,000. This is 6.2 percent above the September rate of 974,000 and is 13.9 percent above the October 2012 estimate of 908,000.

Single-family authorizations in October were at a rate of 620,000; this is 0.8 percent above the September figure of 615,000. Authorizations of units in buildings with five units or more were at a rate of 387,000 in October.

The graph shows total and single unit permits since 1960.

Click on graph for larger image.

This shows the huge collapse following the housing bubble, and that housing starts have been generally increasing after moving sideways for about two years and a half years.

The increase in permits was mostly due to the volatile multi-family sector.  This is the highest level for permits since 2008.

by Calculated Risk on 11/25/2013 10:47:00 PM

Just a reminder ... housing starts have been delayed again ... but permits will be released on Tuesday. This will apparent surprise some people, from CNBC: Tuesday look-ahead: Markets watching housing starts

"The most telling news is tomorrow with housing starts," said Terry Sandven, chief equity strategist for U.S. Bank Wealth Management. ... The report will offer "one more nice data point as to how healthy the economy really is and where it might be going," said JJ Kinahan, chief strategist at TD Ameritrade

Tuesday:
• At 8:30 AM ET, the Housing Permits for September and October. Housing starts have been delayed until December 18th.

• At 9:00 AM, the FHFA House Price Index for September 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% increase.

• Also at 9:00 AM, the S&P/Case-Shiller House Price Index for September. Although this is the September report, it is really a 3 month average of July, August and September. The consensus is for a 13.1% year-over-year increase in the Composite 20 index (NSA) for August.

• At 10:00 AM, the Conference Board's consumer confidence index for November. The consensus is for the index to increase to 72.9 from 71.2.

• Also at 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for November. The consensus is a reading of 4, up from 1 in October (above zero is expansion).

by Calculated Risk on 11/25/2013 05:40:00 PM

Here is another weekly update on housing inventory ... for the sixth consecutive week, housing inventory is up year-over-year.  This suggests inventory bottomed early this year.

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 most recent data was for October).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years.

Click on graph for larger image.

This graph shows the Housing Tracker reported weekly inventory for the 54 metro areas for 2010, 2011, 2012 and 2013.

In 2011 and 2012, inventory only increased slightly early in the year and then declined significantly through the end of each year.

Inventory in 2013 is now 3.2% above the same week in 2012 (red is 2013, blue is 2012).

We can be pretty confident that inventory bottomed early this year, and I expect the seasonal decline to be less than usual at the end of the year - so the year-over-year change will continue to increase.

Inventory is still very low, but this increase in inventory should slow house price increases.  One of the key questions for 2014 will be: How much will inventory increase?  I'll post some thoughts on inventory at the end of the year.