by Calculated Risk on 2/14/2014 09:55:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for February was at 81.2, unchanged from January.

This was above the consensus forecast of 80.0. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011, and another smaller spike down last October and November due to the government shutdown.

I expect to see sentiment at post-recession highs very soon.

by Calculated Risk on 2/14/2014 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production decreased 0.3 percent in January after having risen 0.3 percent in December. In January, manufacturing output fell 0.8 percent, partly because of the severe weather that curtailed production in some regions of the country. Additionally, manufacturing production is now reported to have been lower in the fourth quarter; the index is now estimated to have advanced at an annual rate of 4.6 percent in the fourth quarter rather than 6.2 percent. The output of utilities rose 4.1 percent in January, as demand for heating was boosted by unseasonably cold temperatures. The production at mines declined 0.9 percent following a gain of 1.8 percent in December. At 101.0 percent of its 2007 average, total industrial production in January was 2.9 percent above its level of a year earlier. The capacity utilization rate for total industry decreased in January to 78.5 percent, a rate that is 1.6 percentage points below its long-run (1972–2013) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.6 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.5% is still 1.6 percentage points below its average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased 0.3% in January to 101.0. This is 21% above the recession low, and slightly above the pre-recession peak.

The monthly change for both Industrial Production and Capacity Utilization were well below expectations, and previous months were revised down.

by Calculated Risk on 2/13/2014 09:22:00 PM

First, here is a price index for commercial real estate that I follow. From CoStar: Commercial Real Estate Pricing Gains Momentum in 2013

COMMERCIAL REAL ESTATE RECOVERY ADVANCES IN 2013: The recovery in U.S. commercial real estate advanced in 2013 as broad gains in net absorption, rents, sales activity and pricing extended across markets and property types. Driven by steady economic growth and solid job gains of 2.2 million in 2013, aggregate net absorption across the four major property types was the highest since the recovery began. Meanwhile, new supply remained well in hand, with the exception of the multifamily property sector, which has seen a notable increase in new construction. Vacancy rates fell across the board, reaching new cyclical lows in both the apartment and industrial sectors over the last year.
...
RENTS TRENDING UP AS VACANCY DECLINES: The improvement in market fundamentals has tilted pricing power in the favor of landlords. Rents have surged 14% from the trough of the cycle in the apartment market, with more modest rent recoveries of near 6% in the office and industrial segments since bottoming out in late 2010/early 2011. Even the beleaguered retail property sector, which experienced rent losses into 2012, saw a turnaround in the last year, with retail rents growing a modest 1.9% in 2013. Investor demand for all commercial property types also remained strong, as overall sales volume increased 16% from 2012.
...
IMPROVING MARKET FUNDAMENTALS FUEL PRICING GAINS: The two broadest measures of commercial property pricing in the CCRSI, the U.S. value-weighted index and U.S. equal-weighted index, each posted strong gains of 11.2% and 7.6%, respectively, in 2013. Reflecting the stronger price appreciation of larger properties in core markets, pricing in the value-weighted index has now risen to within 5.5% below the previous peak level set in 2007. Meanwhile, the equal-weighted index, which is more heavily influenced by smaller transactions, is still 25% below the prior peak
emphasis added

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

Friday:
• At 9:15 AM ET, the The Fed will release Industrial Production and Capacity Utilization for January. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 79.3%.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for February). The consensus is for a reading of 80.0, down from 81.2 in January.

by Calculated Risk on 2/13/2014 04:14:00 PM

Economist Tom Lawler sent me the preliminary table below of short sales, foreclosures and cash buyers for several selected cities in January.

From CR: This is just a few markets - more to come - but total "distressed" share is down significantly in these markets, mostly because of a decline in short sales.

And foreclosures are down in all of these areas too.


The All Cash Share (last two columns) is mostly declining year-over-year.  As investors pull back in markets the share of all cash buyers will probably decline.

In general it appears the housing market is slowly moving back to normal.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Jan-14	Jan-13	Jan-14	Jan-13	Jan-14	Jan-13	Jan-14	Jan-13
Las Vegas	17.0%	36.2%	11.0%	12.5%	28.0%	48.7%	46.3%	56.1%
Reno**	16.0%	41.0%	9.0%	10.0%	25.0%	51.0%
Phoenix	6.8%	17.6%	9.6%	16.2%	16.5%	33.8%	36.3%	44.1%
Minneapolis	5.4%	10.3%	24.0%	31.9%	29.4%	42.2%
Mid-Atlantic	8.5%	13.1%	12.2%	12.7%	20.7%	25.8%	22.9%	22.0%
So. California*	12.2%	24.2%	6.6%	17.2%	18.8%	41.4%	29.1%	33.7%
Hampton Roads					29.5%	34.9%
Toledo							43.9%	44.4%
Des Moines							22.2%	26.8%
Tucson							38.2%	36.7%
Omaha							26.4%	21.3%
Memphis*			19.1%	25.9%
*share of existing home sales, based on property records **Single Family Only

by Calculated Risk on 2/13/2014 12:51:00 PM

From the MBA: New Home Purchases Up Sharply in January 2014

MBA estimates that sales of new single-family homes were running at a seasonally adjusted annual rate of 543,000 units in January 2014, based on data from MBA’s Builder Applications Survey.

“While the big jump may appear to conflict with other data, such as MBA’s purchase application index and NAR’s existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes,” said Mike Fratantoni, MBA’s Chief Economist. “It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December.”

The estimated 543,000 unit sales pace for January was an increase of 35 percent from December’s pace of 402,000 units. On an unadjusted basis, the MBA estimates that there were 38,000 new home sales in January 2014, a 36 percent increase from the level of 28,000 units in December 2013. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

A few comments:

1) The MBA Builder survey might be helpful in predicting Census Bureau reports, but there are larger swings in the MBA survey estimates (so the Census Bureau might report an increase for January, but not of the same magnitude as the MBA increase).

2) Last year, in January, the MBA estimates sales of 507 thousand (SAAR), and the Census Bureau reported sales at a 437 thousand pace (eventually revised up to 458 thousand).   So there might be revisions too.

3) Note that for December, the Census Bureau reported sales of 414 thousand (SAAR), and the MBA estimated sales at a 402 thousand pace.  I expect Census Bureau reported sales for December to be revised down.

by Calculated Risk on 2/13/2014 11:01:00 AM

From housing economist Tom Lawler:

Based on local realtor/MLS results I have seen so far, I would estimate that existing home sales as estimated by the National Association of Realtors in January will be about 275,000 on an unadjusted basis, down 5.8% from last January’s unadjusted pace. “Guessing” NAR’s seasonally adjusted estimate this month, however, is trickier than usual, because in the January report the NAR incorporates annual revisions in the seasonal factors used to “transform” unadjusted estimates to seasonally adjusted estimates, and in lately these revisions have been considerable. While someone with the specific version of the seasonal adjustment program used by the NAR (as well as specifics about methodology – e.g., are regional estimates adjusted and then summed, or are national estimates first adjusted and then regional estimates are constrained to the national estimates) could produce the 2014 seasonal factors (and the revised factors for previous years), I am not such a person.

Based on what I THINK the seasonal factor for January should be (not much different from last January), I estimate that existing home sales as measured by the NAR will come in at a seasonally adjusted annual rate of about 4.67 million, down 4.1% from December’s SA pace, and down 5.5% from last January’s SA pace.

While this number might seem “low” – it would be the slowest SA sales pace since July 2012 – it’s not that surprising given (1) the big declines (adjusted for “seasonals”) in pending sales seen in many parts of the country in December; and (2) the unusually bad weather in many parts of the country last month.

While a number this low (or conceivably lower) will be attributed by many as being mainly weather related, in fact that is not the case. To be sure, sales were depressed by adverse weather conditions in many parts of the country last month. By the same token, however, the steep declines in pending sales in December in many parts of the country were not weather related. In fact, some of the biggest YOY declines in pending sales in December were in areas unaffected by weather but where (1) distressed sales AND investor buying were down sharply; and (2) where purchases by owners were flat to down. Some other areas, including the DC metro area, also saw unusually weak pending sales in December, when weather was not unusually “bad.”

by Calculated Risk on 2/13/2014 09:35:00 AM

On a monthly basis, retail sales decreased 0.4% from December to January (seasonally adjusted), and sales were up 2.6% from January 2013. Sales in November were revised down from a 0.2% increase to a 0.1% decrease. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $427.8 billion, a decrease of 0.4 percent from the previous month, but 2.6 percent above January 2013. ... The November to December 2013 percent change was revised from +0.2 percent to -0.1 percent.

Click on graph for larger image.

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


Retail sales ex-autos were unchanged. 

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 (2.6% for all retail sales).

The decrease in January was below consensus expectations.

by Calculated Risk on 2/13/2014 09:20:00 AM

The DOL reports:

In the week ending February 8, the advance figure for seasonally adjusted initial claims was 339,000, an increase of 8,000 from the previous week's unrevised figure of 331,000. The 4-week moving average was 336,750, an increase of 3,500 from the previous week's revised average of 333,250.

The previous week was unrevised.

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 336,750.

This was the higher than the consensus forecast of 330,000.

by Calculated Risk on 2/12/2014 08:03:00 PM

What a surprise ... Congress will pay the bills! (not a surprise to anyone paying attention). From the WSJ: Senate Approves Suspension of U.S. Debt Ceiling

The bill was sent to the White House, where President Barack Obama was expected to sign it, after the Senate voted 55-43 along party lines to approve a suspension of the federal debt limit through March 2015.

And another non-surprise ... from Reuters: U.S. budget deficit smaller than expected in January

The United States posted a smaller budget deficit than expected in January, a sign that a stronger economy is helping government coffers through a rise in tax receipts.

I think the deficit will be smaller than the CBO expects this year.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 330 thousand from 331 thousand.

• Also at 8:30 AM, Retail sales for January will be released. The consensus is for retail sales to decrease 0.1% in December, and to increase 0.1% ex-autos.

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

• Also at 10:00 AM, Testimony, Fed Chair Janet L. Yellen, Semiannual Monetary Policy Report to the Congress, Before the Senate Banking, Housing, and Urban Affairs Committee, Washington, D.C.

by Calculated Risk on 2/12/2014 01:16:00 PM

From DataQuick: Southland Home Sales Drop in January; Price Picture Mixed

Southern California logged its lowest January home sales in three years as buyers continued to wrestle with a tight inventory of homes for sale, a fussy mortgage market and the highest prices in years. ... A total of 14,471 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 21.4 percent from 18,415 in December, and down 9.9 percent from 16,058 sales in January 2013, according to San Diego-based DataQuick.
...
Last month’s Southland sales were 17.3 percent below the average number of sales – 17,493 – in the month of January since 1988. Sales haven’t been above average for any particular month in more than seven years. January sales have ranged from a low of 9,983 in January 2008 to a high of 26,083 in January 2004.

The economy is growing, but Southland home sales have fallen on a year-over-year basis for four consecutive months now and remain well below average. Why? We’re still putting a lot of the blame on the low inventory. But mortgage availability, the rise in interest rates and higher home prices matter, too,” said John Walsh, DataQuick president.

"Two of the bigger questions hanging over the housing market right now are,‘How much pent-up demand is left out there?’ and, ‘Will inventory skyrocket this year as more owners take advantage of the price run-up?’” Walsh continued. “Unfortunately, we’ll probably have to wait until spring for the answers. When it comes to statistical trends, January and February are atypical months that haven’t proven to be predictive over the years.”

Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 6.6 percent of the Southland resale market in January. That was up slightly from 5.8 percent the prior month and was down from 17.2 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 12.2 percent of Southland resales last month. That was down from 13.1 percent the prior month and down from 24.2 percent a year earlier.

Absentee buyers – mostly investors and some second-home purchasers – bought 27.5 percent of the Southland homes sold last month, up slightly from 27.2 percent in December and down from a record 32.4 percent a year earlier.
emphasis added

Generally both distress sales and investor buying is declining - and this is dragging down overall sales (plus inventory is still very low).    However conventional sales are up about 25% year-over-year.

It is important to recognize that declining existing home sales is NOT a negative indicator for the housing recovery.  The reason for the decline in overall existing home sales is fewer distressed sales and less investor buying. Those are positive trends!