by Calculated Risk on 3/05/2014 10:05:00 AM

The February ISM Non-manufacturing index was at 51.6%, down from 54.0% in January. The employment index decreased sharply in February to 47.5%, down from 56.4% in January. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: February 2014 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in February for the 49th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 51.6 percent in February, 2.4 percentage points lower than January's reading of 54 percent. The Non-Manufacturing Business Activity Index decreased to 54.6 percent, which is 1.7 percentage points lower than the reading of 56.3 percent reported in January, reflecting growth for the 55th consecutive month and at a slower rate. The New Orders Index registered 51.3 percent, 0.4 percentage point higher than the reading of 50.9 percent registered in January. The Employment Index decreased 8.9 percentage points to 47.5 percent from the January reading of 56.4 percent and indicates contraction in employment for the first time after 25 consecutive months of growth. The Prices Index decreased 3.4 percentage points from the January reading of 57.1 percent to 53.7 percent, indicating prices increased at a slower rate in February when compared to January. According to the NMI®, ten non-manufacturing industries reported growth in February. The majority of respondents' comments indicate a slowing in the rate of growth month over month of business activity. Some of the respondents attribute this to weather conditions. Overall respondents' comments reflect cautiousness regarding business conditions and the economy."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was well below the consensus forecast of 53.6% and indicates slower expansion in February than in January.

 

by Calculated Risk on 3/05/2014 08:23:00 AM

From ADP:

Private sector employment increased by 139,000 jobs from January to February according to the February ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Mark Zandi, chief economist of Moody’s Analytics, said, "February was another soft month for the job market. Employment was weak across a number of industries. Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures.”

This was below the consensus forecast for 158,000 private sector jobs added in the ADP report. 

Note: ADP hasn't been very useful in directly predicting the BLS report on a monthly basis, but it might provide a hint. The BLS report for February will be released on Friday.

by Calculated Risk on 3/05/2014 07:01:00 AM

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

Mortgage applications increased 9.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 28, 2014. ...

The Refinance Index increased 10 percent from the previous week. The seasonally adjusted Purchase Index increased 9 percent from one week earlier. ...

The seasonally adjusted Purchase Index was 6 percent higher than its level two weeks earlier, but was still 19 percent lower than the same week one year ago. Despite the increase observed this week, the Refinance Index is still 3 percent lower than it was two weeks ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.47 percent from 4.53 percent, with points decreasing to 0.28 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.37 percent from 4.47 percent, with points increasing to 0.20 from 0.13 (including the origination fee) for 80 percent LTV loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down 69% from the levels in May 2013.

With the mortgage rate increases, refinance activity will be significantly lower in 2014 than in 2013.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 17% from a year ago.

The purchase index is probably understating purchase activity because small lenders tend to focus on purchases, and those small lenders are underrepresented in the purchase index - but this is still very weak.

Note: Jumbo rates are still below conforming rates.

by Calculated Risk on 3/04/2014 08:19:00 PM

Note on the previous post: I've contacted the FHA and will post the quarterly FHA REO data soon.

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

• At 8:15 AM, the ADP Employment Report for February. This report is for private payrolls only (no government). The consensus is for 158,000 payroll jobs added in January, down from 175,000 in January.

• At 10:00 AM, the ISM non-Manufacturing Index for February. The consensus is for a reading of 53.6, down from 54.0 in January. Note: Above 50 indicates expansion, below 50 contraction.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 3/04/2014 02:01:00 PM

EDIT: Ooops. The FHA data is for a year ago.

In their Q4 SEC filing, Fannie reported their Real Estate Owned (REO) increased to 103,229 single family properties, up from 100,941 at the end of Q3.

Freddie reported their REO increased to 47,308 in Q4, up from 44,623 at the end of Q3.

The FHA reported their REO increased to 37,977 in Q4, up from 37,445 in Q3. (EDIT: wrong year)

The combined Real Estate Owned (REO) for Fannie, Freddie and the FHA increased to 188,514, up from 185,505 at the end of Q3 2013. The peak for the combined REO of the F's was 295,307 in Q4 2010.

This following graph shows the REO inventory for Fannie, Freddie and the FHA.

Click on graph for larger image.

This is only a portion of the total REO. There is also REO for private-label MBS, FDIC-insured institutions (declined in Q4), VA and more. REO has been declining for those categories.

Although REO is down slightly from Q4 2012, REO has increased for two consecutive quarters - and is still at a high level.

EDIT: Incorrect FHA data.

by Calculated Risk on 3/04/2014 10:50:00 AM

Notes: This CoreLogic House Price Index report is for January. The recent Case-Shiller index release was for December. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: Home Prices Nationwide Increased 12 Percent Year Over Year In January

Home prices, including distressed sales, increased by 12.0 percent in January 2014 compared to December 2013. January marks the 23nd consecutive month of year-over-year home price gains.

Excluding distressed sales, home prices increased by 9.8 percent year over year.

... Despite gains in December, home prices nationwide remain 17.3 percent below their peak, which was set in April 2006.

“Polar vortices and a string of snow storms did not manage to weaken house price appreciation in January. The last time January month-over-month and year-over-year price appreciation was this strong was at the height of the housing bubble in 2006.” [said Dr. Mark Fleming, chief economist for CoreLogic]

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.9% in January, and is up 12.0% over the last year.  This index is not seasonally adjusted, so this was a strong month-to-month gain during the "weak" season.

The index is off 17.3% from the peak - and is up 22.9% from the post-bubble low set in February 2012.

The second graph is from CoreLogic. The year-over-year comparison has been positive for twenty three consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

I expect the year-over-year increases to slow - but it isn't showing up in the CoreLogic index yet.

by Calculated Risk on 3/04/2014 09:21:00 AM

Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division) released their Mortgage Monitor report for January today. According to LPS, 6.27% of mortgages were delinquent in January, down from 6.47% in December. BKFS reports that 2.35% of mortgages were in the foreclosure process, down from 3.41% in January 2013.

This gives a total of 8.62% delinquent or in foreclosure. It breaks down as:

• 1,851,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,289,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,175,000 loans in foreclosure process.

For a total of ​​4,315,000 loans delinquent or in foreclosure in January. This is down from 5,208,000 in January 2013.

Click on graph for larger image.

This graph from BKFS shows percent of loans delinquent and in the foreclosure process over time.

Delinquencies and foreclosures are moving down - and might be back to normal levels in a couple of years.

The second graph from BKFS shows mortgage origination. From BKFS:

“In January, we saw origination volume continue to decline to its lowest point since 2008, with prepayment speeds pointing to further drops in refinance-related originations,” said Herb Blecher, senior vice president of Black Knight Financial Services’ Data & Analytics division. “Overall originations were down almost 60 percent year-over-year, with HARP volumes (according to the most recent FHFA report) down 70 percent over the same period. These declines are largely tied to the increased mortgage interest rate environment, which is having a significant impact on the number of borrowers with incentive to refinance. A high-level view of this refinancible population shows a decline of about 13 percent just over the last two months.

“Of course, in addition to higher interest rates, a good deal of this decline can be attributed to the fact that a majority of those who could refinance at historically low rates in recent years already have, and we see a similar dynamic in terms of HARP-eligible loans. The volume of HARP refinances over the past year has driven this population down to about 700,000 loans in January 2014, as compared to over 2.3 million at the same time last year. From a geographic perspective, outside of Florida and Nevada, we see the Midwestern states of Illinois, Michigan, Missouri and Ohio have among the highest percentage of HARP eligibility.”
emphasis added

There is much more in the mortgage monitor.

by Calculated Risk on 3/03/2014 06:24:00 PM

Here is another weekly update on housing inventory ...

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

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for January).  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, 2013 and 2014.

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

Inventory in 2014 is now 5.9% above the same week in 2013 (red is 2014, blue is 2013).

Inventory is still very low, but this increase in inventory should slow house price increases. 

Note: One of the key questions for 2014 will be: How much will inventory increase?  My guess is inventory will be up 10% to 15% year-over-year by the end of 2014 (inventory would still be below normal).

by Calculated Risk on 3/03/2014 02:55:00 PM

Based on an AutoData estimate, light vehicle sales were at a 15.34 million SAAR in February. That is up slightly from February 2013, and up 1.8% from the sales rate last month. 

This was slightly below the consensus forecast of 15.4 million SAAR (seasonally adjusted annual rate).

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for February (red, light vehicle sales of 15.34 million SAAR from AutoData).

Weather had an impact in February, from WardsAuto:

"John Felice, [Ford] vice president-U.S. Marketing, Sales and Service, says (delayed) orders should be filled this month, which will help March results. The executive also says February started slow, but built momentum as the month progressed, which also bodes well for sales this month."
...
“Weather continued to impact the industry in February, but GM sales started to thaw during the Winter Olympic Games as our brand and marketing messages took hold,” Kurt McNeil, GM vice president-Sales Operations, says in a statement.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and were a key driver of the recovery.   

Looking forward, the growth rate will slow for auto sales, and most forecasts are for around a small gain in 2014 to around 16.1 million light vehicles.  Of course 2014 is off to a slow start.

by Calculated Risk on 3/03/2014 10:45:00 AM

The Census Bureau reported that overall construction spending increased in January:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during January 2014 was estimated at a seasonally adjusted annual rate of $943.1 billion, 0.1 percent above the revised December estimate of $941.9 billion. The January figure is 9.3 percent above the January 2013 estimate of $863.1 billion.

Private spending increased in January, but public spending was down:

Spending on private construction was at a seasonally adjusted annual rate of $670.8 billion, 0.5 percent above the revised December estimate of $667.5 billion. Residential construction was at a seasonally adjusted annual rate of $359.9 billion in January, 1.1 percent above the revised December estimate of $356.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $310.9 billion in January, 0.2 percent below the revised December estimate of $311.5 billion. ...

In January, the estimated seasonally adjusted annual rate of public construction spending was $272.3 billion, 0.8 percent below the revised December estimate of $274.4 billion.
emphasis added

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 47% below the peak in early 2006, and up 57% from the post-bubble low.

Non-residential spending is 25% below the peak in January 2008, and up about 39% from the recent low.

Public construction spending is now 16% below the peak in March 2009 and up just about 3% from the recent low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 15%. Non-residential spending is up 9% year-over-year. Public spending is up 2% year-over-year.

To repeat a few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years - mostly related to energy and power - but the key sectors of office, retail and hotels are still at very low levels.  Based on the architecture billings index, I expect private non-residential to increase this year.

3) Public construction spending was down in January, but is up 3% from the low in April.  It appears that the drag from public construction spending is over.  Public spending has declined to 2006 levels (not adjusted for inflation) and was a drag on the economy for 4+ years. In real terms, public construction spending has declined to 2001 levels.

Looking forward, all categories of construction spending should continue to increase. Residential spending is still very low, non-residential should start to pickup, and public spending appears to have bottomed.