by Calculated Risk on 5/15/2014 09:27:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production decreased 0.6 percent in April 2014 after having risen about 1 percent in both February and March. In April, manufacturing output fell 0.4 percent. The index had increased substantially in February and March following a decrease in January; severe weather had restrained production early in the quarter. The output of utilities dropped 5.3 percent in April, as demand for heating returned toward normal levels. The production at mines increased 1.4 percent following a gain of 2.0 percent in March. At 102.7 percent of its 2007 average, total industrial production in April was 3.5 percent above its level of a year earlier. The capacity utilization rate for total industry decreased 0.7 percentage point in April to 78.6 percent, a rate that is 1.5 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 11.7 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.6% is 1.5 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 0.6% in April to 102.7. This is 23% above the recession low, and 2.0% above the pre-recession peak.

The monthly change for both Industrial Production and Capacity Utilization were below expectations.

by Calculated Risk on 5/15/2014 08:30:00 AM

From the BLS on CPI:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. ....

The index for all items less food and energy rose 0.2 percent in April ... The all items index increased 2.0 percent over the last 12 months; this compares to a 1.5 percent increase for the 12 months ending March, and is the largest 12-month increase since July. The index for all items less food and energy has increased 1.8 percent over the last 12 months.

The consensus was for a 0.3% increase in CPI in April and for core CPI to increase 0.1%. I'll have more later on inflation.

The DOL reports:

In the week ending May 10, the advance figure for seasonally adjusted initial claims was 297,000, a decrease of 24,000 from the previous week's revised level. This is the lowest level for initial claims since May 12, 2007 when they were 297,000. The previous week's level was revised up by 2,000 from 319,000 to 321,000. The 4-week moving average was 323,250, a decrease of 2,000 from the previous week's revised average. The previous week's average was revised up by 500 from 324,750 to 325,250.

There were no special factors impacting this week's initial claims.

The previous week was revised up from 319,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

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 323,250.

This was below the consensus forecast of 317,000.  The 4-week average is close to normal levels for an expansion.

by Calculated Risk on 5/14/2014 07:17:00 PM

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 317 thousand from 319 thousand.

• Also at 8:30 AM, the Consumer Price Index for April. The consensus is for a 0.3% increase in CPI in April and for core CPI to increase 0.1%.

• Also at 8:30 AM, the NY Fed Empire Manufacturing Survey for May. The consensus is for a reading of 5.0, up from 1.3 in April (above zero is expansion).

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for April. The consensus is for no change in Industrial Production, and for Capacity Utilization to decrease to 79.1%.

• At 10:00 AM, the May NAHB homebuilder survey. The consensus is for a reading of 48, up from 47 in April. Any number below 50 indicates that more builders view sales conditions as poor than good.

• Also at 10:00 AM, the Philly Fed manufacturing survey for May. The consensus is for a reading of 12.5, down from 16.6 last month (above zero indicates expansion).

• Also at 10:00 AM, the Mortgage Bankers Association (MBA) Q1 2014 National Delinquency Survey (NDS).

• At 6:10 PM, Speech by Fed Chair Janet Yellen, Small Businesses and the Economy, National Small Business Week 2014, Washington, D.C

Click on photo for larger image.

The San Diego fire today from Color Spot's nursery in Fallbrook.

Photo from a friend at Color Spot Nurseries.

by Calculated Risk on 5/14/2014 04:29:00 PM

From housing economist Tom Lawler:

In a report that got a huge amount of media coverage, RealtyTrac alleged that the all-cash share of home purchases hit a record 42.7% last quarter, up from 19.1% in the first quarter of 2013. This increase was “shockingly” large, and occurred despite a decline in the institutional investor share of home purchases. If correct, it is not surprising that this would be “big news.” In reality, however, they are not ...

Click on graph for larger image.

Here is a chart from RealtyTrac. The blue line is the All-Cash Share.

According to RealtyTrac’s tabulations, the all-cash share of home purchases surged in the third quarter of 2013, and has continued to increase, and last quarter it was more than double the year-earlier share.

Data from other sources, in contrast, strongly indicate that the all-cash share of home purchases has been declining over the last year – not just MLS-based reports (such as the one’s I track, but from another entity (CoreLogic) that uses property and mortgage records.

The RealtyTrac data from 2011 through the second quarter of 2013 show a MASSIVELY lower all-cash share of home purchases than does CoreLogic, or that local MLS data would suggest. CoreLogic, e.g., estimated that the all-cash share of home purchases in the first quarter of 2013 was a tad over 40%, compared to RealtyTrac’s estimate of 19.1%. While I don’t have CoreLogic’s estimates for Q1 2014 yet, I’m pretty sure it will show a drop from the first quarter of 2013 of at least five percentage points. (I’m hoping CoreLogic will send me their Q1/2014 estimates soon.)

Below are some all-cash shares of home purchases for various areas – most based on MLS data, but some based on property records tabulated by Dataquick – for March of this year vs. March 2013.

In looking at both these data and the CoreLogic estimates, how can it POSSIBLY be true that the all-cash share of home sales in the first quarter of 2013 was just 19.1%, or that the all-cash share of home sales in the first quarter of 2014 was more than double that of 2013?

The simple answer is ...it can’t.

	All-Cash Share
	Mar-14	Mar-13
Las Vegas	43.1%	57.5%
Seattle*	22.8%	23.9%
Phoenix	33.1%	41.5%
Sacramento	22.5%	36.5%
Miami*	62.5%	66.6%
Mid-Atlantic	19.9%	20.6%
Orlando	44.6%	55.6%
Bay Area CA*	25.0%	31.0%
So. California*	29.1%	35.1%
Toledo	40.7%	38.9%
Wichita	32.0%	27.9%
Des Moines	20.8%	19.1%
Peoria	21.3%	21.7%
Florida SF	45.5%	48.3%
Florida C/TH	70.9%	74.9%
Tucson	33.5%	35.0%
Omaha	20.3%	22.1%
Georgia***	33.8%	NA
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 5/14/2014 02:58:00 PM

From DataQuick: Bay Area Home Prices Continue to Rise; Sales Up from March, Flat Yr/Yr

A total of 7,555 new and resale houses and condos were sold in the nine-county Bay Area last month. That was up 19.8 percent from 6,308 in March and down 0.9 percent from 7,621 in April a year ago, according to San Diego-based DataQuick.

Bay Area sales generally increase from March to April, but the 19.8 percent increase this year was high. The average increase is 4.8 percent. ...

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 3.6 percent of resales in April, down from a revised 4.3 percent the month before, and down from 8.4 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is 9.9 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 3.8 percent of Bay Area resales last month. That was down from an estimated 4.6 percent in March and down from 11.8 percent a year earlier.

Last month absentee buyers – mostly investors – purchased 20.2 percent of all Bay Area homes. That was down from March’s 20.7 percent and down from 24.2 percent for April a year ago.
emphasis added

Sales declined 0.9% year-over-year in April compared to a 12.9% year-over-year decline in March.

And even though total sales were still down slightly year-over-year, the percent of non-distressed sales is up almost 15%.  There were 7,555 total sales this year in April, and 7.4% were distressed.  In April 2013, there were 7,621 total sales, and 20.1% were distressed.  A big positive change. 

by Calculated Risk on 5/14/2014 12:13:00 PM

For fun: This morning Barry Ritholtz reminded me of an article by Charlie Gasparino from March 2009: Is the Worst Yet to Come?

[T]hey can’t believe what they are witnessing: an economic agenda that is contradictory at best, and possibly reckless in its extreme. Policies that will certainly make a very bad situation even worse ...

Gasparino basically called the market bottom! (Ritholtz wrote yesterday: The Parasites of Finance)

Not to pick on Gasparino - we all make bad calls - but here is what I wrote at the same time: What is a depression?

It seems like the "D" word is everywhere. And that raises a question: what is a depression? Although there is no formal definition, most economists agree it is a prolonged slump with a 10% or more decline in real GDP.
...
I still think a depression is very unlikely. More likely the economy will bottom later this year or at least the rate of economic decline will slow sharply. I also still believe that the eventual recovery will be very sluggish, and it will take some time to return to normal growth.
...
It is possible - see Looking for the Sun - that new home sales and housing starts will bottom in 2009, but any recovery in housing will probably be sluggish.

That leaves Personal Consumption Expenditures (PCE) - and as households increase their savings rate to repair their balance sheets, it seems unlikely that PCE will increase significantly any time soon. So even if the economy bottoms in the 2nd half of 2009, any recovery will probably be very sluggish.

This was one of a series of my more positive posts in 2009 (after being very negative for several years).  Not perfect, but clearly my outlook was changing.

Note:
1) The recession ended in June 2009 according to NBER.

2) Housing starts bottomed in 2009, but new home sales didn't bottom until 2010-2011. Note: I predicted house prices would continue to decline, and finally called the bottom for house prices in Feb 2012.

3) The recovery has been sluggish - for housing, PCE, and the overall economy.

Sometimes it is fun to look back. I remember watching CNBC at that time, and it seemed every talking head was bearish - and many were predicting a depression. Gasparino wasn't alone, and those of us looking for the economy to bottom were definitely in the minority.

by Calculated Risk on 5/14/2014 09:25:00 AM

From Melanie Mason at the LA Times: Howard Jarvis group won't oppose bill to close Prop. 13 loophole

The legislation would eliminate the ability of businesses to elude higher property taxes by carving up ownership in commercial property purchases so no one has a majority stake. The tactic averts a reassessment of the property that can increase its taxes.

The 2006 sale of Santa Monica's Fairmont Miramar Hotel to computer magnate Michael Dell cast one of the brightest lights on that loophole. Dell divided ownership shares among his wife and two business partners, with no one taking on more than 49% of the property.

The move saved him about $1 million a year in property taxes.

This has been going on for years, and there lower properties taxes on existing commercial properties tends to discourage some new construction (hard to compete). This is a positive step and is supported by just about everyone.

by Calculated Risk on 5/14/2014 07:00:00 AM

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

Mortgage applications increased 3.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 9, 2014. ...

The Refinance Index increased 7 percent from the previous week to its highest level since the week ending April 11, 2014. The seasonally adjusted Purchase Index decreased less than 1 percent from one week earlier. The unadjusted Purchase Index increased less than 1 percent compared with the previous week and was 12 percent lower than the same week one year ago. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.39 percent, the lowest rate since November 2013, from 4.43 percent, with points increasing to 0.22 from 0.21 (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 74% from the levels in May 2013 (one year ago).

As expected, with the mortgage rate increases, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 12% from a year ago.

Note: I've wondered if the purchase index was understating purchase activity because small lenders tend to focus on purchases, and those small lenders might be underrepresented in the purchase index. The Mortgage Bankers Association (MBA) told me the mortgage purchase index includes many smaller "purchase focused" lenders, and the MBA doesn't believe their purchase index is "skewed" by large lenders who were focused on refinance applications.

by Calculated Risk on 5/13/2014 06:56:00 PM

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 Producer Price Index for April from the BLS. The consensus is for a 0.2% increase in prices.

From FHFA Director Melvin Watt: Managing the Present: The 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac

From Nick Timiraos at the WSJ: Fannie, Freddie Regulator Signals Broad Shift in Housing Policy

Also from Nick Timiraos at the WSJ: Six Takeaways From Mel Watt’s Speech on Housing

NO COMMENT ON LEGISLATION: ...

NO CHANGES ON LOAN LIMITS: ...
...
ENCOURAGING BROADER CREDIT ACCESS: ...

NEIGHBORHOOD STABILIZATION PILOT PROGRAM: The FHFA will launch a pilot project in Detroit ...

OFFLOADING MORTGAGE-CREDIT RISK: Rather than focus on contracting the footprint of Fannie and Freddie ... Mr. Watt said the companies would now focus on reducing taxpayer risk without necessarily shrinking the companies’ size. ..

MOVING FANNIE AND FREDDIE TO A SINGLE SECURITY:

From David Stevens at the Mortgage Bankers Association: MBA Statement on FHFA Director Watt’s Comments

In his first major speech outlining his priorities as the conservator for, and regulator of, Fannie Mae and Freddie Mac, Director Watt is showing that he has hit the ground running and put a lot of thought into the path he intends to take with the two companies. ...

“Given the difficulties passing GSE reform legislation as the mid-term elections approach, it is good to see Director Watt looking hard at the tools he has at his disposal to help reform and improve the housing finance system. To be sure, this does not in any way lessen the need for Congress to enact needed reforms, but the Director’s comments today indicate that positive change could be on its way in the meantime.”

From Jim Parrott at the Urban Institute: A strong pivot from the new director of FHFA

With this speech, Director Watt has formally ushered in a new era for the FHFA and GSEs. He has pivoted, rather emphatically, from the prior regime’s focus on preparing the enterprises for wind-down to better positioning them to serve as the central conduit for mortgage financing for the indefinite future. At a time when access to credit remains a serious challenge and the timing and shape of long term reform from Congress is deeply unclear, the pivot is a useful one. Even if one believes, as do I, that we need to chart a course for long-term reform, and that that course should involve the winding down of these two enterprises, that is arguably not the job of their conservator. The job of the FHFA is first and foremost to increase the stability and efficiency of the system as it stands. Director Watt has recognized this challenge and risen to it admirably.

by Calculated Risk on 5/13/2014 03:13:00 PM

From DataQuick: Faster Pace for Southland Home Sales; Median Sale Price Edges Higher

Southern California’s housing market perked up a bit in April, with sales rising more than usual from March and dipping below a year earlier by the smallest degree in six months. Home prices edged higher again but at a slower pace, the result of more inventory, affordability constraints and less pressure from investors, a real estate information service reported.

A total of 20,008 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 13.4 percent from 17,638 sales in March, and down 6.6 percent from 21,415 sales in April last year, according to San Diego-based DataQuick.

On average, sales have increased 1.4 percent between March and April since 1988, when DataQuick’s statistics begin. Southland sales have fallen on a year-over-year basis for seven consecutive months, but last month’s decline was the smallest since sales fell 4.4 percent last October.

This April’s sales were higher than in April 2012 and 2011. That’s a significant change from February and March this year, which had the lowest home sales for those particular months in six years.
...
“The housing market’s pulse quickened a bit in April. If the inventory grows more, which we consider likely, it’s going to make it a lot easier for sales to reach at least an average level, which we haven’t seen in more than seven years. There are certainly factors undermining housing demand, including affordability constraints, credit challenges and less investment activity. But there are considerable forces fueling demand, too: Employment is rising, families are growing, and more people can qualify to buy again after losing a home to foreclosure or a short sale over the past eight years,” said Andrew LePage, a DataQuick analyst.

Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 5.9 percent of the Southland resale market in April. That was down from a revised 6.3 percent the prior month and down from 12.4 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 5.4 percent of Southland resales last month. That was down from a revised 7.3 percent the prior month and down from 16.6 percent a year earlier.

Absentee buyers – mostly investors and some second-home purchasers – bought 26.1 percent of the homes sold last month, which is the lowest share since November 2011, when 25.1 percent of homes sold to absentee buyers.
emphasis added

Both distressed sales and investor buying is declining - and this has been dragging down overall sales.  However the year-over-year decline for sales in April was the smallest since last October.

Even though total sales are still down year-over-year, the percent of non-distressed sales is up almost 17%.  There were 20,008 total sales this year, and 11.3% were distressed.  In April 2013, there were 21,415 total sales, and 29% were distressed.  A big positive change.