by Calculated Risk on 8/06/2014 12:11:00 PM

This provisional data for 2013 was released in May and shows a possible impact of the great recession ...

From the National Center for Health Statistics: Births: Preliminary Data for 2013. The NCHS reports:

The 2013 preliminary number of U.S. births was 3,957,577, slightly more (4,736) than in 2012. ...

The general fertility rate was 62.9 births per 1,000 women aged 15–44, down slightly from 2012 and a record low.

The most amazing data is on teen births (see 2nd graph below).

Here is a long term graph of annual U.S. births through 2013 ...

Click on graph for larger image.

Births had declined for five consecutive years, and are about 8.3% below the peak in 2007 (births in 2007 were at the all time high - even higher than during the "baby boom"). I suspect certain segments of the population were under stress before the recession started - like construction workers - and even more families were in distress in 2008 through 2012. And this led to fewer babies.

Notice that the number of births started declining a number of years before the Great Depression started. Many families in the 1920s were under severe stress long before the economy collapsed. By 1933 births were down by almost 23% from the early '20s levels.

Of course economic distress isn't the only reason births decline - look at the huge decline following the baby boom that was driven by demographics. But it is not surprising that the number of births slow or decline during tough economic times - but that appears to be over now.

The second graph is from the NCHS report and shows births per 1,000 women by teen age group. From the NCHS:

The number of births to teenagers aged 15–19 in 2013 was 274,641, also down 10% from 2012 and the lowest number of teen births ever reported for the United States. The 2013 number of births was 38% less than in 2007 (444,899), the most recent high, and 57% less than in 1970, the all-time peak year for the number of teen births (644,708).

Far fewer teens births is great news (and is probably related to the much higher enrollment rates).

Another key trends ... women are waiting longer to have babies:

The birth rate for women aged 20–24 was 81.2 births per 1,000 women in 2013, down 2% from the previous record low rate in 2012 (83.1). Since 2007, the rate for women in this age group has declined steadily at nearly 4% per year.

The 2013 preliminary birth rate for women aged 30–34 was 98.7 births per 1,000 women, up 1% from the rate in 2012 (97.3). The number of births to women in their early 30s also increased in 2013, by 2%. The rate for women aged 35–39 was 49.6 births per 1,000 women, up 3% from 2012 (48.3), reaching the highest rate for this age group since 1963. The number of births to women in their late 30s increased 3% in 2013.

Waiting longer to have children makes sense (see: Demographics and Behavior) and we should expect a baby boom in a few years as the largest cohorts move into the 25 to 34 years old age groups. (for largest cohorts, see: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group).

P.S. I expect that as families have babies, they will tend to buy homes (as opposed to rent)!   The demographics are favorable for renting now (see: The Favorable Demographics for Apartments), but eventually the demographics will be more positive for home ownership.

by Calculated Risk on 8/06/2014 08:30:00 AM

The Department of Commerce reported:

[T]otal June exports of $195.9 billion and imports of $237.4 billion resulted in a goods and services deficit of $41.5 billion, down from $44.7 billion in May, revised. June exports were $0.3 billion more than May exports of $195.6 billion. June imports were $2.9 billion less than May imports of $240.3 billion.

The trade deficit was smaller than the consensus forecast of $45.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through June 2014.

Click on graph for larger image.

Imports decreased and exports increased in June.  

Exports are 18% above the pre-recession peak and up 3% compared to June 2013; imports are about 2% above the pre-recession peak, and up about 5% compared to June 2013. 

The second graph shows the U.S. trade deficit, with and without petroleum, through June.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $96.41 in June, up from $96.12 in May, and down from $96.87 in June 2013.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China increased to $30.1 billion in June, from $26.7 billion in June 2013.

by Calculated Risk on 8/06/2014 07:00:00 AM

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

Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 1, 2014. ...

The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 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 4.35 percent from 4.33 percent, with points decreasing to 0.22 from 0.24 (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.

As expected, 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 14% from a year ago.

by Calculated Risk on 8/05/2014 08:38:00 PM

The ISM manufacturing survey is almost always released before the BLS employment report for the same month, and frequently the ISM non-manufacturing survey also precedes the employment report. This didn't happen for July since the employment report was released on Friday August 1st.

Now that the surveys have been released, the ISM surveys suggested fairly strong hiring in July.

The ISM manufacturing employment index increased in July to 58.2%, from 52.8% in June. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector manufacturing payroll jobs increased about 25,000 in July.

The ISM non-manufacturing employment index increased in July to 56.0%, up from 54.4% in June. A historical correlation between the ISM non-manufacturing index and the BLS employment report for non-manufacturing, suggests that private sector payroll jobs for non-manufacturing increased by about 232,000 in July.

Taken together, these surveys suggested around 257,000 jobs added in July - well above the 198,000 private sector jobs reported by the BLS.  Of course these surveys indicate the number of firms hiring, not the number of people hired - and the relationship is "noisy" with timing issues too - but this is another positive employment indicator.

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 Trade Balance report for June from the Census Bureau. The consensus is for the U.S. trade deficit to be at $45.0 billion in June from $44.4 billion in May.

by Calculated Risk on 8/05/2014 04:42:00 PM

This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in July were down 17% year-over-year and at the lowest for June since 2008.

2) Cash Sales (frequently investors) were down about 43% to less than 25% of total sales. Non-cash sales were down only about 3% year-over-year.  So the decline in sales is probably mostly due to less investor buying.

3) Active inventory is now increasing rapidly and is up 35% year-over-year - and at the highest level for July since 2011 (when prices bottomed in Phoenix).

Inventory has clearly bottomed in Phoenix (A major theme for housing in 2013).   And more inventory (a theme this year) - and less investor buying - suggests price increases should slow sharply in 2014.

According to Case-Shiller, Phoenix house prices bottomed in August 2011 (mostly flat for all of 2011), and then increased 23% in 2012, and another 15% in 2013.  Those large increases were probably due to investor buying, low inventory and some bounce back from the steep price declines in 2007 through 2010.  Now, with more inventory, price increases should flatten out in 2014.

As an example, the Phoenix Case-Shiller index through May shows prices up less than 1% in 2014, and the Zillow index shows Phoenix prices up slightly year-to-date through June. 

July Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash Sales	Percent Cash	Active Inventory	YoY Change Inventory
Jul-08	5,9741	---	---	---	54,5272	---
Jul-09	9,095	52.2%	3,269	35.9%	38,024	---2
Jul-10	7,101	-21.9%	2,901	40.9%	42,887	12.8%
Jul-11	8,397	18.3%	3,779	45.0%	27,663	-35.5%
Jul-12	7,152	-14.8%	3,214	44.9%	20,384	-26.3%
Jul-13	8,214	14.8%	2,944	35.8%	20,049	-1.6%
Jul-14	6,790	-17.3%	1,681	24.8%	27,081	35.1%
1 July 2008 does not include manufactured homes, ~100 more 2 July 2008 Inventory includes pending

by Calculated Risk on 8/05/2014 01:11:00 PM

The BEA has released the underlying details for the Q2 advance GDP report.

Investment in single family structures is now back to being the top category for residential investment (see first graph).  Home improvement was the top category for twenty one consecutive quarters following the housing bust ... but now investment in single family structures is the top category once again.

However - even though investment in single family structures has increased significantly from the bottom - single family investment is still very low, and still below the bottom for previous recessions. I expect further increases over the next few years.

Click on graph for larger image.

The first graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Investment in single family structures was $188 billion (SAAR) (almost 1.1% of GDP).

Investment in home improvement was at a $179 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (just over 1.0% of GDP).   

The second graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased recently, but from a very low level.

Investment in offices is down about 49% from the recent peak (as a percent of GDP) and increasing slowly.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 59% from the peak.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment peaked at 0.31% of GDP in Q3 2008 and is down about 67%.   With the hotel occupancy rate at the highest level since 2000, it is likely that hotel investment will probably continue to increase.

These graphs show investment is now increasing, but from a very low level.

by Calculated Risk on 8/05/2014 10:07:00 AM

The July ISM Non-manufacturing index was at 58.7%, up from 56.0% in June. The employment index increased in July to 56.0%, up from 54.4% in June. Note: Above 50 indicates expansion, below 50 contraction.

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

Economic activity in the non-manufacturing sector grew in July for the 54th 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 58.7 percent in July, 2.7 percentage points higher than the June reading of 56 percent. This represents continued growth in the Non-Manufacturing sector. This month's NMI® is the highest reading for the index since its inception in January 2008. The Non-Manufacturing Business Activity Index increased to 62.4 percent, which is 4.9 percentage points higher than the June reading of 57.5 percent, reflecting growth for the 60th consecutive month at a faster rate. This is the highest reading for the index since February 2011 when the index registered 63.3 percent. The New Orders Index registered 64.9 percent, 3.7 percentage points higher than the reading of 61.2 percent registered in June. This represents the highest reading for the New Orders Index since August 2005 when it registered 65.3 percent. The Employment Index increased 1.6 percentage points to 56 percent from the June reading of 54.4 percent and indicates growth for the fifth consecutive month. The Prices Index decreased 0.3 percentage point from the June reading of 61.2 percent to 60.9 percent, indicating prices increased at a slightly slower rate in July when compared to June. According to the NMI®, 16 non-manufacturing industries reported growth in July. Respondents' comments indicate that stabilization and/or improving market conditions have positively affected the majority of the respective industries and businesses."
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 solidly above the consensus forecast of 56.5% and suggests faster expansion in July than in June.

The NMI was at the highest level since its inception.  New orders was very strong - and employment was up solidly.

by Calculated Risk on 8/05/2014 09:41:00 AM

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

From CoreLogic: CoreLogic Reports Home Prices Rose by 7.5 Percent Year Over Year in June

Home prices nationwide, including distressed sales, increased 7.5 percent in June 2014 compared to June 2013. This change represents 28 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased 1.0 percent in June 2014 compared to May 2014.
...
Excluding distressed sales, home prices nationally increased 6.9 percent in June 2014 compared to June 2013 and 0.9 percent month over month compared to May 2014. Also excluding distressed sales, all 50 states and the District of Columbia showed year-over-year home price appreciation in June. Distressed sales include short sales and real estate owned (REO) transactions.

“Home price appreciation continued moderating in June with its slight month-over-month increase,” said Mark Fleming, chief economist for CoreLogic. “This reversion to normality that we are finally experiencing is expected to continue across the country and should further alleviate concern over diminishing affordability and the risk of another asset bubble.”
emphasis added

Click on graph for larger image.

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

The index was up 1.0 in June, and is up 7.5% over the last year.

This index is not seasonally adjusted, so a solid month-to-month gain was expected for June.


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

However this was the smallest year-over-year gain since late 2012, and I expect the year-over-year increases to continue to slow.

by Calculated Risk on 8/04/2014 08:52:00 PM

First a note on housing inventory and more ...

I think it is a positive that existing home inventory is increasing. Sometimes rising inventory is a sign of trouble (I was pointing to increasing inventory in 2005 as a sign that the bubble was ending), but now inventory is so low that an increase is probably a positive.

This increase in inventory will also slow house price increases - the recent rate of increase in some areas was unsustainable - and getting inventory back to normal levels is another step towards a healthier market.

Also - another step towards normal is the continuing decline in the number of properties in foreclosure and the downward trend for mortgage delinquencies.   (See Black Knight releases Mortgage Monitor for June that was released this morning for details).

And it even appears, according to the Fed Senior Loan Officer survey that lending standards might be easing a little (too loose is bad, but that isn't the problem right now).  

Tuesday:
• At 10:00 AM, the ISM non-Manufacturing Index for July. The consensus is for a reading of 56.5, up from 56.0 in June. Note: Above 50 indicates expansion.

• Also at 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for June. The consensus is for a 0.6% increase in June orders.

by Calculated Risk on 8/04/2014 05:23:00 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 released was for June and indicated inventory was up 6.5% year-over-year).  

Fortunately Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data, for 54 metro areas, 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.

In 2013 (Blue), inventory increased for most of the year before declining seasonally during the holidays.  

Inventory in 2014 (Red) is now 13.6% above the same week in 2013.  (Note: There might be an issue with the Housing Tracker data over the last few weeks - Ben is checking - but inventory is still up significantly).

Inventory is also about 2.4% above the same week in 2012.  According to several of the house price indexes, house prices bottomed in early 2012, and low inventories were a key reason for the subsequent price increases.  Now that inventory is back above 2012 levels, I expect house price increases to slow (and possibly decline in some areas).

Note: One of the key questions for 2014 will be: How much will inventory increase?  My guess was inventory would be up 10% to 15% year-over-year at the end of 2014 based on the NAR report.  Right now it looks like inventory might increase more than I expected.