by Calculated Risk on 8/25/2014 09:22:00 PM

From Gavyn Davies at the Financial Times: Draghi steals the show at Jackson Hole

The markets may read this as an empty threat, but they should note the importance of what [ECB President Mario Draghi] said about inflation expectations, which was added to the written text by the President himself on the day of the speech:

"Over the month of August, financial markets have indicated that inflation expectations exhibited significant declines at all horizons. The 5 year/5 year swap rate declined by 15 basis points to just below 2% … But if we go to shorter and medium-term horizons the revisions have been even more significant. The real [interest] rates on the short and medium term have gone up … The Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term."

This is much more explicit language about declining inflation expectations than anything the ECB has used in the past.

Tuesday:
• At 8:30 AM ET, Durable Goods Orders for July from the Census Bureau. The consensus is for a 5.1% increase in durable goods orders. NOTE: The headline number could be huge because of a large number of aircraft orders in July.

• At 9:00 AM, S&P/Case-Shiller House Price Index for June. Although this is the June report, it is really a 3 month average of April, May and June. The consensus is for a 8.4% year-over-year increase in the Composite 20 index (NSA) for June. The Zillow forecast is for the Composite 20 to increase 8.1% year-over-year, and for prices to be unchanged month-to-month seasonally adjusted.

• Also at 9:00 AM, the FHFA House Price Index for June. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.3% increase.

• At 10:00 AM, the Conference Board's consumer confidence index for August. The consensus is for the index to decrease to 89.7 from 90.9.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for August.

by Calculated Risk on 8/25/2014 04:54:00 PM

Here are two graphs I haven't posted for some time ...

As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in July 2014 was $269,800; the average sales price was $339,100. "

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales. With fewer distressed sales now, it appears the builders have moved to higher price points.

The average price in July 2014 was $339,100, and the median price was $269,800.  Both are above the bubble high (this is due to both a change in mix and rising prices).  The average is at an all time high.

The second graph shows the percent of new homes sold by price. At the peak of the housing bubble, almost 40% of new homes were sold for more than $300K - and over 20% were sold for over $400K.

The percent of home over $300K declined to about 20% in January 2009. Now it has rebounded to 43% of homes over $300K.

And only 8% of homes sold were under $150K in July 2014.  This is down from 30% in 2002 - and down from 20% as recently as August 2011.  Quite a change.

Earlier on New Home Sales:
• New Home Sales at 412,000 Annual Rate in July
• Comments on New Home Sales

by Calculated Risk on 8/25/2014 12:31:00 PM

The new home sales report for July was weak with sales at a 412,000 seasonally adjusted annual rate (SAAR), however combined with the upward revisions for the previous three months, total sales were somewhat above expectations.  Sales for April, May and June were revised up a combined 33,000 sales SAAR.

The Census Bureau reported that new home sales this year, through July, were 266,000, Not seasonally adjusted (NSA). That is down 0.8% from 268,000 during the same period of 2013 (NSA).  Basically flat compared to 2013.

Sales were up 12.3% year-over-year in July - but remember sales declined sharply in July 2013 as mortgage rates increased - so this was an easy comparison (I expect sales for July will be revised up too).

Click on graph for larger image.

This graph shows new home sales for 2013 and 2014 by month (Seasonally Adjusted Annual Rate).

The comparisons to last year will be easy for the next couple of months, and I still expect to see year-over-year growth later this year.

And here is another update to the "distressing gap" graph that I first started posting several years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through June 2014. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to decline or move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 8/25/2014 10:00:00 AM

The Census Bureau reports New Home Sales in July were at a seasonally adjusted annual rate (SAAR) of 412 thousand.

June sales were revised up from 406 thousand to 422 thousand, and May sales were revised up from 442 thousand to 454 thousand.

"Sales of new single-family houses in July 2014 were at a seasonally adjusted annual rate of 412,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.4 percent below the revised June rate of 422,000, but is 12.3 percent above the July 2013 estimate of 367,000."

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the previous two years, new home sales are still close to the bottom for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply increased in July to 6.0 months from 5.6 months in June.

The all time record was 12.1 months of supply in January 2009.

This is now at the top of the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of July was 205,000. This represents a supply of 6.0 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In July 2014 (red column), 37 thousand new homes were sold (NSA). Last year 33 thousand homes were also sold in July. The high for July was 117 thousand in 2005, and the low for July was 26 thousand in 2010.

This was below expectations of 425,000 sales in July, and sales were up 12.3% year-over-year.

I'll have more later today .

by Calculated Risk on 8/25/2014 08:54:00 AM

Notes: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). The timing of different house prices indexes can be a little confusing. Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: U.S. Home Prices Up 0.8 Percent for the Month; Up 5.5 Percent Year-Over-Year

Today, the Data and Analytics division of Black Knight Financial Services released its latest Home Price Index (HPI) report, based on June 2014 residential real estate transactions. The Black Knight HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The Black Knight HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.
...
- Yearly increases in home appreciation continue to slow
- All 20 largest states and 40 largest metros again show month-over-month growth
- Nevada shows largest monthly gain among states, while Colorado and Texas continue to hit new highs
- Reno, Nev. home prices rise nearly 2 percent-- the most of any metropolitan area; Las Vegas still 42 percent off peak

The year-over-year increases have been getting steadily smaller for the last 9 months - as shown in the table below:

Month	YoY House Price Increase
Jan-13	6.7%
Feb-13	7.3%
Mar-13	7.6%
Apr-13	8.1%
May-13	7.9%
Jun-13	8.4%
Jul-13	8.7%
Aug-13	9.0%
Sep-13	9.0%
Oct-13	8.8%
Nov-13	8.5%
Dec-13	8.4%
Jan-14	8.0%
Feb-14	7.6%
Mar-14	7.0%
Apr-14	6.4%
May-14	5.9%
June-14	5.5%

The Black Knight HPI is off 10.4% from the peak in June 2006 (not adjusted for inflation).

Note: The press release has data for the 20 largest states, and 40 MSAs.

Black Knight shows prices off 41.8% from the peak in Las Vegas, off 34.9% in Orlando, and 31.4% off from the peak in Riverside-San Bernardino, CA (Inland Empire). Prices are at new highs in Colorado and Texas (Denver, Austin, Dallas, Houston and San Antonio metros). Prices are also at new highs in San Jose, CA and in Nashville, TN.

Note: Case-Shiller for June will be released tomorrow.

by Calculated Risk on 8/25/2014 08:38:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth picked up in July

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.39 in July from +0.21 in June. Three of the four broad categories of indicators that make up the index made positive contributions to the index in July, and two of the four categories increased from June.

The index’s three-month moving average, CFNAI-MA3, increased to +0.25 in July from +0.16 in June, marking its fifth consecutive reading above zero. July’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was above the historical trend in July (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 8/24/2014 08:31:00 PM

From CME Group: (ht Nemo)

UPDATE: Due to technical issues, CME Globex Markets remain halted. Updates will be provided as they become available

Monday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for July. This is a composite index of other data.

• At 10:00 AM, New Home Sales for July from the Census Bureau. The consensus is for an increase in sales to 425 thousand Seasonally Adjusted Annual Rate (SAAR) in July from 406 thousand in June.

• At 10:30 AM, the Dallas Fed Manufacturing Survey for August.

Weekend:
• Schedule for Week of Aug 24th

Oil prices were down over the last week with WTI futures at $93.41 per barrel and Brent at $101.86 per barrel.  A year ago, WTI was at $105, and Brent was at $111 - so prices are down about 10% year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.43 per gallon (down about a dime from a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 8/24/2014 03:52:00 PM

The automakers will report August vehicle sales on Wednesday, Sept 3rd. Sales in July were at 16.40 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in August will be above 16 million SAAR again.

Note:  There were 27 selling days in August this year compared to 28 last year.

Here are a couple of forecasts:

From J.D. Power: Summer Sizzle Continues as New-Vehicle Sales in August Forecast to Hit Highest Levels of the Year

Retail light-vehicle sales are projected to hit 1.3 million units and total light-vehicle sales are expected to reach nearly 1.5 million in August 2014, both a 3 percent increase on a selling day adjusted basis, compared with August 2013.

The seasonally adjusted annualized rate (SAAR) for retail sales in August 2014 is expected to be 13.6 million units, an increase of more than 100,000 units from the selling rate in July 2014. The August SAAR marks the sixth consecutive month where the SAAR has exceeded 13 million. Retail transactions are the most accurate measure of true underlying consumer demand for new vehicles.  [Total sales forecast at 16.5 million SAAR]

John Humphrey, senior vice president of the global automotive practice at J.D. Power, notes that continued high levels of consumer expenditures on new vehicles demonstrate the continuation of the overall health of the industry.

“We expect consumer spending on new vehicles in August to approach $39 billion, the highest level on record for the month of August and second-highest month ever behind July 2005 ($39.7 billion),” said Humphrey. “The record consumer spending is fueled by both high sales volumes and high transaction prices.”

From WardsAuto: Forecast: Strong Summer Sales to Continue in August

A new WardsAuto forecast calls for August U.S. light-vehicle sales to continue to gain ground on year-ago, as the industry seasonally adjusted annual rate stays in line with recent trend. The report calls for just under 1.51 million LV deliveries this month, equating to a daily sales rate of 55,761 units (over 27 days) – a 4.3% improvement over same-month year-ago (28 days). [Total sales forecast of 16.6 million SAAR]

Another solid month for auto sales.

by Calculated Risk on 8/24/2014 11:33:00 AM

Click on graph for larger image.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is current estimated sales rate.

Heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April 2009 on a seasonally adjusted annual rate (SAAR). Since then sales have more than doubled and hit 413 thousand (SAAR) in July 2014 (about the same is in April of this year) .

The level in April was the highest level since early 2007 (over 7 years ago).  Sales are now above the average (and median) of the last 20 years - but still below the peaks - so I expect some more growth in sales.

by Calculated Risk on 8/23/2014 01:04:00 PM

The key reports this week are July New Home sales on Monday, the second estimate of Q2 GDP on Thursday, and Case-Shiller house prices on Tuesday.

For manufacturing, the August Dallas, Richmond and Kansas City Fed surveys will be released this week.

----- Monday, August 25th -----
8:30 AM ET: Chicago Fed National Activity Index for July. This is a composite index of other data.

10:00 AM: New Home Sales for July from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the June sales rate.

The consensus is for an increase in sales to 425 thousand Seasonally Adjusted Annual Rate (SAAR) in July from 406 thousand in June.

10:30 AM: Dallas Fed Manufacturing Survey for August.

----- Tuesday, August 26th -----
8:30 AM: Durable Goods Orders for July from the Census Bureau. The consensus is for a 5.1% increase in durable goods orders.

9:00 AM: S&P/Case-Shiller House Price Index for June. Although this is the June report, it is really a 3 month average of April, May and June..

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through the May 2014 report (the Composite 20 was started in January 2000).

The consensus is for a 8.4% year-over-year increase in the Composite 20 index (NSA) for June. The Zillow forecast is for the Composite 20 to increase 8.1% year-over-year, and for prices to be unchanged month-to-month seasonally adjusted.

9:00 AM: FHFA House Price Index for June. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.3% increase.

10:00 AM: Conference Board's consumer confidence index for August. The consensus is for the index to decrease to 89.7 from 90.9.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August.

----- Wednesday, August 27th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, August 28th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 300 thousand from 298 thousand.

8:30 AM: Gross Domestic Product, 2nd quarter 2014 (second estimate). The consensus is that real GDP increased 4.0% annualized in Q2, unchanged from 4.0% in the advance estimate.

10:00 AM ET: Pending Home Sales Index for July. The consensus is for a 0.5% increase in the index.

11:00 AM: the Kansas City Fed manufacturing survey for August. This is the last of the Fed regional surveys for August.

----- Friday, August 29th -----
8:30 AM: Personal Income and Outlays for July. The consensus is for a 0.3% increase in personal income, and for a 0.1% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for August. The consensus is for an increase to 56.0, up from 52.6 in July.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for August). The consensus is for a reading of 80.3, up from the preliminary reading of 79.2, and down from the July reading of 82.5.