by Calculated Risk on 1/14/2015 04:13:00 PM

From DataQuick: Southern California Home Sales and Median Sale Price Rise

The number of homes sold increased sharply from the month of November and rose modestly from the same time a year earlier, marking one of just two months in 2014 to post a year-over-year gain in sales. ... A total of 19,205 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in December 2014. That was up month over month 22.8 percent from 15,643 sales in November 2014, and up year over year 4.3 percent from 18,415 sales in December 2013, according to CoreLogic DataQuick data.

"One month doesn’t make a trend, but December’s uptick in home sales might indicate renewed interest in housing thanks to lower mortgage rates and job growth in recent months,” said Andrew LePage, data analyst for CoreLogic DataQuick. “The gain came despite a continued decline in the share of homes sold to investors and cash buyers. If demand continues to build we'll need more supply to keep up with it. One of the big questions hanging over the housing market is whether higher demand and home values will lead to a lot more people listing their homes for sale, as well as more new-home construction, which remains well below average.”
...
Foreclosure resales represented 5.0 percent of the resale market in December. That was down from a revised 5.5 percent in November 2014 and down from 5.8 percent in December 2013. 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. Foreclosure resales are purchased homes that have been previously foreclosed upon in the prior 12 months.

Short sales made up an estimated 6.2 percent of resales in December, down from a revised 6.4 in November 2014 and down from 10.2 percent in December 2013. Short sales are transactions in which the sale price fell short of what was owed on the property.
emphasis added

Based on early reports from different areas, it looks like home sales picked up in December.

by Calculated Risk on 1/14/2015 02:05:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of San Francisco and based on information collected on or before January 5, 2015. "

Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand during the reporting period of mid-November through late December, with most Districts reporting a "modest" or "moderate" pace of growth. In contrast, the Kansas City District reported only slight growth in December. However, most of their contacts, along with those of several other Districts, expect somewhat faster growth over the coming months. ...

And on real estate:

Single-family residential real estate sales and construction were largely flat on balance across the Districts. Sales declined somewhat on a year-over-year basis in the Boston, Cleveland, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas Districts. In the Philadelphia District, year-over-year existing home sales finished lower in November, but pending December sales in some areas were up notably over December 2013. However, builders of new homes in the Philadelphia District reported weak traffic for prospective buyers and fewer contract signings. San Francisco reported that overall home sales picked up in December. Richmond reported a modest increase in housing market activity. Home prices increased modestly, on balance, in the Boston, Philadelphia, Cleveland, Atlanta, Chicago, and Dallas Districts. The Cleveland, Atlanta, Chicago, Minneapolis, and Kansas City Districts all reported slightly slower single-family residential construction activity. However, the pace of single-family home construction increased in some areas of the San Francisco District.

Commercial real estate activity expanded in most Districts. The Philadelphia District reported a modest pace of growth for commercial real estate leasing activity, and Boston reported improving conditions in commercial real estate markets overall. Commercial real estate activity in the Chicago and Kansas City Districts expanded at a moderate pace. The Dallas District noted that office leasing activity remained strong, but one contact noted a slight pullback in demand from oil and gas firms. Demand for apartments in the Dallas District also remained strong. New York City's co-op and condo market showed continued strength in the final quarter of 2014; apartment sales volume was down from the exceptionally high levels of the prior year but still fairly brisk, while selling prices were up moderately. Commercial construction activity increased in most Districts. Activity grew modestly in the Philadelphia District and a bit faster in the Atlanta and Chicago Districts. Atlanta cited the multifamily residential segment as a source of growth, while Chicago credited demand for industrial and office buildings. Commercial builders in the Cleveland District reported a moderate to robust increase for projects in the pipeline. Dallas reported that overall commercial construction was strong. San Francisco reported that multifamily residential construction was strong in many areas of that District and that retail, office, industrial, or infrastructure projects were widespread across that District.
emphasis added

Residential real estate was "flat", however commercial was picking up.

by Calculated Risk on 1/14/2015 01:14:00 PM

During the recession, I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales). For some time, not much changed. But over the last 2+ years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market and other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In December 2014, 12.8% of all resales were distressed sales. This was up from 11.5% last month, and down from 18.8% in December 2013.

The percentage of REOs was at 6.7%, and the percentage of short sales was 6.1%.

Here are the statistics for November.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional (equity) sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Active Listing Inventory for single family homes increased 32.2% year-over-year (YoY) in November.  In general the YoY increases have been trending down after peaking at close to 100%.

Cash buyers accounted for 15.4% of all sales, down from 19.5% in December 2013 (frequently investors).  This has been trending down, and it appears investors are becoming much less of a factor in Sacramento.

Total sales were up 1.5% from December 2013, and conventional equity sales were up 8.9% compared to the same month last year.

Summary: Distressed sales down, conventional sales up and less investor buying.  This is what we'd expect to see in a healing market.  As I've noted before, we are seeing a similar pattern in other distressed areas.

by Calculated Risk on 1/14/2015 12:17:00 PM

From CoreLogic: Press Release and National Foreclosure Report

According to CoreLogic, for the month of November 2014, there were 41,000 completed foreclosures nationally, down from 46,000 in November 2013, a year-over-year decrease of 9.6 percent and down 64 percent from the peak of completed foreclosures in September 2010. ...

As of November 2014, approximately 567,000 homes nationally were in some stage of foreclosure, known as the foreclosure inventory, compared to 880,000 in November 2013, a year-over-year decrease of 35.5 percent and representing 37 consecutive months of year-over-year declines. The foreclosure inventory as of November 2014 made up 1.5 percent of all homes with a mortgage, compared to 2.2 percent in November 2013.
...
“While there has been a large improvement in the reduction of foreclosure inventory, completed foreclosures remain high and serve as one of the obstacles to new single family construction. Until the flow of completed foreclosures declines to normal levels, new-home construction will not pickup because builders have little incentive to compete with foreclosure stock.” Sam Khater, deputy chief economist at CoreLogic

A couple of points: As Khater noted, foreclosures are still an obstacle to new single family construction. In the report, CoreLogic notes that the "completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006" (foreclosure won't decline to zero).

by Calculated Risk on 1/14/2015 08:30:00 AM

On a monthly basis, retail sales decreased 0.9% from November to December (seasonally adjusted), and sales were up 3.2% from December 2013. Sales in November were revised down from an increase of +0.7% to +0.4%.

From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $442.9 billion, a decrease of 0.9 percent from the previous month, but up 3.2 percent above December 2013. ... The October to November 2014 percent change was revised from +0.7 percent to +0.4 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-gasoline decreased 0.3%.

Retail sales ex-autos decreased 1.0%. 

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales ex-gasoline increased by 5.5% on a YoY basis (3.2% for all retail sales).

The decrease in December was well below consensus expectations of a 0.1% decrease.  Both October and November were revised down.

This was a weak report even after removing the impact of lower gasoline prices.

by Calculated Risk on 1/14/2015 07:01:00 AM

From the MBA: Mortgage Applications Increase by 49 Percent, Largest Weekly Gain Since November 2008

Mortgage applications increased 49.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 9, 2015....

The Refinance Index increased 66 percent from the previous week to the highest level since July 2013. The seasonally adjusted Purchase Index increased 24 percent from one week earlier to the highest level since September 2013.
...
“The US economy and job market continued to show signs of strength, but weakness abroad and tumbling oil prices have led to further declines in longer-term interest rates,” said Mike Fratantoni, MBA’s Chief Economist.

“Mortgage rates reached their lowest level since May of 2013, and refinance application volume soared, more than doubling on an unadjusted basis, and up 66 percent after adjusting for the fact that the previous week included the New Year’s holiday. ... In addition to the drop in rates, and news of improvement in the job market, there was additional positive news for prospective homebuyers with evidence that credit availability has increased somewhat, and with FHA’s announcement of a decrease in their mortgage insurance premiums. Purchase application volume increased by almost 24 percent, with stronger growth for conventional applications than for government loans. Purchase application volume was at its highest level since September 2013, increased on a year over year basis in the aggregate, and notably increased across most loan size categories, particularly for the conforming, middle of the market loan segments that had been weak for much of the past year. FHA purchase application volume was up by 17 percent for the week on a seasonally adjusted basis.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89 percent, the lowest level since May 2013, from 4.01 percent, with points decreasing to 0.23 from 0.28 (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.

2014 was the lowest year for refinance activity since year 2000.

Even with the recent sharp decline in rates, mortgage rates would have to decline further for there to be a really large refinance boom.  But it looks like 2015 will see more activity than in 2014, especially from FHA loans after January 26th.

The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is up 2% from a year ago.

Note: Seasonal adjustments are difficult early in the year for all data, so this might be overstating the increase in activity.

by Calculated Risk on 1/13/2015 07:53:00 PM

The West Coast port labor discussions are ongoing ... and this could negatively impact the economy.

From the LA Times: Night shifts at L.A.-area ports to be cut, in latest move during talks

Employers at the ports of Los Angeles and Long Beach will no longer order dockworkers to unload ships at night, a move they contend will help relieve crushing congestion on the waterfront.

The labor cut, scheduled to begin Tuesday, is intended to put fewer new containers on docks that are near capacity, allowing night-shift workers to focus on clearing the cargo boxes already there, said Steve Getzug, a spokesman for the Pacific Maritime Assn., which represents shipping lines and terminal operators.
...
But the union representing West Coast dockworkers said the work reduction would increase port congestion and is intended to pressure union negotiators who have been attempting to reach a new labor agreement for eight months.
...
Last week, tensions between the sides appeared to ease when employers and the union asked for federal mediation to help reach a new contract for about 20,000 West Coast dockworkers.

Still a mess!

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

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

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for November. The consensus is for a 0.2% increase in inventories.

• 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 1/13/2015 02:34:00 PM

The Fed's Household Debt Service ratio through Q3 2014 was released two weeks ago: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations.

These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013.

The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income.

The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR.

This data has limited value in terms of absolute numbers, but is useful in looking at trends. Here is a discussion from the Fed:

The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only an approximation of the debt service ratio faced by households. Nonetheless, this approximation is useful to the extent that, by using the same method and data series over time, it generates a time series that captures the important changes in the household debt service burden.

Click on graph for larger image.

The graph shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio decreased in Q3, and is near the record low set in Q4 2012.  Note: The financial obligation ratio (FOR) is also near a record low  (not shown)

Also the DSR for mortgages (blue) are near the low for the last 30 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.

This data suggests household cash flow is in much better shape than a few years ago.

by Calculated Risk on 1/13/2015 12:32:00 PM

Quick post: I keep hearing how oil is now "cheap" with Brent futures at $46 per barrel. Maybe oil is "cheap" relative to the price of oil over the last few years, but longer term, oil prices have outpaced inflation for some time.

Here is a table comparing the change in headline CPI, Brent oil prices, Food, and Case-Shiller house prices since 1990 and 2000.

CPI is up 40.0% since 2000, but Brent is up 80.4%.

Since 1990, CPI is up 85.9% and Brent is up 116.5%.

Change Since	2000	1990
CPI	40.0%	85.9%
Brent Oil	80.4%	116.5%
Food	47.7%	89.6%
Case-Shiller House Prices	65.7%	116.7%

I also hear how house prices are now "expensive". Since 1990, oil and house prices have increased the same, and oil is up more than house prices since 2000.

 I'd rather own a house than the equivalent number of barrels of oil sitting in storage - a house would provide either rental income or shelter (historically there is a real return to house prices).

So, compared to 1990 and 2000 prices, oil isn't "cheap".

by Calculated Risk on 1/13/2015 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 5.0 million job openings on the last business day of November, little changed from 4.8 million in October, the U.S. Bureau of Labor Statistics reported today. ...
...
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.6 million quits in November, little changed from October.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for November, the most recent employment report was for December.

Click on graph for larger image.


Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in November to 4.972 million from 4.830 million in October.

The number of job openings (yellow) are up 21% year-over-year compared to November 2013.

Quits are up 7% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

This is another very positive report.  It is a good sign that job openings are almost to 5 million, and that quits are increasing year-over-year.