by Calculated Risk on 3/11/2015 04:41:00 PM

From the Federal Reserve: Comprehensive Capital Analysis and Review (CCAR)

The Federal Reserve on Wednesday announced it has not objected to the capital plans of 28 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). One institution received a conditional non-objection based on qualitative grounds, and the Federal Reserve objected to two firms' plans on qualitative grounds.
...
The Federal Reserve did not object to the capital plan of Bank of America Corporation, but is requiring the institution to submit a new capital plan by the end of the third quarter to address certain weaknesses in its capital planning processes. The Federal Reserve objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA on qualitative concerns.

From the WSJ: Federal Reserve Rejects 2 Banks’ Capital Plans in Annual ‘Stress Tests’

Twenty-eight of 31 large banks received Federal Reserve approval to return capital to investors on Wednesday but only after some of the biggest Wall Street firms came perilously close to failing the regulator’s annual “stress test.”

A 29th firm, Bank of America Corp. , received conditional approval of its capital plan and can move forward with boosting dividends or stock buybacks, but must resubmit its proposal to address “certain weaknesses” including its ability to measure losses and revenue, the Fed said. ... The Fed rejected the capital plans of two large banks, the U.S. units of Deutsche Bank AG and Banco Santander SA, for “qualitative” deficiencies including ability to model losses and identify risks. ...

Deutsche Bank, which took the stress test for the first time this year, was rejected for “numerous and significant deficiencies” across several areas of the capital planning process including the bank’s ability to identify risks, the Fed said.

by Calculated Risk on 3/11/2015 12:14:00 PM

From Reuters: U.S. services data suggest upward revision to Q4 growth

The Commerce Department's quarterly services survey ... showed consumption ... increased at a faster clip than the government had assumed in its second estimate of [GDP].

Economists said the data suggested fourth-quarter consumer spending could be raised by at least six-tenths of a percentage point to a 4.9 percent annual rate ... the QSS suggested fourth-quarter GDP growth could be raised to a 2.5 percent pace from the 2.2 percent rate reported last month ...

Here is the Q4 Quarterly Services Press Release

by Calculated Risk on 3/11/2015 10:43:00 AM

Each month I track sales and inventory data for several previous bubble areas (like Las Vegas, Phoenix, Sacramento). These areas are interesting because they had huge prices bubbles, and large price declines - followed by significant investor buying (that is now declining).  I also track these areas because the data is available on line.

Housing economist Tom Lawler is tracking a number of other areas, and has been kind enough to share that data with us (focused on distressed sales and cash buying).

If you are looking for data on your own area, you could try the local MLS, or look at the Zillow Research data. In addition to prices, Zillow tracks inventory and sales by metro area and zip code.  Scroll down to "Other Metrics" and look at "Home Sales" and "For-sale Inventory" for the last five years.

Caution: Zillow has been expanding their coverage, so use caution when creating a data series based on aggregate data.

by Calculated Risk on 3/11/2015 07:01:00 AM

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

Mortgage applications decreased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 6, 2015. ...

The Refinance Index decreased 3 percent from the previous week to the lowest level since January 2015. The seasonally adjusted Purchase Index increased 2 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 4.01 percent, the highest level since the week ending January 2, 2015, from 3.96 percent, with points increasing to 0.39 from 0.30 (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.

2015 will probably see a little more refinance activity than in 2014, but not a large refinance boom.

The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 2% higher than a year ago.

by Calculated Risk on 3/10/2015 07:39:00 PM

From Jon Hilsenrath at the WSJ: Fed Leans Toward Removing ‘Patient’ Promise on Rates

The Federal Reserve is strongly considering removing a barrier to raising short-term interest rates, by dropping its promise to be “patient” before acting.
...
Dropping the patience promise next week doesn’t mean officials are yet set on a rate increase in June. Ms. Yellen has signaled that the inflation backdrop is the key wildcard in the months ahead. Though the job market is improving as the Fed hoped, inflation isn’t moving back toward its 2% objective.

It seems very likely that "patient" will be removed from the statement. This will mean a June rate hike is possible, but not guaranteed.

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

• At 10:00 AM, the Q4 Quarterly Services Report from the Census Bureau.

• At 4:30 PM, the Federal Reserve will release the Comprehensive Capital Analysis and Review Results (Stress Test)

by Calculated Risk on 3/10/2015 04:45:00 PM

For the third consecutive month, inventory was down year-over-year in Phoenix.  This is a significant change.

This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.  These key markets hopefully show us changes in trends for sales and inventory.

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

1) Overall sales in January were up 9.0% year-over-year.  Another change.

2) Cash Sales (frequently investors) were down about 8% to 29.9% of total sales. Non-cash sales were up 18.3% year-over-year.

3) Active inventory is now down 8.4% year-over-year.   Note: House prices bottomed in Phoenix in 2011 at about the current level of inventory.

More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow.

Now, with falling inventory, prices might increase a little faster in 2015 (something to watch if inventory continues to decline).

February Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash Sales	Percent Cash	Active Inventory	YoY Change Inventory
Feb-2008	3,445	---	650	18.9%	57,3051	---
Feb-2009	5,477	59.0%	2,188	39.9%	52,013	-9.2%
Feb-2010	6,595	20.4%	2,997	45.4%	42,388	-18.5%
Feb-2011	7,171	8.7%	3,776	52.7%	40,666	-4.1%
Feb-2012	7,249	1.1%	3,616	49.9%	23,736	-41.6%
Feb-2013	6,618	-8.7%	3,053	46.1%	21,718	-8.5%
Feb-2014	5,476	-17.3%	1,939	35.4%	29,899	37.7%
Feb-2015	5,970	9.0%	1,784	29.9%	27,382	-8.4%
1 February 2008 probably included pending listings

by Calculated Risk on 3/10/2015 01:38:00 PM

In addition to Case-Shiller, and CoreLogic, I'm also watching the FNC, Zillow and several other house price indexes.

FNC released their January 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values decreased 0.3% from December to January (Composite 100 index, not seasonally adjusted). 

The 10 city MSA, the 20-MSA and 30-MSA RPIs all decreased . These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.

The year-over-year (YoY) change was lower in January than in December, with the 100-MSA composite up 4.3% compared to January 2014  (this index was up 5.0% year-over-year in December).   In general, for FNC, the YoY increase has been slowing since peaking in March at 9.0%.

The index is still down 19.8% from the peak in 2006.

Click on graph for larger image.

This graph shows the year-over-year change based on the FNC index (four composites) through January 2015. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Most of the price indexes have been showing a slowdown in price increases.

Note: The January Case-Shiller index will be released on Tuesday, Tuesday, March 31.

by Calculated Risk on 3/10/2015 11:24:00 AM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported GLVAR report points to steady housing market, prices still up about 8 percent for year

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in February was 2,452, up from 2,239 in January, but down from 2,518 one year ago. At this sales pace, Lynam said Southern Nevada continues to have roughly a four-month supply of available homes, while a six-month supply is considered to be a balanced market.
...
GLVAR is tracking a two-year trend of fewer distressed sales and more traditional sales, where lenders are not controlling the transaction. In February, 9.3 percent of all local sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 9.7 percent in January and from 14 percent one year ago. Another 9.7 percent of February sales were bank-owned, up from 9.4 percent in January, but down from 12 percent last year.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in February was 13,188, up 4.1 percent from 12,666 in January, but down 3.2 percent from one year ago. GLVAR tracked a total of 3,558 condos, high-rise condos and townhomes listed for sale on its MLS in February, up 3.8 percent from 3,429 in January, but down 0.1 percent from February 2014.

By the end of February, GLVAR reported 7,313 single-family homes listed without any sort of offer. That’s down 0.9 percent from January, but up 15.8 percent from one year ago. For condos and townhomes, the 2,425 properties listed without offers in February represented a 4.2 percent increase from January and a 9.6 percent increase from one year ago.
emphasis added

There are several key trends that we've been following:

1) Overall sales were down 2.6% year-over-year.

2) However conventional (equity, not distressed) sales were up 6.6% year-over-year.  In February 2014, only 74.0% of all sales were conventional equity.  In February 2015, 81.0% were standard equity sales.   Note: In February 2013 (two years ago), only 51.9% were equity!  A significant change.

3) The percent of cash sales has declined year-over-year from 46.8% in February 2014 to 37.4% in February 2015. (investor buying appears to be declining).

4) Non-contingent inventory is up 15.8% year-over-year. The table below shows the year-over-year change for non-contingent inventory in Las Vegas. Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It appears the inventory build is slowing  - but still ongoing.

Las Vegas: Year-over-year Change in Non-contingent Inventory
Month	YoY
Jan-13	-58.3%
Feb-13	-53.4%
Mar-13	-42.1%
Apr-13	-24.1%
May-13	-13.2%
Jun-13	3.7%
Jul-13	9.0%
Aug-13	41.1%
Sep-13	60.5%
Oct-13	73.4%
Nov-13	77.4%
Dec-13	78.6%
Jan-14	96.2%
Feb-14	107.3%
Mar-14	127.9%
Apr-14	103.1%
May-14	100.6%
Jun-14	86.2%
Jul-14	55.2%
Aug-14	38.8%
Sep-14	29.5%
Oct-14	25.6%
Nov-14	20.0%
Dec-14	18.0%
Jan-15	12.9%
Feb-15	15.8%

by Calculated Risk on 3/10/2015 10:10:00 AM

From the BLS: Job Openings and Labor Turnover Summary

There were 5.0 million job openings on the last business day of January, little changed from 4.9 million in December, 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 2.8 million quits in January, little changed from December.

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 January, the most recent employment report was for February.

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 January to 4.998 million from 4.877 million in December.

The number of job openings (yellow) are up 28% year-over-year compared to January 2014.

Quits are up 17% 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 at 5 million, and that quits are increasing significantly year-over-year.

by Calculated Risk on 3/10/2015 09:04:00 AM

From the National Federation of Independent Business (NFIB): Small Business Optimism Rises Despite Falling Sales Trends

The NFIB Small Business Optimism Survey for February rose 0.1 points to 98.0 a solid result despite some unfavorable conditions.

“In spite of slow economic activity and awful weather in a lot of the country, small business owners are finding reasons to hire and spend which is great news. Of the ten components, owners reporting hard-to-fill job openings was the largest gain increasing three points to a 29 percent which is a nine year high.

“Large firms have been powering the economic recovery since the Great Recession, but that may be shifting to the small business sector. February’s data suggests there are fundamental domestic economic currents leading business owners to add workers and these should bubble up in the official statistics and support stronger growth in domestic output.” ...
...
Fourteen percent cited the availability of qualified labor as their top business problem, the highest since September 2007. The job openings figure is one of the highest in 40 years and this suggests that labor markets are tightening and that there will be more pressure on compensation in the coming months.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 98.0 in February from 97.9 in January.