by Calculated Risk on 4/16/2015 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 926,000. This is 2.0 percent above the revised February estimate of 908,000, but is 2.5 percent below the March 2014 rate of 950,000.

Single-family housing starts in March were at a rate of 618,000; this is 4.4 percent above the revised February figure of 592,000. The March rate for units in buildings with five units or more was 287,000.
emphasis added

Building Permits:
Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,039,000. This is 5.7 percent below the revised February rate of 1,102,000, but is 2.9 percent above the March 2014 estimate of 1,010,000.

Single-family authorizations in March were at a rate of 636,000; this is 2.1 percent above the revised February figure of 623,000. Authorizations of units in buildings with five units or more were at a rate of 378,000 in March.

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in March.  Multi-family starts are down 2.5% year-over-year.

Single-family starts (blue) increased in March and are also down about 2.5% year-over-year.

The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

This was well below expectations of 1.040 million starts in March.  Overall this was another weak report, although permits were decent.  I'll have more later ...

by Calculated Risk on 4/15/2015 08:08:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Having Trouble Moving Lower

Mortgage rates were unchanged to slightly higher today, though that depends largely on the individual strategies of the lender in question. Some lenders recalled rate sheets yesterday and raised rates due to afternoon market weakness. Those lenders stood a better chance of being unchanged today. Lenders who didn't reprice yesterday never saw the underlying market for mortgage-backed-securities make it back to the same levels from yesterday morning. As such, they would be slightly weaker today (higher in rate or fees). Either way, we're talking about fine-tuning adjustments rather than big-picture shifts. Conventional 30yr fixed rate quotes of 3.625% are still most prevalent for top tier scenarios, followed closely by 3.75%.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 280 thousand from 281 thousand.

• Also at 8:30 AM, Housing Starts for March.  The consensus is for total housing starts to increase to 1.040 million (SAAR) in March.

• At 10:00 AM, the Philly Fed manufacturing survey for March. The consensus is for a reading of 5.0, unchanged from 5.0 last month (above zero indicates expansion).

by Calculated Risk on 4/15/2015 02:49:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Cleveland based on information collected on or before April 3, 2015."

Reports from the twelve Federal Reserve Districts indicate that the economy continued to expand across most regions from mid-February through the end of March. Activity in the Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts grew at a moderate pace, while New York, Philadelphia, and St. Louis cited modest growth. Boston reported that business activity continues to expand, while Cleveland cited a slight pace of growth. Atlanta and Kansas City described economic conditions as steady. ...

Demand for manufactured products was mixed during the current reporting period. Weakening activity was attributed in part to the strong dollar, falling oil prices, and the harsh winter weather

And on real estate:

Residential real estate activity improved in the Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts, while remaining steady in all others, except New York, which reported softening conditions. Philadelphia, Cleveland, Atlanta, and Dallas reported a slowdown in construction activity due in part to harsh weather conditions. Low-to-declining levels of inventory were cited by contacts in Boston, Philadelphia, Cleveland, Atlanta, Chicago, and San Francisco. The Chicago District reported that inventories were near historic lows, particularly for lower-priced homes. Most Districts reported a tight supply of residential real estate in most price points of the market. The Philadelphia and Cleveland Districts reported that mid- to high-priced homes were selling better, while Chicago, Kansas City, and Dallas reported that low- to mid-ranged homes were outpacing other categories in sales. Cleveland and Philadelphia reported an absence of first-time homebuyers. Contacts across the system uniformly reported that they were optimistic and many expect a greater than normal upswing in home sales with the coming of spring. The multifamily sector remains strong, with flat to declining vacancy rates reported in multiple Districts. Boston, Cleveland, and San Francisco reported a continued shortage of skilled labor, which was cited as a factor driving up wages.

Commercial real estate activity remained stable to expanding across many Districts. Boston, New York, Philadelphia, Chicago, Minneapolis, Dallas, and San Francisco all saw strong gains in industrial and office building construction. Demand for commercial properties in the city of Boston continues to be fuelled by foreign institutional investors, many of which are increasing their allocations to real estate. Contacts in Boston, Richmond, Atlanta, Minneapolis, and Dallas noted stable to strong multifamily construction. Chicago reported that leasing of industrial buildings, office and retail space all increased. Cleveland mentioned that successful developers have easier access to credit compared to prior years, and Boston reported a slight uptick in speculative activity for commercial construction.
emphasis added

by Calculated Risk on 4/15/2015 12:58:00 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 March, 12.4% of all resales were distressed sales. This was down from 14.8% last month, and down from 16.3% in March 2014. Since distressed sales happen year round, but conventional sales decline in December and January, the percent of distressed sales bumps up in the winter (seasonal).

The percentage of REOs was at 6.8%, and the percentage of short sales was 5.7%.

Here are the statistics for February.

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 25.1% year-over-year (YoY) in March.  In general the YoY increases have been trending down after peaking at close to 100%, however the YoY increase was larger in March than in February.

Cash buyers accounted for 16.5% of all sales (frequently investors).

Total sales were up 10.6% from March 2014, and conventional equity sales were up 15.8% compared to the same month last year.

Summary: This data suggests a healing market with fewer distressed sales, more equity sales, and less investor buying.

by Calculated Risk on 4/15/2015 10:05:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 56 in April, up from 52 in March. Any number above 50 indicates that more builders view sales conditions as good than poor.

From Reuters: Builder Confidence Rises Four Points in April

Builder confidence in the market for newly built, single-family homes in April rose four points to a level of 56 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.
...
“The HMI component index measuring future sales expectations rose five points in April to its highest level of the year,” said NAHB Chief Economist David Crowe. “This uptick shows builders are feeling optimistic that the housing market will continue to strengthen throughout 2015.”
...
All three HMI components registered gains in April. The component charting sales expectations in the next six months jumped five points to 64, the index measuring buyer traffic increased four points to 41, and the component gauging current sales conditions rose three points to 61.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was above the consensus forecast of 55.

by Calculated Risk on 4/15/2015 09:24:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production decreased 0.6 percent in March after increasing 0.1 percent in February. For the first quarter of 2015 as a whole, industrial production declined at an annual rate of 1.0 percent, the first quarterly decrease since the second quarter of 2009. The decline last quarter resulted from a drop in oil and gas well drilling and servicing of more than 60 percent at an annual rate and from a decrease in manufacturing production of 1.2 percent. In March, manufacturing output moved up 0.1 percent for its first monthly gain since November; however, factory output in January is now estimated to have fallen 0.6 percent, about twice the size of the previously reported decline. The index for mining decreased 0.7 percent in March. The output of utilities fell 5.9 percent to largely reverse a similarly sized increase in February, which was related to unseasonably cold temperatures. At 105.2 percent of its 2007 average, total industrial production in March was 2.0 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased 0.6 percentage point in March to 78.4 percent, a rate that is 1.7 percentage points below its long-run (1972–2014) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.1 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.4% is 1.7% below the 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 March to 105.2. This is 25.6% above the recession low, and 4.4% above the pre-recession peak.

This was below expectations, although much of the decline was due to the "drop in oil and gas well drilling and servicing".

by Calculated Risk on 4/15/2015 07:01:00 AM

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

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 10, 2015. ...

The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. ... The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 7 percent higher than the same week one year ago.
...
“Purchase mortgage application volume last week increased to its highest level since July 2013, spurred on by still low mortgage rates and strengthening housing markets,” said Mike Fratantoni, MBA’s Chief Economist. “Purchase volume has increased for three straight weeks now on a seasonally adjusted basis.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.87 percent from 3.86 percent, with points increasing to 0.38 from 0.27 (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 7% higher than a year ago.

by Calculated Risk on 4/14/2015 07:17:00 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, NY Fed Empire State Manufacturing Survey for April. The consensus is for a reading of 7.0, up from 6.9 last month (above zero is expansion).

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for March. The consensus is for a 0.3% decrease in Industrial Production, and for Capacity Utilization to decrease to 78.7%.

• At 10:00 AM, the April NAHB homebuilder survey. The consensus is for a reading of 55, up from 53 last month. Any number above 50 indicates that more builders view sales conditions as good than poor.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

Economist Tom Lawler sent me the preliminary table below of short sales, foreclosures and cash buyers for a few selected cities in March.

On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales (Mid-Atlantic is up year-over-year because of an increase foreclosure as lenders work through the backlog).

Short sales are down in these areas.

The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Mar-15	Mar-14	Mar-15	Mar-14	Mar-15	Mar-14	Mar-15	Mar-14
Las Vegas	8.3%	12.9%	9.3%	11.7%	17.6%	24.6%	32.4%	43.1%
Reno**	5.0%	14.0%	8.0%	7.0%	13.0%	21.0%
Phoenix							27.5%	33.1%
Minneapolis	2.9%	4.9%	12.2%	21.9%	15.1%	26.8%
Mid-Atlantic	4.7%	7.7%	14.0%	10.9%	18.8%	18.5%	18.2%	19.9%
Tucson							32.0%	33.5%
Chicago (city)					21.9%	28.8%
Northeast Florida					31.0%	39.1%
Hampton Roads					22.7%	24.5%
Toledo							32.7%	40.7%
Des Moines							16.3%	20.8%
Toledo							32.7%	40.7%
Georgia***							23.2%	33.8%
Tucson							32.0%	33.5%
Richmond VA MSA			11.9%	18.1%			18.0%	21.1%
Memphis*			15.0%	17.6%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 4/14/2015 03:58:00 PM

From housing economist Tom Lawler:

Based on state and local realtor/MLS reports I’ve seen from across the country, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 5.18 million in March, up 6.1 % from February’s pace and up 10.2% from last March’s seasonally-adjusted pace.

On the inventory front, I project that the NAR’s measure of the inventory of existing homes for sale at the end of March will be 1.96 million, up 3.7% from February and unchanged from a year ago. Finally, I estimate that the NAR’s estimate of the median existing SF home sales price in March will be about 8% higher than a year earlier.

The NAR is scheduled to release its March existing home sales report on April 22nd. I will send out an updated projection near the middle of next week.

by Calculated Risk on 4/14/2015 03:34:00 PM

From CoreLogic: Press Release and National Foreclosure Report

CoreLogic® ... today released its February 2015 National Foreclosure Report which shows that the foreclosure inventory declined by 27.3 percent and completed foreclosures declined by 15.7 percent from February 2014. According to CoreLogic data, there were 39,000 completed foreclosures nationwide in February 2015, down from 46,000 in February 2014 and representing a decrease of 67 percent from the peak of completed foreclosures in September 2010. ...

CoreLogic also reports the number of mortgages in serious delinquency declined by 19.3 percent from February 2014 to February 2015 with 1.5 million mortgages, or 4 percent, in serious delinquency (defined as 90 days or more past due, including those loans in foreclosure or REO). This is the lowest delinquency rate since June 2008. On a month-over-month basis, the number of seriously delinquent mortgages declined by 1.1 percent.

As of February 2015 the national foreclosure inventory included approximately 553,000 homes compared to 761,000 homes in February 2014. The foreclosure inventory as of February 2015 represented 1.4 percent of all homes with a mortgage, compared to 1.9 percent in February 2014.
...
“The number of homes in foreclosure proceedings fell by 27 percent from a year ago and stands at about one-third of what it was at the trough of the housing cycle,” said Frank Nothaft, chief economist at CoreLogic. “While the drop in the share of mortgages in foreclosure to 1.4 percent is a welcome sign of continued recovery in the housing market, the share remains more than double the 0.6 percent average foreclosure rate that we saw during 2000-2004.”

A couple of points: 1) Foreclosures are still an obstacle to new single family construction in some areas, and 2) Foreclosure inventory is still more than double the normal level.  But this is moving the correct direction (fewer foreclosures and fewer delinquencies).