by Calculated Risk on 4/16/2015 08:59:00 PM

Friday:
• At 8:30 AM ET, the Consumer Price Index for March from the BLS. The consensus is for a 0.3% increase in prices, and a 0.2% increase in core CPI.

• At 10:00 AM, University of Michigan's Consumer sentiment index (preliminary for April). The consensus is for a reading of 93.7, up from 93.0 in March.

Economist Tom Lawler sent me the updated 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	3.2%	5.1%	4.2%	6.9%	7.4%	11.9%	27.5%	33.1%
Sacramento	5.4%	8.2%	6.9%	7.9%	12.3%	16.1%	19.3%	22.5%
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%
Orlando	4.2%	7.9%	26.9%	23.7%	31.1%	31.6%	38.2%	44.6%
Chicago (city)					21.9%	28.8%
Hampton Roads					22.7%	24.5%
Northeast Florida					31.0%	39.1%
Richmond VA			11.9%	18.1%			18.0%	21.1%
Tucson							32.0%	33.5%
Toledo							32.7%	40.7%
Des Moines							16.3%	20.8%
Omaha							16.1%	20.3%
Wichita							23.2%	32.0%
Pensacola							33.4%	35.7%
Memphis*			15.5%	18.5%
Springfield IL**			11.8%	14.4%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 4/16/2015 05:50:00 PM

From the National Multi Housing Council (NMHC): Apartment Markets Expand in April NMHC Quarterly Survey

All four indexes landed above the breakeven level of 50 in the April National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions.

“The song remains the same—the apartment markets are not only strong but getting stronger,” said Mark Obrinsky, NMHC’s SVP of Research and Chief Economist. “Despite occasional predictions to the contrary, markets keep getting tighter. As new construction increases, so do absorptions, indicating the demand for apartments is not yet close to being sated.”

The Market Tightness Index increased by 7 points from last quarter (and by 2 points from a year earlier) to 58. Thirty-one percent of respondents reported tighter conditions than three months ago. This now marks the fifth consecutive quarter where the index indicates overall improving conditions.
emphasis added

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. This indicates market conditions were tighter over the last quarter.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

by Calculated Risk on 4/16/2015 02:54:00 PM

March was another disappointing month for housing start.

In February, it was easy to blame the weather, especially in the Northeast where starts plunged and then bounced back in March. However, in March, the weakness was more in the South and West (maybe related to oil prices in Texas and the drought in California).

Note: It is also possible that the West Coast port slowdown impacted starts a little in March.  The labor situation was resolved in February, and any impact should disappear quickly.

Click on graph for larger image.

This graph shows the month to month comparison between 2014 (blue) and 2015 (red).

Even with two weak months, starts are still running about 5% ahead of 2014 through March.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).

Note that the blue line (multi-family starts) might be starting to move more sideways.

I think most of the growth in multi-family starts is probably behind us - although I expect solid multi-family starts for a few more years (based on demographics).

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

by Calculated Risk on 4/16/2015 11:23:00 AM

Earlier from the Philly Fed: April Manufacturing Survey

Manufacturing activity in the region increased modestly in April, according to firms responding to this month’s Manufacturing Business Outlook Survey. Indicators for general activity and new orders were positive but remained at low readings. Firms reported overall declines in shipments this month, but employment and work hours increased at the reporting firms. Firms reported continued price reductions in April, with indicators for prices of inputs and the firms’ own products remaining negative. The survey’s indicators of future activity suggest a continuation of modest growth in the manufacturing sector over the next six months.
...
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 5.0 in March to 7.5 this month. ...

Firms’ responses suggest some improvement in labor market conditions compared with March. The current employment index increased 8 points, to 11.5, its highest reading in five months.
emphasis added

This was above the consensus forecast of a reading of 5.0 for April.

Earlier this week, the NY Fed reported: April Empire State Manufacturing Survey Indicates Sluggish Conditions

The survey’s headline general business conditions index turned slightly negative for the first time since December, falling 8 points to -1.2 in a sign that the growth in manufacturing had paused. The new orders index—a bellwether of demand for manufactured goods—was also negative, pointing to a modest decline in orders for a second consecutive month. Employment growth slowed, too.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The yellow line is an average of the NY Fed (Empire State) and Philly Fed surveys through April. The ISM and total Fed surveys are through March.

The average of the Empire State and Philly Fed surveys declined in April, and this suggests a slightly weaker ISM report for April.

by Calculated Risk on 4/16/2015 09:30:00 AM

The DOL reported:

In the week ending April 11, the advance figure for seasonally adjusted initial claims was 294,000, an increase of 12,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 281,000 to 282,000. The 4-week moving average was 282,750, an increase of 250 from the previous week's revised average. The previous week's average was revised up by 250 from 282,250 to 282,500.

There were no special factors impacting this week's initial claims.

The previous week was revised up by 1,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 282,750.

This was above the consensus forecast of 280,000, and the low level of the 4-week average suggests few layoffs.

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.