by Calculated Risk on 5/05/2015 10:05:00 AM

The April ISM Non-manufacturing index was at 57.8%, up from 56.5% in March. The employment index increased in April to 56.7%, up slightly from 56.6% in March. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: April 2015 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in April for the 63rd consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 57.8 percent in April, 1.3 percentage points higher than the March reading of 56.5 percent. This represents continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased substantially to 61.6 percent, which is 4.1 percentage points higher than the March reading of 57.5 percent, reflecting growth for the 69th consecutive month at a faster rate. The New Orders Index registered 59.2 percent, 1.4 percentage points higher than the reading of 57.8 percent registered in March. The Employment Index increased 0.1 percentage point to 56.7 percent from the March reading of 56.6 percent and indicates growth for the 14th consecutive month. The Prices Index decreased 2.3 percentage points from the March reading of 52.4 percent to 50.1 percent, indicating prices increased in April for the second consecutive month, but at a slower rate. According to the NMI®, 14 non-manufacturing industries reported growth in April. The majority of respondents indicate that there has been an uptick in business activity due to the improved economic climate and prevailing stability in business conditions."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was above the consensus forecast of 57.8% and suggests faster expansion in April than in March.  Overall this was a solid report.

by Calculated Risk on 5/05/2015 08:43:00 AM

The Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $51.4 billion in March, up $15.5 billion from $35.9 billion in February, revised. March exports were $187.8 billion, $1.6 billion more than February exports. March imports were $239.2 billion, $17.1 billion more than February imports.

The trade deficit much larger than the consensus forecast of $42.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through March 2015.

Click on graph for larger image.

Imports and exports increased in March ( due a bounce back following the resolution of the West Coast port slowdown).

Exports are 13% above the pre-recession peak and down 3% compared to March 2014; imports are 3% above the pre-recession peak, and up 1% compared to March 2014. 

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $46.47 in March, down from $49.53 in February, and down from $93.91 in March 2014.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China increased to $31.2 billion in March, from $20.4 billion in March 2014. Much of this increase was due to unloading all the ships backed up at West Coast ports. The deficit with China is a large portion of the overall deficit.

Note: The deficit was larger than the BEA assumed for the advance GDP estimate, and this suggests GDP be revised down for Q1.

by Calculated Risk on 5/04/2015 08:06:00 PM

Note: West Coast port traffic increased sharply in March following the resolution of the labor issue in February. The workers were catching up with all the ships anchored in the harbor (now gone).

This graph is monthly for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).



Both imports and exports rebounded in March, but imports rebounded more - and were up 36% year-over-year - whereas exports were down 20% year-over-year.

This suggests more imports from Asia in March, and also suggests the trade deficit was significantly higher in March than in February.

Tuesday:
• At 8:30 AM ET, Trade Balance report for March from the Census Bureau. The consensus is for the U.S. trade deficit to be at $42.0 billion in March from $35.4 billion in February.

• At 10:00 AM, the ISM non-Manufacturing Index for April. The consensus is for index to decrease to 56.2 from 56.5 in March.

by Calculated Risk on 5/04/2015 05:15:00 PM

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand), however prices didn't fall as sharply either.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through April 2015 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are down about 11% from a year ago, and CME futures are down around 25% year-over-year.

by Calculated Risk on 5/04/2015 02:00:00 PM

From the Federal Reserve: The April 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices

Regarding loans to businesses, the April survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the first quarter of 2015. On net, banks reported having eased some price terms. With respect to commercial real estate (CRE) lending, on balance, survey respondents reported having eased standards on loans secured by nonfarm nonresidential properties. A few large banks also indicated that they had eased standards on construction and land development loans, and some large banks reported that they had eased standards on loans secured by multifamily properties. In addition, survey respondents reported having eased some CRE loan terms, on net, over the past year. On the demand side, banks indicated having experienced little change in demand for C&I loans in the first quarter; in contrast, respondents reported stronger demand for all three categories of CRE loans covered in the survey.

The survey contained a set of special questions about lending to firms in the oil and natural gas drilling or extraction sector. Banks expected delinquency and charge-off rates on such loans to deteriorate over 2015, but they indicated that their exposures were small, and that they were undertaking a number of actions to mitigate the risk of loan losses.

Regarding loans to households, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months on net. Most banks reported no change in standards and terms on consumer loans. On the demand side, moderate net fractions of banks reported stronger demand across most categories of home-purchase loans. Similarly, respondents experienced stronger demand for auto and credit card loans on balance.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

This graph shows the change in lending standards and for CRE (commercial real estate) loans.

Banks are loosening their standards for CRE loans, and for various categories of CRE (right half of graph).  Multifamily is seeing slightly tighter standards.

The second graph shows the change in demand for CRE loans.

Banks are seeing a pickup in demand for all categories of CRE.

This suggests that we will see a further increase in commercial real estate development.

Also the banks are easing credit a little for residential mortgages  (see graph on page 3).

by Calculated Risk on 5/04/2015 11:09:00 AM

This is a quarterly index that was released last week by the the National Association of Home Builders (NAHB). This index is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008 (during the housing bust), so the readings were initially very low

From the NAHB: Builder Confidence in the 55+ Housing Market Remains Positive in the First Quarter

Builder confidence in the single-family 55+ housing market remains in positive territory for the first quarter of 2015, according to the National Association of Home Builders’ (NAHB) 55+ Housing Market Index (HMI) released today. Compared to the previous quarter, the single-family index edged down slightly by one point to 58, which is the fourth consecutive quarter above 50.

Two of the three components of the 55+ single-family HMI posted increases from the previous quarter: present sales increased one point to 64 and expected sales for the next six months rose three points to 67, while traffic of prospective buyers dropped eight points to 40.
...
“The strong eight-point surge in the 55+ HMI survey’s index for multifamily rental production is a positive sign, and a contrast to the relatively low attitudes builders are currently expressing towards 55+ multifamily condos,” said NAHB Chief Economist David Crowe. “This suggests that there is a significant number of 55+ households who desire to live in dense multifamily settings but not to own, at least not right away.”
emphasis added

Click on graph for larger image.

This graph shows the NAHB 55+ Single Family HMI through Q1 2015.  And reading above 50 indicates that more builders view conditions as good than as  poor.  The index declined slightly in Q1, and increased in Q1 2015 to 58 from 47 in Q1 2014. 

There are two key drivers in addition to the improved economy: 1) there is a large cohort moving into the 55+ group, and 2) the homeownership rate typically increases for people in the 55 to 70 year old age group. So demographics should be favorable for the 55+ market.

by Calculated Risk on 5/04/2015 08:06:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for March today. According to BKFS, 4.70% of mortgages were delinquent in March, down from 5.36% in February. BKFS reported that 1.55% of mortgages were in the foreclosure process, down from 2.13% in March 2014.

This gives a total of 6.25% delinquent or in foreclosure. It breaks down as:

• 1,409,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 971,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 782,000 loans in foreclosure process.

For a total of ​​3,162,000 loans delinquent or in foreclosure in March. This is down from 3,840,000 in March 2014.

Typically there is a large decline in the March delinquency rate, but the decline this year was especially large.

Click on graph for larger image.

From Black Knight:

March’s 12.2 percent drop in delinquency rates was the largest monthly decline in 9 years

Delinquencies were down approximately 15 percent year-over-year

While seasonal decreases in March are typical (they’ve been seen in each of the past 10 years), this year’s drop was the largest since the 16.2 percent decline seen in March of 2006

Also from Black Knight on negative equity:

Black Knight analyzed the latest available data on the nation’s negative equity situation. As explained by Ben Graboske, senior vice president, Black Knight Data and Analytics, the trend remains one of overall improvement – though negative equity distribution varies considerably depending upon geographical location and home values within a given market.
...
“Our most recent data shows that just over 8 percent of borrowers are currently underwater on their mortgages, representing a nearly 30 percent reduction in the negative equity rate since last year. We also observed that 29 percent of underwater borrowers are seriously delinquent on their mortgages and that borrowers in negative equity positions make up 77 percent of all active foreclosures. In fact, one of every three borrowers in active foreclosure has a current loan-to-value ratio of 150 or more, meaning they owe 50 percent more than their homes are worth." [said Graboske.]

Just over 4 million borrowers (8.08 percent of active mortgage universe) are in a negative equity position as of January 2015

Last year this population stood at 5.7 million borrowers (11.4 percent), marking a reduction of nearly 29 percent, or 1.6 million fewer underwater borrowers in 2015

The current population of underwater borrowers is just a quarter of the negative equity population at its peak in early 2011 (when 30 percent of borrowers were in negative equity positions)

There is much more in the mortgage monitor.

by Calculated Risk on 5/03/2015 08:53:00 PM

Looking for wages ... from Greg Ip at the WSJ: In Labor vs. Capital, Workers Gain a Slight Edge

Hopefully there will be some small sign of a pickup in wages in the April employment report (to be released Friday).

Monday:
• Early, the Black Knight March Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

• At 10:00 AM ET, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for March. The consensus is a 2.1% increase in orders.

• At 2:00 PM: the April 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.

Weekend:
• Schedule for Week of May 3, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures and DOW futures are down slightly (fair value).

Oil prices were up over the last week with WTI futures at $59.09 per barrel and Brent at $66.48 per barrel.  A year ago, WTI was at $100, and Brent was at $109 - so, even with the recent increases, prices are down 40%+ year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are up to $2.63 per gallon (down just over $1.00 per gallon 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 5/03/2015 10:15:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 25 April

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 19-25 April 2015, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy increased 4.3 percent to 69.8 percent. Average daily rate increased 6.5 percent to finish the week at US$120.07. Revenue per available room for the week was up 11.0 percent to finish at US$83.86.
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotels are now in the Spring travel period and business travel is solid.

Click on graph for larger image.

The red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and solidly above last year.

Right now 2015 is even above 2000 (best year for hotels) - and 2015 will probably be the best year on record for hotels.  Note the strong gains in RevPAR too.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 5/02/2015 03:06:00 PM

A technical note from housing economist Tom Lawler:

Earlier this week the Census Bureau released its “Residential Vacancies and Homeownership” Report (commonly referred to as the Housing Vacancy Survey, or HVS) for the first quarter of 2015, and while the results were not as “eye-popping” as those in the previous quarter, they were nevertheless – if reflective of actual housing trends – stunning.

The HVS estimate of the US homeownership rate continued its recent rapid descent last quarter, and the 1.2 percentage point decline over the last four quarters is the largest four-quarter decline since the HVS began. The YOY declines in the HVS HOR’s were especially steep for householders 44 years old or younger.

On the housing inventory front, the HVS estimate of the number of occupied homes (or households) declined by 407,000 in the first quarter following the all-time record 1.337 million jump in the fourth quarter of last year. After adjusting for normal seasonal patterns, the HVS household estimate fell by about 60,000 last quarter after jumping by a record 1.17 million in the previous quarter.

Here are some summary stats from the latest report.

Selected Statisitcs, Census Housing Vacancy Survey
	Q1/2014	Q2/2014	Q3/2014	Q4/2014	Q1/2015	YOY Change
Rental Vacancy Rate	8.3%	7.5%	7.4%	7.0%	7.1%	-1.2%
Homeowner Vacancy Rate	2.0%	1.9%	1.8%	2.0%	1.9%	-0.1%
Gross Vacancy Rate	13.8%	13.6%	13.5%	12.6%	13.0%	-0.8%
Homeownership Rate	64.8%	64.7%	64.4%	64.0%	63.7%	-1.1%
Homeownership Rate SA	65.0%	64.7%	64.3%	64.0%	63.8%	-1.2%
Housing Stock (000')	133,087	133,209	133,331	133,453	133,575	488
Occupied Housing Stock	114,762	115,127	115,310	116,647	116,240	1,478
Owner	74,404	74,458	74,240	74,606	74,018	-386
Renter	40,357	40,669	41,070	42,041	42,222	1,865
Homeownership Rate by Age of Householder
< 35	36.2%	35.9%	36.0%	35.3%	34.6%	-1.6%
35-44	60.7%	60.2%	59.1%	58.8%	58.4%	-2.3%
45-54	71.4%	70.7%	70.1%	70.5%	70.1%	-1.3%
55-64	76.4%	76.4%	76.6%	75.8%	75.8%	-0.6%
65+	79.9%	80.1%	80.0%	79.5%	79.0%	-0.9%

The fourth quarter jump in the HVS estimate of total households was eye-popping, but there are several reasons to question the magnitude of the jump. First, in the fourth quarter of 2014 the HVS estimate of the number of “seasonal” housing units fell by a record 453,000 from the previous quarter, only to jump back up by 385,000 in the subsequent quarter. Since the HVS “controls” it housing units by category to independent estimates of the overall housing stock, this “strange” swing in the number of “seasonal” housing units may have artificially boosted the occupied unit category in the fourth quarter.

Second, beginning in April 2014 the HVS began “phasing in” in new sample which may have “artificially” increased household estimate gains since the early part of 2014. Here is an excerpt from the HVS “Sources and Accuracy” document.

“Beginning in April 2014, a new sample is being phased in over a 16-month period. The methods used to select the sample households for the survey are evaluated after each decennial census. Based on these evaluations, the design of the survey is modified and systems are put in place to provide the sample for the following decade. The previous decennial revision incorporated new information from Census 2000 and was complete as of July 2005. The design for the entire decade was selected from the 2000 based sample. The current revision incorporates new information from Census 2010 and will be complete in July 2015. The new sample is based on the Master Address File (MAF) compiled during the 2010 Census and will use annual selections from the MAF instead of the once a decade sample selection used previously.”

Comparisons between Decennial Census results and the HVS clearly indicate that the HVS estimates have not reliably reflected overall US housing trends in a number of important respects, including (but not limited to) overall vacancy rates (overstated), homeownership rates (overstated), and the distributed of households by age (overstated share of younger householders). These HVS errors widened from 2000 to 2010. It is not clear how much of the HVS estimation problem has been related to its “sampling frame” and how much is related to “non-sampling” errors. To the extent that the new sample better reflects the actual characteristics of the US housing stock, however, then one would expect that the phasing-in of the new sample would, among other things, result in (1) faster than “actual” household growth; (2) faster than “actual” growth in renter households relative to owner households; and (3) larger than “actual” declines in the homeownership rate.

My understanding is that Census “phases in” the new sample over such a long period of time so that there is not a “really big” discontinuous” shift it the CPS/HVS time series. If there are huge differences between the old and new samples, however, then even with such a “phasing in” there can be discontinuities in time series estimates. It would be nice, however, if Census would show a comparison of HVS results using the old sample and HVS results using the new sample so that analysts could assess the “sampling” vs. “non-sampling” errors of HVS results themselves.

While recognizing that the overall change in owner-occupied vs. renter-occupied housing units as estimated by the HVS over the last year may not reflect “actual” changes, I thought some folks might be interested in HVS-based estimates of owner- vs. renter-occupied housing units by units in structure. The HVS does not actually publish such estimates, but in detailed tables HVS shows estimates of (1) the distribution of rental and owner housing units (renter occupied plus for rent or owner occupied plus for sale only) by units in structure, and (2) vacancy rates by units in structure for renter and owner housing units. As such, one can produce the implied HVS occupied renter and owner housing units by units in structure. The HVS includes one-unit manufactured/mobile housing units in its one-unit structure category, so this category is not the same as what analysts generally consider “single-family” housing units. Here is a comparison of the first quarter of 2015 with the first quarter of 2014.

HVS-Based Estimates of Owner and Renter Occupied Housing Units by Units in Structure (000's)
	Q1/2014	Q1/2015	Change
Renter-Occupied Total	40,357	42,222	1,865
One-Unit	15,831	16,572	741
2-4 Units	7,753	8,090	337
5-9 Units	5,051	5,300	249
10+ Units	11,722	12,260	538
Owner-Occupied Total	74,404	74,018	-386
One-Unit	70,920	70,518	-402
2-4 Units	1,335	1,347	12
5-9 Units	574	563	-11
10+ Units	1,575	1,590	15

HVS estimates suggest that the trend toward more single-family units being rented rather than owned continued over the last year. Compared to the fourth quarter of 2005, HVS estimates suggest that the number of owner-occupied one-unit homes fell by about 1.969 million units, while the number of renter-occupied one-unit housing units increased by about 4.345 million units.