by Calculated Risk on 8/11/2015 09:51:00 AM

From the National Federation of Independent Business (NFIB): NFIB Small Business Optimism Index increased 1.3 points in July

The Small Business Optimism Index rose 1.3 points to 95.4. After giving up over 4 points in June, the Index clawed back 1.3 points in July, a familiar theme now, which has produced the most grudging gains in the Index’s history – and still not above the 42 year average of 98. ...

Job creation was flat in July. On balance, owners added a net 0.05 workers per firm in recent months, better than June’s -0.01 reading, but still close to the zero line.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 95.4 in July from 94.1 in June.

by Calculated Risk on 8/10/2015 07:37:00 PM

Fannie and Freddie reported results last week. Here is some information on Real Estate Owned (REOs).

From Fannie Mae:

The continued decrease in the number of our seriously delinquent single-family loans has resulted in a reduction in the number of REO acquisitions in the first half of 2015 as compared with the first half of 2014.

We continue to manage our REO inventory to appropriately manage costs and maximize sales proceeds. However, we are unable to market and sell a large portion of our inventory, primarily due to occupancy and state or local redemption or confirmation periods, which extends the amount of time it takes to bring our properties to a marketable state and eventually dispose of them. This results in higher foreclosed property expenses, which include costs related to maintaining the property and ensuring that the property is vacant. Additionally, before we market our foreclosed properties, we may choose to repair them in order to maximize the sales price and increase the likelihood that an owner occupant will purchase. The percent of properties we repair prior to marketing has increased as a result of market demand and our continued focus on stabilizing neighborhoods and increasing opportunities for owner occupants to purchase.
emphasis added

Fannie is unable to currently market about 40% of their inventory.

From Freddie Mac:

In recent periods, third-party sales at foreclosure auction have comprised an increasing portion of foreclosure transfers. Third-party sales at foreclosure auction avoid the REO property expenses that we would have otherwise incurred if we held the property in our REO inventory until disposition.

Fannie and Freddie are still working through the backlog of loans made during the housing bubble, mostly in judicial foreclosure states.

Click on graph for larger image.

Here is a graph of Fannie and Freddie Real Estate Owned (REO).

REO inventory decreased in Q2 for both Fannie and Freddie, and combined inventory is down 33% year-over-year.   For Freddie, this is the lowest level of REO since Q1 2008.  For Fannie, this is the lowest level since Q2 2009.

Short term delinquencies are at normal levels, but there are still a fairly large number of properties in the foreclosure process with long time lines in judicial foreclosure states.

by Calculated Risk on 8/10/2015 02:01:00 PM

By request, a few more employment graphs ...

Here are the previous posts on the employment report:

• July Employment Report: 215,000 Jobs, 5.3% Unemployment Rate
• Employment Report Comments and more Graphs

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

The general trend is down for all categories, and the "less than 5 weeks", "6 to 14 weeks" and "15 to 26 weeks" are all close to normal levels. 

The long term unemployed is less than 1.4% of the labor force, however the number (and percent) of long term unemployed remains elevated.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Construction Employment
This graph shows total construction employment as reported by the BLS (not just residential).

Since construction employment bottomed in January 2011, construction payrolls have increased by 951 thousand.

Construction employment is still far below the bubble peak - and below the level in the late '90s.

Diffusion Indexes
 The BLS diffusion index for total private employment was at 64.4 in July, up from 60.6 in June.

For manufacturing, the diffusion index was at 57.5, up from 52.5 in June.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.  Above 60 is very good.  From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

Overall private job growth was widespread in July.  A positive indicator.

by Calculated Risk on 8/10/2015 10:18:00 AM

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

FNC released their June 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 1.2% from May to June (Composite 100 index, not seasonally adjusted). 

The 10 city MSA increased 1.7% in June, the 20-MSA RPI increased 1.6%, and the 30-MSA RPI increased 1.4%. 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 larger in June than in May, with the 100-MSA composite up 5.7% compared to June 2014.

The index is still down 15.2% from the peak in 2006 (not inflation adjusted).

Click on graph for larger image.

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

Most of the other indexes are also showing the year-over-year change around 5%, but increasing a little faster over the last several months.

Note: The June Case-Shiller index will be released on Tuesday, August 25th.

by Calculated Risk on 8/10/2015 08:11:00 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 reports local home sales, prices continue to climb steadily from last year

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in July was 3,815, up from 3,314 one year ago. Compared to July 2014, 20.4 percent more homes, but 5.5 percent fewer condos and townhomes, sold this July.
...
For more than two years, GLVAR has been reporting fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. In July, 7.1 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 11.5 percent one year ago. Another 7.7 percent of July sales were bank-owned, down from 9.1 percent one year ago.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in July was 13,616, down 0.7 percent from one year ago. GLVAR tracked a total of 3,465 condos, high-rise condos and townhomes listed for sale on its MLS in July, down 4.4 percent from one year ago.

By the end of July, GLVAR reported 7,636 single-family homes listed without any sort of offer. That’s up 5.1 percent from one year ago. For condos and townhomes, the 2,320 properties listed without offers in July represented a 0.4 percent decrease from one year ago.
emphasis added

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

1) Overall sales were up 15% year-over-year.

2) Conventional (equity, not distressed) sales were up 24% year-over-year.  In July 2014, 79.4% of all sales were conventional equity.  In July 2015, 85.2% were standard equity sales.

3) The percent of cash sales has declined year-over-year from 35.6% in July 2014 to 27.1% in July 2015. (investor buying appears to be declining).

4) Non-contingent inventory is up 5.1% 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%
Mar-15	12.2%
Apr-15	7.6%
May-15	7.8%
Jun-15	4.3%
Jul-15	5.1%

by Calculated Risk on 8/09/2015 10:55:00 PM

From the WSJ: Oil Futures Signal Weak Prices Could Last Years

Benchmark U.S. oil futures for September delivery are nearing the six-year low hit in March. But contracts for delivery in later years have taken an even bigger hit, with prices for 2016 and 2017 already trading below their March lows.

That indicates that investors, traders and oil companies see the global glut of crude oil persisting beyond this year.

This would be good news for consumers (bad news for producers).

Weekend:
• Schedule for Week of August 9, 2015

Monday:
• At 10:00 AM ET, The Fed will release the monthly Labor Market Conditions Index (LMCI).

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up 4 and DOW futures are up 20 (fair value).

Oil prices were down over the last week with WTI futures at $43.65 per barrel and Brent at $48.34 per barrel.  A year ago, WTI was at $97, and Brent was at $104 - so prices are down over 50% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.60 per gallon (down about $0.85 per gallon from a year ago).  Gasoline prices should follow oil prices down.

by Calculated Risk on 8/09/2015 10:36:00 AM

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).

In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.

Overall the decline in prices is probably due to more supply, and less demand from China.

Click on graph for larger image in graph gallery.

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

Right now Random Lengths prices are down about 14% from a year ago, and CME futures are down around 24% year-over-year.

by Calculated Risk on 8/08/2015 08:11:00 AM

The key economic report this week is July Retail sales on Thursday.

For manufacturing, the July Industrial Production and Capacity Utilization report will be released this week.

For prices, PPI will be released on Friday.

----- Monday, August 10th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, August 11th -----
9:00 AM: NFIB Small Business Optimism Index for July.

----- Wednesday, August 12th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Job Openings and Labor Turnover Survey for June from the BLS.

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

Jobs openings increased in May to 5.363 million from 5.334 million in April.

The number of job openings (yellow) were up 16% year-over-year, and Quits were up 8% year-over-year.

2:00 PM ET: The Monthly Treasury Budget Statement for July.

----- Thursday, August 13th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to be unchanged at 270 thousand.

8:30 AM ET: Retail sales for July will be released.

This graph shows retail sales since 1992 through June 2015. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales were down 0.3% from May to June (seasonally adjusted), and sales were up 1.4% from June 2014.

The consensus is for retail sales to increase 0.5% in July, and to increase 0.4% ex-autos.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for June.  The consensus is for a 0.3% increase in inventories.

11:00 AM: the New York Fed will Release the Q2 2015 Household Debt and Credit Report

----- Friday, August 14th -----
8:30 AM ET: The Producer Price Index for July from the BLS. The consensus is for a 0.1% increase in prices, and a 0.1% increase in core PPI.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for July.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 78.1%.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for August). The consensus is for a reading of 93.5, up from 93.1 in July.

by Calculated Risk on 8/07/2015 09:19:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Surprisingly Calm After Jobs Report

Most lenders continue to quote conventional 30yr fixed rates of 4.0% on top tier scenarios, but with slightly lower closing costs today. The more aggressive lenders are increasingly able to quote 3.875% after these sorts of moves, though others are still stuck at 4.125% unless bond markets improve a bit further.

As of today, rates have improved for 3 straight weeks. ...
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 8/07/2015 06:05:00 PM

An excerpt from a research piece by Merrill Lynch economist Micheal Hanson:

After the July employment report largely matched expectations, we anticipate that the FOMC should see enough cumulative progress to start the hiking cycle at the September meeting — the chance that liftoff occurs then continues to creep up, in our view. That said, there are still another five weeks until that meeting. With data dependence as the focus of the Fed, unexpected shocks or a broad-based slowdown in the data could still lead the Committee to delay hiking. The bigger question for some Fed officials and market participants is low inflation. We expect continued labor market gains to leave the FOMC “reasonably confident” on the inflation outlook come September — something they should communicate in upcoming speeches.
emphasis added

It seems more and more likely that the Fed will hike in September.