by Calculated Risk on 4/27/2016 11:50:00 AM

The Case-Shiller house price indexes for February were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: March Case-Shiller Forecast: Expect the Slowdown to Continue

All three headline S&P/Case-Shiller Home Price Indices grew at a slightly slower pace in February compared to January, and the slowdown should extend into March, according to Zillow’s March Case-Shiller forecast.

The March Case-Shiller National Index is expected to gain another 0.3 percent in March from February, down from 0.4 percent growth in February from January. We expect the 10-City Index to grow 4.3 percent year-over-year in March, and the 20-City Index to grow 5 percent over the same period, down from annual growth of 4.6 percent and 5.4 percent in February, respectively. The National Index looks set to rise 5.3 percent year-over-year in March, equal to February’s annual growth.

Zillow’s March Case-Shiller forecast is shown in the table below. These forecasts are based on today’s February Case-Shiller data release and the March 2016 Zillow Home Value Index (ZHVI). The March Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, May 31.

The year-over-year change for the 10-city and 20-city indexes will probably be lower in the March report than in the February report.  The change for the National Index will probably be about the same.

by Calculated Risk on 4/27/2016 10:03:00 AM

From the NAR: Pending Home Sales Maintain Momentum in March

The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 1.4 percent to 110.5 in March from an downwardly revised 109.0 in February and is now 1.4 percent above March 2015 (109.0). After last month’s slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).
...
The PHSI in the Northeast increased 3.2 percent to 97.0 in March, and is now 18.4 percent above a year ago. In the Midwest the index inched up 0.2 percent to 112.8 in March, and is now 4.0 percent above March 2015.

Pending home sales in the South rose 3.0 percent to an index of 125.4 in March but are still 0.6 percent lower than last March. The index in the West declined 1.8 percent in March to 95.3, and is now 7.9 percent below a year ago.
emphasis added

This was above expectations of a 0.5% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in April and May.

by Calculated Risk on 4/27/2016 07:00:00 AM

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

Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 22, 2016.
...
The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.85 percent from 3.83 percent, with points increasing to 0.35 from 0.32 (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 since 1990.

Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000.

Refinance activity has increased a little with lower rates.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 14% higher than a year ago.

by Calculated Risk on 4/26/2016 07:34:00 PM

A few FOMC previews ...
From Tim Duy: The Fed Is Meeting in April to Talk About June

From Goldman Sachs: Goldman: Expect FOMC statement next week to say risks are "nearly balanced"

From me: FOMC Preview: No Rate Hike, Risks "Nearly Balanced"

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

• At 10:00 AM, Pending Home Sales Index for March. The consensus is for a 0.5% increase in the index.

• At 2:00 PM, the FOMC Meeting Announcement.  The FOMC is expected to make no change to policy at this meeting.

by Calculated Risk on 4/26/2016 04:54:00 PM

From Professor Tim Duy writing at Bloomberg: The Fed Is Meeting in April to Talk About June

The Fed will stand pat this week. We know it, they know it. So what then will the Fed talk about[?]
...
The April meeting of the Federal Open Market Committee (FOMC) will be about the June meeting. Policymakers' fundamental challenge is that the FOMC doesn't want to rule out a June hike, but the markets already have.
...
Bottom Line: Look for the Fed to hold steady this meeting, but be aware it is probably not comfortable with the market’s assessment of potential rate hikes this year. It will likely want to increase the uncertainty surrounding the June meeting in particular. The improving financial situation gives it room to do so by moving to a balanced assessment of risks. ...

by Calculated Risk on 4/26/2016 02:31:00 PM

Here is an indicator that I'm following that appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Accelerated in April; Signaling Increased U.S. Business Activity Into Fourth Quarter

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), expanded 0.6 percent in April following a revised 0.1 percent increase in March and 0.2 percent decline in February. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 1.8 percent over this time last year, a marked deceleration of activity from one year ago when the barometer logged a 2.7 percent year-over-year gain from 2014. On an unadjusted basis the CAB jumped 1.4 percent, following a solid 0.8 percent gain in March.
...
Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

Currently CAB is up slightly year-over-year, and this suggests an increase in Industrial Production over the next year is possible.

by Calculated Risk on 4/26/2016 11:54:00 AM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 5.3% year-over-year in February

Note: There was an error in the Case-Shiller press release this morning. From the press release:

"Fourteen of 20 cities reported increases in February before seasonal adjustment; after seasonal adjustment, only 10 cities increased for the month."

The NSA count is correct (14 of 20 cities increased before seasonal adjustment), but the SA number is incorrect. After seasonal adjustment, all 20 cities increased in February (not 10).

The year-over-year increase in prices is mostly moving sideways now around 5%. In February, the index was up 5.3% YoY.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $273,000 today adjusted for inflation (36%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 3.0% below the bubble peak.   However, in real terms, the National index is still about 17% below the bubble peak.

Nominal House Prices


The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through February) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to November 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to April 2005 levels, and the CoreLogic index (NSA) is back to July 2005.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to February 2004 levels, the Composite 20 index is back to November 2003, and the CoreLogic index back to February 2004.

In real terms, house prices are back to early 2004 levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to May 2003 levels, and the CoreLogic index is back to August 2003.

In real terms, and as a price-to-rent ratio, prices are back to late 2003 and early 2004 levels - and the price-to-rent ratio maybe moving a little more sideways now.

by Calculated Risk on 4/26/2016 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Price Increases Slow Down in February According to the S&P/Case-Shiller Home Price Indices

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite’s year-over-year gain was 5.4%, down from 5.7% the prior month.
...
Before seasonal adjustment, the National Index posted a gain of 0.2% month-over-month in February. The 10-City Composite recorded a 0.1% month-over-month increase while the 20-City Composite posted a 0.2% increase in February. After seasonal adjustment, the National Index recorded a 0.4% month-over-month increase. The 10-City Composite posted a 0.6% increase and the 20-City Composite reported a 0.7% month-over-month increase after seasonal adjustment. Fourteen of 20 cities reported increases in February before seasonal adjustment; after seasonal adjustment, only 10 cities increased for the month.
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 11.4% from the peak, and up 0.6% in February (SA).

The Composite 20 index is off 9.7% from the peak, and up 0.7% (SA) in February.

The National index is off 3.0% from the peak, and up 0.4% (SA) in February.  The National index is up 31.0% from the post-bubble low set in December 2011 (SA).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 4.6% compared to February 2015.

The Composite 20 SA is up 5.3% year-over-year..

The National index SA is up 5.3% year-over-year.

I'll have more on house prices later.

by Calculated Risk on 4/25/2016 06:49:00 PM

Earlier from the Dallas Fed: Texas Manufacturing Activity Expands Again

Texas factory activity increased for a second month in a row in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 3.3 to 5.8, suggesting a slight pickup in output growth.

Most other indexes of current manufacturing activity also reflected growth this month. The new orders index rebounded into positive territory after four months of negative readings, coming in at 6.2. ...

Labor market indicators reflected persistent weakness in April. The employment and hours worked indexes remained negative for the fourth straight month but rose to -3.7 and -1.0, respectively. Fourteen percent of firms noted net hiring, and 18 percent noted net layoffs in April.

This is the second consecutive month of manufacturing growth in Texas.

• At 8:30 AM ET, Durable Goods Orders for March from the Census Bureau. The consensus is for a 1.6% increase in durable goods orders.

• At 9:00 AM, S&P/Case-Shiller House Price Index for February. Although this is the February report, it is really a 3 month average of December, January and February prices. The consensus is for a 5.5% year-over-year increase in the Comp 20 index for February. The Zillow forecast is for the National Index to increase 5.3% year-over-year in February.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for April.

by Calculated Risk on 4/25/2016 03:15:00 PM

The automakers will report April vehicle sales on Tuesday, May 3rd.

Note:  There were 27 selling days in April, up from 26 in April 2015.

From WardsAuto: Forecast: April Sales to Return to 17 Million SAAR Trend

WardsAuto forecast calls for U.S. automakers to deliver 1.52 million light vehicles in April, a record-high volume for the month.

The report puts the seasonally adjusted annual rate of sales for the month at 17.6 million units, well above last month’s 16.5 million and year-ago’s 16.7 million.
...
The monthly volume will be 5.0% above last year. Beyond an extra selling day, this April lacks the Easter holiday, allowing full sales over five weekends.
emphasis added

From J.D. Power: New-Vehicle Retail Sales Won’t Grow in April; Revised Full-Year Forecast Calls For Modest Increase Over 2015

Total light-vehicle sales in April are expected to reach 1,523,000, up 1% on a selling-day adjusted basis from 1,452,241 from a year ago and the strongest total sales in April on record.

The SAAR for total sales is projected at 17.6 million units in April 2016, up 0.8 million units from 16.7 million a year ago.

Looks like a strong month for vehicle sales.