by Calculated Risk on 5/16/2016 05:52:00 PM

Tuesday:
• At 8:30 AM ET, Housing Starts for April. Total housing starts decreased to 1.089 million (SAAR) in March. Single family starts decreased to 764 thousand SAAR in March. The consensus for 1.135 million, up from the March rate.

• Also at 8:30 AM, The Consumer Price Index for May from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for April. The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 74.9%.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Surprisingly Steady Despite Market Volatility

Mortgage rates held surprisingly steady today, even though underlying bond markets were in noticeably weaker territory. As bonds weaken, rates normally move higher, but there's been a bit of a disconnect recently. In light of our discussion last week, perhaps it isn't so surprising. We had anticipated that mortgage rates would start out with an advantage this week because they didn't move much lower at the end of last week even though bond markets were stronger. In other words, bond markets are suggesting rates should be right about where they were on Thursday afternoon, and that's exactly where they are.

Naturally, this means that we no longer have the same sort of implicit advantage we enjoyed on Friday afternoon heading into the weekend. As such, it's definitely safer to lean back toward locking. The most prevalently-quoted conventional 30yr fixed rate remains 3.625% on top tier scenarios, with a smattering of lenders still down at 3.5%.
emphasis added

by Calculated Risk on 5/16/2016 01:14:00 PM

From economist Tim Duy: Fed Not As Convinced About June As Markets

Market participants place less than 10 percent chance of a rate hike in June. In contrast, San Francisco Federal Reserve President John Williams continues hold out hope for a third.
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I think the Fed increasingly believes the data is lining up in their favor. Friday's retail sales report likely went a long-way toward dispelling any lingering concerns they might have over the strength of the consumer. The tenor of that data has picked up markedly in the last few months.
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Remember that if we assume July and October are off the table (lack of press conferences and/or proximity to election), then retaining the option to hike three times requires a hard look at June. I think that will lead to a much more extensive discussion of a rate hike at the June meeting than many market participants appear to expect.
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Bottom Line: I don't think the data lines up to support a June rate hike. But I don't think the case will be as clear-cut as signaled by the low odds financial market participants place on a hike.

CR Note: Most analysts have moved to the September meeting as the next most likely for the next rate hike. To hike in June, I think the FOMC would need to see a pickup in key inflation measures,  especially core PCE inflation in April (to be released May 31st).

by Calculated Risk on 5/16/2016 10:04:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 58 in May, unchanged from 58 in April. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Holds Stable in May

Builder confidence in the market for newly-built single-family homes remained unchanged in May at a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Builder confidence has held steady at 58 for four straight months, which indicates that the single-family housing sector remains in positive territory,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “However, builders are facing an increasing number of regulations and lot supply constraints.”

The HMI components measuring sales expectations in the next six months increased three points to 65, while the component charting current sales conditions and the index gauging buyer traffic both held steady at 63 and 44, respectively.

“The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” said NAHB Chief Economist Robert Dietz. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.”
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Looking at the three-month moving averages for regional HMI scores, the South and Midwest both registered one-point gains to 59 and 58, respectively. The West remained unchanged at 67 and the Northeast fell three points to 41.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was below the consensus forecast of 59, but still a strong reading.

by Calculated Risk on 5/16/2016 08:39:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity contracted for New York manufacturing firms, according to the May 2016 survey. Following a brief foray into positive territory in March and April, the general business conditions index fell back below zero, declining nineteen points to -9.0.
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Employment levels remained fairly steady, with the index for number of employees showing little change at 2.1, while the average workweek index declined ten points to -8.3—evidence that the average workweek was shorter this month.
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Indexes for the six-month outlook generally suggested that firms were somewhat less optimistic about future conditions than they were in April.

This was well below the consensus forecast of 7.0, and suggests manufacturing contracted in the NY region in May.

by Calculated Risk on 5/15/2016 07:13:00 PM

Weekend:
• Schedule for Week of May 15, 2016

Monday:
• At 8:30 AM ET, the New York Fed Empire State manufacturing survey for May. The consensus is for a reading of 7.0, down from 9.5.

• At 10:00 AM, the May NAHB homebuilder survey. The consensus is for a reading of  59, up from 58 in April.  Any number above 50 indicates that more builders view sales conditions as good than poor.

From CNBC: Pre-Market Data and Bloomberg futures: S&P are down 4 and DOW futures are down 30 (fair value).

Oil prices were up over the last week with WTI futures at $46.21 per barrel and Brent at $47.83 per barrel.  A year ago, WTI was at $59, and Brent was at $66 - so prices are down about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.23 per gallon (down about $0.45 per gallon from a year ago).

by Calculated Risk on 5/15/2016 10:38:00 AM

This is a fascinating article by Neil Irwin in the NY Times: What Was the Greatest Era for Innovation? A Brief Guided Tour.

Irwin discusses the impact of plumbing, air conditioning, improvements in transportation and sanitation, and much more. He discusses what life was like in 1870, 1920, 1970, and now. Great overview.

Some of this article discusses the improvements in life expectancy that I discussed here: The Projected Improvement in Life Expectancy. Here is a graph from that post:

This graph is based on data from the CDC and shows the number of people who die before a certain age, but after the previous age. As an example, for those born in 1900 (blue), 12,448 of the 100,000 born alive died before age 1, and another 5,748 died between age 1 and age 5.  That is 18.2% of those born in 1900 died before age 5.

In 1950, only 3.5% died before age 5.  In 2010, it was 0.7%.

The peak age for deaths didn't change much for those born in 1900 and 1950 (between 76 and 80, but many more people born in 1950 will make it).

Now the CDC is projecting the peak age for deaths - for those born in 2010 - will increase to 86 to 90!

Also the number of deaths for those younger than 20 will be very small (down to mostly accidents, guns, and drugs).  Self-driving cars might reduce the accident components of young deaths.

In 1900, 25,2% died before age 20.  And another 26.8% died before 55.

In 1950, 5.3% died before age 20.  And another 18.7% died before 55.  A dramatic decline in early deaths.

In 2010, 1.5% are projected to die before age 20.  And only 9.7% before 55.  A dramatic decline in prime working age deaths.

by Calculated Risk on 5/14/2016 08:01:00 AM

The key economic reports this week are April housing starts on Tuesday, and April Existing Home Sales on Friday.

For manufacturing, April Industrial Production, and the New York and Philly Fed manufacturing surveys will be released this week.

----- Monday, May 16th -----
8:30 AM: the New York Fed Empire State manufacturing survey for May. The consensus is for a reading of 7.0, down from 9.5.

10:00 AM: The May NAHB homebuilder survey. The consensus is for a reading of  59, up from 58 in April.  Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Tuesday, May 17th -----
8:30 AM: Housing Starts for April.

Total housing starts decreased to 1.089 million (SAAR) in March. Single family starts decreased to 764 thousand SAAR in March.

The consensus for 1.135 million, up from the March rate.

8:30 AM: The Consumer Price Index for May from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.

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

This graph shows industrial production since 1967.

The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 74.9%.

----- Wednesday, May 18th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA's Architecture Billings Index for April (a leading indicator for commercial real estate).

2:00 PM: the Fed will release the FOMC Minutes for the meeting of April 26-27, 2016

----- Thursday, May 19th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 275 thousand initial claims, down from 294 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for May. The consensus is for a reading of 3.0, up from -1.6.

8:30 AM ET: Chicago Fed National Activity Index for April. This is a composite index of other data.

----- Friday, May 20th -----
10:00 AM: Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 5.40 million SAAR, up from 5.33 million in March.

10:00 AM: Regional and State Employment and Unemployment for April 2016

by Calculated Risk on 5/13/2016 02:23:00 PM

Click on graph for larger image.

The preliminary University of Michigan consumer sentiment index for May was at 95.8, up from 89.0 in April:

"Consumer sentiment rebounded in early May due to more frequent income gains, an improved jobs outlook, and the expectation of lower inflation and interest rates. The largest gains were recorded among lower income and younger households, although the gains were recorded among all income and age subgroups as well as across all regions. Nearly all of the gains were in the Expectations Index, which rose to its highest level in nearly a year. "
emphasis added

by Calculated Risk on 5/13/2016 11:12:00 AM

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 a few years, not much changed. But in 2012 and 2013, we saw some significant changes with a dramatic shift from distressed sales to more normal equity sales.

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 April, total sales were down 3.3% from April 2015, and conventional equity sales were unchanged compared to the same month last year.

In April, 6.5% of all resales were distressed sales. This was down from 10.1% last month, and down from 11.9% in April 2015.

The percentage of REOs was at 3.3% in April, and the percentage of short sales was 3.2%.

Here are the statistics.

Press Release: Inventory stationary, days on market falling, prices inch upward

Sales volume increased 7.9% from 1,440 in April to 1,554. This number is a 3.3% decrease from April 2015 (1,607 sales).
...
Although the total Active Listing Inventory increased 6.5% (1,973 to 2,102), the Months of Inventory remained at 1.4 months. Compared with the total Listing Inventory of April 2015, the current number is down 17.4%, where the Months of Inventory was 1.6 and numbered 2,546 units.  

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 decreased 17.4% year-over-year (YoY) in April.  This was the twelfth consecutive monthly YoY decrease in inventory in Sacramento.

Cash buyers accounted for 16.0% of all sales (frequently investors).

Summary: This data suggests a more normal market with fewer distressed sales, more equity sales, and less investor buying - but limited inventory.

by Calculated Risk on 5/13/2016 08:38:00 AM

On a monthly basis, retail sales were up 1.3% from March to April (seasonally adjusted), and sales were up 3.0% from April 2015.

From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $453.4 billion, an increase of 1.3 percent from the previous month, and 3.0 percent above April 2015. ... The February 2016 to March 2016 percent change was revised from down 0.4 percent to down 0.3 percent.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 1.2%.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales ex-gasoline increased by 4.1% on a YoY basis.

The increase in April was above expectations for the month, and retail sales for February and March were revised up. A strong report.