by Calculated Risk on 9/09/2016 07:18:00 PM

Note: This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data & Analytics: Dodge Momentum Index Continues Ascent in August

The Dodge Momentum Index grew 1.3% in August to 134.9 (2000=100), from its revised July reading of 133.2. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The move higher in August was the result of a 1.7% increase from July for institutional planning as well as a 1.0% gain for commercial planning. August is the fifth consecutive month that the Momentum Index has increased, marking the longest such streak since the end of 2012 into 2013. The Momentum Index is currently 16% above the same month a year ago, reflecting this growth by major sector – institutional planning up 22% and commercial planning up 11%. That both sectors are showing such improvement suggests that developers are shrugging off sluggish economic data and the uncertainty surrounding the November elections, and moving ahead with plans for new projects.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 134.9 in August, up from 133.2 in July.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further increases in CRE spending over the next year.

by Calculated Risk on 9/09/2016 03:58:00 PM

CR Note: I'm asked this question frequently, so here is a repost ...

Some information from mortgage broker Solyent Green is People:

For people with foreclosures or short sales on their record, the waiting period depends on if there are "Extenuating Circumstances" EC ( death in family, company relocation/shut down - about 5/10% of cases) or if the foreclosure or short sale was due to "Financial Mismanagement" FM (the majority of cases).

Jumbo loans, Foreclosure: 7 years (FM and EC)
Jumbo loans, Short Sale: 7 years FM, only 4 years EC
Fannie/Freddie, Foreclosure: 7 years FM, 3 years EC
Fannie/Freddie, Short Sale: 4 years FM, 2 years EC
FHA Foreclosure/Short Sale: 3 years (FM and EC)

A large number of the foreclosures were in 2009 and 2010, so those people will be eligible to borrow soon.

CR Note: Even though people are eligible to borrow, doesn't mean they will. They will have to saved enough for a downpayment, and many of these people are psychological scarred (and will wait longer to buy again).

by Calculated Risk on 9/09/2016 11:58:00 AM

From the Altanta Fed: GDPNow

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.5 percent on September 2, up from 3.2 percent on September 1.

From the NY Fed Nowcasting Report

The FRBNY Staff Nowcast stands at 2.8% for 2016:Q3, unchanged from last week.

From Merrill Lynch:

We revise up our 3Q GDP forecast to 3% from 2.4% to reflect the recent tracking.

CR Note: Looks like real GDP growth around 3% in Q3 (and a probably little upward revision to Q2).

by Calculated Risk on 9/09/2016 09:50:00 AM

Here is another update 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 were 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.  This decline in 2015 was also probably related to weakness in China.

Prices in 2016 are now up year-over-year.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through early September 2016 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are up 11% from a year ago, and CME futures are up about 26% year-over-year.

by Calculated Risk on 9/08/2016 05:58:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Rise Thanks to Europe

Mortgage Rates bounced higher today, bringing them back in line with the pervasive range of the past several weeks. As of yesterday, rates were technically at 2-week lows.

The ultra-narrow range continues to be an important caveat for any discussion of rate movement. Simply put, there is such a small gap between 2-week highs and 2-week lows that it could be easily traversed on an average day of movement. Most lenders continue to offer conventional 30yr fixed quotes around 3.375% on top tier scenarios.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 9/08/2016 01:14:00 PM

The EIA released the Short-Term Energy Outlook yesterday. From the STEO:

• Benchmark North Sea Brent crude oil spot prices averaged $46/barrel (b) in August, a $1/b increase from July. This was the fourth consecutive month in which Brent spot crude oil prices averaged between $44/b and $49/b.

• Brent crude oil prices are forecast to average $43/b in 2016 and $52/b in 2017. West Texas Intermediate (WTI) crude oil prices are forecast to average $1/b less than Brent in 2016 and 2017.

• U.S. regular gasoline retail prices are expected to decline from an average of $2.18/gallon (gal) in August to $1.92/gal in December. For the year, U.S. regular gasoline retail prices are forecast to average $2.08/gal in 2016 and $2.26/gal in 2017.

• U.S. retail gasoline prices are expected to continue falling through the end of 2016, even though gasoline demand this year is expected to be the highest ever.

by Calculated Risk on 9/08/2016 11:21:00 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 Southern Nevada Home Sales Increasing While Supply Stays Tight, GLVAR Housing Statistics for August 2016

“It’s good to see that we sold more homes last month than we did during the previous month and year, even with this persistently tight inventory we’ve been dealing with this year,” said 2016 GLVAR President Scott Beaudry, a longtime local REALTOR®. “As for home prices, we’re starting to see a more normal rate of appreciation, where prices are going up more gradually, as opposed to the double-digit increases we’ve seen the last few years.”

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in August was 3,789, up from 3,454 total sales in August of 2015. Compared to the same month one year ago, 8.7 percent more homes, and 14.7 percent more condos and townhomes sold in August.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in August was 13,222, down 2.8 percent from one year ago. GLVAR tracked a total of 2,366 condos, high-rise condos and townhomes listed for sale on its MLS in August, down 31.6 percent from one year ago.

By the end of August, GLVAR reported 7,594 single-family homes listed without any sort of offer. That’s down 5.8 percent from one year ago. For condos and townhomes, the 1,244 properties listed without offers in August represented a 46.4 percent decrease from one year ago.

GLVAR continues to track declines in distressed sales and a corresponding increase in traditional home sales, where lenders are not controlling the transaction. In August, 4.1 percent of all local sales were short sales – when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 6.2 percent of all sales one year ago. Another 5.5 percent of all August sales were bank-owned, down from 7.0 percent one year ago.
emphasis added

1) Overall sales were up 9.7% year-over-year.

2) Total active inventory (single-family and condos) is down 14.9% from a year ago (A very sharp decline in condo inventory).

3) Distressed sales are down from 13.2% of sales in August 2015, to 9.6% of sales in August 2016.

by Calculated Risk on 9/08/2016 08:33:00 AM

The DOL reported:

In the week ending September 3, the advance figure for seasonally adjusted initial claims was 259,000, a decrease of 4,000 from the previous week's unrevised level of 263,000. The 4-week moving average was 261,250, a decrease of 1,750 from the previous week's unrevised average of 263,000.

There were no special factors impacting this week's initial claims. This marks 79 consecutive weeks of initial claims below 300,000, the longest streak since 1970.

The previous week was unrevised.

The following graph shows the 4-week moving average of weekly claims since 1971.

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 decreased to 261,250.

This was lower than the consensus forecast of 264,000. The low level of claims suggests relatively few layoffs.

by Calculated Risk on 9/07/2016 08:37:00 PM

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released.  The consensus is for 264 thousand initial claims, up from 263 thousand the previous week.

• At 10:00 AM: The Q2 Quarterly Services Report from the Census Bureau.

• At 3:00 PM, Consumer Credit for July from the Federal Reserve.  The consensus is for credit to increase $15.6 billion.

From Tim Duy at Fed Watch: Is Pushing Unemployment Lower A Risky Strategy?

The unemployment is closing in on the Fed's estimate of the natural rate of unemployment ... Consequently, Fed hawks are pushing for a rate hike sooner than later in an effort to prevent the economy from "overhearing." This overheating is argued to set the stage for the next recession.
...
Bottom Line: The Fed thinks the costs of undershooting their estimate of the natural rate of unemployment outweigh the benefits. I am skeptical they are doing the calculus right on this one. I would be more convinced they had it right if I sensed that placed greater weight on the possibility that they are too pessimistic about the natural rate. I would be more convinced if they were already at their inflation target. And I would be more convinced if their analysis of why tightening cycles end in recessions was a bit more introspective. Was it destiny or repeated policy error? But none of these things seem to be true.

by Calculated Risk on 9/07/2016 04:33:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

Inventory was up 3.4% year-over-year in August.  This is the sixth consecutive month with a YoY increase in inventory, following fifteen consecutive months of YoY declines in Phoenix.  This could be a significant change.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in August were up 13.6% year-over-year.

2) Cash Sales (frequently investors) were down to 20.3% of total sales.

3) Active inventory is now up 3.4% year-over-year.  

More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.

In 2015, with falling inventory, prices increased a little faster -  Prices were up 6.3% in 2015 according to Case-Shiller.

Now inventory is increasing a little again, and - if this trend continues in Phoenix - price increases will probably slow in Phoenix.    Prices in Phoenix are up 1.6% through June (about a 3.2% annual rate) - slower than in 2015.

August Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash Sales	Percent Cash	Active Inventory	YoY Change Inventory
Aug-08	5,660	---	1,004	17.7%	53,5691	---
Aug-09	8,008	41.5%	2,849	35.6%	38,085	-28.9%
Aug-10	7,358	-8.1%	3,129	42.5%	44,307	16.3%
Aug-11	8,712	18.4%	3,953	45.4%	26,983	-39.1%
Aug-12	7,574	-13.1%	3,382	44.7%	20,934	-22.4%
Aug-13	7,055	-6.9%	2,409	34.1%	21,444	2.4%
Aug-14	6,431	-8.8%	1,621	25.2%	26,138	21.9%
Aug-15	7,023	9.2%	1,588	22.6%	22,554	-13.7%
Aug-16	7,975	13.6%	1,616	20.3%	23,318	3.4%
1 August 2008 probably includes pending listings