by Calculated Risk on 6/06/2017 05:23:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Unexpectedly Fall to 2017 Lows (Again)

Mortgage rates unexpectedly fell to new 7-month lows today, following bond market gains in the overnight hours (Asian and European trading sessions).
...
The average lender is now quoting conventional 30yr fixed rates in the high 3% range on top tier scenarios.  The range is fairly wide between lenders as some were better positioned for these market movements than others.  That means the same scenario could see a rate as low as 3.75% at one lender and 4.125% at another with the same closing costs.

It continues to be the case that Thursday's events have the biggest potential to push rates higher or lower.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 6/06/2017 02:43:00 PM

Here is another update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs - and prices are once again near the 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 2017 are up solidly 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 June 2017 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are up 14% from a year ago, and CME futures are up about 17% year-over-year.

by Calculated Risk on 6/06/2017 10:09:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings increased to a series high of 6.0 million on the last business day of April, the U.S. Bureau of Labor Statistics reported today. Over the month, hires decreased to 5.1 million and separations edged down to 5.0 million. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.1 percent and 1.1 percent, respectively. ...

The number of quits edged down to 3.0 million (-111,000) in April.
emphasis added

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

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for April, the most recent employment report was for May.

Click on graph for larger image.


Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in April to 6.044 million from 5.785 million in March.  Job openings are at a new series high.

The number of job openings (yellow) are up 7% year-over-year.

Quits are up 4 year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

This is another solid report.

by Calculated Risk on 6/06/2017 09:28:00 AM

Notes: This CoreLogic House Price Index report is for April. The recent Case-Shiller index release was for March. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 6.9 Percent in April 2017

Home prices nationwide, including distressed sales, increased year over year by 6.9 percent in April 2017 compared with April 2016 and increased month over month by 1.6 percent in April 2017 compared with March 2017, according to the CoreLogic HPI.
...
Mortgage rates in April dipped back to their lowest level since November of last year, spurring home-buying activity,” said Dr. Frank Nothaft, chief economist for CoreLogic. “In some metro areas, there has been a bidding frenzy as multiple contracts are placed on a single home. This has led home-price growth to outpace rent gains. Nationally, home prices were up 6.9 percent over the last year, while rent growth for single-family rental homes recorded a 3 percent rise through April, according to the CoreLogic Single-Family Rental Index.”

“Interest rates on fixed-rate mortgages are down by one-fourth of a percentage point since mid-March, just in time to support the spring home-buying season,” said Frank Martell, president and CEO of CoreLogic. “Some metro areas have low for-sale inventory, short time-on-market trends and homes that sell above the list price. Geographically, gains were strongest in the West with Washington and Utah posting double-digit gains.”
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.6% in April (NSA), and is up 6.9% over the last year.

This index is not seasonally adjusted, and this was another strong month-to-month increase.

The index is still 1.8% below the bubble peak in nominal terms (not inflation adjusted).

The second graph shows the YoY change in nominal terms (not adjusted for inflation).

The YoY increase had been moving sideways over the last two years, but might have picked up recently (the recent pickup could be revised away).

The year-over-year comparison has been positive for over five consecutive years since turning positive year-over-year in February 2012.

by Calculated Risk on 6/06/2017 08:00:00 AM

This is a key distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Despite housing shortage, local home prices and sales keep rising, GLVAR Housing Statistics for May 2017

Despite a shrinking housing supply, the Greater Las Vegas Association of REALTORS® (GLVAR) reported today that local home prices and sales continued to rise.
...
 At the current sales pace, GLVAR President David J. Tina said Southern Nevada now has less a two-month supply of existing homes available for sale. A six-month supply is considered to be a balanced market.
...
... The total number of existing local homes, condos and townhomes sold in May was 4,297, up from 3,349 in May 2016. Compared to one year ago, sales were up 24.8 percent for homes and up 11.4 percent for condos and townhomes.

According to GLVAR, total sales to date in 2017 are 17,963, which includes all homes, condos, townhomes and other residential properties sold through GLVAR’s MLS. These sales continue to outpace 2016, when 41,720 total properties were sold in Southern Nevada. That was more than the 38,577 properties sold during 2015. It was also more total sales than in 2014, but fewer than each year from 2009 through 2013.
...
By the end of May, GLVAR reported 4,972 single-family homes listed for sale without any sort of offer. That’s down 32.4 percent from one year ago. For condos and townhomes, the 630 properties listed without offers in May represented a 71.8 percent drop from one year ago.

For several years, GLVAR has been reporting fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. That trend continued in May, when 3.1 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 compares to 4.5 percent of all sales in May 2016. Another 3.7 percent of all May sales were bank-owned, down from 6.1 percent one year ago.
emphasis added

1) Overall sales were up 28% year-over-year.

2) Active inventory (single-family and condos) is down sharply from a year ago (A very sharp decline in condo inventory).

3) Fewer distressed sales.

by Calculated Risk on 6/05/2017 06:18:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Just Off 7-Month Lows

Mortgage rates were modestly higher today after hitting the lowest levels since early November at the end of last week.  Along with mid-April, this is the second time rates have been in this territory in more than 7 months.  Most prospective borrowers will see very little--if any difference between Friday's rate quotes and today's [30 Year fixed at 4.0%].
...
With rates being driven by financial markets and with investors generally on edge ahead of Thursday's congressional testimony from former FBI Director Comey, it makes sense to Friday's momentum to ebb to some extent.  Thursday should remain a focal point for volatility this week.
emphasis added

Tuesday:
• At 10:00 AM: Job Openings and Labor Turnover Survey for April from the BLS. Jobs openings increased in March to 5.743 million from 5.682 million in February. The number of job openings were down 2% year-over-year, and Quits were up 6% year-over-year.

by Calculated Risk on 6/05/2017 03:07:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 27 May

The U.S. hotel industry reported positive results in the three key performance metrics during the week of 21-27 May 2017, according to data from STR.

In comparison with the week of 22-28 May 2016, the industry recorded the following:

• Occupancy: +0.5% to 70.3%
• Average daily rate (ADR): +2.5% to US$127.47
• Revenue per available room (RevPAR): +3.1% to US$89.67
emphasis added

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

The red line is for 2017, dashed is 2015 (best year on record), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

For hotels, occupancy will increase further during the summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 6/05/2017 11:33:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for April today. According to BKFS, 4.08% of mortgages were delinquent in April, down from 4.24% in April 2016. BKFS also reported that 0.85% of mortgages were in the foreclosure process, down from 1.17% a year ago.

This gives a total of 4.93% delinquent or in foreclosure.

Press Release: Black Knight’s Mortgage Monitor: Q1 2017 Originations Fall 34 Percent, Led By 45 Percent Drop in Refinance Lending; Despite Recent Rate Softening, Home Affordability Remains Near Post-Recession Low

Today, the Data & Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of April 2017. This month, Black Knight looked at Q1 2017 purchase and refinance originations, finding significant quarterly declines in volume among both. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, the declines are rooted in the upward interest rate shift seen in Q4 2016.

“Overall, first lien mortgage originations fell by 34 percent in the first quarter of 2017,” said Graboske. “As expected, the decline was most pronounced in the refinance market, which saw a 45 percent decline from Q4 2016 and were down 20 percent from last year. They also made up a smaller share of overall originations than in the past; just 45 percent of total Q1 originations were refinances vs. 54 percent in Q4 2016. Purchase originations were also down 21 percent from Q4 2016, although the first quarter is historically the calendar-year low for such lending. Purchase lending was up year-over-year, but the three percent annual growth is a marked decline from Q4 2016’s 12 percent, and marks the slowest growth rate Black Knight has observed in more than three years – going back to Q4 2013. At that point in time, interest rates had risen abruptly – very similarly to what we saw at the end of 2016 – and originations slowed considerably. The same dynamic is at work here.

“Likewise, refinance lending among higher-credit-score borrowers, who have largely driven the refinance market these past several years, saw a quarterly decline of 50 percent. As we’ve seen in the past, these borrowers tend to strike quickly and often when interest rate incentives are present, but tend to hold back when the conditions are less favorable. At the other end of the credit spectrum, lower credit borrowers – those with credit scores below 700 – only saw refinance volumes decrease by 24 percent. Again, we saw a similar phenomenon when rates rose in late 2013/early 2014. This is worth noting as we monitor the future performance of 2017 originations. Not only are refinances -- which generally tend to outperform purchase mortgages -- making up a smaller share of the market, but there’s also been a net lowering of average credit scores as well. The average Q1 2017 refinance credit score was 742, down from 751 in Q4 2016, and the lowest average credit score since Q3 2014. Both of these factors could have a dampening factor on mortgage performance, holistically speaking.”
emphasis added

Click on graph for larger image.

This graph from Black Knight shows the refinance volume by credit score.

From Black Knight:

• Higher credit score borrowers (740 and up) saw the greatest decline in refinance activity, with origination volumes declining by 50 percent

• At the other end of the spectrum, refinance lending to lower credit borrowers – those with credit scores below 700 – decreased by 24 percent

• A similar phenomenon was observed in late 2013/early 2014 when interest rates had also risen abruptly, in a very similar fashion to what was observed at the end of 2016

This graph from Black Knight shows the change in refinance origination by credit score. 

From Black Knight:

• Refinances – which generally tend to outperform purchase mortgages – are making up a smaller share of the market, accounting for 45 percent of total Q1 originations vs. 54 percent in Q4 2016

• There’s been a net lowering of average credit scores as well, with the average Q1 refinance credit score coming in at 742, down from 751 in Q4 2016, and the lowest average credit score since Q3 2014

• Both of these factors could have a dampening factor on mortgage performance holistically speaking and are worth noting as we monitor future performance of 2017 originations

There is much more in the mortgage monitor.

by Calculated Risk on 6/05/2017 10:05:00 AM

The April ISM Non-manufacturing index was at 56.9%, down from 57.5% in April. The employment index increased in May to 57.8%, from 51.4%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management:May 2017 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in May for the 89th 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., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 56.9 percent, which is 0.6 percentage point lower than the April reading of 57.5 percent. This represents continued growth in the non-manufacturing sector at a slightly slower rate. The Non-Manufacturing Business Activity Index decreased to 60.7 percent, 1.7 percentage points lower than the April reading of 62.4 percent, reflecting growth for the 94th consecutive month, at a slower rate in May. The New Orders Index registered 57.7 percent, 5.5 percentage points lower than the reading of 63.2 percent in April. The Employment Index increased 6.4 percentage points in May to 57.8 percent from the April reading of 51.4 percent. The Prices Index decreased 8.4 percentage points from the April reading of 57.6 percent to 49.2 percent, indicating prices decreased in May for the first time after 13 consecutive months of increasing. According to the NMI®, 17 non-manufacturing industries reported growth. Although the non-manufacturing sector’s growth rate dipped in May, the sector continues to reflect strength, buoyed by the strong rate of growth in the Employment Index. The majority of respondents’ comments continue to indicate optimism about business conditions and the overall economy."
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 suggests slightly slower expansion in May than in April.

by Calculated Risk on 6/04/2017 07:04:00 PM

Weekend:
• Schedule for Week of June 4, 2017

Monday:
• At 10:00 AM ET, the ISM non-Manufacturing Index for May. The consensus is for index to decrease to 57.0 from 57.5 in April.

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

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

Oil prices were down over the last week with WTI futures at $47.75 per barrel and Brent at $49.95 per barrel.  A year ago, WTI was at $49, and Brent was at $49 - so oil prices are mostly unchanged year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.37 per gallon - a year ago prices were at $2.37 per gallon - so gasoline prices are unchanged year-over-year.