by Calculated Risk on 11/08/2018 01:01:00 PM

From Dodge Data Analytics: Dodge Momentum Index Declines in October

The Dodge Momentum Index moved 4.2% lower in October to 150.5 (2000=100) from the revised September reading of 157.0. 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. October’s shortfall was the third consecutive monthly decline and the result of losses in both components of the Momentum Index. The commercial component fell by 4.9% from September to October, while the institutional component dropped 3.1%. The commercial component has, in fact, been the impetus behind the recent string of declines in the overall index. This is consistent with the view that the commercial building sector is approaching a peak and should begin to gradually ease back over the coming year. The institutional component, meanwhile, has been relatively more stable due to the availability of public funds for projects such as schools and airport terminals.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 150.5 in October, down from 157.0 in September.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year".

by Calculated Risk on 11/08/2018 10:35:00 AM

From the MBA: Mortgage Delinquencies Up Slightly in Third Quarter of 2018

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 4.47 percent of all loans outstanding at the end of the third quarter of 2018, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate was up 11 basis points from the previous quarter, but down 41 basis points from one year ago. The percentage of loans on which foreclosure actions were started dropped one basis point from the last quarter to 0.23 percent – its lowest level since the fourth quarter of 1985.

“Despite the small uptick this quarter, the healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories,” said Marina Walsh, Vice President of Industry Analysis at MBA. “Unemployment is at its lowest level since 1969, wages have grown 3.1 percent year-over-year – the biggest jump in almost a decade – and job growth is averaging over 212,000 jobs per month thus far.”

Walsh notes that natural disasters are a major factor in determining whether borrowers make timely mortgage payments. Specifically, there were significant delinquency increases in states adversely impacted by Hurricane Florence and Tropical Storm Gordon, including North Carolina, South Carolina, Mississippi, Arkansas and Alabama. Hurricane Michael, which made landfall after the survey reporting period, will not be reflected until MBA’s fourth quarter survey. Walsh believes it will likely take several quarters for the most recent storms’ effects on the survey results to dissipate.

“The impact of the August and September 2017 hurricanes on several states, particularly Texas and Florida, continues to retreat,” said Walsh. “Primarily because of the declining effects of last fall’s hurricane-related spike, the overall mortgage delinquency rate in the third quarter was down 41 basis points on a year-over-year basis.”
...
In relation to the second quarter of 2018, the 30-day delinquency rate increased 20 basis points to 2.51 percent, the 60-day delinquency rate increased 2 basis points to 0.77 percent, and the 90-day delinquency bucket dropped 11 basis points to 1.18 percent.
...
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the third quarter was 0.99 percent, down 6 basis points from the second quarter of 2018 and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the second quarter of 2006.
...
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.13 percent – a decrease of 17 basis points from last quarter – and a decrease of 39 basis points from last year.
emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.

The percent of loans delinquent increased slightly in Q3, mostly due to the impact of Hurricane Florence.

The percent of loans in the foreclosure process continues to decline, and is close to normal levels.

Note: Delinquencies will probably increase further in Q4 due to Hurricane Michael.

by Calculated Risk on 11/08/2018 08:34:00 AM

The DOL reported:

In the week ending November 3, the advance figure for seasonally adjusted initial claims was 214,000, a decrease of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 214,000 to 215,000. The 4-week moving average was 213,750, a decrease of 250 from the previous week's revised average. The previous week's average was revised up by 250 from 213,750 to 214,000.
emphasis added

The previous week was revised up.

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 213,750.

This was slightly higher than the consensus forecast. The low level of claims suggest few layoffs.

by Calculated Risk on 11/07/2018 08:27:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 213 thousand initial claims, down from 214 thousand the previous week.

• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.

by Calculated Risk on 11/07/2018 04:46:00 PM

As expected, the deficit is increasing significantly.

From the CBO: Monthly Budget Review: Summary for Fiscal Year 2018

In fiscal year 2018, which ended on September 30, the federal budget deficit totaled $779 billion—$113 billion more than the shortfall recorded in 2017. The deficit increased to 3.8 percent of the nation’s gross domestic product (GDP) in 2018, up from 3.5 percent in 2017 and 3.2 percent in 2016. Outlays in 2018 were reduced by a shift in the timing of certain payments; those payments were instead made in fiscal year 2017 because October 1, 2017 (the first day of fiscal year 2018), fell on a weekend. If not for that shift, the deficit in 2018 would have been $823 billion, or 4.1 percent of GDP.

CBO is projecting the deficit next year will probably be close to $1 Trillion (about 4.6% of GDP).

by Calculated Risk on 11/07/2018 02:59:00 PM

Towards the end of each year I collect some housing forecasts for the following year.  This is just a beginning (I'll gather many more).

The table below shows a few forecasts for 2019:

From Fannie Mae: Housing Forecast: October 2018

From Freddie Mac: Freddie Mac October Forecast: Economic Growth and Home Sales Slow as Mortgage Rates Rise

From NAHB: Economic and Housing Forecasts

From NAR: Economic & Housing Market Outlook November 2018

Note: For comparison, new home sales in 2018 will probably be around 623 thousand, and total housing starts around 1.265 million.

Housing Forecasts for 2019
	New Home Sales (000s)	Single Family Starts (000s)	Total Starts (000s)	House Prices1
Fannie Mae	679	963	1,303	4.1%2
Freddie Mac			1,350	4.6%2
NAHB	639	885	1,268
NAR	623			3.1%3
1Case-Shiller unless indicated otherwise 2FHFA Purchase-Only Index 3NAR Median Prices

by Calculated Risk on 11/07/2018 10:11:00 AM

The Northwest Multiple Listing Service reported Slower Market Means Homebuyers Have "Newfound Ability to Negotiate"

Seven months of steadily rising housing inventory reversed course in October when Northwest Multiple Listing Service brokers added the fewest new listings since February, according to a new report. MLS members believe the onset of wintry weather and transition to the holiday season are factors, but suggested the slower pace also signals improving conditions for house-hunters.

"After months of inventory growth that more than quadrupled the number of homes buyers have to choose from, things got back on a seasonal track with new listings and total supply falling in October," said Robert Wasser, a director with Northwest MLS, when comparing those metrics with September.

"Buyers are catching on to their newfound ability to negotiate. For the first time since 2012, closed sales system-wide rose from September to October," noted Wasser, a branch manager with Windermere Real Estate in Bellevue.
emphasis added

The press release is for the Northwest. In Seattle, sales were down 17.5% year-over-year, and inventory was up 102% year-over-year. This is another market with inventory increasing sharply year-over-year, but months-of-supply in Seattle is still on the low side at 2.4 months.

by Calculated Risk on 11/07/2018 07:00:00 AM

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

Mortgage applications decreased 4.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 2, 2018.

... The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier to the lowest level since November 2016. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 0.2 percent lower than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 5.15 percent from 5.11 percent, with points increasing to 0.51 from 0.50 (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 will not pick up significantly unless mortgage rates fall 50 bps or more from the recent level.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 0.2% year-over-year.

by Calculated Risk on 11/06/2018 03:26:00 PM

If you read my site, you know I'm focused on the facts.   Donald Trump has always been at war with the data. From 2016:

Trump says he thinks the US unemployment rate is close to 20 percent and not the 5 percent reported by the Labor Department.

Anyone who believes the 5 percent is a “dummy,” he said.

When asked yesterday about his dishonest and racist advertisements, Donald Trump said they are "effective". He doesn't care about the truth, just his version of "winning".

Note: Trump lies about almost everything (see: Daniel Dale's Trump Checks).

The only way to stop the racist and hateful rhetorical and frequent lies is to show Mr. Trump that they are not "effective".

And that means to vote for Democrats for the House and Senate.

Also, the economy will be fine if the Democrats control the House and / or Senate.  That is just fear mongering.

So Vote.  And Vote for Democrats.   And make sure your friends and neighbors vote.

by Calculated Risk on 11/06/2018 02:22:00 PM

An interesting article by Nancy Sarnoff at the Houston Chronicle: Builders shrink home sizes to appeal to more buyers (ht MV)

After years of catering to move-up buyers with substantial budgets, builders are introducing new models with lower price tags and smaller footprints — oftentimes the size of a two-bedroom apartment. They’re doing so by building on smaller lots, skimping on high-end materials, such as granite and brick, and designing floor plans that eliminate formal dining and living rooms, foyers and other spaces that often go unused.
...
These developments have helped shrink the size of the average Houston-area home to 2,846 square feet from 3,084 in 2015, according to data from Metrostudy, a consulting firm for the homebuilding industry.
…
When the housing market recovered ... builders began targeting buyers who could spend big on large homes. Few offered floor plans under about 1,900 square feet.

CR Note: This is good to see and makes sense. Some smaller homes are a key for further increases in new home sales. It made sense for builders to target higher end homes following the housing bust, but now builders also need to offer more smaller homes and lower prices.