by Calculated Risk on 1/10/2019 07:33:00 PM

Friday:
• At 8:30 AM ET, The Consumer Price Index for November from the BLS. The consensus is for 0.1% decrease in CPI, and a 0.2% increase in core CPI.

by Calculated Risk on 1/10/2019 04:48:00 PM

Here a statement from the BLS: Does the partial government shutdown impact BLS data or release dates?

by Calculated Risk on 1/10/2019 01:02:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 0.76% in November, from 0.79% in October. The serious delinquency rate is down from 1.12% in November 2017.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

This is the lowest serious delinquency rate for Fannie Mae since August 2007.

Freddie Mac reported that the Single-Family serious delinquency rate in November was 0.70%, down from 0.71% in October. Freddie's rate is down from 0.95% in November 2017.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

This is the lowest serious delinquency rate for Freddie Mac since December 2007.

Click on graph for larger image

For Fannie, by vintage, for loans made in 2004 or earlier (3% of portfolio), 2.62% are seriously delinquent. For loans made in 2005 through 2008 (5% of portfolio), 4.50% are seriously delinquent, For recent loans, originated in 2009 through 2018 (92% of portfolio), only 0.33% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

The increase late last year in the delinquency rate was due to the hurricanes - there were no worries about the overall market.

I expect the serious delinquency rate will probably decline to 0.5 to 0.7 percent or so to a cycle bottom.  But this is close.

by Calculated Risk on 1/10/2019 10:48:00 AM

Earlier I wrote: The Impact of the Government Shutdown on the January Employment Report

Here are some clarifications (based on further information from the BLS):

As I wrote before, if the government shutdown continues through this coming week, then the unemployment rate in the January report will be negatively impacted. This is a key week since it is the reference week for the BLS report (contains the 12th of the month). If the shutdown continues through next weekend, Federal employees who are on furlough will be counted as unemployed in the January report (CPS, Household survey).

If the government shutdown continues, then the unemployment rate will probably bump up to 4.0% or 4.1% in the January report.

As far as the headline jobs number from the CES (Establishment survey), the jobs were people who are working without pay will still be counted. For the furloughed employees, it is different. Since they are not being paid, the positions will not be counted - UNLESS - legislation is passed that provides for back pay.    If the legislation is passed, even after the reference week, the furloughed positions will be counted in the CES (headline jobs number). This is what has happened in previous shutdowns.

So, for the unemployment number, it depends on what happens this week.

For the headline jobs number, it depends on what legislation is eventually passed.

by Calculated Risk on 1/10/2019 08:32:00 AM

The DOL reported:

In the week ending January 5, the advance figure for seasonally adjusted initial claims was 216,000, a decrease of 17,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 231,000 to 233,000. The 4-week moving average was 221,750, an increase of 2,500 from the previous week's revised average. The previous week's average was revised up by 500 from 218,750 to 219,250.
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 increased to 221,750.

This was lower than the consensus forecast.

by Calculated Risk on 1/09/2019 07:11:00 PM

Note: I'd expect a bump up in unemployment claims related to the government shutdown, but the consensus is expecting claims to decline.

Thursday:
• At 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for 222 thousand initial claims, down from 231 thousand the previous week.

• At 8:30 AM, The Producer Price Index for December from the BLS.

• At 12:45 PM, Discussion, Fed Chair Jerome Powell, At the Economic Club of Washington, D.C., Washington, D.C.

by Calculated Risk on 1/09/2019 04:09:00 PM

Houston set a record for sales in 2018. However, the year ended soft, and with lower oil prices - in addition to higher mortgage rates - 2019 will probably be a more difficult year in Houston.

From the HAR: Sluggish December sales and limited housing supply can’t slow down overall real estate activity for the year

The Houston real estate market set new records in 2018 despite uncertainty across the region when the year began, with many survivors of Hurricane Harvey still rebuilding their homes and lives. Single-family home sales for the full year surpassed 2017’s record volume by nearly four percent. However, as 2019 gets underway, housing inventory remains constrained – still sitting below its more balanced pre-Harvey levels.

According to the Houston Association of Realtors’ (HAR) 2018 annual report, single family home sales rose 3.8 percent to 82,177 while sales of all property types totaled 98,323, a 3.7-percent increase over 2017’s record volume. Total dollar volume for full-year 2018 jumped 21.5 percent to a record-breaking $28 billion.

“We entered 2018 cautiously optimistic that the Houston real estate market would continue the resilience it showed after Hurricane Harvey, but no one that I know anticipated it being a record year,” said HAR Chair Shannon Cobb Evans with Heritage Texas Properties. “Now, as we look ahead to the new year, federal workers are on edge about the ongoing government shutdown and how that might hurt their cash flow, which could affect housing. And our market is still challenged in terms of housing inventory, which is something that truly needs to improve in 2019 to ensure that real estate remains a vibrant player in the overall Houston economy."

December single-family home sales fell 4.1 percent to 6,543 versus December 2017. Only two housing segments saw positive sales activity, with the strongest taking place in the luxury market – that is, homes priced from $750,000 and up. Total property sales for the month declined 4.6 percent to 7,709.
...
Total active listings, or the total number of available properties, jumped 13.3 percent from December 2017 to 37,554.

Single-family homes inventory grew slightly from a 3.2-months supply to 3.5 months.
emphasis added

by Calculated Risk on 1/09/2019 02:10:00 PM

From the Fed: Minutes of the Federal Open Market Committee, December 18-19, 2018. A few excerpts:

With regard to the outlook for monetary policy beyond this meeting, participants generally judged that some further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term. With an increase in the target range at this meeting, the federal funds rate would be at or close to the lower end of the range of estimates of the longer-run neutral interest rate, and participants expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier. Against this backdrop, many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming. A number of participants noted that, before making further changes to the stance of policy, it was important for the Committee to assess factors such as how the risks that had become more pronounced in recent months might unfold and to what extent they would affect economic activity, and the effects of past actions to remove policy accommodation, which were likely still working their way through the economy.

Participants emphasized that the Committee's approach to setting the stance of policy should be importantly guided by the implications of incoming data for the economic outlook. They noted that their expectations for the path of the federal funds rate were based on their current assessment of the economic outlook. Monetary policy was not on a preset course; neither the pace nor the ultimate endpoint of future rate increases was known. If incoming information prompted meaningful reassessments of the economic outlook and attendant risks, either to the upside or the downside, their policy outlook would change. Various factors, such as the recent tightening in financial conditions and risks to the global outlook, on the one hand, and further indicators of tightness in labor markets and possible risks to financial stability from a prolonged period of tight resource utilization, on the other hand, were noted in this context.
emphasis added

by Calculated Risk on 1/09/2019 11:59:00 AM

In 2018, no FDIC insured banks failed. This was down from 8 in 2017. This is only the third time since the FDIC was founded in 1933 that there were no bank failures in a calendar year.

The great recession / housing bust / financial crisis related failures are behind us.

The first graph shows the number of bank failures per year since the FDIC was founded in 1933.

Click on graph for larger image.

Typically about 7 banks fail per year.

This was the first year with no failures since 2006.

Note: There were a large number of failures in the '80s and early '90s. Many of these failures were related to loose lending, especially for commercial real estate.  Also, a large number of the failures in the '80s and '90s were in Texas with loose regulation.

Even though there were more failures in the '80s and early '90s then during the recent crisis, the recent financial crisis was much worse (larger banks failed and were bailed out).

The second graph includes pre-FDIC failures. In a typical year - before the Depression - 500 banks would fail and the depositors would lose a large portion of their savings.

Then, during the Depression, thousands of banks failed. Note that the S&L crisis and recent financial crisis look small on this graph.

by Calculated Risk on 1/09/2019 09:30:00 AM

Black Knight released their Mortgage Monitor report for November today. According to Black Knight, 3.71% of mortgages were delinquent in November, down from 4.55% in November 2017. Black Knight also reported that 0.52% of mortgages were in the foreclosure process, down from 0.66% a year ago.

This gives a total of 4.23% delinquent or in foreclosure.

Press Release: Black Knight: 550,000 Homeowners Regain Incentive to Refinance as Interest Rates Fall Slightly; Refinanceable Population Still Down Nearly 50 Percent from Last Year

Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon its industry-leading loan-level mortgage performance database. As mortgage interest rates have dropped from multi-year highs in recent weeks, the number of homeowners with mortgages who could likely qualify for and see at least a 0.75 percent interest rate reduction by refinancing has increased by approximately 550,000. Ben Graboske, executive vice president of Black Knight’s Data & Analytics division, explained that although this number represents a relatively small share of outstanding mortgages, it is a sizeable increase from recent lows in the size of the refinanceable population.

“As recently as last month, the size of the refinanceable population fell to a 10-year low as interest rates hit multi-year highs,” said Graboske. “Rates have since pulled back, with the 30-year fixed rate falling to 4.55 percent as of the end of December. As a result, some 550,000 homeowners with mortgages who would not benefit from refinancing have now seen their interest rate incentive to refinance return. Even so, at 2.43 million, the refinanceable population is still down nearly 50 percent from last year. Still, the increase does represent a 29 percent rise from that 10-year low, which may provide some solace to a refinance market still reeling from multiple quarters of historically low – and declining – volumes.

“In fact, through the third quarter of 2018, refinances made up just 36 percent of mortgage originations, an 18-year low. And of course, as refinances decline, the purchase share of the market rises correspondingly. So now, in the most purchase-dominant market we’ve seen this century, we need to ask whether the shift in originations will have any impact on mortgage performance. The short answer, based on historical trends, is that it certainly bears close watching. Refinances have tended to perform significantly better than purchase mortgages in recent years. When we take a look back and apply today’s blend of originations to prior vintages, the impact becomes clear. A market blend matching today's would have resulted in an increase in the number of non-current mortgages by anywhere from two percent in 2017 to more than a 30 percent rise in 2012, when refinances made up more than 70 percent of all lending. As today’s market shifts to a purchase-heavy blend of lending, Black Knight will continue to keep a close eye on the data for signs of how – or if – this impacts mortgage performance moving forward.”

Leveraging the latest data from the Black Knight Home Price Index, the report also finds that flattening home price growth over the last four months has led to the slowest annual appreciation rates in nearly three years.
emphasis added

Click on graph for larger image.

Here is a graph from the Mortgage Monitor that compares Black Knight's estimate of home price appreciation and 30 year mortgage rates.

From Black Knight:

• Home prices were effectively flat M/M (+0.01%) in October, and in fact had been so over the prior four months (+0.01%)

• While fall and winter are typically slow times of the year for home price growth, this is the most tepid 4-month stretch of growth in nearly four years

• Annual home price gains continue to slow, decelerating by 1.3% over the past 8 months, from a 4-year high of 6.7% in February to 5.4% Y/Y in October and slowing rapidly

• Additional near-term pressure may be on the way as affordability hit a new low point as interest rates rose to 4.87% on average in November

• Rates have since pulled back noticeably in December, bringing the average monthly payment to buy the average-priced home down $46 from November's 11-year high

• Even with December's pullback, it still takes $141 more per month (+13%) in principal and interest (assuming 20% down) to purchase the average home than 12 months ago

There is much more in the mortgage monitor.