by Calculated Risk on 4/17/2019 10:26:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture Billings Index backslides in March

Following consistently increasing demand for design services for over two years, the Architecture Billings Index (ABI) dipped into negative territory in March, according to a new report today from The American Institute of Architects (AIA).

The ABI score for March was 47.8, down from 50.3 in February. Indicators of work in the pipeline, including inquiries into new projects and the value of new design contracts remained positive.

“Though billings haven’t contracted in a while, it is important to note that it does follow on the heels of a particularly tough late winter period for much of the country,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Many indicators of future work at firms still remain positive, although the pace of growth of design contracts has slowed in recent months.“
...
• Regional averages: South (54.2), Midwest (48.7), West (47.2), Northeast (43.5)

• Sector index breakdown: mixed practice (53.1), commercial/industrial (47.0), institutional (48.9), multi-family residential (47.7)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 47.8 in March, down from 50.3 in February. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index has been positive for 11 of the previous 12 months, suggesting a further increase in CRE investment in 2019.

by Calculated Risk on 4/17/2019 08:41:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $49.4 billion in February, down $1.8 billion from $51.1 billion in January, revised.

February exports were $209.7 billion, $2.3 billion more than January exports. February imports were $259.1 billion, $0.6 billion more than January imports.

Click on graph for larger image.

Exports increased and imports decreased in January.

Exports are 27% above the pre-recession peak and up 2% compared to February 2018; imports are 12% above the pre-recession peak, and down slightly compared to February 2018.

In general, trade has been picking up, although both imports and exports have declined slightly recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $46.89 per barrel in February, up from $42.59 in January, and down from $54.61 in February 2018.

The trade deficit with China decreased to $24.8 billion in February, from $29.3 billion in February 2018.

by Calculated Risk on 4/17/2019 07:00:00 AM

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

Mortgage applications decreased 3.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 12, 2019.

... The Refinance Index decreased 8 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 7 percent higher than the same week one year ago.
...
“Mortgage applications decreased over the week, driven by a decline in refinances. With mortgage rates up for the second week in a row, it’s no surprise that refinancings slid 8 percent and average loan sizes dropped back closer to normal levels,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase activity remained strong and increased slightly, reaching its highest level since April 2010. The spring buying season continues to be robust, with activity more than 7 percent higher than a year ago and up year-over-year for the ninth straight week.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.44 percent from 4.40 percent, with points decreasing to 0.42 from 0.47 (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.

Once mortgage rates fell more than 50 bps from the highs of last year, a number of recent buyers were able to refinance.  But it would take another significant decrease in rates to see further refinance activity.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 7% year-over-year.

by Calculated Risk on 4/16/2019 09:17:00 PM

Wednesday:
• At 7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Trade Balance report for February from the Census Bureau. The consensus is the trade deficit to be $53.7 billion.  The U.S. trade deficit was at $51.1 billion in January.

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

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 4/16/2019 12:19:00 PM

The CAR reported: California home sales, median price moderate in March, C.A.R. reports

The lowest interest rates in more than a year boosted California’s housing market and kept home sales level in March after an exceptionally strong performance the previous month, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 397,210 units in March, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2019 if sales maintained the March pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

March’s sales figure was down 0.2 percent from the revised 398,040 level in February and down 6.3 percent from home sales in March 2018 of 423,990.

“The lowest interest rates in more than a year gave would-be buyers the confidence to enter the housing market and provided a much-needed push to jump-start the spring homebuying season,” said C.A.R. President Jared Martin. “Pending sales also showed healthy improvement in March, which suggests a brighter market outlook could be in place in the second quarter.”
...
Active listings continued to climb from the prior year, increasing 13.4 percent from last March. It was the 12th consecutive month active listings rose year-over-year and the ninth month in a row they grew double digits from the prior year. The pace of increase, however, was the slowest since July 2018, and the growth rate has been decelerating since December 2018.

The Unsold Inventory Index (UII), which is a ratio of inventory over sales, improved on a year-over-year basis but decreased on a month-to-month basis. The Unsold Inventory Index was 3.6 months in March, down from 4.6 months in February but up from 3.0 months in March 2018. The index measures the number of months it would take to sell the supply of homes on the market at the current sales rate. The jump in the UII from a year ago can be attributed to the moderate sales decline and the sharp increase in active listings.
emphasis added

Here is some inventory data from the NAR and CAR (ht Tom Lawler).   Note that the YoY increase has been slowing in both California and Nationally.

YOY % Change, Existing SF Homes for Sale
	NAR (National)	CAR (California)
Sep-17	-8.4%	-11.2%
Oct-17	-10.4%	-11.5%
Nov-17	-9.7%	-11.5%
Dec-17	-11.5%	-12.0%
Jan-18	-9.5%	-6.6%
Feb-18	-8.6%	-1.3%
Mar-18	-7.2%	-1.0%
Apr-18	-6.3%	1.9%
May-18	-5.1	8.3%
Jun-18	-0.5%	8.1%
Jul-18	0.0%	11.9%
Aug-18	2.1%	17.2%
Sep-18	1.1%	20.4%
Oct-18	2.8%	28%
Nov-18	4.2%	31%
Dec-18	4.8%	30.6%
Jan-19	4.6%	27%
Feb-19	3.1%	19.2%
Mar-19	NA	13.4%

by Calculated Risk on 4/16/2019 10:04:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 63 in April, up from 62 in March. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Edges Higher in April

Builder confidence in the market for newly-built single-family homes rose one point to 63 in April, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the low 60s for the past three months.

“Builders report solid demand for new single-family homes but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

“Ongoing job growth, favorable demographics and a low-interest rate environment will help to modestly spark sales growth in the near term,” said NAHB Chief Economist Robert Dietz. “However, supply-side headwinds that are putting upward pressure on housing costs will limit more robust growth in the housing market.”
…
The HMI index gauging current sales conditions increased one point to 69, and the component measuring traffic of prospective buyers rose three points to 47. The measure charting sales expectations in the next six months fell one point to 71.

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a three-point gain to 51, the Midwest increased two points to 53, and the South was up one point to 67. The West remained unchanged at 69.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was at the consensus forecast.

by Calculated Risk on 4/16/2019 09:35:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production edged down 0.1 percent in March after edging up 0.1 percent in February; for the first quarter as a whole, the index slipped 0.3 percent at an annual rate. Manufacturing production was unchanged in March after declining in both January and February. The index for utilities rose 0.2 percent, while mining output moved down 0.8 percent. At 110.2 percent of its 2012 average, total industrial production was 2.8 percent higher in March than it was a year earlier. Capacity utilization for the industrial sector decreased 0.2 percentage point in March to 78.8 percent, a rate that is 1.0 percentage point below its long-run (1972–2018) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 12.1 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.8% is 1.0% below the average from 1972 to 2017 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased in March to 109.7. This is 27% above the recession low, and 4.6% above the pre-recession peak.

The decrease in industrial production and decrease in capacity utilization were below consensus.

by Calculated Risk on 4/15/2019 07:03:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Highest in More Than 3 Weeks

Mortgage rates continued higher to start the week, following a relatively sharp increase on Friday. … This brings the average lender to the highest levels seen since before the Fed's rate-friendly announcement back on March 20th. [30YR FIXED - 4.25%]
emphasis added

Tuesday:
• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for March. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 79.2%.

• At 10:00 AM, The April NAHB homebuilder survey. The consensus is for a reading of  63, up from 62.  Any number above 50 indicates that more builders view sales conditions as good than poor.

by Calculated Risk on 4/15/2019 04:11:00 PM

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

The Arizona Regional Multiple Listing Service (ARMLS) reports ("Stats Report"):

1) Overall sales declined to 8,344 in March, from 9,402 in March 2018. Sales were UP 30.2% from February 2019, but down 11.3% from March 2018.

2) Active inventory was at 18,182, up from 16,645 in March 2018. This is up 9.2% year-over-year.  This is the fifth consecutive month with a YoY increase in active inventory.

The last five months - with a YoY increase - followed twenty-four consecutive months with a YoY decrease in inventory in Phoenix.

Months of supply decreased from 3.63 in February to 2.78 in March. This is still low.

by Calculated Risk on 4/15/2019 01:43:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on April 14, 2019:

• Oil rigs rose 2, to 833

• Horizontal oil rigs gave back almost their entire gains of last week, -7 to 727

• The Permian gave back 3 of last week’s 8 gains in horizontal oil rig adds: -3 to 423

• Last week’s bottom for the mini-cycle is holding, but just barely

Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.