by Calculated Risk on 6/05/2019 08:19:00 AM

From ADP:

Private sector employment increased by 27,000 jobs from April to May according to the May ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
“Following an overly strong April, May marked the smallest gain since the expansion began,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Large companies continue to remain strong as they are better equipped to compete for labor in a tight labor market.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

This was well below the consensus forecast for 175,000 private sector jobs added in the ADP report. 

The BLS report will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in May.

by Calculated Risk on 6/05/2019 07:00:00 AM

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

Mortgage applications increased 1.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 31, 2019. This week’s results included an adjustment for the Memorial Day holiday.

... The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 0.5 percent higher than the same week one year ago.
...
“Mortgage rates dropped to their lowest level since the first week of 2018, driven by increasing concerns regarding the ongoing trade tensions with China and Mexico,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Some borrowers, particularly those with larger loans, jumped on the opportunity to refinance, bringing the index and average refinance loan size to their highest levels since early April. Additionally, refinances for FHA and VA loans jumped by 11 percent.”

Added Fratantoni, “Coming out of the Memorial Day holiday, and likely impacted by the financial market volatility caused by the trade tensions, purchase application volume declined for the week. Potential homebuyers may be more cautious given the heightened economic uncertainty.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.23 percent from 4.33 percent, with points decreasing to 0.33 from 0.42 (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 a further decrease in rates to see a further increase in refinance activity.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 0.5% year-over-year.

by Calculated Risk on 6/04/2019 07:53:00 PM

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

• At 8:15 AM, The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 175,000 payroll jobs added in May, down from 175,000 added in April.

• At 10:00 AM, the ISM non-Manufacturing Index for May.   The consensus is for a reading of 55.7, up from 55.5.

• 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 6/04/2019 04:08:00 PM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 27% from the peak, and is increasing again (up 9.7% from low). The number of salesperson's licenses has increased to October 2004 levels.

Brokers' licenses are off 14.3% from the peak and have fallen to December 2005 levels, and are still slowly declining (down 1% year-over-year).

Click on graph for larger image.

We are seeing a pickup in Real Estate licensees in California, although the number of Brokers is still declining.

by Calculated Risk on 6/04/2019 02:04:00 PM

The BEA released their estimate of May vehicle sales this morning. The BEA estimated sales of 17.31 million SAAR in May 2019 (Seasonally Adjusted Annual Rate), up 5.9% from the April sales rate, and up slightly from May 2018.

Sales in 2019 are averaging 16.8 million (average of seasonally adjusted rate), down 1.9% compared to the same period in 2018.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and an estimate for May (red).

This was below the consensus forecast for April.

A small decline in sales to date this year isn't a concern - I think sales will move mostly sideways at near record levels.

This means the economic boost from increasing auto sales is over (from the bottom in 2009, auto sales boosted growth every year through 2016).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate of 17.31 million SAAR.

by Calculated Risk on 6/04/2019 09:58:00 AM

From Fed Chair Jerome Powell: Opening Remarks

I’d like first to say a word about recent developments involving trade negotiations and other matters. We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective. My comments today, like this conference, will focus on longer-run issues that will remain even as the issues of the moment evolve.

by Calculated Risk on 6/04/2019 08:37:00 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 Reports April Home Prices Increased by 3.6% Year Over Year

CoreLogic® ... today released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for April 2019, which shows home prices rose both year over year and month over month. Home prices increased nationally by 3.6% from April 2018. On a month-over-month basis, prices increased by 1% in April 2019. (March 2019 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results each month.)

Looking ahead, after several months of moderation in early 2019, the CoreLogic HPI Forecast indicates home prices will begin to pick up and increase by 4.7% from April 2019 to April 2020. On a month-over-month basis, home prices are expected to decrease by 0.3% from April 2019 to May 2019. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

“The pickup in sales between March and April, has helped to counter the recent slowing in annual home-price growth,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Mortgage rates are 0.6 percentage points below what they were one year ago and incomes are up, which has improved affordability for buyers. However, price growth has remained the highest for lower-priced homes, constraining housing choices for first-time buyers.”
emphasis added

CR Note: The CoreLogic YoY increase had been in the 5% to 7% range for several years, before slowing last year. The slight pickup in the YoY appreciation is the first "acceleration" since March 2018.

The year-over-year comparison has been positive for more than seven years since turning positive year-over-year in February 2012.

by Calculated Risk on 6/03/2019 07:38:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Continue to Plummet

Mortgage rates dropped quickly again today, easily hitting the lowest levels since late 2017 for the average lender. [Today's Most Prevalent Rates 30YR FIXED - 3.875%]
emphasis added

Tuesday:
• All day, Light vehicle sales for May. The consensus is for light vehicle sales to be 16.9 million SAAR in April, up from 16.4 million in April (Seasonally Adjusted Annual Rate).

• At 9:55 AM, Speech by Fed Chair Jerome Powell, Opening Remarks, Monetary Policy Strategy, Tools, and Communication Practices, At the Conference on Monetary Policy Strategy, Tools, and Communication Practices (A Fed Listens Event), Federal Reserve Bank of Chicago, Chicago, Illinois (Watch here)

• At 10:00 AM, Corelogic House Price index for April.

by Calculated Risk on 6/03/2019 03:00:00 PM

Here is another monthly update on framing lumber prices.   Lumber prices declined from the record highs in early 2018, and are now down almost 50% year-over-year.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through May 31, 2019 (via NAHB), and 2) CME framing futures.

Click on graph for larger image in graph gallery.

Right now Random Lengths prices are down 44% from a year ago, and CME futures are  down 49% year-over-year.

There is a seasonal pattern for lumber prices, and usually prices will increase in the Spring, and peak around May, and then bottom around October or November - although there is quite a bit of seasonal variability.

The trade war is a factor with reports that lumber exports to China have declined by 40% since last September.

by Calculated Risk on 6/03/2019 11:59:00 AM

From the Census Bureau reported that overall construction spending was mostly unchanged in April:

Construction spending during April 2019 was estimated at a seasonally adjusted annual rate of $1,298.5 billion, nearly the same as the revised March estimate of $1,299.2 billion. The April figure is 1.2 percent below the April 2018 estimate of $1,314.7 billion.

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $954.0 billion, 1.7 percent below the revised March estimate of $970.4 billion. ...

In April, the estimated seasonally adjusted annual rate of public construction spending was $344.6 billion, 4.8 percent above the revised March estimate of $328.7 billion.
emphasis added

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending had been increasing - but turned down in the 2nd half of 2018 - and is now 26% below the bubble peak.

Non-residential spending is 10% above the previous peak in January 2008 (nominal dollars).

Public construction spending is 6% above the previous peak in March 2009, and 32% above the austerity low in February 2014.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is down 11%. Non-residential spending is up slightly year-over-year. Public spending is up 15% year-over-year.

This was below consensus expectations, however spending for February and March  were revised up (mostly public spending).