by Calculated Risk on 6/18/2019 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,269,000. This is 0.9 percent below the revised April estimate of 1,281,000 and is 4.7 percent below the May 2018 rate of 1,332,000. Single‐family housing starts in May were at a rate of 820,000; this is 6.4 percent below the revised April figure of 876,000. The May rate for units in buildings with five units or more was 436,000.

Building Permits:
Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,294,000. This is 0.3 percent above the revised April rate of 1,290,000, but is 0.5 percent below the May 2018 rate of 1,301,000. Single‐family authorizations in May were at a rate of 815,000; this is 3.7 percent above the revised April figure of 786,000. Authorizations of units in buildings with five units or more were at a rate of 442,000 in May.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) were up in May compared to April.   Multi-family starts were up 14% year-over-year in May.

Multi-family is volatile month-to-month, and  has been mostly moving sideways the last few years.

Single-family starts (blue) decreased in May, and were down 12% year-over-year.

The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then eventual recovery (but still historically low).

Total housing starts in May were above expectations, and starts for March and April were revised up.

I'll have more later …

by Calculated Risk on 6/17/2019 07:16:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Stay Flat, But Risks Will Increase From Here

Mortgage rates were only modestly higher today. Most lenders were still quoting the same rates compared to Friday with the only difference being slightly higher upfront costs. This means the rate at the top of the average mortgage quote is still within striking distance of the lowest levels since September 2017. [Most Prevalent Rates 30YR FIXED - 3.875% - 4.0%]
emphasis added

Tuesday:
• At 8:30 AM ET: Housing Starts for May. The consensus is for 1.240 million SAAR, up from 1.235 million SAAR in April.

by Calculated Risk on 6/17/2019 12:20:00 PM

The CAR reported: Lower interest rates perk up May home sales as median price reaches another high

California’s median home price edged higher to another peak for the second straight month as lower interest rates helped bolster home sales in May, 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 406,960 units in May, 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 May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

May’s sales figure was up 2.6 percent from the 396,780 level in April and down 0.6 percent from home sales in May 2018 of 409,270. Sales rose above the 400,000 benchmark for the first time since July 2018 and reached the highest level in 11 months, while the year-to-year sales dip was the smallest in 13 months.

“The lowest interest rates in nearly a year and a half, no doubt, have elevated housing demand as monthly mortgage payments have become more manageable to home buyers in general,” said C.A.R. President Jared Martin. “The state’s housing market remains soft, however, as home sales continue to lag behind last year’s level for more than a year now.”
...
Active listings, which have been decelerating since December 2018, continued to climb from the prior year, increasing 7.4 percent from a year ago. It was the 14th consecutive year-over-year increase but also the first single-digit gain since last June.

The Unsold Inventory Index (UII), which is a ratio of inventory over sales, was lower than April’s level, suggesting that the typical seasonal pattern of rising home sales are beginning to play out this year. The Unsold Inventory Index was 3.2 months in May, down from 3.4 months in April but up from 3.0 months in May 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 mild 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	3.2%	19.2%
Mar-19	2.4%	13.4%
Apr-19	1.7%	10.8%
May-19	NA	7.4%

by Calculated Risk on 6/17/2019 11:25:00 AM

The consensus is that there will no change in policy at the FOMC meeting this week, but that the Fed might take a more dovish tone (and possibly even remove the word "patience") - and possibly hint at a rate cut later this year (perhaps as insurance).

Note that Goldman Sachs chief economist Jan Hatzius wrote today: "A Skeptical View of Insurance Cuts". Hatzius thinks the Fed will remain data dependent (any rate cut will be based on the data), and not cut rates as "insurance".

There might some revisions in the economic projections, especially for inflation.

Here are the March FOMC projections.

Q1 real GDP growth was at 3.1% annualized, and most analysts are projecting around 2% in Q2.  So the GDP projections will probably be little changed.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2019	2020	2021
Mar 2019	1.9 to 2.2	1.8 to 2.0	1.7 to 2.0
Dec 2018	2.3 to 2.5	1.8 to 2.0	1.5 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.6% in May.  The unemployment rate projection for 2019 will probably be unchanged or revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2019	2020	2021
Mar 2019	3.6 to 3.8	3.6 to 3.9	3.7 to 4.1
Dec 2018	3.5 to 3.7	3.5 to 3.8	3.6 to 3.9

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2019, PCE inflation was up 1.5% from April 2018.  This was below the projected range for 2019 and PCE inflation might be revised down for 2019.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2019	2020	2021
Mar 2019	1.8 to 1.9	2.0 to 2.1	2.0 to 2.1
Dec 2018	1.8 to 2.1	2.0 to 2.1	2.0 to 2.1

PCE core inflation was up 1.6% in April year-over-year.  So the projection for core PCE for 2019 will probably be revised down.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2019	2020	2021
Mar 2019	1.9 to 2.0	2.0 to 2.1	2.0 to 2.1
Dec 2018	2.0 to 2.1	2.0 to 2.1	2.0 to 2.1

In general, GDP and the unemployment rate have been at or better than the March projections, however inflation has been softer than the March projections.

by Calculated Risk on 6/17/2019 10:04:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 64 in June, down from 66 in May. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Solid in June Amidst Growing Economic Uncertainty

Builder confidence in the market for newly-built single-family homes fell two points to 64 in June, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held at a solid range in the low- to mid-60s for the past five months.

“While demand for single-family homes remains sound, builders continue to report rising development and construction costs, with some additional concerns over trade issues,” said NAHB Chairman Greg Ugalde.

“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” said NAHB Chief Economist Robert Dietz. “And while new home sales picked up in March and April, builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”
…
All the HMI indices inched lower in June. The index measuring current sales conditions fell one point to 71, the component gauging expectations in the next six months moved two points lower to 70 and the metric charting buyer traffic dropped one point to 48.

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a three-point gain to 60 and the Midwest was also up three points to 57. The West held steady at 71 and the South fell a single point to 67.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was below the consensus forecast.

by Calculated Risk on 6/17/2019 08:34:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity took a sharp turn downward in New York State, according to firms responding to the June 2019 Empire State Manufacturing Survey. The headline general business conditions index plummeted twenty-six points, its largest monthly decline on record, to -8.6. New orders receded, while shipments increased modestly. Unfilled orders fell, and delivery times and inventories moved slightly lower. Labor market indicators pointed to small declines in employment and hours worked.

The index for number of employees fell eight points to -3.5, its first negative value in over two years, pointing to a small decline in employment levels. The average workweek index also fell below zero, to -2.2, pointing to a slightly shorter workweek.
emphasis added

This was well below the consensus forecast.

by Calculated Risk on 6/16/2019 07:59:00 PM

Weekend:
• Schedule for Week of June 16, 2019

Monday:
• At 8:30 AM, The New York Fed Empire State manufacturing survey for June. The consensus is for a reading of 10.0, down from 17.8.

• At 10:00 AM, The June NAHB homebuilder survey. The consensus is for a reading of 67, up from 66. Any number above 50 indicates that more builders view sales conditions as good than poor.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 7 and DOW futures are up 56 (fair value).

Oil prices were down over the last week with WTI futures at $52.60 per barrel and Brent at $62.15 per barrel.  A year ago, WTI was at $68, and Brent was at $75 - so oil prices are down about 15% to 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.67 per gallon. A year ago prices were at $2.90 per gallon, so gasoline prices are down about 8% year-over-year.

by Calculated Risk on 6/16/2019 08:20:00 AM

From SacRealtor.org: May sees increase in sales, inventory

The month ended with 1,630 total sales, a 9% increase from the 1,496 sales of April. Compared to the same month last year (1,730), the current figure is down 5.8%.
...
The Active Listing Inventory increased 10.5% from 2,094 to 2,314 units. The Months of Inventory, however, remained at 1.4 Months. [Note: Compared to May 2018, inventory is down 7.8%] .
...
The Median DOM (days on market) dropped for the third month, decreasing from 11 to 10 from April to May. The Average DOM also decreased, dropping from 29 to 25. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.”
emphasis added

1) Overall sales decreased to 1,630 in May, down from 1,730 in May 2018. Sales were up 9.0% from April 2019 (last month), and down 5.8% from May 2018.

2) Active inventory was at 2,314, down from 2,509 in May 2018. That is down 7.8% year-over-year.  This is the first YoY decline in 20 months.

Inventory is still low - months of inventory is at 1.4 months, probably closer to 4 months would be normal.

by Calculated Risk on 6/15/2019 08:11:00 AM

The key reports this week are May housing starts and existing home sales.

For manufacturing, the June New York and Philly Fed manufacturing surveys will be released.

The FOMC meets this week, and no change to policy is expected at this meeting.

----- Monday, June 17th -----
8:30 AM: The New York Fed Empire State manufacturing survey for June. The consensus is for a reading of 10.0, down from 17.8.

10:00 AM: The June NAHB homebuilder survey. The consensus is for a reading of 67, up from 66. Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Tuesday, June 18th -----
8:30 AM ET: Housing Starts for May.

This graph shows single and total housing starts since 1968.

The consensus is for 1.240 million SAAR, up from 1.235 million SAAR in April.

----- Wednesday, June 19th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

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

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

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, June 20th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 217 thousand initial claims, down from 222 thousand last week.

8:30 AM: the Philly Fed manufacturing survey for June. The consensus is for a reading of 14.0, down from 16.6.

----- Friday, June 21st -----
10:00 AM: Existing Home Sales for May from the National Association of Realtors (NAR). The consensus is for 5.29 million SAAR, up from 5.19 million.

The graph shows existing home sales from 1994 through the report last month.

by Calculated Risk on 6/14/2019 08:51:00 PM

From Compass chief economist Selma Hepp: Plenty of Bay Area buyers, but why are they hesitant?

• While April’s momentum is slightly slower in May, May sales are still only 2 percent below last year’s highs after double-digit declines earlier in the year.

• Home sales momentum remains solid in East Bay. Napa sales finally jumped 6 percent after a 6-month losing streak, averaging 20 percent annual declines.

• Affordable sales picked up again with sales of homes priced below $1 million up 3 percent year-over-year, the first two-month consecutive annual increase in the last four years.

• For-sale inventory growth is slowing after the winter jump with homes averaging seven days longer on the market.

• San-Francisco continues to see significant inventory declines with May down 19 percent YOY (four months of declines averaging 20 percent).

• Buyer competition picks up again with 58 percent of homes selling over the asking price.

• Bay Area housing market correction resembles “Table Top” with prices remaining flat, compared to “Mountain Top” seen in the last cycle when prices fell significantly following the peak.