by Calculated Risk on 6/25/2019 11:29:00 AM

New home sales for May were reported at 626,000 on a seasonally adjusted annual rate basis (SAAR). Sales for April were revised up slightly, and sales for March were revised down.

Earlier: New Home Sales decreased to 626,000 Annual Rate in May.

Click on graph for larger image.

This graph shows new home sales for 2018 and 2019 by month (Seasonally Adjusted Annual Rate).

Sales in May were down 3.7% year-over-year compared to May 2018.

Year-to-date (just through May), sales are up 4.0% compared to the same period in 2018.

This comparison was the most difficult in the first half of 2018, so even with the disappointing sales in May, this is a solid start for 2019.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through May 2019. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

Even though distressed sales are down significantly, following the bust, new home builders focused on more expensive homes - so the gap has only closed slowly.

I still expect this gap to close.   However, this assumes that the builders will offer some smaller, less expensive homes.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 6/25/2019 10:14:00 AM

The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 626 thousand.

The previous three months were revised down slightly, combined.

"Sales of new single‐family houses in May 2019 were at a seasonally adjusted annual rate of 626,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent below the revised April rate of 679,000 and is 3.7 percent below the May 2018 estimate of 650,000."
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still somewhat low historically.

The second graph shows New Home Months of Supply.

The months of supply increased in May to 6.4 months from 5.9 months in April.

The all time record was 12.1 months of supply in January 2009.

This is at the top of the normal range (less than 6 months supply is normal).

"The seasonally‐adjusted estimate of new houses for sale at the end of May was 333,000. This represents a supply of 6.4 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still somewhat low, and the combined total of completed and under construction is close to normal.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In May 2019 (red column), 60 thousand new homes were sold (NSA). Last year, 62 thousand homes were sold in May.

The all time high for May was 120 thousand in 2005, and the all time low for May was 30 thousand in 2011.

This was below expectations of 680 thousand sales SAAR, and sales in the three previous months were revised down slightly combined.  I'll have more later today.

by Calculated Risk on 6/25/2019 09:10:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for March ("April" is a 3 month average of February, March and April prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Annual Home Price Gains Continue to Fall According to the S&P CoreLogic Case-Shiller Index

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.5% annual gain in April, down from 3.7% in the previous month. The 10-City Composite annual increase came in at 2.3%, up from 2.2% in the previous month. The 20-City Composite posted a 2.5% year-over-year gain, down from 2.6% in the previous month.

Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities. In April, Las Vegas led the way with a 7.1% year-over-year price increase, followed by Phoenix with a 6.0% increase, and Tampa with a 5.6% increase. Nine of the 20 cities reported greater price increases in the year ending April 2019 versus the year ending March 2019.
...
Before seasonal adjustment, the National Index posted a month-over-month increase of 0.9% in April. The 10-City and 20-City Composites both reported 0.8% increases for the month. After seasonal adjustment, the National Index recorded a 0.3% month-over-month increase in April. The 10-City Composite posted a 0.2% month-over-month increases and the 20-City Composite did not report an increase. In April, 19 of 20 cities reported increases before seasonal adjustment, while 14 of 20 cities reported increases after seasonal adjustment.

“Home price gains continued in a trend of broad-based moderation,” says Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices. “Year-over-year price gains remain positive in most cities, though at diminishing rates of change. Seattle is a notable exception, where the YOY change has decreased from 13.1% in April 2018 to 0.0% in April 2019.“
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up slightly from the bubble peak, and up 0.2% in April (SA).

The Composite 20 index is 4.4% above the bubble peak, and unchanged (SA) in April.

The National index is 12.9% above the bubble peak (SA), and up 0.3% (SA) in April.  The National index is up 52.6% from the post-bubble low set in December 2011 (SA).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 2.3% compared to April 2018.  The Composite 20 SA is up 2.5% year-over-year.

The National index SA is up 3.5% year-over-year.

Note: According to the data, prices increased in 16 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

by Calculated Risk on 6/24/2019 05:10:00 PM

From Matthew Graham at Mortgage News Daily: Rates Catch a Break to Remain Near Long-Term Lows

Mortgage rates were generally flat today, depending on the lender. Some were noticeably better while others were a hair worse. In both cases, rates are very close to the lowest levels since late 2016. Changes from Friday would most likely be measured in terms of upfront costs as opposed to differences in the quoted "note rate" itself (the rate most people are talking about when they talk about mortgage rates). [Most Prevalent Rates 30YR FIXED - 3.625% OR 3.875%]
emphasis added

Tuesday:
• At 9:00 AM: S&P/Case-Shiller House Price Index for April. The consensus is for a 2.5% year-over-year increase in the Comp 20 index for April.

• At 9:00 AM: FHFA House Price Index for April 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM: New Home Sales for May from the Census Bureau. The consensus is for 680 thousand SAAR, up from 673 thousand in April.

• At 10:00 AM: Richmond Fed Survey of Manufacturing Activity for June.

• At 1:00 PM: Speech by Fed Chair Jerome H. Powell, Economic Outlook and Monetary Policy Review, At C. Peter McColough Series on International Economics: A Conversation with Jerome H. Powell, New York, N.Y.

by Calculated Risk on 6/24/2019 12:14:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

Inventory, on a national basis, was up 2.7% year-over-year (YoY) in May this was the tenth consecutive month with a YoY increase, following over three years of YoY declines.

The graph below shows the YoY change for non-contingent inventory in Houston, Las Vegas, and Sacramento and Phoenix, and total existing home inventory as reported by the NAR (through May).

Click on graph for larger image.

The black line is the year-over-year change in inventory as reported by the NAR.

Note that inventory was up 98% YoY in Las Vegas in May (red), the tenth consecutive month with a YoY increase.

Houston is a special case, and inventory was up for several years due to lower oil prices, but declined YoY last year as oil prices increased.  Inventory was up 10.5% year-over-year in Houston in May.

Inventory is a key for the housing market.  Right now it appears the inventory build that started last year is slowing.

Also note that inventory in Seattle was up 124% year-over-year in May (not graphed)!

by Calculated Risk on 6/24/2019 10:34:00 AM

From the Dallas Fed: Texas Manufacturing Expansion Continues but Pace Slows

Texas factory activity continued to expand in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 6.3 to 8.9, indicating output growth accelerated slightly from May.

Other measures of manufacturing activity exhibited mixed movements in June. The new orders index edged up to 3.7, a reading still below average. The growth rate of orders index fell eight points to -6.7, reaching its lowest reading in nearly three years. The capacity utilization index inched up to 9.6, while the shipments index retreated six points to 1.7, a two-year low. The capital expenditures index posted a double-digit decline, falling 11 points to 6.9, also a two-year low.

Perceptions of broader business conditions shifted down again in June. The general business activity index pushed further into negative territory as more firms noted worsened activity this month than last. The index declined from -5.3 to -12.1, hitting a three-year low. Similarly, the company outlook index fell from -1.7 to -5.5, also a three-year low. The index measuring uncertainty regarding companies’ outlooks pushed up to 21.6, its highest reading since the question was added to the survey in January 2018.

Labor market measures suggested solid, but somewhat slower, growth in employment and work hours in June. The employment index slipped from 11.6 to 8.8 but remained slightly above average.
emphasis added

Another weak regional report. This was the worst reading for the general activity index since 2016.

by Calculated Risk on 6/24/2019 08:41:00 AM

From the Chicago Fed: Index points to a pickup in economic growth in May

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to –0.05 in May from –0.48 in April. Three of the four broad categories of indicators that make up the index increased from April, but only one of the four categories made a positive contribution to the index in May. The index’s three-month moving average, CFNAI-MA3, moved up to –0.17 in May from –0.37 in April.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was below the historical trend in May (using the three-month average).

According to the Chicago Fed:

The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

by Calculated Risk on 6/23/2019 08:48:00 PM

Weekend:
• Schedule for Week of June 23, 2019

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for May. This is a composite index of other data.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for June.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 1 and DOW futures are up 13 (fair value).

Oil prices were up over the last week with WTI futures at $57.87 per barrel and Brent at $65.56 barrel.  A year ago, WTI was at $69, and Brent was at $73 - so oil prices are down about 10% to 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.65 per gallon. A year ago prices were at $2.84 per gallon, so gasoline prices are down about 7% year-over-year.

by Calculated Risk on 6/23/2019 11:04:00 AM

By request, here is an update to the chart showing market performance under Presidents Trump and Obama.

Note: I don't think the stock market is a great measure of policy performance, but some people do - and I'm having a little fun with them.

There are some observers who think the stock market is the key barometer of policy success.  My view is there are many measures of success - and that the economy needs to work well for a majority of the people - not just stock investors.

However, for example, Treasury Secretary Steven Mnuchin was on CNBC on Feb 22, 2017, and was asked if the stock market rally was a vote of confidence in the new administration, he replied: "Absolutely, this is a mark-to-market business, and you see what the market thinks."

And Larry Kudlow wrote in 2007: A Stock Market Vote of Confidence for Bush: "I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president."

Note: Kudlow's comments were made a few months before the market started selling off in the Great Recession. For more on Kudlow, see: Larry Kudlow is usually wrong

And from White House chief economic advisor Gary Cohn on December 20, 2017:

"I think there is a lot more momentum in the stock market. ... "The stock market is reflecting the reality of what's going in the business environment today," said Cohn, director of the National Economic Council. "There is going to be a continuation [of the] rally in the equity markets based on real underlying fundamentals of the U.S. economy ... as well as companies having more earnings power because of lower tax rates."

For fun, here is a graph comparing S&P500 returns (ex-dividends) under Presidents Trump and Obama:

Click on graph for larger image.

Blue is for Mr. Obama, Orange is for Mr. Trump.

At this point, the S&P500 is up 30% under Mr. Trump - compared to up 58% under Mr. Obama for the same number of market days.

by Calculated Risk on 6/22/2019 08:11:00 AM

The key reports this week are the third estimate of Q1 GDP, May New Home Sales, Case-Shiller house prices, and Personal Income and Outlays for May.

For manufacturing, the June Dallas, Richmond and Kansas City Fed manufacturing surveys will be released.

On Tuesday, Fed Chair Jerome Powell speaks on the Economic Outlook and Monetary Policy.

----- Monday, June 24th -----
8:30 AM ET: Chicago Fed National Activity Index for May. This is a composite index of other data.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for June.

----- Tuesday, June 25th -----
9:00 AM: S&P/Case-Shiller House Price Index for April.

This graph shows the year-over-year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 2.5% year-over-year increase in the Comp 20 index for April.

9:00 AM: FHFA House Price Index for April 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

10:00 AM: New Home Sales for May from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the sales rate for last month.

The consensus is for 680 thousand SAAR, up from 673 thousand in April.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for June.

1:00 PM: Speech by Fed Chair Jerome H. Powell, Economic Outlook and Monetary Policy Review, At C. Peter McColough Series on International Economics: A Conversation with Jerome H. Powell, New York, N.Y.

----- Wednesday, June 26th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Durable Goods Orders for May from the Census Bureau. The consensus is for no change in durable goods orders.

----- Thursday, June 27th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 218 thousand initial claims, up from 216 thousand last week.

8:30 AM: Gross Domestic Product, 1st quarter 2019 (Third estimate). The consensus is that real GDP increased 3.1% annualized in Q1, unchanged from the second estimate of 3.1%.

10:00 AM: Pending Home Sales Index for May. The consensus is for a 0.6% increase in the index.

11:00 AM: the Kansas City Fed manufacturing survey for June. This is the last of regional manufacturing surveys for June.

----- Friday, June 28th -----
8:30 AM ET: Personal Income and Outlays, May 2019. The consensus is for a 0.3% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:45 AM: Chicago Purchasing Managers Index for June.

10:00 AM: University of Michigan's Consumer sentiment index (Final for June). The consensus is for a reading of 97.9.