by Calculated Risk on 11/13/2019 10:37:00 AM

Another solid regional market in October.

From the HAR: Buyers Maintain Demand for Houston Housing in October

Continued low mortgage interest rates kept consumers in a buying mood in October, powering home sales to a fourth consecutive positive month. According to the latest monthly report from the Houston Association of Realtors (HAR), sales of single-family homes across the greater Houston area totaled 7,231 in October. That is up 8.1 percent compared to a year earlier. On a year-to-date basis, home sales are 4.2 percent ahead of 2018’s record volume, making it ever more likely that 2019 will establish a new record for local real estate.
...
Sales of all property types climbed 6.2 percent in October, totaling 8,579 units. Total dollar volume rose 7.9 percent to $2.4 billion.
…
In addition to the incentive that lower mortgage rates create, buyers benefited from a slightly larger supply of homes on the market with housing inventory up to a 4.0-months supply in October versus 3.9 months in 2018. So far this year, the peak inventory was reached in June and July when it grew to a 4.3-months supply.

“Consumers continue to take advantage of attractive buying conditions, between low interest rates, a healthy supply of homes on the market and a strong overall Houston economy,” said HAR Chair Shannon Cobb Evans with Better Homes and Gardens Real Estate Gary Greene. “Interest rates are currently forecast to remain low into the new year, so it’s possible that we get through the holidays without too much of a seasonal slowdown in home sales, but we’ll just have to see how things go.”
emphasis added

Total active inventory was up 6.9% YoY to 43,468 properties from 40,675 properties in October 2018. Sales are on pace for a record year.

by Calculated Risk on 11/13/2019 08:33:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in October on a seasonally adjusted basis after being unchanged in September, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment.
...
The index for all items less food and energy rose 0.2 percent in October after increasing 0.1 percent in September.
...
The all items index increased 1.8 percent for the 12 months ending October, a slightly larger rise than the 1.7-percent increase for the period ending September. The index for all items less food and energy rose 2.3 percent over the last 12 months.
emphasis added

Core inflation was at expectations in October. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 11/13/2019 07:00:00 AM

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

Mortgage applications increased 9.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 8, 2019.

... The Refinance Index increased 13 percent from the previous week and was 188 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 15 percent higher than the same week one year ago.
...
“Mortgage applications increased to their highest level in over a month, as both purchase and refinance activity rose despite another climb in mortgage rates. Positive data on consumer sentiment, and growing optimism surrounding the U.S. and China trade dispute, were behind last week’s rise in the 30-year fixed mortgage rate to 4.03 percent,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting. “Refinance applications jumped 13 percent to the highest level in five weeks, as conventional, FHA, and VA refinances all posted weekly gains. With rates still in the 4 percent range, we continue to expect to see moderate growth in refinance activity in the final weeks of 2020.”

Added Kan, “Last week was a solid week for homebuyers. Purchase applications increased 2 percent and were 15 percent higher than a year ago. Low supply and high home prices remain a key characteristic of this fall’s housing market, which is why the largest growth in activity continues to be in loans with higher loan balances.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.03 percent from 3.98 percent, with points decreasing to 0.31 from 0.37 (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.

With lower rates, we saw a sharp increase in refinance activity, but mortgage rates would have to decline further to see a huge refinance boom.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 15% year-over-year.

by Calculated Risk on 11/12/2019 07:10:00 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, The Consumer Price Index for October from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.

• At 11:00 AM, NY Fed: Q3 Quarterly Report on Household Debt and Credit

• At 11:00 AM, Testimony, Fed Chair Jerome Powell, The Economic Outlook, Before the Joint Economic Committee, U.S. Congress

by Calculated Risk on 11/12/2019 10:43:00 AM

From Dodge Data Analytics: Dodge Momentum Index Moves Higher in October

The Dodge Momentum Index increased 6.9% in October to 152.6 (2000=100) from the revised September reading of 142.7. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. October’s increase was due entirely to a recovery in institutional planning projects, which had stepped back over the previous few months. Institutional planning moved 22.8% higher in the month while commercial planning lost 0.5%.

Despite the October increase, institutional projects entering planning remain 4.3% lower on a year-over-year basis compared to October 2018. Commercial projects meanwhile are 14.3% higher than October 2018 as several mega projects have entered the early stages of planning over the last several months. The overall Momentum Index is 6.7% higher than a year ago, although its level remains below the July 2018 peak.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 152.6 in October, up from 142.7 in September.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year".  After declining late last year, this index moved mostly sideways in 2019, and has increased recently.

by Calculated Risk on 11/12/2019 09:00:00 AM

CR Note: Most of this survey is noise, but there is some information, especially on the labor market and the "Single Most Important Problem".

From the National Federation of Independent Business (NFIB): October 2019 Report: Small Businesses Continue to Push the Economy Forward

The small business half of the economy continued its remarkable economic streak, posting a 0.6 point gain in October’s Optimism Index. The 102.4 reading was buoyed by eight of the 10 Index components advancing, as talk of a recession waned in October. The Uncertainty Index declined 4 points but remains historically high heading into an election year.
..
Twenty-five percent of the owners selected “finding qualified labor” as their top business problem, more than cited taxes or regulations. Reports of higher worker compensation rose 1 point to a net 30 percent of all firms – a historically high reading. Plans to raise compensation rose 4 points to a net 22 percent.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 102.4 in October.

Note: Usually small business owners complain about taxes and regulations (currently 2nd and 3rd on the "Single Most Important Problem" list).  However, during the recession, "poor sales" was the top problem. Now the difficulty of finding qualified workers is a top problem.

by Calculated Risk on 11/11/2019 02:59:00 PM

During the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.

Since then Las Vegas visitor traffic recovered to new record highs.

However, in 2018, visitor traffic declined 0.2% compared to 2017, but was still 7.5% above the pre-recession peak.

Convention attendance declined 2.2% in 2018 from the record high in 2017.  Here is the data from the Las Vegas Convention and Visitors Authority.  

Click on graph for larger image.

The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale).  2019 is estimated based on data through September 2019.

Convention attendance was up 3.3% in 2019 compared to the same period in 2018.

Visitor traffic was up 0.6% in 2019 compared to the first nine months of 2018.

Historically, declines in Las Vegas visitor traffic have been associated with economic weakness, so the slight declines over the last two years was concerning.

by Calculated Risk on 11/11/2019 11:53:00 AM

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the October 2019 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand in May 2009, on a seasonally adjusted annual rate basis (SAAR). Then sales increased more than 2 1/2 times, and hit 479 thousand SAAR in June 2015.

Heavy truck sales declined again - mostly due to the weakness in the oil sector - and bottomed at 366 thousand SAAR in October 2016.


Click on graph for larger image.

Following the low in 2016, heavy truck sales increased to a new all time high in September 2019 (revised).

Heavy truck sales were at 536 thousand SAAR in October, down from 575 thousand SAAR in September, but up from 521 thousand SAAR in October 2018.

by Calculated Risk on 11/11/2019 09:06:00 AM

Special note: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was down 1.4% in October compared to the rolling 12 months ending in September.   Outbound traffic was down 0.7% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year (February 5th in 2019).

In general imports have been increasing (although down this year), and exports have mostly moved sideways over the last 8 years - and also have moved down recently.

by Calculated Risk on 11/10/2019 06:55:00 PM

Thank you to all the veterans! Especially to my 97 years young father who flew a Corsair off the USS Bennington in the Pacific during WWII, and also served in Korea and Vietnam. And thanks to Uncle Jack (who passed away early this year) and Uncle Kenny. Thank you all.

Weekend:
• Schedule for Week of November 10, 2019

• Update on Yield Curve

Monday:
• Veterans Day Holiday: Most banks will be closed in observance of Veterans Day. The stock market will be open. No economic releases are scheduled.

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

Oil prices were down over the last week with WTI futures at $57.13 per barrel and Brent at $62.40 barrel.  A year ago, WTI was at $60, and Brent was at $69 - so oil prices are down about 5% to 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.62 per gallon. A year ago prices were at $2.67 per gallon, so gasoline prices are down sligthly year-over-year.