by Calculated Risk on 2/04/2020 06:21:00 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 January. This report is for private payrolls only (no government). The consensus is for 159,000 payroll jobs added in January, down from 202,000 added in December.

• At 8:30 AM, Trade Balance report for December from the Census Bureau. The consensus is the trade deficit to be $48.0 billion.  The U.S. trade deficit was at $43.1 billion in November.

• At 10:00 AM, the ISM non-Manufacturing Index for January.

by Calculated Risk on 2/04/2020 04:33:00 PM

From the U.S. Courts: Bankruptcy Filings Increase Slightly

Bankruptcy filings increased slightly for the 12-month period ending Dec. 31, 2019, compared with cases for the year ending Dec. 31, 2018, according to statistics released by the Administrative Office of the U.S. Courts. It was the second straight quarter that bankruptcy filings rose, after annual declines lasting nearly a decade.

Annual bankruptcy filings totaled 774,940, compared with 773,418 cases in December 2018. That is an increase of 0.2 percent.

The level of filings is still 51 percent below the peak reached in 2010, during the aftermath of the Great Recession, 2007-2009. A national wave of bankruptcies that began in 2008 reached a peak in the year ending September 2010, when nearly 1.6 million bankruptcy cases were filed.

Click on graph for larger image.

This graph shows the business and non-business bankruptcy filings by calendar year since 2001.

The sharp decline in 2006 was due to the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". (a good example of Orwellian named legislation since this was more a "Lender Protection Act").

This was the first increase in filings since 2010, but the increase was very small.   Bankruptcy filings have been at about the same level for the last four years.

by Calculated Risk on 2/04/2020 12:15:00 PM

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the January 2020 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009. Then sales increased more than 2 1/2 times, and hit 480 thousand SAAR in June 2015.

Heavy truck sales declined again in 2016 - mostly due to the weakness in the oil sector - and bottomed at 363 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 of 575 thousand SAAR in September 2019.  However heavy truck sales have declined since then and are off 11% year-over-year.

Heavy truck sales were at 467 thousand SAAR in January, down from 473 thousand SAAR in December, and down from 527 thousand SAAR in January 2019.   The recent weakness is probably due to the weakness in manufacturing and the decline in oil prices.

by Calculated Risk on 2/04/2020 09:22:00 AM

The BEA released their estimate of January vehicle sales this morning. The BEA estimated light vehicle sales of 16.84 million SAAR in January 2020 (Seasonally Adjusted Annual Rate), up 1.2% from the December sales rate, and up 0.8% from January 2019.

Light vehicle sales in 2019 were revised down slightly to 16.95 million, down 1.5% from 17.21 million in 2018.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and an estimate for January 2020 (red).

A small decline in sales last 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 16.84 million SAAR.

Sales have been generally decreasing slightly, but are still at a high level.

by Calculated Risk on 2/04/2020 09:02:00 AM

Notes: This CoreLogic House Price Index report is for December. The recent Case-Shiller index release was for November. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports December Home Prices Increased by 4.0% Year Over Year

Home prices nationwide, including distressed sales, increased year over year by 4% in December 2019 compared with December 2018 and increased month over month by 0.3% in December 2019 compared with November 2019.
...
“Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers. Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median.” Dr. Frank Nothaft, Chief Economist for CoreLogic
emphasis added

CR Note: The YoY change in the CoreLogic index decreased over the last year, but lately the YoY change has been increasing.

by Calculated Risk on 2/03/2020 07:17:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Digging Deeper Into Multi-Year Lows

Now, as the new week begins, Treasury yields and MBS alike are indicating slightly higher rates than Friday, but because lenders played it so safe, they were instead able to offer slightly LOWER rates today. Simply put, mortgage rates are even deeper into multi-year lows now, even though the bond market is pointing to slightly higher rates versus last Friday. [Most Prevalent Rates For Top Tier Scenarios 30YR FIXED 3.375-3.5%]
emphasis added

Tuesday:
• Early: the BEA will release Light vehicle sales for January. The consensus is for light vehicle sales to be 16.8 million SAAR in January, up from 16.7 million in December (Seasonally Adjusted Annual Rate).

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

by Calculated Risk on 2/03/2020 04:35:00 PM

The National Multifamily Housing Council (NMHC) released their January report: January Quarterly Survey Indicates Apartment Conditions Mixed

Certain market conditions are loosening, according to the NMHC Quarterly Survey of Apartment Market Conditions, conducted in January 2020. The Sales Volume Index slipped further below the breakeven level (50) to 43, indicating a continued softness in property sales. “This reflects some seasonal decline along with the paucity of available deals, some respondents also noted the negative impact of the new rent laws in New York,” said NMHC Chief Economist Mark Obrinsky.

Additionally, Market Tightness (48) slipped below the breakeven level (50). “Apartment markets showed some softening in line with the slower leasing in the winter months,” noted Obrinsky. “Even so, the Market Tightness Index reading of 48 was the highest January reading in five years, and slightly higher than the January average of 45 in the survey’s 21-year history.”
...
The Market Tightness Index decreased from 54 to 48, indicating the first sign of looser market conditions since January 2019. Nearly one-quarter (23 percent) of respondents reported looser market conditions than three months prior, compared to 18 percent who reported tighter conditions. Over half (59 percent) of respondents felt that conditions were no different from last quarter.

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading below 50 indicates looser conditions from the previous quarter. This indicates market conditions were looser over the last quarter, but this may be due to seasonal factors.

This followed three consecutive quarters with tighter conditions.

by Calculated Risk on 2/03/2020 12:31:00 PM

Here is another monthly update on framing lumber prices.   Lumber prices declined sharply from the record highs in early 2018, and have increased a little lately.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through Jan 24, 2020 (via NAHB), and 2) CME framing futures.

Click on graph for larger image in graph gallery.

Right now Random Lengths prices are up 14% from a year ago, and CME futures are up 12% 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 was a factor in the sharp decline with reports that lumber exports to China had declined by 40%.   Now, with a pickup in housing, lumber prices are moving up again.

by Calculated Risk on 2/03/2020 10:27:00 AM

From the Census Bureau reported that overall construction spending decreased in December:

Construction spending during December 2019 was estimated at a seasonally adjusted annual rate of $1,327.7 billion, 0.2 percent below the revised November estimate of $1,329.9 billion. The December figure is 5.0 percent above the December 2018 estimate of $1,264.8 billion.

The value of construction in 2019 was $1,303.5 billion, 0.3 percent below the $1,307.2 billion spent in 2018.
emphasis added

Both private and public spending decreased:

Spending on private construction was at a seasonally adjusted annual rate of $991.2 billion, 0.1 percent below the revised November estimate of $992.2 billion. ...

In December, the estimated seasonally adjusted annual rate of public construction spending was $336.4 billion, 0.4 percent below the revised November estimate of $337.7 billion.

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.  Now it is increasing again, but is still 20% below the bubble peak.

Non-residential spending is 9% above the previous peak in January 2008 (nominal dollars).

Public construction spending is 3% above the previous peak in March 2009, and 28% 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 up 5.5%. Non-residential spending is down slightly year-over-year. Public spending is up 11.5% year-over-year.

This was below consensus expectations of a 0.5% increase in spending, however construction spending for October and November was revised up slightly.

by Calculated Risk on 2/03/2020 10:05:00 AM

The ISM manufacturing index indicated expansion in January. The PMI was at 50.9% in January, up from 47.2% in December. The employment index was at 46.4%, up from 45.1% last month, and the new orders index was at 52.0%, up from 46.8%.

From the Institute for Supply Management: January 2020 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector grew in January, and the overall economy grew for the 129th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The January PMI® registered 50.9 percent, an increase of 3.1 percentage points from the seasonally adjusted December reading of 47.8 percent. The New Orders Index registered 52 percent, an increase of 4.4 percentage points from the seasonally adjusted December reading of 47.6 percent. The Production Index registered 54.3 percent, up 9.5 percentage points compared to the seasonally adjusted December reading of 44.8 percent. The Backlog of Orders Index registered 45.7 percent, up 2.4 percentage points compared to the December reading of 43.3 percent. The Employment Index registered 46.6 percent, a 1.4-percentage point increase from the seasonally adjusted December reading of 45.2 percent. The Supplier Deliveries Index registered 52.9 percent, a 1.7-percentage point decrease from the December reading of 54.6 percent. The Inventories Index registered 48.8 percent, a decrease of 0.4 percentage point from the seasonally adjusted December reading of 49.2 percent. The Prices Index registered 53.3 percent, a 1.6-percentage point increase from the December reading of 51.7 percent. The New Export Orders Index registered 53.3 percent, a 6-percentage point increase from the December reading of 47.3 percent. The Imports Index registered 51.3 percent, a 2.5-percentage point increase from the December reading of 48.8 percent.
emphasis added

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was above expectations of 48.5%, and suggests manufacturing expanded slightly in January after five months of contraction.