by Calculated Risk on 2/27/2020 10:32:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays for January. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:45 AM, Chicago Purchasing Managers Index for February. The consensus is for a reading of 45.8, up from 42.9 in January.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for February). The consensus is for a reading of 100.9.

by Calculated Risk on 2/27/2020 04:43:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in January was 0.60%, down from 0.63% in December. Freddie's rate is down from 0.70% in January 2019.

This the lowest delinquency rate since November 2007.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Click on graph for larger image

I expect the delinquency rate to decline to a cycle bottom in the 0.4% to 0.6% range - so this is close to a bottom.

Note: Fannie Mae will report for January soon.

by Calculated Risk on 2/27/2020 12:57:00 PM

From the NAR: Pending Home Sales Ascend 5.2% in January

Pending home sales rebounded in January, ticking up following a decline in December, according to the National Association of Realtors®. Only the West region reported a minor drop in month-over-month contract activity, while the other three major regions each saw pending home sales grow. Year-over-year pending home sales activity was up in all four regions and thus up nationally compared to one year ago.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, grew 5.2% to 108.8 in January. Year-over-year contract signings increased 5.7%. An index of 100 is equal to the level of contract activity in 2001.
...
The Northeast PHSI rose 1.3% to 92.9 in January, 1.2% higher than a year ago. In the Midwest, the index increased 7.3% to 105.3 last month, 6.5% higher than in January 2019.

Pending home sales in the South grew 8.7% to an index of 129.4 in January, a 7.1% increase from January 2019. The index in the West declined 1.1% in January 2020 to 92.6, still a jump of 5.5% from a year ago.
emphasis added

This was well above expectations for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in February and March.

by Calculated Risk on 2/27/2020 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Increased Modestly

The Federal Reserve Bank of Kansas City released the February Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity increased modestly, reaching positive territory for the first time in eight months.

“Regional factory activity finally expanded again in February,” said Wilkerson. “This was despite over 40 percent of firms reporting some negative effect from the spread of coronavirus so far in 2020.”
...
The month-over-month composite index was 5 in February, higher than -1 in January and -5 in December. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The increase in district manufacturing activity was driven by both durable and non-durable goods plants, particularly food and transportation equipment producers. Most month-over-month indexes moved into positive territory in February, with many reaching their highest levels in over a year. However, the order backlog and employment indexes continued to fall. Year-over-year factory indexes rebounded strongly, with the composite index jumping from -7 to 5. The future composite index remained solid, inching slightly higher from 14 to 16.
emphasis added

This was the last of the regional Fed surveys for February.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through February), and five Fed surveys are averaged (blue, through February) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through January (right axis).

Based on these regional surveys, it seems likely the ISM manufacturing index will increase further in February.

by Calculated Risk on 2/27/2020 08:39:00 AM

From the BEA: Gross Domestic Product, Fourth Quarter and Year 2019 (Second Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of 2019 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP also increased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was also 2.1 percent. In the second estimate, an upward revision to private inventory investment was offset by a downward revision to nonresidential fixed investment.
emphasis added

Here is a Comparison of Second and Advance Estimates. PCE growth was revised down to 1.7% from 1.8%. Residential investment was revised up from 5.8% to 6.2%. The revisions were small. This was at the consensus forecast.

by Calculated Risk on 2/27/2020 08:33:00 AM

The DOL reported:

In the week ending February 22, the advance figure for seasonally adjusted initial claims was 219,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 210,000 to 211,000. The 4-week moving average was 209,750, an increase of 500 from the previous week's revised average. The previous week's average was revised up by 250 from 209,000 to 209,250.
emphasis added

The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 209,750.

This was higher than the consensus forecast.

by Calculated Risk on 2/26/2020 07:42:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 211 thousand initial claims, up from 210 thousand the previous week.

• At 8:30 AM, Gross Domestic Product, 4th quarter 2019 (Second estimate). The consensus is that real GDP increased 2.1% annualized in Q4, unchanged from the advance estimate.

• At 8:30 AM, Durable Goods Orders for January from the Census Bureau. The consensus is for a 1.5% decrease in durable goods orders.

• At 11:00 AM, the Kansas City Fed manufacturing survey for February. This is the last of regional manufacturing surveys for February.

by Calculated Risk on 2/26/2020 04:58:00 PM

The Case-Shiller house price indexes for December were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: December Case-Shiller Results & January Forecast: Back on the Gas

The final reading of 2019 confirmed that a reacceleration of home price growth has indeed begun, after growth spent nearly the entire calendar year tapping on the brakes.

The national Case-Shiller Home Price Index rose 3.8% year-over-year in December. The smaller 10- and 20-city composite indices grew more slowly, at 2.4% and 2.9% year-over-year, respectively.
...
For-sale inventory remains near its lowest level on record, which has stoked competition for the relatively few homes on the market and nudged prices back upward as a result. The rebound in home price growth is also rooted in the sustained strength of the U.S. economy, which continues to ride a robust labor market, and mortgage rates that finished the year near their lowest levels since 2016 and have fallen even further since.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 4.0% in January, up from 3.8% in December.

The Zillow forecast is for the 20-City index to be up 3.2% YoY in January from 2.9% in December, and for the 10-City index to increase to 2.8% YoY compared to 2.4% YoY in December.

by Calculated Risk on 2/26/2020 03:24:00 PM

As part of the new home sales report released today, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in January 2020 was $348,200. The average sales price was $402,300."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

The average price in January 2020 was $402,300, and the median price was $348,200.

The second graph shows the percent of new homes sold by price.

Very few new homes sold were under $150K in January 2020.  This is down from 30% in 2002.  In general, the under $150K bracket is going away.   

The $400K+ bracket increased significantly since the housing recovery started, but has been holding steady recently.  Still, a majority of new homes (about 55%) in the U.S., are in the $200K to $400K range.

by Calculated Risk on 2/26/2020 11:08:00 AM

New home sales for January were reported at 764,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised up, combined.

This was the highest sales rate since July 2007.

Earlier: New Home Sales increase to 764,000 Annual Rate in January.

Click on graph for larger image.

This graph shows new home sales for 2019 and 2020 by month (Seasonally Adjusted Annual Rate).

The year-over-year comparison are fairly easy in the first half of 2020, and sales were up 18.6% YoY in January.

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 January 2020. 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 closed slowly.

Now the gap is mostly closed, and I expect it to close a little more.   However, this assumes that the builders will offer some smaller, less expensive homes.

Another way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down since the housing bust - and is getting close to the historical ratio - and I expect this ratio will trend down a little more.

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.