by Calculated Risk on 4/24/2020 10:02:00 AM

From the University of Michigan: Preliminary Results for April 2020

April's final Sentiment Index reading remained largely unchanged from the mid-month figure (+0.8 points), and households with below median incomes expressed the same level of confidence as those with above median incomes (71.9). This merging reflects somewhat larger April declines among households with above median incomes (-19.8 points) compared with those with below median incomes (-14.0). The seven-day moving average of the Index of Consumer Sentiment indicated a second larger improvement that was quickly reversed (see the featured chart); its cause could not be linked to any direct judgements about the coronavirus. The notable divergence between the two main components of the Sentiment Index remained large. The Current Conditions Index fell by 29.4 points in the past month and by 40.5 points in the past two months, whereas the Expectations Index has posted smaller declines of 9.6 points in the past month and 22.0 points from February. While the decline in both indices indicates an ongoing recession, the gap reflects the anticipated cyclical nature of the coronavirus.
emphasis added

by Calculated Risk on 4/24/2020 08:34:00 AM

From Black Knight: More than 3.4 Million Homeowners – 6.4% of All Mortgages – Now in COVID-19-Related Forbearance Plans According to Black Knight’s McDash Flash Data Set

• The McDash Flash suite from Black Knight leverages daily, loan-level data to provide market participants with the most current view of the forbearance and mortgage performance landscape

• According to the McDash Flash Forbearance Tracker, as of April 23, 2020, more than 3.4 million homeowners – or 6.4% of all mortgages – have entered into COVID-19 mortgage forbearance plans

• This population represents $754 billion in unpaid principal and includes 5.6% of all GSE-backed loans and 8.9% of all FHA/VA loans

• At today’s level, mortgage servicers are bound to advance $2.8 billion of principal and interest payments per month to holders of government-backed securities on COVID-19-related forbearances

• Another $1.3 billion per month in lost funds is faced by those with portfolio-held or privately-securitized mortgages

• Given FHFA’s recently announced four-month limit on advance obligations, servicers of GSE-backed mortgages could still face more than $7 billion in advances based on the number of forbearance plans thus far

by Calculated Risk on 4/23/2020 08:08:00 PM

Friday:
• At 8:30 AM ET, Durable Goods Orders for March from the Census Bureau. The consensus is for a 6.0% decrease in durable goods orders.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for April). The consensus is for a reading of 70.0.

by Calculated Risk on 4/23/2020 05:05:00 PM

NOTE: California reported over 165,000 tests yesterday. Perhaps they were clearing a backlog, but a majority of the tests were negative - pushing down the percent positive rate. I'd take yerserday's numbers with a grain of salt.

Test-and-trace is a key criterion in starting to reopen the country.   My current guess is test-and-trace will require around 300,000 tests per day at first since the US is far behind the curve.  Some scientists believe we need around 800,000 tests per day.

Note: The Financial Times reports that Germany is doing more than 50,000 tests per day (with about one-fourth of the US population). That would be 200,000 in the US.  I rounded up to 300,000 per day since the US is so behind on testing. But there are recommendations that Germany needs 200,000 tests per day to do test-and-trace.  (800,000 adjusted for population).

This is just test results reported daily.

There were 193,479 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 17% (red line). The US probably needs enough tests to push  the percentage below 5% (probably much lower based on testing in New Zealand).

All experts agree: We need many more tests!

by Calculated Risk on 4/23/2020 02:29:00 PM

Note: Loans in forbearance will be counted as delinquent in this survey, so the delinquency rate will jump in April (see Black Knight's on this below)

From Black Knight: Black Knight’s First Look: Mortgage Delinquencies See First-Ever March Increase from Early COVID-19 Impact; Foreclosures, Serious Delinquencies Hit Record Lows

• In what’s typically the strongest month of the year for mortgage performance, delinquencies rose by 3.33%, the first March increase since the turn of the century, an early sign of COVID-19’s impact on the market

• Both the national foreclosure and 90-day delinquency rates set new record lows in March, a lingering reminder of the strength of the mortgage market heading into the pandemic

• At just 27,600 for the month, foreclosure starts also fell to their lowest level on record, as COVID-19-related moratoriums began to impact foreclosure inflows

• Prepayment activity jumped by nearly 40% in March, driven by record-low 30-year mortgage rates

• Note: For the purposes of this report going forward, the millions of homeowners who have since entered into forbearance will be counted as past due, but should not be reported as such to the credit bureaus by their servicers
emphasis added

According to Black Knight's First Look report for March, the percent of loans delinquent increased 3.3% in March compared to February, and decreased 7.3% year-over-year.

The percent of loans in the foreclosure process decreased 7.7% in March and were down 18.0% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 3.39% in March, up from 3.28% in February.

The percent of loans in the foreclosure process decreased in March to 0.42% from 0.45% in February.

The number of delinquent properties, but not in foreclosure, is down 111,000 properties year-over-year, and the number of properties in the foreclosure process is down 44,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Mar 2020	Feb 2020	Mar 2019	Mar 2018
Delinquent	3.39%	3.28%	3.65%	3.73%
In Foreclosure	0.42%	0.45%	0.51%	0.63%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	1,792,000	1,737,000	1,903,000	1,191,000
Number of properties in foreclosure pre-sale inventory:	220,000	239,000	264,000	321,000
Total Properties	2,013,000	1,976,000	2,167,000	2,232,000

by Calculated Risk on 4/23/2020 12:28:00 PM

New home sales for March were reported at 627,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down.

New home sales are counted when contracts are signed, so the impact of COVID-19 was probably in the second half of March.   I expect sales will decline significantly in the April New Home sales report (to be released in May).

Earlier: New Home Sales Decrease to 627,000 Annual Rate in March.

Click on graph for larger image.

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

New home sales were down 9.5% year-over-year (YoY) in March.   Year-to-date (YTD) sales are still up 6.7%, but sales will be down YTD soon.

The comparisons are easy over the first five months of the year, but sales will probably be down YoY for the next several months - at least - due to COVID-19.

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 March 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.

Now the gap is mostly closed.   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.

Over the next several months, both new and existing home sales will be negatively impacted by COVID-19.

by Calculated Risk on 4/23/2020 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Decreased Further

Tenth District manufacturing activity decreased further to the lowest reading in survey history (since 1994), while expectations for future activity improved but remained slightly negative. Month-over-month price indexes declined again in April, but District firms expected prices to rise slightly in the next six months.

The month-over-month composite index was -30 in April, the lowest composite reading in survey history, and down considerably from -17 in March and 5 in February. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The decrease in district manufacturing activity was steepest at durable goods factories such as primary and fabricated metals, and activity at non-durable goods plants including food and beverage manufacturing declined as well. All month-over-month indexes dropped further in April except for supplier delivery time which continued to increase. Year-over-year factory indexes also decreased again in April, and the composite index fell from -14 to -30. The future composite index improved from -19 April, but remained slightly negative at -6.
emphasis added

All of the regional surveys for April have been very weak.

by Calculated Risk on 4/23/2020 10:14:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 627 thousand.

The previous three months were revised down.

Sales of new single‐family houses in March 2020 were at a seasonally adjusted annual rate of 627,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 15.4 percent below the revised February rate of 741,000 and is 9.5 percent below the March 2019 estimate of 693,000."
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 just at a normal level.

The second graph shows New Home Months of Supply.

The months of supply increased in March to 6.4 months from 5.2 months in February.

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

This is slightly above the normal range (less than 6 months supply is normal).

"The seasonally‐adjusted estimate of new houses for sale at the end of March 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 March 2020 (red column), 61 thousand new homes were sold (NSA). Last year, 68 thousand homes were sold in March.

The all time high for March was 127 thousand in 2005, and the all time low for March was 28 thousand in 2011.

This was below expectations of 645 thousand sales SAAR, and sales in the three previous months were revised down.  I'll have more later today.

The sales in March were only partially impacted by COVID-19 crisis.  Sales in April will probably be much lower.

by Calculated Risk on 4/23/2020 08:36:00 AM

The DOL reported:

In the week ending April 18, the advance figure for seasonally adjusted initial claims was 4,427,000, a decrease of 810,000 from the previous week's revised level. The previous week's level was revised down by 8,000 from 5,245,000 to 5,237,000. The 4-week moving average was 5,786,500, an increase of 280,000 from the previous week's revised average. The previous week's average was revised down by 2,000 from 5,508,500 to 5,506,500.
emphasis added

The previous week was revised down.

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 5,786,500.

This was higher than the consensus forecast.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week while increasing sharply).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims have already increased to a new record high of 15.976 million (SA) and will increase further over the next few weeks - and likely stay at that high level until the crisis abates.

by Calculated Risk on 4/22/2020 06:53:00 PM

CR Note: The number of weekly claims will be huge again, but probably lower than the previous weeks.   Also, the March New Home Sales report will likely show weakness due to COVID-19.

The Kansas City Fed manufacturing survey is for April, and will probably be very weak.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a 4.150 million initial claims, down from 5.245 million the previous week.

• At 10:00 AM, New Home Sales for March from the Census Bureau. The consensus is for 645 thousand SAAR, down from 765 thousand in February.

• At 11:00 AM, the Kansas City Fed manufacturing survey for April.